Inspiring Solutions,
Transforming Communities
2023 ANNUAL REPORT
Boardwalk Centre, Edmonton, AB
Transforming Communities
with Love Always
We are committed to leading our communities with
innovation, transformation, and of course, Love Always.
CORPORATE PROFILE
Boardwalk REIT (“Boardwalk”, the “Trust”) strives to be
Canada’s friendliest community provider and is a leading
owner/operator of multi-family rental communities.
Providing homes in more than 200 communities, with over
34,000 residential suites totaling over 29 million net
rentable square feet, Boardwalk has a proven long-term
track record of building better communities, where love
always livesTM. Our three-tiered and distinct brands:
Boardwalk Living, Boardwalk Communities, and Boardwalk
Lifestyle, cater to a large diverse demographic and has
evolved to capture the life cycle of all Resident Members.
Boardwalk's disciplined approach to capital allocation,
acquisition, development, purposeful re-positioning, and
management of apartment communities allows the Trust
to provide its brand of community across Canada creating
exceptional Resident Member experiences. Differentiated
by its peak performance culture, Boardwalk is committed
to delivering exceptional service, product quality and
experience to our Resident Members who reward us with
high retention and market leading operating results, which
in turn, lead to higher free cash flow and investment
returns, stable monthly distributions, and value creation
for all our stakeholders.
Boardwalk REIT’s Trust Units are listed on the Toronto
Stock Exchange, trading under the symbol BEI.UN.
Additional information about Boardwalk REIT can be found
on the Trust’s website at www.bwalk.com/investors.
Boardwalk Centre, Edmonton, AB
TABLE OF CONTENTS
Corporate Profile
2023 Highlights
Letter to Unitholders
Communities in Motion
Our Portfolio
Portfolio Profiles
Management’s Discussion and Analysis
Independent Auditor’s Report
Financial Statements
Notes to the Consolidated
Financial Statements
Corporate Information
02
04
05
11
13
15
25
86
89
93
141
2
BOARDWALK REIT 2023 ANNUAL REPORT Boardwalk Centre, Edmonton, AB
3
2023 Highlights
$666.1 million
Profit
$3.60
FFO per Unit (1)
15%
Growth in FFO per Unit
$4.3 billion
Unitholders’ Equity
$84.41
Net Asset Value per Unit (1)
$527.0 million
Total Available Liquidity
at the end of 2023
$60.3 million
Property Acquisitions
$126 million
Investment in Capital Assets
> 24%
Management Ownership
(1)
Please refer to the section titled “Presentation of
Non-GAAP Measures” in the MD&A for more information.
Boardwalk Centre, Edmonton, AB
4
BOARDWALK REIT 2023 ANNUAL REPORT Letter to Unitholders
Dear Unitholders,
2023 Year in Review
• Operating Margin of 61.0%, compared to 58.2% in 2022
Guided by Love Always, we are pleased to have delivered
• Funds from Operations per Unit of $3.60, +15.0%
outstanding performance in 2023 for both our Residents
from 2022
and Unitholders. Our inspirational team’s relentless
pursuit of providing the best product quality, service and
experience to our Resident Members has led to another
• Net Asset Value per Unit of $84.41, +18.3% from 2022
• Unitholders’ Equity of $4.3 billion
transformative year in our communities, and resulted
Our largest markets of Edmonton and Calgary continued
in strong Funds from Operations (“FFO”) per Unit.
to see an influx of new residents throughout the year,
Key financial highlights for the year include:
driven by the affordability of housing relative to other
• Rental Revenue of $545.7 million, +9.9% from 2022
• Profit of $666.1 million
major urban centers, an attractive lifestyle, and
employment opportunities across a wide array of
industries as the economy continues to diversify over
• Net Operating Income of $333.0 million, +15.4%
time. Throughout 2023, occupancy levels improved
from 2022
• Same Property Rental Revenue of $532.0 million,
+8.8% from 2022
• Same Property Net Operating of $329.5 million,
+13.7% from 2022
significantly in both Edmonton and Calgary due to a
continued demand-supply imbalance, as new construction
has not kept pace with strong population growth from
both international and interprovincial migration.
“ Resident Members are at the
core of the Trust’s success and
creating homes where Love
Always Lives is the best way to
create sustainable returns for
our Unitholders.”
Sam Kolias, Chairman and Chief Executive Officer
5
Boardwalk Centre, Edmonton, AB
6
BOARDWALK REIT 2023 ANNUAL REPORT Boardwalk Centre, Edmonton, AB
Working Collaboratively Toward
Solutions for Canadians
rental adjustments, while increasing the length of our
organic growth runway for unitholders.
2023 was an inspirational year for developing collaborative
The Trust also believes the best and most cost-effective
housing solutions with our partners in housing and various
source of capital for re-investment in its communities is the
levels of government. The Trust is proud to have been a
cash flow generated by its operations. The Trust employs a
founding member alongside its peers of the Canadian
maximum cash flow retention policy (distributions paid to
Rental Housing Providers for Affordable Housing
unitholders limited to the minimum required for tax
(foraffordable.ca) to increase educational efforts on
purposes) in order to further improve its communities for
solutions that can help solve the housing supply crisis.
Residents and compound returns for Unitholders.
Boardwalk continues to work with various levels of
government and other partners on innovative solutions
Capital Allocation
that can help ensure we are continuing to provide and
We continue to improve the quality of our communities,
deliver additional affordable housing to those who need it
while further compounding organic growth through our
the most. We look forward to further progress in 2024.
value-add capital investments, which continue to exceed
Our Unique Business Model
our targeted return thresholds. As turnover has declined,
the focus has shifted toward investments that support a
Resident Members are at the core of the Trust’s success and
more sustainable future while enhancing returns for
creating homes where Love Always Lives is the best way to
Unitholders through reduced operating expenses. A few
create sustainable returns for our Unitholders. In 2023, our
examples include building envelope improvements and
Residents continued to provide us with consistent positive
sub-metering initiatives. We also continue to invest in
feedback on their experience with us. Our NPS score of 85
common area revitalizations that enhance the livability of
for the year is a record for the Trust. We recognize the
our communities for existing and future Residents. Our
importance of this balance over the longer term and
three distinct brands, Boardwalk Living, Communities and
continue to self-moderate the pace of rental adjustments
Lifestyle provide attractive housing options for renters
on both new leases and lease renewals in our non-price
across the affordability continuum, while limiting the
controlled markets. This approach is a win-win for all our
volatility of the Trust’s results over time.
stakeholders, providing our Residents with sustainable
7
OUR GOALS AND 2023 RESULTS
1. Organic Growth
• Rental revenue growth of 9.9%
• Achieved same property NOI growth of 13.7%
• Expansion of Operating Margin to 61.0%, compared
to 58.2% in the prior year
2. Accretive Capital Recycling
• Re-invested $93.7 million of value-add capital into
our communities
• Acquired 124 suites in Langford, BC, removed conditions
on 295 suites in Calgary, AB
• Delivered Tower 2 of 45 Railroad development in
Brampton, ON
3. Solid Financial Foundation
• 96% of mortgages are CMHC insured
• Liquidity of $527.0 million as at February 2024
•
Interest coverage at 2.83
4. Compelling Value
• Repositioned/renovated 10 properties and renovated
1,089 suites
• Net Asset Value per Unit(1) growth of 18.3%
• Average Occupied Rent of $1,388 as of December 2023
5. Creating Stakeholder Value
• Profit of $666,099
• FFO(1) of $181,353; AFFO(1) of $149,098
• FFO per Unit(1) of $3.60 (Initial 2023 Guidance range
of $3.25 to $3.45)
• AFFO per Unit(1) of $2.96 (Initial 2023 Guidance range
of $2.59 to $2.79)
• Outperformance relative to peers; 2023 total return of
47.0% compared to S&P/TSX Capped REIT Index of -2.4%
(1)
A non-GAAP measure. Please refer to the Trust's Management
Discussion & Analysis for the years ended December 31, 2023 and
2022 for definitions, reconciliations and the basis of presentation
of Boardwalk REIT's non-GAAP measures.
Boardwalk Centre, Edmonton, AB
(1)
(2)
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8
BOARDWALK REIT 2023 ANNUAL REPORT From an external growth perspective, the Trust continues
2024 Outlook
to target opportunistic acquisitions that are accretive to
FFO per unit over the short term, and Net Asset Value per
unit over the short to medium term. During 2023, the Trust
completed the acquisition of the newly-built The Vue
community in Langford, British Columbia and also
removed conditions on the acquisition of The Circle
community in Calgary, Alberta, which closed during the
first quarter of 2024. Both acquisitions increase the scale of
the Trust’s portfolio in the surrounding, rapidly growing,
regions where it has an existing presence.
As part of its long-term growth strategy, the Trust maintains
a selective development pipeline in order to incrementally
improve the quality and breadth of its product offering over
time and scale up in supply-constrained markets. During
2023, the Trust completed construction on the second
tower of its 45 Railroad community in Brampton, Ontario
while progressing on the construction of its Aspire
development in View Royal, British Columbia.
Balance Sheet Strength
The Trust’s growing cash flows over the last several years
and maximum cash flow retention policy has compounded
and improved the Trust’s availability of capital to deploy on
external growth opportunities to supplement its market-
leading organic growth. Although interest rates remained
elevated in 2023 compared to recent years, the Trust’s
disciplined approach in maintaining a well-laddered
Heading into 2024, our outlook remains bright for building
on our track record of delivering strong performance for
our Residents and Unitholders. Housing fundamentals in
our core markets continue to be strong with population
growth significantly outpacing new construction over the
medium-term. Our significant exposure to non-price
controlled markets, paired with our sustainability focused
self-moderation of rent adjustments on lease renewals and
new leases, extends our runway for growth into future
years while supporting further operating margin expansion.
Affordability, particularly in the Trust’s largest market of
Alberta, remains exceptional with rent-to-income ratios in
Edmonton and Calgary well-below other major urban
centers in Canada. At the provincial level, the government’s
fiscal surplus uniquely positions the province to invest in
infrastructure to support ongoing population growth from
both interprovincial and international sources.
Organic growth remains our primary value driver in 2024.
With strong fundamentals across our core markets and
continued evolution of our platform, we are confident that
we can continue to provide Resident Members with the
best value in housing. The increased liquidity following
our recent equity issuance provides the Trust with an
additional avenue to supplement its organic growth
through re-deployment into opportunistic acquisitions.
As a result of this favorable outlook, the Trust is introducing
maturity curve on its mortgages has proven effective in
its 2024 financial guidance as follows:
minimizing mortgage renewal risk in any individual year.
The Trust’s presence in primarily non-price controlled
markets has also increased its ability to offset higher
interest costs. The Trust continues to utilize primarily
Canada Mortgage and Housing Corporation (CMHC) insured
mortgages which provide access to low-cost financing and
Same Property
NOI Growth
Profit
FFO (1)(2)
limit renewal risk. As of the end of the year, approximately
AFFO (1)(2)
2024 Guidance
+10.0% to 14.0%
N/A
N/A
N/A
2023 Actual
(In $000's, except per Unit)
13.7%
$666,099
$181,353
$149,098
$3.60
$2.96
96% of the Trust’s outstanding mortgage principal balance
is CMHC insured.
In December, the Trust completed its first equity issuance in
approximately 17 years to capitalize on accretive growth
opportunities, while further improving the Trust’s balance
FFO Per Unit (2)
$3.93 to $4.18
AFFO Per Unit (2)
$3.30 to $3.55
(1) This is a non-GAAP financial measure.
(2)
Please refer to the section titled “Presentation of Non-GAAP Measures” in the
MD&A for more information.
sheet metrics. This positions the Trust for further success
As a result of improving cash flow and higher taxable income,
in 2024.
9
the Trust is increasing its regular monthly distribution by
23.1% to $0.12 per Unit or $1.44 per Unit on an annualized
basis for the months of March, April and May 2024.
Boardwalk Centre, Edmonton, AB
Boardwalk’s Trust Units are currently trading at an
Thank you to our lending partners, our various levels of
equivalent value of $204,000 per suite, and at an
government, and CMHC, who are invaluable in achieving
approximate 4.8% cap rate on our most recent fiscal year
our common goal of providing affordable housing options
NOI. This compares to our estimated NAV of approximately
and best product quality, service and experience to our
$222,000 per suite which represents a 4.4% cap rate on our
Resident Members.
last 12 months of NOI. This continues to represent strong
value in the multi-family space given the quality of the
Trust’s asset base, growth profile, and transactions in the
private market.
Thank you to you, our Unitholders, for your ongoing trust
and support, as we continue to focus on delivering strong
and sustainable financial performance.
Thank you to our amazing Boardwalk Team who relentlessly
strive to deliver the best communities to call home.
And lastly, thank you to our Resident Members for the
ultimate honor, making Boardwalk your community
provider of choice.
With Love Always,
sam kolias
10
BOARDWALK REIT 2023 ANNUAL REPORT Communities in Motion
The cover of this report features the powerful new
The colours represent our commitment to building better
Communities in Motion mark. Each individual roof
communities by embracing diversity, championing
symbolizes a home – the essence of our welcoming
community, promoting sustainability, and giving back.
communities. This roof is built with mutual respect and
A roof isn’t just a shelter, it is a symbol of protection and
shared values between people of various races, cultures,
genders, and orientation. It’s a place where our Residents
unity. It represents a safe place where differences are not
only celebrated but embraced, where love aways livesTM.
feel like they belong.
People
Places
People are the heart of Boardwalk. We prioritize health and
Our Communities offer affordable, quality homes with
well-being, ensuring an environment where everyone feels
optimized suites creating a welcoming home for our
safe, welcome, and heard.
Resident Members.
Planet
Play
Our planet is a shared responsibility. Boardwalk is
Our commitment to play is built on our dedication to
dedicated to a greener future, investing in energy-efficient
spreading our love always and having fun! We build strong
technology, engaging the community in sustainable
Communities through strategic partnerships, Resident
practices, and giving back more to the planet than we take.
Member programming and community events.
Join us in putting Communities in Motion,
because our people, our places, our
planet, and our play matter. Boardwalk –
Building better communities, together.
Our colourful Communities in Motion mark is a powerful
reminder that the strongest, most vibrant communities
emerge when we all come together as one.
11
Boardwalk Centre, Edmonton, AB
12
BOARDWALK REIT 2023 ANNUAL REPORT Our Portfolio
Comprised of over 34,000 apartment suites across
Canada, with three distinct brands, Boardwalk aims to
serve all rental demographics where love always livesTM.
RESIDENTIAL SUITES
9
8
8
5
2
,
6
2
3
9
2
,
9
3
2
,
1
3
9
5
1
,
2
3
8
9
2
3
3
,
7
0
2
4
3
,
7
8
4
6
3
,
5
8
7
6
3
,
9
1
4
6
3
,
7
7
2
,
5
3
7
7
2
,
5
3
7
7
2
,
5
3
6
8
3
,
5
3
6
2
6
4
3
,
7
4
9
2
3
,
3
7
7
3
3
,
7
8
1
,
3
3
7
1
4
3
3
,
3
6
2
3
3
,
6
9
3
,
3
3
4
6
2
3
3
,
0
1
8
3
3
,
9
2
0
4
3
,
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022 2023
Boardwalk Centre, Edmonton, AB
13
Victoria
0.7% Edmonton
37.9%
Calgary
18.4%
Other AB
5.7% Saskatoon
4.5%
Regina
5.8%
Quebec
3.9%
Brampton
1.0%
Montreal
13.7%
Kitchener/Waterloo
Cambridge
1.8%
London
6.6%
BOARDWALK PORTFOLIO
Edmonton/St. Albert/Spruce Grove
12,882 | 37.9%
Calgary/Airdrie/Canmore/Banff
6,266 | 18.4%
Montreal
4,681 | 13.7%
London
2,256 | 6.6%
Regina
1,974 | 5.8%
Saskatoon
1,531 | 4.5%
Quebec City
1,319 | 3.9%
Kitchener/Waterloo/Cambridge
611 | 1.8%
Brampton
335 | 1.0%
Victoria
238 | 0.7%
Red Deer/Fort McMurray/Grande Prairie
Under development – Victoria
1,936 | 5.7%
Approximately 650 suites in various development stages
14
BOARDWALK REIT 2023 ANNUAL REPORT Our Portfolio
MULTI-FAMILY PROPERTY PORTFOLIO
Victoria, BC
Property (1)
Aurora
The Vue
Totals:
Brand
Lifestyle
Lifestyle
Year of
Renovation (2)
Building
Type (3)
Walk-Up
Highrise
# of
Suites
Net Rentable
Sq. Ft.
Average Suite
Size (Sq. Ft.)
114
124
238
95,756
122,815
218,571
840
990
880
Year of
Renovation (2)
Building
Type (3)
# of
Suites
Net Rentable
Sq. Ft.
Average Suite
Size (Sq. Ft.)
HR, WU & TH
1,176
1,138,368
Edmonton, Spruce Grove & St. Albert, AB
Property (1)
West Edmonton Village
Whitehall Square
Boardwalk Centre
Fairmont Village
Meadowview Manor
Sturgeon Point Villas
Boardwalk Villages
Riverview Plaza
Morningside Estates
Sir William Place
Pembroke Estates
Greentree Village
Maple Gardens
Northridge Estates
Brand
Living
Living
Living
Living
Living
Living
Living
Living
Living
Living
Living
Living
Living
Living
2021
2019
HR & WU
2022 & 2023
Highrise
2022
2023
2022
2020
2015
Walk-Up
Walk-Up
Walk-Up
Townhouse
Walk-Up
Walk-Up
2022 & 2023
HR & WU
2015
2021
2020
2020
Walk-Up
Walk-Up
Walk-Up
Walk-Up
598
597
424
348
280
255
252
223
220
198
192
181
180
545,934
471,871
362,184
284,490
284,953
258,150
203,740
167,064
126,940
198,360
156,000
163,840
103,270
968
913
790
854
818
1,018
1,012
808
749
577
1,002
813
905
574
(1) Ordered by brand, followed by descending number of suites
(2) Year of renovation is provided for those properties participating in the Trust's brand diversification initiative.
(3) HR – Highrise; MR – Midrise; TH – Townhouse; WU – Walk-Up
15
# of
Suites
Net Rentable
Sq. Ft.
Average Suite
Size (Sq. Ft.)
Edmonton, Spruce Grove & St. Albert, AB (continued)
Property (1)
Briarwynd Court
Westbrook Estates
Galbraith House *
Springwood Place Apartments
Lord Byron Towers
Corian Apartments
Primrose Lane Apartments
Habitat Village
Meadowside Estates
Lord Byron Townhouses
Cedarville Apartments
Leewood Village
Pinetree Village
Imperial Tower
The Westmount
Tamarack East & West
Brookside Terrace
Redwood Court
Terrace Garden Estates
Castleridge Estates
Kew Place
Cambrian Place
Monterey Pointe
Parkview Estates
Victorian Arms
The Palisades
Westridge Estates B
Westridge Estates C
Castle Court
West Edmonton Court
Sandstone Pointe
Brand
Living
Living
Living
Living
Living
Living
Living
Living
Living
Living
Living
Living
Living
Living
Living
Living
Living
Living
Living
Living
Living
Living
Living
Living
Living
Living
Living
Living
Living
Living
Living
Year of
Renovation (2)
2022
2021
2019
Building
Type (3)
TH & WU
Walk-Up
Highrise
Lowrise
2022 & 2023
Highrise
2020
2020
Garden
Walk-Up
Townhouse
2016
Walk-Up
2020
Townhouse
Walk-Up
Walk-Up
2015 & 2020
Walk-Up
2016
Highrise
2022 & 2023
Highrise
2015
2015
2020
2020
Garden
TH & WU
Lowrise
Walk-Up
Townhouse
Walk-Up
Walk-Up
Walk-Up
Townhouse
Walk-Up
Highrise
Lowrise
Lowrise
Walk-Up
Walk-Up
Walk-Up
172
172
163
160
158
153
153
151
148
147
144
142
142
138
133
132
131
116
114
108
108
105
104
104
96
94
91
90
89
82
81
144,896
148,616
110,400
122,640
133,994
167,400
151,310
129,256
104,036
172,369
122,120
129,375
106,740
112,050
124,825
212,486
196,779
107,680
101,980
124,524
105,776
105,008
83,548
88,432
91,524
77,200
56,950
56,950
93,950
73,209
83,800
(1) Ordered by brand, followed by descending number of suites
(2) Year of renovation is provided for those properties participating in the Trust's brand diversification initiative.
(3) HR – Highrise; MR – Midrise; TH – Townhouse; WU – Walk-Up
842
864
677
767
848
1,094
989
856
703
1,173
848
911
752
812
939
1,610
1,502
928
895
1,153
979
1,000
803
850
953
821
626
633
1,056
893
1,035
16
BOARDWALK REIT 2023 ANNUAL REPORT Edmonton, Spruce Grove & St. Albert, AB (continued)
Brand
Living
Living
Living
Living
Living
Living
Living
Living
Living
Living
Living
Living
Living
Living
Living
Living
Living
Living
Living
Living
Property (1)
Aspen Court
Lorelei House
Kingsway Tower
Point West Townhouses
Village Plaza
Breton Manor
Carmen
Westridge Manor
Fontana Place
Suncourt Place
Warwick Apartments
Westborough Court
Garden Oaks
Marlborough Manor
Westmoreland Apartments
Valley Ridge Tower
Granville Square
Westwinds of Summerlea
Christopher Arms
Summerlea Place
Viking Arms
Ermineskin Place
Southgate Tower
Wimbledon
Community
2018
Community
2020
Community
2020
Community
2019
Capital View Tower
Community
2019
Tower On The Hill
Community
2019
Fort Garry House
Community
2019
Maureen Manor
Community
Prominence Place
Community
2018
Solano House
Terrace Tower
Community
2018
Community
2020
Year of
Renovation (2)
2020
2022
2020
2022
Building
Type (3)
Walk-Up
Walk-Up
Highrise
Townhouse
Townhouse
Walk-Up
Walk-Up
Garden
Lowrise
Walk-Up
Walk-Up
Walk-Up
Garden
2020 & 2023
Walk-Up
Lowrise
Highrise
Townhouse
Garden
Lowrise
Garden
Highrise
Highrise
Highrise
Highrise
Highrise
Highrise
Highrise
Highrise
Highrise
Highrise
Highrise
# of
Suites
Net Rentable
Sq. Ft.
Average Suite
Size (Sq. Ft.)
80
78
74
69
68
66
68,680
65,870
41,550
72,810
65,280
57,760
128
109,250
64
62
62
60
60
56
56
56
49
48
48
45
39
240
226
170
165
115
100
93
91
91
91
84
69,038
40,820
55,144
49,092
50,250
47,250
49,582
45,865
30,546
53,376
53,872
29,900
43,297
257,410
181,788
153,385
117,216
71,281
85,008
70,950
64,918
73,310
79,325
66,000
859
844
561
1,055
960
875
854
1,079
658
889
818
838
844
885
819
623
1,112
1,122
664
1,110
1,073
804
902
710
620
850
763
713
806
872
786
(1) Ordered by brand, followed by descending number of suites
(2) Year of renovation is provided for those properties participating in the Trust's brand diversification initiative.
(3) HR – Highrise; MR – Midrise; TH – Townhouse; WU – Walk-Up
17
Brand
Year of
Renovation (2)
Building
Type (3)
# of
Suites
Net Rentable
Sq. Ft.
Average Suite
Size (Sq. Ft.)
Edmonton, Spruce Grove & St. Albert, AB (continued)
Property (1)
Tower Hill
Community
2020
Riverview Manor
Community
2020
Deville Apartments
Community
2020
Lansdowne Park
Community
2020
The Edge
Park Place Tower
Axxess
Vita Estates
Lifestyle
Lifestyle
Lifestyle
2020
2019
Lifestyle
2020
Insignia Tower
Lifestyle
Highrise
Highrise
Highrise
Midrise
Lowrise
Highrise
Lowrise
Lowrise
Highrise
82
81
66
62
182
179
165
162
124
46,360
62,092
47,700
48,473
163,103
162,049
149,565
135,454
112,864
Totals:
12,882
11,352,470
Year of
Renovation (2)
Building
Type (3)
# of
Suites
Net Rentable
Sq. Ft.
Average Suite
Size (Sq. Ft.)
Calgary, Airdrie, Banff & Canmore, AB
Property (1)
Russet Court
Radisson Village I
Radisson Village II
Radisson Village III
Vista Gardens
Travois Apartments
Hillside Estates
Pineridge Apartments
Flintridge Place
Willow Park Gardens
McKinnon Manor Apartments
McKinnon Court Apartments
Brand
Living
Living
Living
Living
Living
Living
Living
Living
Living
Living
Living
Living
2018
2019
2019
2019
2020
2021
2020
2019
2018
2022
2021
Patrician Village
Community
2018
Richmond Towers
Community
2020
Spruce Ridge Estates
Community
2020
Oak Hill Estates
Community
2020
Townhouse
Boardwalk Heights
Community
2018
Highrise
(1) Ordered by brand, followed by descending number of suites
(2) Year of renovation is provided for those properties participating in the Trust's brand diversification initiative.
(3) HR – Highrise; MR – Midrise; TH – Townhouse; WU – Walk-Up
Garden
TH & WU
TH & WU
Townhouse
Townhouse
Walk-Up
Walk-Up
Lowrise
Midrise
Walk-Up
Walk-Up
Walk-Up
Walk-Up
HR & MR
Walk-Up
206
124
124
118
100
89
76
76
68
66
60
48
392
376
284
240
202
213,264
108,269
108,015
124,379
121,040
61,350
58,900
52,275
55,023
44,563
43,740
36,540
295,600
301,720
196,464
236,040
160,894
565
767
723
782
896
905
906
836
910
881
1,035
873
871
1,054
1,210
689
775
688
809
675
729
761
754
802
692
984
797
18
BOARDWALK REIT 2023 ANNUAL REPORT Calgary, Airdrie, Banff & Canmore, AB (continued)
Property (1)
O'Neil Tower
Brand
Year of
Renovation (2)
Community
2019
Westwinds Village
Community
2019
Tower Lane Terrace Apartments
Community
2018
Building
Type (3)
Highrise
Walk-Up
Walk-Up
Ridgeview Gardens
Community
2020
Townhouse
The Level
Community
2023
Northwest Pointe
Community
2018
Walk-Up
Walk-Up
Skygate Tower
Community
2018 & 2023
Highrise
Boardwalk Retirement Community
Community
2019
Lakeview Apartments
Community
2021
Brentview Tower
Broadway Centre
Dorsett Square
Spruce Ridge Gardens
Lakeside Estates
Community
2018
Community
2018
Community
2021
Community
Community
Glamorgan Manor
Community
2022
Royal Park Plaza
Community
2018
Mountainview Estates*
Elk Valley Estates*
Community
Community
Prominence Place Apartments
Community
2021
Randal House
Community
2019
Varsity Place Apartments
Community
2018
Beddington Court
Community
2020
Highrise
Walk-Up
Highrise
Highrise
Highrise
Walk-Up
Walk-Up
Walk-Up
Highrise
TH & WU
Walk-Up
Walk-Up
Highrise
Walk-up
Walk-Up
Village Vale
Community
Townhouse
Varsity Square Apartments
Auburn Landing
Peak Estates
Chateau Apartments
Centre Pointe West
BRIO
Totals:
2018
2023
2017
2017
Lifestyle
Lifestyle
Lifestyle
Lifestyle
Lifestyle
Lifestyle
MR & LR
Lowrise
Walk-Up
Highrise
Midrise
Highrise
# of
Suites
Net Rentable
Sq. Ft.
Average Suite
Size (Sq. Ft.)
187
180
163
160
158
150
142
124
120
115
115
109
109
89
86
86
81
76
75
70
70
66
54
297
238
148
145
123
81
131,281
137,815
130,920
151,080
114,550
102,750
113,350
82,130
107,680
69,310
80,424
98,948
86,351
77,732
63,510
66,137
75,624
53,340
55,920
56,600
47,090
50,919
66,366
241,128
209,976
149,689
110,545
110,611
71,500
6,266
5,131,352
702
766
803
944
725
685
798
662
897
603
699
908
792
873
738
769
934
702
746
809
673
772
1,229
812
882
1,011
762
899
883
819
(1) Ordered by brand, followed by descending number of suites
(2) Year of renovation is provided for those properties participating in the Trust's brand diversification initiative.
(3) HR – Highrise; MR – Midrise; TH – Townhouse; WU – Walk-Up
19
Red Deer, Fort McMurray & Grande Prairie, AB
Year of
Renovation (2)
2022
2018
2019
Property (1)
Boardwalk Park Estates I
Prairie Sunrise
Canyon Pointe Apartments
Riverbend Village Apartments
Taylor Heights Apartments
Chanteclair Apartments
Inglewood Terrace Apartments
McMurray Manor
The Granada
The Valencia
Mallard Arms
Boardwalk Park Estates II
Edelweiss Terrace
Hillside Manor
Birchwood Manor
Heatherton Apartments
Brand
Living
Living
Living
Living
Living
Living
Living
Living
Living
Living
Living
Living
Living
Living
Living
Living
Cloverhill Terrace
Community
2018
Building
Type (3)
TH & WU
HR & WU
Walk-Up
Walk-Up
Walk-Up
Walk-Up
Lowrise
Lowrise
Walk-Up
Walk-Up
Walk-Up
Townhouse
Walk-Up
Walk-Up
Walk-Up
Walk-Up
Midrise
Westridge Estates
Community
Townhouse
Parke Avenue Square
Community
2021
Community
2017
Community
2019
Walk-up
Midrise
Midrise
# of
Suites
Net Rentable
Sq. Ft.
Average Suite
Size (Sq. Ft.)
369
244
163
150
140
79
68
44
44
40
36
32
32
30
24
23
120
112
88
50
48
306,850
201,992
114,039
114,750
103,512
68,138
42,407
30,350
35,775
33,850
30,497
30,210
27,226
21,248
18,120
16,750
102,225
113,664
87,268
43,988
53,762
1,936
1,596,621
832
828
700
765
739
863
624
690
813
846
847
944
851
708
755
728
852
1,015
992
880
1,120
825
Watson Tower
Saratoga Tower
Totals:
Regina
Property (1)
Wascana Park Estates
Qu'appelle Village III
Centennial South
Qu'appelle Village I & II
Eastside Estates
Brand
Living
Living
Living
Living
Living
Year of
Renovation (2)
Building
Type (3)
# of
Suites
Net Rentable
Sq. Ft.
Average Suite
Size (Sq. Ft.)
Townhouse
Walk-Up
Garden
TH & WU
Townhouse
316
180
170
154
150
303,360
144,160
129,080
133,200
167,550
960
801
759
865
1,117
(1) Ordered by brand, followed by descending number of suites
(2) Year of renovation is provided for those properties participating in the Trust's brand diversification initiative.
(3) HR – Highrise; MR – Midrise; TH – Townhouse; WU – Walk-Up
20
BOARDWALK REIT 2023 ANNUAL REPORT Regina (continued)
Property (1)
Evergreen Estates
Pines of Normanview
Lockwood Arms Apartments
Grace Manors
Greenbriar Apartments
Centennial West
The Meadows
Year of
Renovation (2)
2021
2020
Brand
Living
Living
Living
Living
Living
Living
Living
Southpointe Plaza
Community
2021
Pines Edge
Pines Edge II
Pines Edge III
Totals:
Saskatoon
Property (1)
Palace Gates
Meadow Park Estates
Stonebridge Apartments
St. Charles Place
Heritage Townhomes
Stonebridge Townhomes
Lawson Village
Wildwood Ways B
Regal Towers
Carlton Tower
Community
Lifestyle
Lifestyle
Brand
Living
Living
Living
Living
Living
Living
Living
Living
Community
2020
Community
2019
Penthouse Apartments
Community
2021
Dorchester Tower
Community
2020
Building
Type (3)
Walk-Up
Garden
Walk-Up
Townhouse
Walk-Up
Garden
Townhouse
Midrise
Garden
Garden
Garden
Walk-Up
Walk-Up
Townhouse
Townhouse
Walk-Up
Walk-Up
Highrise
Highrise
Lowrise
Highrise
Year of
Renovation (2)
Building
Type (3)
Walk-Up
2023
Townhouse
# of
Suites
Net Rentable
Sq. Ft.
Average Suite
Size (Sq. Ft.)
150
133
96
72
72
60
52
125,660
115,973
69,000
69,120
57,600
46,032
57,824
140
117,560
79
79
71
67,298
67,298
62,818
1,974
1,733,533
838
872
719
960
800
767
1,112
840
852
852
885
878
# of
Suites
Net Rentable
Sq. Ft.
Average Suite
Size (Sq. Ft.)
206
200
162
156
104
100
96
54
161
158
82
52
142,525
192,000
131,864
123,000
99,840
135,486
75,441
43,961
122,384
155,138
61,550
48,608
692
960
814
788
960
1,355
786
814
760
982
751
935
870
Totals:
1,531
1,331,797
(1) Ordered by brand, followed by descending number of suites
(2) Year of renovation is provided for those properties participating in the Trust's brand diversification initiative.
(3) HR – Highrise; MR – Midrise; TH – Townhouse; WU – Walk-Up
21
London
Property (1)
Noel Meadows
Heritage Square
Year of
Renovation (2)
Brand
Living
Community
2019
Forest City Estates
Community
2019
Maple Ridge On The Parc
Community
2019
Landmark Towers
Community
2020
Topping Lane Terrace
Community
Westmount Ridge
Community
2019
Meadowcrest Apartments
Community
Castlegrove Estates
The Bristol
Community
Community
Sandford Apartments
Community
2019
Villages of Hyde Park
Abbey Estates
Ridgewood Estates
Totals:
Community
Community
Community
Kitchener, Waterloo, Cambridge & Brampton, ON
Building
Type (3)
Walk-Up
MR & WU
Highrise
Highrise
Highrise
Midrise
Midrise
Walk-Up
Lowrise
Highrise
Walk-Up
Townhouse
Townhouse
Townhouse
# of
Suites
Net Rentable
Sq. Ft.
Average Suite
Size (Sq. Ft.)
105
359
272
257
213
189
179
162
144
138
96
60
53
29
72,600
270,828
221,000
247,166
173,400
177,880
131,700
110,835
126,420
109,059
77,594
57,850
59,794
31,020
2,256
1,867,146
691
754
813
962
814
941
736
684
878
790
808
964
1,128
1,070
828
Year of
Renovation (2)
Building
Type (3)
# of
Suites
Net Rentable
Sq. Ft.
Average Suite
Size (Sq. Ft.)
Property (1)
Ardglen Place
Kings Tower
Westheights Place
Elmridge Heights
Courtland Place
Mayfieldview Court
Cambridge Court
Wesley Park
45 Railroad
Totals:
Brand
Living
Community
2021
Community
Community
Community
Community
Community
Community
Lifestyle
Townhouse
Highrise
Midrise
Walk-Up
Walk-Up
Walk-Up
Townhouse
Walk-Up
Highrise
152
226
103
70
60
60
56
36
183
946
159,696
171,100
91,920
71,420
61,152
61,440
66,550
41,960
162,703
887,941
1,051
757
892
1,020
1,019
1,024
1,188
1,166
889
939
(1) Ordered by brand, followed by descending number of suites
(2) Year of renovation is provided for those properties participating in the Trust's brand diversification initiative.
(3) HR – Highrise; MR – Midrise; TH – Townhouse; WU – Walk-Up
22
BOARDWALK REIT 2023 ANNUAL REPORT Montreal
Property (1)
Le Bienville
Jardins Viva
Brand
Living
Living
Year of
Renovation (2)
Building
Type (3)
Walk-Up
Walk-Up
# of
Suites
Net Rentable
Sq. Ft.
Average Suite
Size (Sq. Ft.)
168
112
115,600
91,000
Nuns' Island Portfolio *
Community
2021 & 2023
HR, WU & TH
3,100
3,106,110
Highrise
Highrise
Highrise
720
322
259
560,880
276,324
153,500
4,681
4,303,414
688
813
1,002
779
858
593
919
Domaine d'Iberville Apartments *
Community
Complexe Deguire
Le Quatre Cent
Totals:
Quebec City
Property (1)
Place Chamonix
Community
Community
Brand
Living
Les Jardins de Merici
Community
Les Appartements Du Verdier
Community
L'Astre
Community
2021
Place Samuel de Champlain
Community
Place du Parc
Place Charlesbourg
Totals:
Community
Community
Year of
Renovation (2)
Building
Type (3)
# of
Suites
Net Rentable
Sq. Ft.
Average Suite
Size (Sq. Ft.)
Townhouse
Highrise
Walk-Up
Midrise
Highrise
Midrise
Midrise
246
346
195
183
130
111
108
236,630
300,000
152,645
134,480
104,153
81,746
82,624
1,319
1,092,278
962
867
783
735
801
736
765
828
Total Portfolio – As at Dec. 31, 2023:
34,029
29,515,123
867
(1) Ordered by brand, followed by descending number of suites
(2) Year of renovation is provided for those properties participating in the Trust's brand diversification initiative.
(3) HR – Highrise; MR – Midrise; TH – Townhouse; WU – Walk-Up
23
Financial Review Contents
Management’s Discussion and Analysis
Financial Statements
Independent Auditor’s Report
Financial Statements
Notes to the Consolidated Financial Statements
Supplemental Information
Five Year Summary
2023 Quarterly Results
2022 Quarterly Results
Market & Unitholder Information
Corporate Information
86
89
93
134
136
137
138
141
General and Forward-looking Statements Advisory
Executive Summary
Business Overview
Environmental, Social and Governance Overview
MD&A Overview
Outlook
Declaration of Trust
Presentation of Financial Information
Presentation of Non-GAAP Measures
Performance Review of 2023
Financial Performance Summary
Consolidated Operations and Earnings Review
Overall Review
Segmented Operational Reviews
Operational Sensitivities
Same Property Results
Financing Costs
Administration
Depreciation
Other Income and Expenses
Financial Condition
Review of Cash Flows
Capital Structure and Liquidity
Risks and Risk Management
General Risks
Specific Risks
Certain Tax Risks
Risks Associated with Disclosure Controls and
Procedures & Internal Control Over
Financial Reporting
Accounting and Control Matters
Critical Accounting Policies
Application of New and Revised IFRS and
Future Accounting Policies
International Financial Reporting Standards
Disclosure Controls and Procedures (“DC&P”) &
Internal Control Over Financial Reporting
2024 Financial Outlook and Market Guidance
Selected Consolidated Financial Information
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26
26
27
27
27
29
30
30
33
35
36
36
38
41
44
47
48
48
49
50
50
57
62
62
65
70
71
72
72
81
83
83
84
85
24
BOARDWALK REIT 2023 ANNUAL REPORT
Management’s Discussion
and Analysis
For the Years Ended, December 31, 2023 and 2022
GENERAL AND FORWARD-LOOKING STATEMENTS ADVISORY
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. 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 21, 2024 unless otherwise stated, and should be read in conjunction with Boardwalk’s audited annual consolidated financial
statements for the years ended December 31, 2023 and 2022, which have been prepared in accordance with IFRS, together with this MD&A, 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.sedarplus.ca. Historical results and percentage relationships contained in the audited annual
consolidated financial statements for the years ended December 31, 2023 and 2022 and this MD&A, including trends, should not be read as indicative of
future operations.
Provided all of the Trust’s income each year is paid or made payable to Unitholders (as defined below), then the Trust itself would generally not be subject
to income tax. Boardwalk intends to distribute or allocate all of its taxable income of the Trust to its Unitholders and to deduct these distributions for
income tax purposes. The Income Tax Act (Canada) (the “Tax Act”) contains legislation affecting the tax treatment of publicly traded trusts (the “SIFT
Legislation”), which if applicable, would tax the Trust in a manner similar to a corporation and tax certain distributions from such trusts as taxable
dividends from a taxable Canadian corporation. A trust which qualifies under the Tax Act as a real estate investment trust (the “REIT Exemption”) is not
subject to tax under SIFT Legislation. Boardwalk qualified for the REIT Exemption for the years ended December 31, 2023 and 2022 and intends to continue
to qualify for the REIT Exemption on an ongoing basis. Further discussion of this is contained in this MD&A.
Certain information contained in this MD&A concerning the economy generally and relating to the industry in which the Trust operates has been
obtained from publicly and/or industry available information from third party sources, including both the Bank of Canada’s January 2024 Monetary
Policy Report and the Royal Bank of Canada’s December 2023 Provincial Report. The Trust has not verified the accuracy or completeness of any
information contained in such publicly available information. In addition, the Trust has not determined if there has been any omission by any such
third party to disclose any facts, information, or events which may have occurred prior to or subsequent to the date as of which any such information
contained in such publicly available information has been furnished or which may affect the significance or accuracy of any information contained in
any such information and summarized herein.
Unless otherwise indicated, all amounts are expressed in Canadian dollars.
Forward-looking Statements 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 forward-looking statements include, but are not limited to, statements made concerning Boardwalk’s
objectives, including, but not limited to, the REIT’s 2024 financial outlook and market guidance, increasing and maintaining its occupancy rates, joint
arrangement developments and future acquisition and development opportunities, including its plans for land in Victoria, British Columbia and its long-term
strategic plan of opportunistic acquisitions and investments, its strategies to achieve those objectives, expectations regarding Boardwalk’s vision and its
strategies to achieve that vision, expected value enhancements through Boardwalk’s branding initiative and suite renovation program, expected demand for
housing, the Trust’s ability to provide the optimal return to Unitholders, Boardwalk’s goal of expanding geographically and diversifying its brand, expected
increases in property taxes, utilities, and insurance costs, the anticipated impact of inflation and rising interest rates, the possibility of economic contractions
as a result of a potential recession, Boardwalk’s goal to decrease incentives implemented to maintain occupancy levels, as well as statements with respect to
management of the Trust’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 of the Trust’s current beliefs and are
based on information currently available to management of the Trust at the time such statements are made. Management of the Trust’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.
25
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, 2023 (“AIF”) dated February 21, 2024 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 (“CMHC”) rules regarding mortgage insurance, interest rates, joint arrangements/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. 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, the REIT’s future growth potential, prospects and opportunities, 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 timing to deploy equity proceeds, the impact of accounting principles under IFRS, general industry
conditions and trends, changes in laws and regulations including, without limitation, changes in tax laws, 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 of the Trust 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” or “future oriented financial information (FOFI)” for purposes of applicable
securities laws, all of which are subject to the same assumptions, risk factors, limitations and qualifications as set forth above. The actual results of
operations of the Trust and the resulting financial results will likely vary from the amounts set forth in this MD&A and such variation may be material.
Boardwalk REIT and its management believe that the FOFI contained in this MD&A has been prepared on a reasonable basis, reflecting management of the
Trust’s best estimates and judgements. However, because this information is subjective and subject to numerous risks, it should not be relied on as necessarily
indicative of future results. FOFI contained in this MD&A was made as of the date of this MD&A and was provided for the purpose of providing further
information about the Trust’s anticipated future business operations. Readers are cautioned that the FOFI contained in this MD&A should not be used for
purposes other than for which it is disclosed herein.
Except as required by applicable law, Boardwalk undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result
of new information, future events, or otherwise.
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, 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’s units (the “Trust Units”) trade on the Toronto Stock Exchange (“TSX”) under the trading symbol ‘BEI.UN’.
Additionally, the Trust has 4,475,000 special voting units issued to holders of Class B Units of Boardwalk REIT Limited Partnership
(“LP Class B Units” and, together with the Trust Units, the “Units”), each of which also has a special voting unit in the REIT. Boardwalk
REIT’s principal objectives are to provide Resident Members (as defined herein) with superior quality rental communities and the best
tenant/customer service, provide its holders (“Unitholders”) of Trust Units with stable monthly cash distributions, and to increase the
value of the Trust Units through the effective management of its residential multi-family revenue producing properties, renovations
and upgrades to its current portfolio, and the acquisition and/or development of additional, accretive properties or interests therein.
As at December 31, 2023, Boardwalk REIT owned and operated in excess of 200 properties, comprised of over 34,000 residential
suites, and totaling over 29 million net rentable square feet. At the end of 2023, Boardwalk REIT’s property portfolio was located in the
provinces of British Columbia, Alberta, Saskatchewan, Ontario, and Quebec.
26
BOARDWALK REIT 2023 ANNUAL REPORT ENVIRONMENTAL, SOCIAL AND GOVERNANCE OVERVIEW
The Trust is committed to environmental, social and governance (“ESG”) objectives and initiatives, including working towards
reducing greenhouse gas emissions as well as electricity and natural gas consumption, water conservation, waste minimization,
Resident Member satisfaction and a continued focus on governance and oversight. As part of its 2023 annual reporting, the Trust
will be publishing its ESG Report, which will be available under the Trust’s profile at www.sedarplus.ca or on the Trust’s website at
www.bwalk.com/en-ca/investors/esg. The ESG Report does not form a part of this MD&A.
MD&A OVERVIEW
This MD&A focuses on key areas from the audited annual consolidated financial statements for the years ended December 31, 2023
and 2022, and pertains to major known risks and uncertainties relating to the real estate industry, in general, and the Trust’s business,
in particular. This discussion should not be considered all-inclusive as it excludes changes that may occur in general economic,
political, and environmental conditions. Additionally, other elements may or may not occur, which could affect the organization in the
future. Please refer to the section titled “General and Forward-Looking Statements Advisory – Forward-Looking Statements 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 Boardwalk REIT’s 2023 Annual Report, the audited annual consolidated financial statements for the years ended
December 31, 2023 and 2022, and the AIF, each of which are available under the REIT’s profile on www.sedarplus.ca.
OUTLOOK
In its January 2024 Monetary Policy Report, the Bank of Canada has noted that the interest rate hikes they have undertaken over the
past couple of years are working to slow the economy, and inflation is coming down. Progress towards price stability has been made
but the path back to their 2% target will be gradual. Economic growth has stalled since the middle of 2023, allowing supply to catch up
to demand, which has helped to temper inflation. Consumers are holding back on spending and businesses have pulled back on hiring
and investment. As a result, the Bank of Canada expects growth will remain weak in the first half of 2024 before picking up in the
second half of the year. Inflation should stay close to 3% until the summer, at which point the Bank of Canada expects inflation to ease
to 2.5% in the second half of 2024 before returning to the 2% target in 2025.
The Royal Bank of Canada's (“RBC”) December 2023 Provincial Report also noted that higher interest rates and slower growth are
working to ease inflation pressures and have slowed the economy. As a result, RBC expects the Bank of Canada will be pivoting to
interest rate cuts in the year ahead. Once interest rate cuts begin to occur, RBC expects the economy to perk up over the second half
of 2024.
Alberta is slated to keep its place near the top of RBC’s provincial growth ranking in 2024, with 1.7% expected for the year. Per RBC,
“the relative affordability advantage and impressive growth streak continues to entice a record number of new migrants, keeping
pressure on aggregate spending, investment, and employment growth. Despite the upside strong demographic trends bring to overall
growth, a flourishing population, alone, won’t be enough to shield Alberta’s economy from moderating further in 2024, as tailwinds
from commodity markets and strong population inflows are waning”. RBC predicts growth prospects on the horizon for
Saskatchewan following a difficult year for crop production and fertilizer exports. The 2024 outlook for potash is improving, and RBC
expects economic growth up to 1.6%, well ahead of the Canadian average. A steep moderation is expected for Ontario’s 2024 growth
likely bringing them to the back of RBC’s provincial growth rankings at 0.2%. Per RBC, this is attributable to higher interest rates
continuing to hamper housing market activity and spending in 2024, together with slower growth in the United States. In Quebec, RBC
expects economic growth to be moderate at only 0.4% with only slight improvement from 2023 as the economy remains sluggish in
part due to the high cost of living and recent large labour strikes weighing heavily on activity. In British Columbia, high interest rates
and strained affordability are poised to keep consumer spending and business investment down which RBC expects will place growth
at 0.3% for this provincial economy.
In addition to having among the highest expected growth in 2024, currently, in the Trust’s core markets, total housing supply under
construction remains low relative to anticipated household formation. Demand is expected to remain high from strong international
and interprovincial migration. Furthermore, when considering rent as compared to median renter household income, the Trust’s core,
non-price controlled markets remain the most affordable in the country, further encouraging migration and positioning the REIT for
strong organic growth.
27
Boardwalk’s Strategic Plan
Boardwalk provides inclusive communities to work and live through its strategy of operational excellence, innovation, and
opportunistic growth focused capital allocation, to create leading earnings performance resulting in strong total Unitholder return.
Opportunistic growth is defined as pursuing opportunities which drive Funds From Operations (“FFO”) per fully diluted Unit and Net
Asset Value (“NAV”) per fully diluted Unit accretion on a sustainable and long-term basis.
Underpinned by its dynamic culture and performance-focused team, Boardwalk strives to create the best multi-family communities
across diverse, affordable, non-price controlled and high growth supply-constrained housing markets. This is our mission: to build
better communities, where love always lives. Boardwalk’s initiatives to create additional value include the development of new
apartments on existing land as well as the potential acquisition of new land for future development projects. 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 and the Trust’s stakeholders.
Strong housing fundamentals in Boardwalk’s core markets paired with the Trust’s proven platform, positions Boardwalk for optimized
cash flow growth, in Management’s view. Management of the Trust believes that Boardwalk’s distribution policy of maximum cash
flow reinvestment coupled with its strong balance sheet provides the ability for the Trust to allocate capital towards external growth
opportunities, development of communities in under-supplied markets, yield enhancing value-add capital, and, when appropriate,
investment in our own existing portfolio through the purchase and cancellation of Trust Units through the normal course issuer bids
implemented in both 2023 and 2022.
The Trust sells non-core properties in its portfolio, 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, paying down debt 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.
Brand Diversification
The medium to long-term goal of the Trust is to not only diversify geographically, but also 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 Living – Affordable Value
Boardwalk Living features classic suites for our Resident Members who
appreciate flexibility, reliability, and value that comes with a quality home.
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 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.
49%
Living
44%
Communities
7%
Lifestyle
Boardwalk’s Branding Initiative and Suite Renovation Program
In 2023, Boardwalk invested $126.0 million in capital assets (for the year ended December 31, 2022 – $129.4 million), including
$93.4 million in value-add capital ($96.3 million in 2022), focusing on upgrading common areas, building improvements, energy
efficiency projects, and suite renovations. Please refer to the section titled “Financial Condition – Review of Cash Flows – Investing
Activities – Maintenance of Productive Capacity” in this MD&A for further discussion on value-add capital. Each of the three brands
have different renovation specifications depending on needs and anticipated returns. Market rents are adjusted upward based on an
expected rate of return on the strategic investment. Management of the Trust believes these renovations and upgrades will continue
28
BOARDWALK REIT 2023 ANNUAL REPORT 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’s most affordable brand, ‘Boardwalk Living’, receives suite enhancements on an as needed basis, with the focus being on
providing affordable suites to this demographic segment. ‘Boardwalk Communities’, the Trust’s core brand, conveys enhanced value
and receives major suite upgrades based on need as well as upgrades to existing common areas. ‘Boardwalk Lifestyle’, which
exemplifies upgraded, luxury suites, receives 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 concierge services may be added when
appropriate. 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. Overall, Boardwalk
has and continues to achieve more than its targeted rate of return.
While management of the Trust believes these investments will enhance long-term value, we also recognize the short-term
effects of this program, such as temporary higher vacancies and incentives, though with the increase in apartment demand, this
impact has been significantly reduced. Rebranding and repositioning communities will take time. Construction causes disruption
to existing Resident Members and, depending on the level of investment, may result in higher turnover. Boardwalk continues to
reduce the vacancy loss associated with suites being renovated by reducing the time to completion while still lowering the cost of
the renovations.
DECLARATION OF TRUST
The investment guidelines and operating policies of the Trust are outlined in the DOT, a copy of which is available on request to all
Unitholders and is also available under the REIT’s profile on www.sedarplus.ca. 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.
2.
Acquire, hold, develop, maintain, improve, lease, and manage multi-family residential properties and ancillary real estate
ventures; and
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.
2.
3.
4.
Interest Coverage Ratio of at least 1.5 to 1;
No guaranteeing of third-party debt unless related to direct or indirect ownership or acquisition of real property, including
potential joint arrangement partner structures;
Third-party surveys of structural and environmental conditions are required prior to the acquisition of a multi-family asset; and
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 the employees of the Trust (“Associates”), repairs and
maintenance, as well as capital upgrades.
Distribution Policy
Boardwalk REIT may distribute to holders of Trust Units and LP Class B 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. Please refer to the section titled
“Presentation of Non-GAAP Measures” in this MD&A for more information on FFO. 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 capital renovation program, brand diversification
initiative, acquisitions and new construction of multi-family communities in supply-constrained markets.
29
Compliance with DOT
As at December 31, 2023, the Trust was in compliance with all investment guidelines and operating policies as stipulated in the DOT.
More details are provided later in this MD&A with respect to certain detailed calculations.
For the year ended December 31, 2023, Boardwalk REIT’s interest coverage ratio of consolidated EBITDA (Earnings Before Interest,
Taxes, Depreciation and Amortization) to consolidated interest expense was 2.83 (year ended December 31, 2022 – 2.90). Further
details of the Trust’s interest coverage ratio can be found in NOTE 20 to the audited annual consolidated financial statements for the
years ended December 31, 2023 and 2022, which are available under the Trust’s profile at www.sedarplus.ca.
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, 2023 and 2022, unless otherwise specified.
PRESENTATION OF NON-GAAP MEASURES
Non-GAAP Financial Measures
Boardwalk REIT prepares its consolidated 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 non-GAAP
financial measures called FFO and Adjusted Funds From Operations (“AFFO”) to supplement operating income and profits as
measures of operating performance, as well as a cash flow metric called Adjusted Cash Flow From Operations (“ACFO”). These
non-GAAP financial measures are considered to be meaningful and useful measures of real estate operating performance, however,
are not measures defined by IFRS. The discussion below outlines these measurements and the other non-GAAP financial measures
used by the Trust. Non-GAAP financial measures are not standardized financial measures under IFRS and might not be comparable to
similar financial measures disclosed by other entities. Non-GAAP financial measures should not be construed as alternatives to IFRS
defined measures.
Funds From Operations
The IFRS measurement most comparable to FFO is profit. Boardwalk REIT considers FFO to be an appropriate measurement of the
performance of a publicly listed multi-family residential entity as it is the most widely used and reported measure of real estate
investment trust performance. Profit includes items such as fair value changes of investment property that are subject to market
conditions and capitalization rate fluctuations which are not representative of recurring operating performance. Consistent with
REALPAC, we define FFO as profit adjusted for fair value gains or losses, distributions on the LP Class B Units, gains or losses on the
sale of the Trust’s investment properties, depreciation, deferred income tax, and certain other non-cash adjustments, if any, but after
deducting the principal repayment on lease liabilities and adding the principal repayment on lease receivable. Boardwalk REIT does
not include any gains or losses reported on the sale of its properties in its calculation of FFO. Management of the Trust believes 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. 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 costs” under IFRS. REALPAC recognizes this classification, however,
adds the distributions that were treated as interest expense back when calculating FFO, which suggests these puttable instruments
are similar to equity. Management of the Trust agrees these distribution payments do not truly represent "financing costs", as these
amounts are only payable if the Trust declares distributions, and only for the amount of any distributions declared, both of which are
at the discretion of the Board of Trustees as outlined in the DOT. Therefore, these distributions are excluded from the calculation of
FFO, consistent with the treatment of distributions paid to all other Unitholders. The reconciliation from profit under IFRS to FFO can
be found under the section titled “Performance Review of 2023 – FFO and AFFO Reconciliations” in this MD&A. The Trust uses FFO to
assess operating performance and its distribution paying capacity, determine the level of Associate incentive-based compensation,
and decisions related to investment in capital assets. To facilitate a clear understanding of the combined historical operating results
of Boardwalk REIT, management of the Trust believes FFO should be considered in conjunction with profit as presented in the audited
annual consolidated financial statements for the years ended December 31, 2023 and 2022.
30
BOARDWALK REIT 2023 ANNUAL REPORT Adjusted Funds From Operations
Similar to FFO, the IFRS measurement most comparable to AFFO is profit. Boardwalk REIT considers AFFO to be an appropriate
measurement of a publicly listed multi-family residential entity as it measures the economic performance after deducting for
maintenance capital expenditures to the existing portfolio of investment properties. 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 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 maintains the value of the related assets. The reconciliation of AFFO can be found
under the section titled “Performance Review of 2023 – FFO and AFFO Reconciliations” in this MD&A. The Trust uses AFFO to assess
operating performance and its distribution paying capacity, and decisions related to investment in capital assets. A more detailed
discussion is provided under the section titled “Financial Condition – Review of Cash Flows – Investing Activities – Maintenance of
Productive Capacity” in this MD&A.
Adjusted Cash Flow 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
operating activities 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 under the section titled “Financial Condition – Review of Cash Flows –
Operating Activities” in this MD&A, along with added commentary on the sustainability of Trust Unit distributions. The Trust uses
ACFO to assess its distribution paying capacity.
Boardwalk REIT’s presentation of FFO, AFFO, and ACFO are materially consistent with the definitions provided by REALPAC. These
measurements, however, are not necessarily indicative of cash that is available to fund cash needs and should not be considered
alternatives to cash flow as a measure of liquidity. FFO, AFFO, and ACFO do not represent earnings or cash flow from operating
activities as defined by IFRS. FFO and AFFO should not be construed as an alternative to profit determined in accordance with IFRS as
indicators of Boardwalk REIT’s performance. In addition, Boardwalk REIT’s calculation methodology for FFO, AFFO, and ACFO may
differ from that of other real estate companies and trusts.
Adjusted Real Estate Assets
The IFRS measurement most comparable to Adjusted Real Estate Assets is investment properties. Adjusted Real Estate Assets is
comprised of investment properties, equity accounted investment, and cash and cash equivalents. Adjusted Real Estate Assets is
useful in summarizing the real estate assets owned by the Trust and it is used in the calculation of NAV, which management of the
Trust believes is a useful measure in estimating the entity's value. The reconciliation from Investment Properties under IFRS to
Adjusted Real Estate Assets can be found under the section titled “Capital Structure and Liquidity – Net Asset Value Per Unit” in
this MD&A.
Adjusted Real Estate Debt
The IFRS measurement most comparable to Adjusted Real Estate Debt is total mortgage principal outstanding. Adjusted Real Estate
Debt is comprised of total mortgage principal outstanding and total lease liabilities attributable to land leases. It is useful in
summarizing the Trust’s debt which is attributable to its real estate assets and is used in the calculation of NAV, which management of
the Trust believes is a useful measure in estimating the entity’s value. The reconciliation from total mortgage principal outstanding
under IFRS to Adjusted Real Estate Debt can be found under the section titled “Capital Structure and Liquidity – Net Asset Value per
Unit” in this MD&A.
Net Asset Value
The IFRS measurement most comparable to NAV is Unitholders’ equity. With real estate entities, NAV is the total value of the entity’s
investment properties, equity accounted investment, and cash minus the total value of the entity’s debt. The Trust determines NAV by
taking Adjusted Real Estate Assets and subtracting Adjusted Real Estate Debt, which management of the Trust believes is a useful
measure in estimating the entity’s value. The reconciliation from Unitholders’ Equity under IFRS to NAV can be found under the
section titled “Capital Structure and Liquidity – Net Asset Value per Unit” in this MD&A.
31
Non-GAAP Ratios
The discussion below outlines the non-GAAP ratios used by the Trust. Each non-GAAP ratio has a non-GAAP financial measure as one
or more of its components, and, as a result, does not have a standardized meaning prescribed by IFRS and therefore may not be
comparable to similar financial measurements presented by other entities. Non-GAAP financial measures should not be construed as
alternatives to IFRS defined measures.
FFO per Unit, AFFO per Unit, ACFO per Unit, and NAV per Unit
FFO per Unit includes the non-GAAP financial measure FFO as a component in the calculation. The Trust uses FFO per Unit to assess
operating performance on a per Unit basis, as well as determining the level of Associate incentive-based compensation.
AFFO per Unit includes the non-GAAP financial measure AFFO as a component in the calculation. The Trust uses AFFO per Unit to
assess operating performance on a per Unit basis and its distribution paying capacity.
ACFO per Unit includes the non-GAAP financial measure ACFO as a component in the calculation. The Trust uses ACFO per Unit to
assess its distribution paying capacity.
FFO per Unit, AFFO per Unit, and ACFO per Unit are calculated by taking the non-GAAP ratio's corresponding non-GAAP financial
measure and dividing by the weighted average Trust Units outstanding for the period on a fully diluted basis, which assumes
conversion of the LP Class B Units and vested deferred units determined in the calculation of diluted per Trust Unit amounts in
accordance with IFRS.
NAV per Unit includes the non-GAAP financial measure NAV as a component in the calculation. Management of the Trust believes it
is a useful measure in estimating the entity’s value on a per Unit basis, which an investor can compare to the entity’s Trust Unit price
which is publicly traded to help with investment decisions.
NAV per Unit is calculated as NAV divided by the Trust Units outstanding as at the reporting date on a fully diluted basis which
assumes conversion of the LP Class B Units and vested deferred units outstanding.
FFO per Unit Future Financial Guidance
FFO per Unit Future Financial Guidance is calculated as FFO Future Financial Guidance divided by the estimated weighted average
Trust Units and LP Class B Units outstanding throughout the year. Boardwalk REIT considers FFO per Unit Future Financial Guidance
to be an appropriate measurement of the estimated future financial performance based on information currently available to
management of the Trust at the date of this MD&A.
AFFO per Unit Future Financial Guidance
AFFO per Unit Future Financial Guidance is calculated as AFFO Future Financial Guidance divided by the estimated weighted average
Trust Units and LP Class B Units outstanding throughout the year. Boardwalk REIT considers AFFO per Unit Future Financial Guidance
to be an appropriate measurement of the estimated future profitability based on information currently available to management of
the Trust at the date of this MD&A.
FFO Payout Ratio, AFFO Payout Ratio, and ACFO Payout Ratio
FFO Payout Ratio, AFFO Payout Ratio, and ACFO Payout Ratio represent the REIT’s ability to pay distributions. These non-GAAP ratios
are computed by dividing regular distributions paid on the Trust Units and LP Class B Units by the non-GAAP financial measure of FFO,
AFFO, and ACFO, respectively. Management of the Trust use these non-GAAP ratios to assess its distribution paying capacity.
32
BOARDWALK REIT 2023 ANNUAL REPORT PERFORMANCE REVIEW OF 2023
Boardwalk REIT generates revenues, cash flows, and earnings from two separate sources: primarily rental operations and also 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 suites to customers (referred to as “Resident Members”). Periodically, Boardwalk REIT has generated
additional income from the sale of selective non-core real estate properties and utilized the equity for the acquisition and/or
development of new rental properties and/or for the purchase for cancellation of Trust Units pursuant to its normal course issuer bid.
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.
Performance Measures
The Trust intends to continue 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 2023, the Board of Trustees approved an increase
to the distribution to $0.0975 per Trust Unit on a monthly basis (or $1.17 on an annualized basis) beginning March 2023. This was an
increase of $0.0075 per Trust Unit from the monthly $0.0900 per Trust Unit distributed for January and February 2023. The Trust
intends to continue to redeploy its capital towards long-term value creation, including its suite renovation program, brand
diversification initiative, and acquisition and development of new multi-family suites in supply-constrained markets.
For the three months and year ended December 31, 2023 and 2022, the Trust declared regular distributions of $15.0 million and
$58.3 million (inclusive of distributions paid to holders of the LP Class B Units), respectively (three months and year ended
December 31, 2022 – $13.6 million and $53.7 million, respectively), and recorded profit of $173.1 million and $666.1 million,
respectively (three months and year ended December 31, 2022 – $14.1 million and $283.1 million, respectively). The FFO Payout
Ratio for the three months ended December 31, 2023 was 30.8% (three months ended December 31, 2022 – 33.9%). For the year
ended December 31, 2023, the FFO Payout Ratio was 32.2% (year ended December 31, 2022 – 34.1%). Please refer to the section titled
“Presentation of Non-GAAP Measures” in this MD&A for more information on FFO Payout Ratio. The overall operating performance of
the first and fourth quarters tends to generate the highest payout ratio, mainly due to the high seasonality in total rental expenses. In
particular, these quarters tend to be the highest demand periods for natural gas, a major operational cost for the Trust. It is therefore
important to not 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. 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.
33
FFO per Unit Reconciliations from 2022 to 2023
The following tables show reconciliations of changes in FFO per Unit from December 31, 2022 to December 31, 2023. As previously
noted, we define the calculation of FFO as profit before fair value adjustments, distributions on the LP Class B Units, gains or losses on
the sale of the Trust's investment properties, depreciation, deferred income taxes, and certain other non-cash items. A more detailed
disclosure of the calculation of FFO is included later in this MD&A.
FFO per Unit Reconciliation
FFO per Unit (1) – Dec. 31, 2022
Same Property Net Operating Income (“NOI”) (2)
Non Same Property NOI (2)
Administration
Financing Costs and Interest Income
Unit Issuance
FFO per Unit – Dec. 31, 2023
3 Months
12 Months
$
0.80
$
3.13
0.25
0.01
(0.04)
(0.05)
(0.01)
$
0.96
$
0.79
0.09
(0.18)
(0.22)
(0.01)
3.60
(1) Please refer to the section titled “Presentation of Non-GAAP Measures” in this MD&A for more information.
(2) The definition of same property and non same property can be found in the section titled “Same Property Results” in this MD&A.
FFO and AFFO Reconciliations
In the following table, Boardwalk REIT provides a reconciliation of FFO to Profit, the most comparable related financial statement
measurement, for the three and 12 months ended December 31, 2023 and 2022. Adjustments are explained in the notes below,
as appropriate.
FFO Reconciliation
(In $000’s, except per Unit amounts)
3 Months
Dec. 31, 2023
3 Months
Dec. 31, 2022
% Change
12 Months
Dec. 31, 2023
12 Months
Dec. 31, 2022
% Change
Profit
Adjustments
Other income (1)
Loss on sale of asset
Fair value (gains) losses
LP Class B Unit distributions
Deferred tax expense
Depreciation
Principal repayments on lease liabilities
Principal repayments on lease receivable
FFO (2)(3)
FFO per Unit (3)
$ 173,130 $
14,137
$ 666,099 $
283,096
(68)
928
(127,849)
1,309
6
2,244
(803)
-
(189)
-
23,497
1,208
10
2,069
(945)
186
(886)
928
(2,788)
-
(494,877)
(132,256)
5,169
75
7,921
(3,397)
321
4,774
76
7,782
(3,965)
725
$
48,897 $
39,973
22.3% $ 181,353 $
157,444
$
0.96 $
0.80
20.0% $
3.60 $
3.13
15.2%
15.0%
(1) Other income is comprised of capital gains from investment income.
(2) This is a non-GAAP financial measure.
(3) Please refer to the section titled “Presentation of Non-GAAP Measures” in this MD&A for more information.
Overall, Boardwalk REIT earned FFO of $48.9 million for the fourth quarter of 2023 compared to $40.0 million for the same period in
2022. FFO, on a per Unit basis, for the quarter ended December 31, 2023, increased approximately 20.0% compared to the same
quarter in the prior year from $0.80 to $0.96. Additionally, the Trust earned FFO of $181.4 million for fiscal 2023 compared to
$157.4 million for fiscal 2022. FFO per Unit for the year ended December 31, 2023 increased approximately 15.0% compared to the
prior year from $3.13 to $3.60. The increase for the year ended December 31, 2023 was primarily driven by higher occupied rents,
lower vacancy loss and incentives, and the acquisitions in Alberta and Ontario during 2022 and in British Columbia in April 2023,
partially offset by increased wages and salaries, repairs and maintenance, utilities, property taxes, financing costs, and
administration. For the quarter, FFO was driven largely by the same factors as the year ended December 31, 2023 with the exception
of lower wages and salaries as well as lower utilities due to milder weather compared to the same period in the prior year.
34
BOARDWALK REIT 2023 ANNUAL REPORT
Profit for the fourth quarter of 2023 was $173.1 million compared to a profit of $14.1 million in the fourth quarter of 2022. Profit for the
year ended December 31, 2023 was $666.1 million, compared to profit of $283.1 million in the prior year. The increases in profit were
mainly attributable to the significant increase in fair value gains recognized on investment properties due to increased market rents.
These gains were partially offset by increases in stabilized capitalization rates in the third quarter of 2023, a reflection of rising
interest rates. The year ended December 31, 2023, has shown continued improvements in the economy and, along with the increasing
demand for affordable housing driven in part by rising interest rates and record high immigration, has resulted in further growth in
market rents. The weighted average capitalization rates for the Trust were 5.05% and 4.92% as at December 31, 2023 and 2022,
respectively. For more information on the Trust's capitalization rates, please refer to the section titled “Financial Condition – Review
of Cash Flows – Investing Activities – Investment Properties” in this MD&A.
The following table provides a reconciliation of FFO to AFFO:
(000’s)
FFO (1)(2)
Maintenance Capital Expenditures (3)
AFFO (1)(2)
FFO per Unit (2)
AFFO per Unit (2)
Regular Distributions
FFO Payout Ratio (2)
AFFO Payout Ratio (2)
Profit
3 Month
Dec. 31, 2023
3 Months
Dec. 31, 2022
12 Months
Dec. 31, 2023
12 Months
Dec. 31, 2022
$
48,897 $
39,973 $ 181,353 $
157,444
8,651
6,994
32,255
31,263
$
40,246 $
32,979 $ 149,098 $
126,181
$
$
0.96 $
0.80 $
3.60 $
0.79 $
0.66 $
2.96 $
3.13
2.51
$
15,041 $
13,554 $
58,338 $
53,673
30.8%
37.4%
33.9%
41.1%
32.2%
39.1%
34.1%
42.5%
$ 173,130 $
14,137 $ 666,099 $
283,096
(1) This is a non-GAAP financial measure.
(2) Please refer to the section titled “Presentation of Non-GAAP Measures” in this MD&A for more information.
(3)
Details of the calculation of Maintenance Capital Expenditures can be found in the section titled “Financial Condition – Review of Cash Flows – Investing Activities –
Value-add Capital and Maintenance Capital Expenditures” in this MD&A.
FINANCIAL PERFORMANCE SUMMARY
At a Glance
(In $000’s, except per Unit amounts)
Total assets
Rental revenue
Profit
FFO (1)(2)
FFO per Unit (2)
2023
8,141,876
545,658
666,099
181,353
3.60
$
$
$
$
$
2022
7,067,275
496,360
283,096
157,444
3.13
$
$
$
$
$
% Change
15.2%
9.9%
135.3%
15.2%
15.0%
(1) This is a non-GAAP financial measure.
(2) Please refer to the section titled “Presentation of Non-GAAP Measures” in this MD&A for more information.
Total assets increased from the amounts reported in the prior year, mainly as a result of fair value gains and investment in
capital assets on the Trust’s investment properties, as well as a new investment property acquisition that occurred in 2023.
Rental revenue increased by 9.9%, due to higher in-place occupied rents across all regions and lower incentives and vacancy in
Alberta and Saskatchewan. In addition, acquisitions in Alberta and Ontario during 2022 and in British Columbia in April 2023 have
contributed to the increase in the rental revenues. The increase in profit compared to the prior year was due primarily to a significant
fair value gain recognized of $598.8 million on its investment properties in 2023, compared to a $106.4 million gain in 2022. The
change in fair value gains of the Trust's investment properties was largely driven by larger increases in market rents, partially offset by
increases in stabilized capitalization rates compared to the prior year, a reflection of rising interest rates. Partially offsetting the
increase in profit was higher expenses attributable to wages and salaries, repairs and maintenance, utilities, property taxes, financing
costs, and administration.
35
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 by balancing
market rents, rental incentives, turnovers, and occupancy gains. The application of this rental revenue strategy is ongoing, on a
market-by-market basis, with the focus on obtaining the optimal balance of these variables given existing market conditions. In
addition, the NOI strategy focuses on minimizing expenses.
(In $000’s, except number of suites)
Rental revenue
Expenses
Operating expenses
Utilities
Property taxes
Total rental expenses
Net operating income
Operating margin (1)
Number of suites at December 31 (2)
3 Months
Dec. 31, 2023
3 Months
Dec. 31, 2022
% Change
12 Months
Dec. 31, 2023
12 Months
Dec. 31, 2022
% Change
$ 141,907 $
129,172
9.9% $ 545,658 $
496,360
9.9%
26,367
13,872
13,720
26,924
14,556
12,888
(2.1)%
(4.7)%
6.5%
106,190
$104,081
53,392
53,087
52,572
51,047
$
53,959 $
54,368
(0.8)% $
212,669 $
207,700
2.0%
1.6%
4.0%
2.4%
$
87,948 $
74,804
17.6% $ 332,989 $
288,660
15.4%
62.0%
33,846
57.9%
33,722
61.0%
33,846
58.2%
33,722
(1) Operating margin is calculated by dividing NOI by rental revenue allowing management to assess the percentage of rental revenue which generated profit.
(2) Excludes 183 suites related to the Trust’s joint venture in Brampton, Ontario.
(In $000’s, except number of suites)
Gross rental revenue (1)
Vacancy loss (2)
Incentives (3)
Rental revenue
3 Months
Dec. 31, 2023
3 Months
Dec. 31, 2022
% Change
12 Months
Dec. 31, 2023
12 Months
Dec. 31, 2022
$ 146,468 $
138,312
5.9% $ 570,703 $
542,729
(1,320)
(3,241)
(2,537)
(6,603)
(48.0)%
(50.9)%
(7,397)
(17,648)
(15,478)
(30,891)
$ 141,907 $
129,172
9.9% $ 545,658 $
496,360
% Change
5.2%
(52.2)%
(42.9)%
9.9%
(1)
(2)
(3)
Gross rental revenue is a component of rental revenue and represents rental revenue based on 100% occupancy before adjustments for vacancy loss and incentives.
Vacancy loss is a component of rental revenue and represents the estimated loss of gross rental revenue from unoccupied suites during the period.
Incentives is a component of rental revenue and represents any suite specific rental discount offered or initial direct costs incurred in negotiating and arranging an
operating lease amortized over the term of the operating lease.
Boardwalk REIT’s rental operations for the three and 12 months ended December 31, 2023 reported higher results compared to the
same periods in the prior year, with rental revenue increasing 9.9% in both periods. For the three and 12 months ended December 31,
2023, the increase in rental revenue was due to higher in-place occupied rents, lower vacancy loss, and lower incentives offered, as
well as the acquisitions in Alberta and Ontario during 2022 and in British Columbia in April 2023. As outlined in the second table
above, the Trust was able to reduce incentives by 42.9% year-over-year, while also reducing vacancy losses by 52.2% for the year
ended December 31, 2023. The Trust intends to continue to offer selective incentives in certain communities to maintain occupancy
levels, with an overall goal of limiting incentives on new leases and decreasing incentives altogether.
36
BOARDWALK REIT 2023 ANNUAL REPORT
For the three months ended December 31, 2023, total rental expenses were relatively consistent with the same period in the prior
year, with only a slight decrease of 0.8%. Increases in property taxes were largely offset by decreases in operating expenses and
utilities. For the year ended December, 31, 2023, total rental expense increased 2.4% compared to the same period in 2022 due to
higher operating expenses, utilities, and property taxes.
The Trust continues to track, in detail, the actual work performed by our onsite Associates to assist in the operating effectiveness of
its overall operations. This program results in overall lower costs while allowing the Trust greater control over the timing of its capital
improvement projects, compared to contracting these same projects out to third parties. 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 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 ended December 31, 2023, operating expenses decreased 2.1% compared to the same period in the prior year
due to lower wages and salaries, lower insurance premiums, as well as lower advertising costs and bad debts as a result of the higher
occupancy being realized throughout the portfolio, partially offset by higher building repairs and maintenance. For the year ended
December 31, 2023, operating expenses increased 2.0% compared to the same period in the prior year due to higher wages and
salaries, higher building repairs and maintenance, and higher insurance premiums for the first half of the year, partially offset by
lower bad debt expense, advertising costs, and lower insurance premiums upon renewal in July 2023.
Utility costs decreased by 4.7% and increased by 1.6% for the three and 12 months ended December 31, 2023, respectively, compared
to the same periods in 2022. For the fourth quarter, the decrease was primarily attributable to lower natural gas costs due to the
milder weather compared to the same period last year, resulting in reduced consumption levels. For the year-to-date, the increase
was mainly attributable to higher electricity costs resulting from significant rate increases in the last quarter of 2022, higher water and
sewer costs, higher carbon levy costs from the federal increases being implemented, and a larger one-time refund received during the
third quarter in 2022. Natural gas costs decreased year-over-year due to lower rates paired with lower consumption from more
favourable weather compared to last year. Higher sub-metering recoveries in the year ended December 31, 2023 also helped to
partially offset the higher utilities. Fixed price physical commodity contracts have helped to partially or fully mitigate the Trust’s
exposure to fluctuating natural gas and electricity prices. Further details regarding the contracts on natural gas, as well as electricity
prices in Alberta, can be found in NOTE 19 to the audited annual consolidated financial statements for the years ended December 31,
2023 and 2022.
Property taxes increased 6.5% and 4.0% for the three months and year ended December 31, 2023, respectively, compared to the same
periods in the prior year mainly due to higher overall property tax assessments received and the acquisitions during 2022 and 2023.
The Trust is constantly reviewing property tax assessments and related charges and, where management of the Trust believes
appropriate, will, for a fee, appeal all or a portion of the related assessment. It is not uncommon for the Trust to receive property tax
refunds and adjustments; however, due to the uncertainty of the amount and timing of the refunds and adjustments, these amounts
are only reported when they are received.
Overall, operating margin for the three months ended December 31, 2023 was 62.0%, compared to 57.9% for the same period in 2022,
an increase of 7.1%. Similarly, operating margins for the 12 months ended December 31, 2023 and 2022 were 61.0% and 58.2%
respectively, an increase of 4.9% year over year.
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.
37
SEGMENTED OPERATIONAL REVIEWS
Alberta Rental Operations
(In $000’s, except number of suites)
Rental revenue
Expenses
Operating expenses
Utilities
Property taxes
Total rental expenses
Net operating income
Operating margin
Number of suites at December 31
3 Months
Dec. 31, 2023
3 Months
Dec. 31, 2022
% Change
12 Months
Dec. 31, 2023
12 Months
Dec. 31, 2022
% Change
$
90,261 $
81,490
10.8% $ 346,368 $
311,908
11.0%
16,244
8,918
8,780
17,161
9,711
8,383
(5.3)%
(8.2)%
4.7%
65,520
34,374
34,399
66,067
34,107
33,232
$
33,942 $
35,255
(3.7)% $ 134,293 $
133,406
$
56,319 $
46,235
21.8% $ 212,075 $
178,502
62.4%
21,084
56.7%
21,084
61.2%
21,084
57.2%
21,084
(0.8)%
0.8%
3.5%
0.7%
18.8%
Alberta is Boardwalk’s largest operating segment, representing 63.7% of total reported NOI for the year ended December 31, 2023. In
addition, Alberta represents 62.3% of total suites. Boardwalk REIT’s Alberta operations for three months and year ended December 31,
2023 reported a 10.8% and 11.0% increase, respectively, in rental revenue compared to the same periods in the prior year due to higher
in-place occupied rents and lower vacancy loss and incentives. Increases were driven, in part, by the high migrations into the province in
2022 and continuing into 2023. These improvements were coupled with two asset acquisitions in 2022, one in Canmore and one in
Calgary. For the three months ended December 31, 2023, total rental expenses decreased by 3.7% compared to the same period in the
prior year due to lower operating expenses and utilities, partially offset by increased property taxes. For the 12 months ended December
31, 2023, total rental expenses were relatively consistent with the same period in the prior year, increasing slightly by 0.7% due to higher
utilities and property taxes which were largely offset by lower operating expenses. The year-over-year changes are partially attributable
to the acquisitions in Canmore and Calgary in 2022; however, even excluding these new buildings the portfolio still experienced increases
in rental revenues and total rental expenses consistent with the prior year.
Operating expenses decreased by 5.3% and 0.8% for the three months and year ended December 31, 2023 compared to the same
periods in the prior year. For the fourth quarter, the decrease was due to lower wages and salaries, lower insurance premiums, as well
as lower advertising costs and bad debts as a result of the higher occupancy being realized throughout the portfolio, partially offset
by higher building repairs and maintenance. For the year ended December 31, 2023, overall operating expenses were fairly consistent
with the prior year. Higher wages and salaries and higher insurance premiums for the first half of the year were largely offset by lower
bad debt expense, advertising costs, and lower insurance premiums upon renewal in July 2023.
Utilities for the three months ended December 31, 2023 decreased by 8.2% due primarily to lower natural gas costs attributable to
the milder weather compared to the same period last year, resulting in reduced consumption levels. For the year ended December 31,
2023, utilities were consistent with same period in the prior year. Higher electricity costs due to rates increasing significantly in the
last quarter of 2022, higher water and sewer costs, higher carbon levy costs from the federal increases being implemented, and a
larger one-time refund received during the third quarter in 2022, were offset by lower natural gas costs due to lower rates paired with
lower consumption from more favourable weather compared to last year, as well as higher sub-metering recoveries in the year ended
December 31, 2023. Currently, the Trust has three outstanding natural gas contracts to mitigate the price of its natural gas usage.
The Trust also has two outstanding electricity contracts with two utility retailers to supply the Trust with its electrical power needs.
More details can be found in NOTE 19 to the audited annual consolidated financial statements for the years ended December 31, 2023
and 2022.
Property taxes for the three and 12 months ended December 31, 2023 increased 4.7% and 3.5% respectively, compared to the same
periods in the prior year due to higher property tax assessments and the acquisitions that were completed during 2022.
NOI for Alberta increased $33.6 million, or 18.8%, for the 12 months ended December 31, 2023, compared to the same period in 2022.
Alberta’s operating margin for the year ended December 31, 2023 was 61.2%, which is 7.0% higher compared to the same period in 2022.
38
BOARDWALK REIT 2023 ANNUAL REPORT
British Columbia Rental Operations
(In $000’s, except number of suites)
Rental revenue
Expenses
Operating expenses
Utilities
Property taxes
Total rental expenses
Net operating income
Operating margin
Number of suites at December 31
3 Months
Dec. 31, 2023
3 Months
Dec. 31, 2022
% Change
12 Months
Dec. 31, 2023
12 Months
Dec. 31, 2022
% Change
$
1,698 $
682
149.0% $
5,487 $
2,691
103.9%
164
59
97
$
$
320 $
1,378 $
81.2%
238
51
23
41
115
567
83.1%
114
221.6%
156.5%
136.6%
488
220
345
178.3% $
1,053 $
241
103
164
508
143.0% $
4,434 $
2,183
102.5%
113.6%
110.4%
107.3%
103.1%
80.8%
238
81.1%
114
For the three months and year ended December 31, 2023, operating results were higher than the same periods in the prior year due to
one rental building consisting of 124 suites that was acquired in Victoria, British Columbia on April 25, 2023. Further details on this
acquisition can be found in the section titled “Financial Condition – Review of Cash Flows– Investing Activities – New Property
Acquisitions and Dispositions” in this MD&A.
Saskatchewan Rental Operations
(In $000’s, except number of suites)
Rental revenue
Expenses
Operating expenses
Utilities
Property taxes
Total rental expenses
Net operating income
Operating margin
Number of suites at December 31
3 Months
Dec. 31, 2023
3 Months
Dec. 31, 2022
% Change
12 Months
Dec. 31, 2023
12 Months
Dec. 31, 2022
% Change
$
14,891 $
13,713
8.6% $
57,508 $
52,952
8.6%
2,290
1,685
1,156
$
$
5,131 $
9,760 $
65.5%
3,505
2,443
1,663
1,119
5,225
8,488
61.9%
3,505
(6.3)%
1.3%
3.3%
9,764
6,852
4,590
9,321
6,510
4,380
(1.8)% $
21,206 $
20,211
4.8%
5.3%
4.8%
4.9%
15.0% $
36,302 $
32,741
10.9%
63.1%
3,505
61.8%
3,505
For both the three months and year ended December 31, 2023, Saskatchewan rental revenue increased by 8.6% compared to the
same periods in the prior year due to higher in-place occupied rents coupled with lower incentives and vacancy loss. For the three
months ended December 31, 2023, total rental expenses decreased by 1.8% compared to the same period in the prior year due to
lower operating expenses, partially offset by higher utilities and property taxes. For the year ended December 31, 2023, total rental
expenses increased by 4.9% compared to the same period in the prior year due to higher operating expenses, utilities, and
property taxes.
Operating expenses for the three months and year ended December 31, 2023 decreased by 6.3% and increased by 4.8%, respectively,
compared to the same periods in the prior year. For the fourth quarter, the decrease was due to lower wages and salaries, advertising
costs, and lower insurance premiums upon renewal in July 2023. For the year-to-date, the increase in operating expense was driven
by higher wages and salaries, building repairs and maintenance, and higher insurance premiums for the first half of the year, partially
offset by lower advertising costs and bad debt expense.
39
Utilities for the three months and year ended December 31, 2023, increased by 1.3% and 5.3%, respectively, compared to the same
periods in the prior year. The increases were a result of higher electricity costs, water and sewer costs, and carbon levies. The lower
increase for the fourth quarter was due to lower natural gas costs and electricity attributable to the milder weather conditions
compared to the same period in the prior year resulting in lower consumption. The Trust has one outstanding fixed price contract to
mitigate its natural gas price for its Saskatchewan natural gas usage. Details of the contract can be found in NOTE 19 to the audited
annual consolidated financial statements for the years ended December 31, 2023 and 2022.
Property taxes increased by 3.3% and 4.8% for the three and 12 months ended December 31, 2023, respectively, compared to the
same periods in the prior year due to higher property tax assessments.
Reported operating margin for the year ended December 31, 2023 was 63.1% compared to 61.8% for the same period in 2022.
Ontario Rental Operations
(In $000’s, except number of suites)
Rental revenue
Expenses
Operating expenses
Utilities
Property taxes
Total rental expenses
Net operating income
Operating margin
Number of suites at December 31 (1)
3 Months
Dec. 31, 2023
3 Months
Dec. 31, 2022
% Change
12 Months
Dec. 31, 2023
12 Months
Dec. 31, 2022
% Change
$
11,525 $
10,945
5.3% $
45,355 $
42,332
7.1%
2,175
1,144
1,268
$
$
4,587 $
6,938 $
60.2%
3,019
2,005
1,088
1,107
4,200
6,745
61.6%
3,019
8.5%
5.1%
14.5%
8,310
4,676
4,593
7,722
4,275
4,340
9.2% $
17,579 $
16,337
2.9% $
27,776 $
25,995
61.2%
3,019
61.4%
3,019
7.6%
9.4%
5.8%
7.6%
6.9%
(1) Excludes 183 suites related to the Trust’s joint venture in Brampton, Ontario.
Boardwalk REIT’s Ontario operations for the three months ended December 31, 2023 reported a 5.3% increase in rental revenue
compared to the same period in the prior year due to higher in-place occupied rents. For the year ended December 31, 2023, rental
revenue increased 7.1% compared to the same period in 2022 due to higher in-place occupied rents and an acquisition in Brampton
consisting of 152 suites on March 30, 2022. Total rental expenses increased by 9.2% and 7.6% for the three months and year ended
December 31, 2023, respectively, compared to the same periods in the prior year due to higher operating expenses, utilities, and
property taxes, as well as the addition of the acquisition in Brampton.
Operating expenses for the three months ended December 31, 2023 increased by 8.5% compared to the same period in the prior year,
which was attributable to higher wages and salaries, building repair and maintenance, bad debt expense, and advertising costs. For
the year ended December 31, 2023, operating expenses increased 7.6% compared to the same period in the prior year due to higher
wages and salaries, building repairs and maintenance, insurance, advertising costs, as well as the addition of the acquisition in
Brampton, partially offset by lower bad debt expense.
Utility costs increased 5.1% for the three months ended December 31, 2023 compared to the same period in the prior year due to
higher electricity and natural gas costs. For the year ended December 31, 2023, utilities increased 9.4% compared to the same period
in the prior year mainly due to higher natural gas costs and higher carbon levies as a result of the implementation of the federal
increases, and as a result of proceeds from a one-time refund that was received in the third quarter of 2022. The Trust has one
outstanding fixed price natural gas contract for 69% of its London natural gas usage. Details of the contract can be found in NOTE 19
to the audited annual consolidated financial statements years ended December 31, 2023 and 2022.
Property taxes increased 14.5% and 5.8% for the three months and year ended December 31, 2023, respectively, compared to the
same periods in the prior year due to higher property tax assessments.
NOI increased by 6.9% for the year ended December 31, 2023 compared to the prior year. Reported operating margin for the year
ended December 31, 2023 was 61.2% compared to 61.4% for the prior year.
40
BOARDWALK REIT 2023 ANNUAL REPORT
Quebec Rental Operations
(In $000’s, except number of suites)
Rental revenue
Expenses
Operating expenses
Utilities
Property taxes
Total rental expenses
Net operating income
Operating margin
Number of suites at December 31
3 Months
Dec. 31, 2023
3 Months
Dec. 31, 2022
% Change
12 Months
Dec. 31, 2023
12 Months
Dec. 31, 2022
% Change
$
23,098 $
21,849
5.7% $
89,873 $
85,184
5.5%
4,019
1,970
2,370
$
8,359 $
3,827
1,962
2,196
7,985
5.0%
0.4%
7.9%
15,632
6,894
8,952
14,653
7,157
8,708
4.7% $
31,478 $
30,518
$
14,739 $
13,864
6.3% $
58,395 $
54,666
63.8%
6,000
63.5%
6,000
65.0%
6,000
64.2%
6,000
6.7%
(3.7)%
2.8%
3.1%
6.8%
Boardwalk REIT’s Quebec operations reported rental revenue increases of 5.7% and 5.5% for the three and 12 months ended
December 31, 2023, respectively, compared to the same periods in the prior year. The increases were mainly attributable to higher
in-place occupied rents and a decrease in vacancy loss mainly due to the lease up of the newly re-positioned former seniors’ home
that was completed in the beginning of 2022. Total rental expenses for the three months and year ended December 31, 2023 increased
4.7% and 3.1%, respectively, compared to the same periods in 2022, due to higher operating expenses and property taxes, while
utilities were consistent for the fourth quarter of 2023 and decreased on a year-to-date basis, compared to the same periods in 2022.
For the three and 12 months ended December 31, 2023, operating expenses increased by 5.0% and 6.7%, respectively, compared to
the same periods in 2022 mainly due to higher wages and salaries and building repairs and maintenance. Insurance expense was
higher for the first half of 2023 but decreased in the third quarter upon renewal in July 2023.
For the three months ended December 31, 2023, utilities remained relatively flat with a slight increase of 0.4% compared to the same
period in 2022. For the year ended December 31, 2023, utilities decreased 3.7% compared to the same period in 2022 due to lower
natural gas costs resulting from lower rates and consumption. The Trust has one outstanding fixed price natural gas contract to
mitigate 74% of its Nun's Island natural gas usage. The details of the natural gas contract are reported in NOTE 19 to the audited
annual consolidated financial statements for the years ended December 31, 2023 and 2022.
Property taxes increased 7.9% and 2.8% for the three months and year ended December 31, 2023, respectively, compared to the same
periods in the prior year due to higher property tax assessments.
Reported operating margins for the 12 months ended December 31, 2023 increased from 64.2% to 65.0%.
OPERATIONAL SENSITIVITIES
Net Operating Income Optimization
Boardwalk continues to focus on optimizing its NOI. This focus requires the Trust to manage not only revenues but also related
operating costs and takes both into consideration when determining a service and pricing model. Lowering overall turnover while
maintaining competitive lease rental rates and a focus on a high-quality level of service continue to be the model that has delivered
the most stable and long-term income source to date. This strategy is region specific and these variables are in constant flux.
In competitive markets, 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 increased use of these incentives, particularly in Alberta, was an attempt
by the Trust to keep occupancy levels higher than the overall market. As the market is in under supply of housing, the Trust has begun
to unwind these incentives and increase market rents. This is evidenced in the current quarter with incentives decreasing 50.9% and
42.9% for the three and 12 months ended December 31, 2023, respectively, compared to the same periods in the prior year. It has
been our experience that this proactive approach has resulted in optimizing NOI.
In addition, in these competitive, non-price-controlled markets, the Trust takes steps to renew leases 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
41
to the next fiscal period. The percentages reported as occupancy levels (see table below) represent those occupied suites generating
revenue for the period noted. The Trust closely monitors ‘apartment availability’, which represents unoccupied suites 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
recent acquisitions or newer developments, portfolio occupancy is on a same property basis.
Management of the Trust believes that when the NOI optimization strategy is combined with our 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 may have some short-term consequences, as the timing
of these enhancements may result in longer periods of time that suites are not available to be rented, leading to short-term increases
in vacancy losses. However, the renovation program has slowed in relation to the current higher occupancy rates and in turn, the Trust
will monitor the various renovation opportunities as they arise. It is still management’s belief that a focus on 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, and
refining them where appropriate.
Boardwalk REIT’s Portfolio Occupancy (Same property):
City
Calgary
Edmonton
Fort McMurray
Grande Prairie
Kitchener
London
Cambridge
Waterloo
Montreal
Quebec City
Red Deer
Regina
Saskatoon
Verdun
Portfolio
Q4 2023
Q4 2022
99.38%
98.42%
97.91%
98.13%
98.26%
98.69%
97.13%
99.44%
99.56%
99.27%
99.32%
98.85%
99.39%
99.75%
98.91%
98.88%
97.15%
94.87%
96.00%
98.62%
98.87%
97.49%
98.33%
97.60%
96.12%
98.57%
98.29%
99.24%
99.82%
97.99%
In Q4 2023, the Trust reported an increase of 92 basis points (bps) in its overall same property occupancy rate compared to the same
quarter in the prior year, an increase from 97.99% to 98.91%. In Alberta, the continued growth and improvements to the market
conditions and the increasing net migration into the province since 2022 have been driving up demand and increasing occupancy,
which is reflected above in all Alberta regions. Edmonton, which had been experiencing competitive market conditions from new
supply of multi-family suites entering the market as well as challenging economic conditions, has realized an increase of 127 bps in
occupancy compared to the same quarter in the prior year. In Calgary, occupancy for the quarter increased 50 bps when compared to
the same period in the prior year. The increases seen in Fort McMurray and Grande Prairie are a result of the energy sector maintaining
strong momentum compared to the last few years, together with improved economic conditions from recent increases in commodity
prices leading to more drilling activity and capital investment into the region, thereby contributing to a stronger oil and gas market
compared to the last few years. In addition, Alberta has seen record high net migration into the province in 2022 and 2023, which has
also contributed to the increased occupancy within this market segment and an uptick in leasing activity.
42
BOARDWALK REIT 2023 ANNUAL REPORT The rising occupancy across the whole portfolio is a further indication of the rebound within the economy. In Saskatchewan,
occupancy in Q4 2023 continued to grow in the Regina and Saskatoon markets compared to the same quarter in the prior year. Regina
occupancy levels increased to 98.85% in Q4 2023 compared to 98.29% in Q4 2022. Saskatoon occupancy levels increased to 99.39% in
Q4 2023 compared to 99.24% in Q4 2022. These increases are a result of improved economic conditions in the agricultural sector this
past year, which can be partly attributed to the war in Ukraine driving up grain prices and drawing more in-migration to the province.
Occupancy continued to remain strong in Ontario and Quebec. In Quebec City, occupancy quarter-over-quarter increased from
96.12% in Q4 2022 to 99.27% in Q4 2023. The lower occupancy in 2022 was attributed to the seniors’ community building within
Quebec City that was being re-positioned to a conventional multi-family asset beginning in early 2021. The repositioning was
completed in early 2022 and occupancy of the building has continued to increase from 86.34% occupancy at December 31, 2022, to
98.91% at December 31, 2023.
As overall markets stabilize, we expect some up and down movements in occupancy as the Trust aims to maintain occupancy near
current levels.
Rentals, Move-outs and Impact on Reported Occupancy (Same property):
Rentals, Move-outs & Occupancy
Turnover
Rentals
% Occupancy
1,400
1,200
1,000
800
600
400
200
0
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan
Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Jan
Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Jan
2021
2022
2023
2024
100%
98%
96%
94%
92%
90%
88%
Demand and supply, as with any industry, is an essential performance indicator for multi-family real estate. The above chart shows
the total move-outs (supply) compared to total rentals (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. Adjusting market
rental rates is an ongoing process for the Trust and is consistent with its overall strategy of optimizing overall NOI; consequently, the
Trust expects to 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
$5.5 million, or $0.11 per Trust Unit on a fully diluted basis.
43
SAME PROPERTY RESULTS
Boardwalk defines same 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 same properties was 98.3% of its total rental suite portfolio as at December 31, 2023, or a total
of 33,264 suites. The tables below provide a regional breakdown on these properties for the fourth quarter of 2023 compared to the
fourth quarter of 2022, and fiscal 2023 compared to fiscal 2022.
Same Property Dec. 31 2023 – 3 M
# of Suites
% Rental
Revenue Growth
% Total Rental
Expenses Growth
% Net Operating
Income Growth
Edmonton
Calgary
Other Alberta
Alberta
Quebec
Saskatchewan
Ontario
British Columbia
12,882
5,960
1,936
20,778
6,000
3,505
2,867
114
33,264
10.2%
12.0%
10.3%
10.8%
5.7%
8.6%
5.5%
4.7%
9.2%
(3.9)%
(3.2)%
(7.6)%
(4.2)%
4.7%
(1.8)%
7.6%
13.4%
(1.6)%
22.8%
20.8%
26.2%
22.3%
6.3%
15.0%
4.2%
3.0%
16.8%
Same Property Dec. 31 2023 – 12 M
# of Suites
% Rental
Revenue Growth
% Total Rental
Expenses Growth
% Net Operating
Income Growth
Edmonton
Calgary
Other Alberta
Alberta
Quebec
Saskatchewan
Ontario
British Columbia
12,882
5,960
1,936
20,778
6,000
3,505
2,867
114
33,264
9.4%
11.8%
9.1%
10.2%
5.5%
8.6%
5.4%
4.6%
8.8%
(1.0)%
3.6%
(3.4)%
0.1%
3.1%
4.9%
6.8%
12.8%
1.6%
18.5%
16.4%
20.1%
17.8%
6.8%
10.9%
4.6%
2.7%
13.7%
% of NOI
35.1%
23.3%
5.0%
63.4%
17.0%
11.3%
7.6%
0.7%
100.0%
% of NOI
34.8%
23.0%
4.9%
62.7%
17.7%
11.0%
7.9%
0.7%
100.0%
Same property rental revenue increased by 8.8% for the year ended December 31, 2023, compared to the same period in the prior
year. Total rental expenses reported for the year increased by 1.6% from 2022, resulting in a NOI increase of 13.7% compared to the
prior year. The increase in reported rental revenue was driven by the higher in-place occupied rents across all regions as well as
continued decreases in incentives in the Alberta and Saskatchewan markets and decreases in vacancy loss in all regions, excluding
British Columbia. Same property rental expenses increased for most regions due to the current economic environment leading to
higher wages and salaries from inflation, higher utilities from increased rates, and higher property taxes. In particular, Calgary
incurred increased wages and salaries, as well as increased utilities costs specific to increased prices for electricity as a result of a
fixed price contract which expired in 2022 and was renewed at a higher rate. The increased cost in Saskatchewan total rental expenses
was the result of inflationary pressure on wages and salaries and repairs and maintenance coupled with increased prices for most
utilities. British Columbia total rental expenses were also impacted by inflationary pressure on most operating expense categories
including wages and salaries and repairs and maintenance. However, total same property rental expenses decreased slightly in
Edmonton and decreased within Other Alberta due to lower repairs and maintenance costs, advertising, and bad debts as a result of
the higher occupancy recognized. These positive gains in rental revenues and reductions in operating expenses, where noted, have
led to same property NOI growth in Alberta of 17.8% for the year ended December 31, 2023, compared to the same period in the prior
year. Overall, the Trust recognized same property NOI growth of 13.7% for 2023 compared to the prior year.
44
BOARDWALK REIT 2023 ANNUAL REPORT
Same Property Rental Revenue Growth
Edmonton
Calgary
Other Alberta
Quebec
Saskatchewan
Ontario
British Columbia
# of Suites
12,882
5,960
1,936
6,000
3,505
2,867
114
33,264
Q4 2023
vs Q3 2023
Q4 2023
vs Q2 2023
Q4 2023
vs Q1 2023
Q4 2023
vs Q4 2022
2.7%
2.8%
3.2%
2.0%
2.6%
1.3%
0.5%
2.5%
5.6%
5.9%
5.3%
4.5%
5.1%
2.4%
1.7%
5.1%
8.8%
9.2%
8.5%
4.9%
6.9%
3.1%
3.7%
7.5%
10.2%
12.0%
10.3%
5.7%
8.6%
5.5%
4.7%
9.2%
On a sequential basis, same property rental revenue reported in the fourth quarter of 2023 increased by 2.5% over Q3 2023, increased
by 5.1% compared to Q2 2023, increased by 7.5% compared to Q1 2023, and increased by 9.2% compared to Q4 2022. 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. The significant increases over the same
quarter in the prior year also reflect market improvements and an influx in migration across provinces and international immigration,
which has increased demand and contributed to the increases seen across Alberta. As rental demand increases, the Trust’s focus is on
sustainable rental rate increases with an emphasis on retention. The Trust continues to closely monitor this latest trend.
Estimated Mark-to-Market Revenue Gain Calculation
Boardwalk REIT’s projected mark-to-market revenue gain, representing the difference between estimated market rents and actual
occupied rents in December 2023, and adjusted for current occupancy levels, totaled approximately $56.4 million on an annualized
basis, representing $1.12 per Unit (Trust Units and LP Class B Units). For the most part, Boardwalk REIT’s rental lease agreements last
no longer than 12 months. By managing market rents and providing suite-specific incentives to our Resident Members, the Trust and
all its stakeholders continue to benefit from lower turnover, reduced expenses, and high occupancy. Estimated mark-to-market
revenue gain is measured at a point in time and is not intended to depict expected future financial performance. 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 mark-to-market revenue gain” amount. The importance of this estimate, however, is that it can be an
indicator of future rental performance, assuming continuing economic conditions and trends. 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, particularly on renewals.
45
Without Incentives
With Incentives
Dec. 2023
Market
Rent (1)
Dec. 2023
Occupied
Rent (2)
Mark-to-
Market
Per
Month (3)
Same Property
Annualized
Mark-to-
Market
Adjusted
for Current
Occupancy
Levels
($000's)
Dec. 2023
Market Rent,
Including
Incentives (4)
Dec. 2023
Occupied
Rent (2)
Mark-to-
Market
Per
Month (3)
Annualized
Mark-to-
Market
Adjusted
for Current
Occupancy
Levels
($000's)
Weighted
Average
Apartment
Suites (5)
% of
Portfolio
Edmonton
$ 1,428 $
1,341 $
87 $ 13,262 $
1,378 $
1,341 $
37 $
5,552
12,882
Calgary
Other Alberta
1,892
1,355
1,662
1,229
230
126
16,539
2,897
1,866
1,301
1,662
1,229
204
72
14,684
1,641
6,041
1,936
Alberta
$ 1,555 $
1,423 $
132 $ 32,698 $
1,512 $
1,423 $
89 $ 21,877
20,859
Quebec
$ 1,434 $
1,282 $
152 $ 10,908 $
1,432 $
1,282 $
150 $ 10,813
Saskatchewan (6)
Ontario
British Columbia
1,508
1,894
2,512
1,429
1,274
2,121
79
620
391
3,316
21,099
530
1,475
1,893
2,508
1,429
1,274
2,121
46
619
387
1,927
21,240
527
6,000
3,505
2,867
114
39%
18%
6%
63%
18%
10%
9%
0%
Total Portfolio
$ 1,561 $
1,388 $
173 $ 68,551 $
1,530 $
1,388 $
142 $ 56,384
33,345
100%
(1)
(2)
(3)
(4)
(5)
(6)
Market rent is a component of rental revenue and represents same properties only. It is calculated as of the first day of each month as the average rental revenue amount a
willing landlord might reasonably expect to receive, and a willing tenant might reasonably expect to pay, for a tenancy, before adjustments for other rental revenue items
such as, incentives, vacancy loss, fees, specific recoveries, and revenue from commercial tenants.
Occupied rent is a component of rental revenue and represents same properties only. It is calculated for occupied suites as of the first day of each month as the average
rental revenue, adjusted for other rental revenue items such as fees, specific recoveries, and revenue from commercial tenants.
Mark-to-market represents the difference between market rent and occupied rent, or market rent including incentives and occupied rent, where indicated.
Market rent including incentives is market rent, as described, adjusted for incentives.
Calgary includes the BRIO joint operation at 100% suite count.
Saskatchewan market rent includes an increase for cable and internet service.
The increase in the mark-to-market revenue gain for our portfolio, from $55.4 million at September 2023, to $56.4 million at December
2023, was due primarily to an increase in market rents in the Calgary and Ontario markets for the month of December, contributing to
a weighted average mark-to-market of $142 per suite per month. Excluded from the mark-to-market revenue gain calculation of
$56.4 million is approximately $31 per suite per month of incentives, representing the difference of the mark-to-market calculated
excluding incentives and the mark-to-market calculated including incentives, resulting in potential additional revenue of
approximately $12 million per annum or a total mark-to-market opportunity of $68.6 million.
In fiscal 2023, as with prior periods, Boardwalk REIT continued to focus on the optimization of all rental revenue, with attention to
appropriate levels of market rents and certain occupancy level targets, as well as suite-selective incentives when warranted.
Vacancy Loss and Incentives
Vacancy loss and rental incentives are strong indicators of current and future revenue performance. Depending on specific market
conditions, to best manage overall economic rental revenue, the correct balance between rental incentives and vacancy loss is
important. On a quarterly basis, the chart below details rental incentives offered versus vacancy loss, on a same property basis.
Select incentives are continuing in the Alberta and Saskatchewan markets to maintain and increase occupancy levels. However,
incentives and vacancy loss in these markets are on a downward trend as noted previously under the section titled “Segmented
Operational Reviews” in this MD&A, with decreased incentives being used on the renewal of leases and minimal to no incentives being
offered on new leases. Boardwalk REIT continues to focus on maximizing overall revenues through the management of three key
revenue variables, notably, market rents, occupancy levels, and suite-selective incentives.
46
BOARDWALK REIT 2023 ANNUAL REPORT
Rental Revenue, Incentives, Vacancy Loss ($000s)
Rental Revenue
Incentives
Vacancy Loss
140,000
135,000
130,000
125,000
120,000
115,000
110,000
105,000
100,000
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2018
2019
2020
2021
2022
2023
FINANCING COSTS
Financing costs, including interest expense on the Trust’s secured mortgages and lease obligations for the year ended December 31,
2023 increased from the same period in the prior year, from $97.0 million to $111.2 million. At December 31, 2023, the reported
weighted average interest rate for mortgages payable of 3.00% was up from the weighted average interest rate of 2.72% at
December 31, 2022. Boardwalk REIT has continued to refinance and renew certain mortgages with a focus on balancing the renewing
interest rate as well as staggering the mortgage maturity curve. The average term to maturity of the Trust’s mortgage portfolio is
approximately 3.7 years.
Boardwalk REIT concentrates on multi-family residential real estate which makes it eligible to obtain government-backed insurance
through the NHA (as defined herein) program, administered by CMHC. The benefits of purchasing this insurance are two-fold.
1.
2.
CMHC insurance allows Boardwalk REIT to 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; and,
CMHC insurance lowers 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.
This government-backed mortgage insurance program administered by CMHC provides significant benefits to the Trust, which in
turn allows for increased quality and affordability for the Trust's Resident Members. Despite past volatility in the overall credit
markets, the Trust has been able to maintain a number of mortgage lenders willing to assume, or underwrite, additional mortgages
under this program.
At December 31, 2023, approximately 96% of Boardwalk REIT’s mortgages were backed by this NHA insurance, with a weighted
average amortization period of approximately 32 years.
As the LP Class B Units are classified as financial liabilities in accordance with IFRS, the corresponding distributions paid to the
Unitholders are classified as financing costs under IFRS. In its definition of FFO, REALPAC notes that puttable instruments are
classified as financial liabilities and distributions are therefore treated as interest expense, however, adds the distributions that were
treated as interest expense back when calculating FFO, which suggests those puttable instruments are similar to equity. The total
amount of distributions paid to the holders of LP Class B Units for the year ended December 31, 2023, which have been recorded as
financing costs, was $5.1 million (year ended December 31, 2022 – $4.8 million). Based on this rationale, these amounts have been
added back in the calculation of FFO.
47
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 prospectively.
The total amortization of deferred financing costs for the year ended December 31, 2023 was $7.2 million, the same as recorded for
the prior year. Amortization of deferred financing costs is included in financing costs.
Interest Rate Sensitivity
Although Boardwalk REIT manages its financing risk in a variety of ways, significant interest rate changes could still 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 2024, the Trust anticipates having approximately $439.6 million of secured mortgages
maturing with a weighted average rate of 2.92%. 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 4.45% (as of February 2024).
To date, the Trust has renewed, or forward locked the interest rate on $26.9 million or 6.1% of its total 2024 mortgage maturities at an
average interest rate of 4.36%, while extending the term of these mortgages by an average of five years.
ADMINISTRATION
Included in administration expenses are costs associated with Boardwalk REIT’s centralized administrative functions. The amount
reported for the year ended December 31, 2023, which relates to corporate administration from continuing operations, was
$41.2 million compared to $33.9 million in the prior year, an increase of approximately 21.5% for the year. The increase was
attributable to higher administrative wages, which was increased in part due to rising inflation coupled with bonus considerations,
as well as higher professional fees (including audit/advisory fees, legal expenses, and government relation costs), travel costs, and
third party software as a service fees.
DEPRECIATION
Depreciation recorded on the Consolidated Statements of Comprehensive Income is made up of the depreciation of property,
plant and equipment.
The Trust has elected to use the cost model under IAS 16 – Property, Plant and Equipment (“IAS 16”) to value its property, plant and
equipment, and, as a result of this method, depreciation expense is a charge taken against earnings to reflect the estimated
depreciation that has occurred to these assets as a result of their use during the reporting period in question.
Boardwalk reviews its key depreciation estimates on an ongoing basis and, if warranted, will adjust these estimates on a
prospective basis.
The total amount reported as depreciation for the year ended December 31, 2023 was $7.9 million, which was consistent with the
$7.8 million recorded for the same period in the prior year.
48
BOARDWALK REIT 2023 ANNUAL REPORT 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 would exempt Boardwalk REIT from
income tax under the SIFT Legislation. For 2022 and 2023, 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.
Boardwalk REIT has received a letter from the Canada Revenue Agency (“CRA”) informing the Trust that the CRA will be issuing
notices of reassessment of tax (“CRA Letter”). The CRA Letter outlines that when issuing its notices of reassessment, the CRA will be
increasing the Trust’s taxable income by $5.6 million, $20.6 million, $14.1 million, and $0.06 million for its taxation years ended
December 31, 2011, 2012, 2013, and 2014, respectively, on the basis that the Trust did not report deemed taxable capital gains in each
of those taxation years resulting from alleged negative adjusted cost base in the Trust's units of Top Hat Operating Trust (“Operating
Trust”), a trust 100% owned by Boardwalk REIT. Management of the Trust is assessing the implications of the CRA Letter and once it
receives the notices of reassessment, the Trust has 90 days to file a notice of objection to the expected reassessments. The Trust
intends to file an objection with the CRA Appeals Division as it disagrees with the CRA’s proposed assessment. The Trust will not be
required to pay any amount to the CRA in order to dispute this matter. It is difficult to estimate the amount of time it could take to
resolve the dispute with the CRA Appeals Division and it is possible that an appeal to the Tax Court of Canada could be required in
order to resolve this dispute. Please refer to the section titled “Risk and Risk Management – Certain Tax Risks – Change of Tax Laws”
in this MD&A for more information.
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
Trust Units at any time at the option of the holder. The LP Class B Units and the deferred unit-based compensation plan are recorded
at their fair value at each reporting date. As at December 31, 2023, the Trust used a price of $71.34 based on the closing price of the
Trust Units on the TSX to determine the fair value of these liabilities at that date. The total fair value of the LP Class B Units recorded
on the Consolidated Statements of Financial Position at December 31, 2023, was $319.2 million (December 31, 2022 –
$221.2 million), and a corresponding fair value loss of $98.0 million (year ended December 31, 2022 – fair value gain of $24.2 million)
was recorded on the Consolidated Statements of Comprehensive Income for the year ended December 31, 2023.
The deferred unit-based compensation plan had a fair value of $15.8 million (December 31, 2022 – $8.1 million), and a corresponding
fair value loss of $4.6 million (year ended December 31, 2022 – fair value gain of $0.2 million) was recorded on the Consolidated
Statements of Comprehensive Income for the year ended December 31, 2023.
49
Financial Condition
REVIEW OF CASH FLOWS
Operating Activities
Cash flow from operating activities increased by 24.2% from $160.9 million for the year ended December 31, 2022 to $199.8 million
for the year ended December 31, 2023. For the year ended December 31, 2023, Boardwalk REIT reported ACFO of $149.1 million, or
$2.96 per Unit. This represented an increase of approximately 18.1%, compared to $126.2 million, or $2.51 per Unit, reported for the
same twelve months in 2022. The increase in cash flow from operating activities for 2023 was mainly the result of increased rental
revenues partially offset by higher operating and administrative costs incurred in the period and higher interest expense as a result of
higher interest rates. The increase in ACFO was primarily due to higher rental revenues from higher occupied rent and lower incentives
and vacancy loss.
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, 2023
3 Months
Dec. 31, 2022
% Change
12 Months
Dec. 31, 2023
12 Months
Dec. 31, 2022
% Change
Cash flow from operating activities
$
55,133 $
43,951
$ 199,796 $
160,904
Adjustments
Net change in operating working capital
Loss from equity accounted investment
Deferred unit-based compensation
LP Class B Unit distributions
Government grant amortization
Interest paid
Financing costs
Principal repayments on lease liabilities
Principal repayments on lease receivable
Maintenance Capital Expenditures (1)
ACFO (2)(3)
ACFO per Unit (3)
(5,290)
(572)
(921)
1,309
94
28,852
(28,905)
(803)
-
(8,651)
40,246
(1,420)
(247)
(678)
1,208
94
23,615
(25,791)
(945)
186
(6,994)
32,979
(8,385)
(1,113)
(3,328)
5,169
378
103,084
(111,172)
(3,397)
321
(32,255)
22.0%
149,098
5,878
(247)
(2,556)
4,774
378
88,574
(97,021)
(3,965)
725
(31,263)
126,181
$
0.79 $
0.66
19.7% $
2.96 $
2.51
18.2%
17.9%
(1)
Details of the calculation of Maintenance Capital Expenditures can be found in the section titled, “Financial Condition – Review of Cash Flows – Investing Activities –
Value-add Capital and Maintenance Capital Expenditures” in this MD&A.
(2) This is a non-GAAP financial measure.
(3) Please refer to the section titled “Presentation of Non-GAAP Measures” in this MD&A for more information.
For the current quarter, FFO Payout Ratio and ACFO Payout Ratio were 30.8% and 37.4%, respectively, compared to 33.9% and 41.1%,
respectively, for the same period in the prior year. For the year ended December 31, 2023, FFO Payout Ratio and ACFO Payout Ratio
were 32.2% and 39.1%, respectively, compared to 34.1% and 42.5%, respectively, in the prior year.
ACFO, in the longer term, is indicative of the Trust’s ability to pay distributions to its Unitholders. ACFO Payout Ratio is a non-GAAP
ratio. Please refer to the section titled “Presentation of Non-GAAP Measures” in this MD&A for more information on ACFO Payout
Ratio. As regular distributions are funded by the Trust's liquidity, cash flow from operating activities, 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 at the beginning of 2023, the Board of Trustees had approved distributions of
$1.17 per Trust Unit on an annualized basis effective March 2023. With the completion of 2023, the Board of Trustees has approved
distributions of $1.44 per Trust Unit on an annualized basis effective March 2024.
50
BOARDWALK REIT 2023 ANNUAL REPORT
Investing Activities
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, meet Resident Members’ expectations, and comply with health and safety regulations.
A few of the Trust’s communities will be selected to fall under the ‘Boardwalk Lifestyle’ brand based on a number of criteria. In
general, these communities are located in extremely attractive locations and desirable neighbourhoods. 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 renters commonly referred to as a
‘renter by choice’.
A number of the Trust’s communities will be selected to be repositioned to the ‘Boardwalk Communities’ category. These
communities will also be targeted based on location and will focus in on a modernization program. These communities tend to be
located in mature areas near schools, parks, downtown core, shopping and other desirable amenities. Investment in these
communities will enhance the already large suite size and will significantly upgrade most aspects of the suite, including new upgraded
flooring, all new appliances with modernized kitchens, modern electrical, plumbing and hardware fixtures. Modernization of existing
common areas such as hallways and lobbies will also be considered.
The majority of Boardwalk’s existing portfolio falls into the ‘Boardwalk Living’ category. Resident Members in this area are looking for
value but tend to be more price sensitive. Again, many of these Boardwalk communities are located in established communities with
extensive local amenities. Although Boardwalk’s investment in this area will be less significant than in its 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 2023, Boardwalk REIT invested approximately $126.0 million in capital assets (comprised of $119.0 million on its investment
properties and $7.0 million on property, plant and equipment) back into its properties in the form of equipment and project
enhancements to upgrade existing suites, common areas, and building exteriors and systems, compared to the $129.4 million
($123.9 million on its investment properties and $5.5 million on property, plant and equipment) invested in 2022.
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 themselves, 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 investment in capital
assets is approximately $33.8 million of on-site wages and
salaries that have been incurred towards these projects for 2023,
compared to $34.4 million for 2022.
2023 12 M Investment in Capital Assets
28%
Building
Improvements
17%
Suite
Improvements
7%
Hallway
Improvements
4%
Appliances
10%
Elevators/Boilers/Mechanical
27%
Internal
Capital
Program
7%
Other
(incl. Equipment)
51
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 or “Maintenance CAPEX” and value-add capital investments.
Maintenance CAPEX over the longer term is funded from cash flow from operating activities. These expenditures are deducted from
FFO in order to estimate a sustainable amount, AFFO, which can be distributed to Unitholders. Maintenance CAPEX include those
expenditures that, while capital in nature, are not considered betterments and relate more to maintaining the existing earnings
capacity of our property portfolio, though do extend the useful life of the asset. In contrast, value-add capital investments are more
discretionary in nature and focus on increasing the productivity of the property, with the goal of increasing NOI through revenue
growth and/or decreased operating expenses. Management of the Trust believes that significant judgement is required to determine
whether a capital expenditure is needed to maintain the earning capacity of an asset or to increase the earning capacity of an asset.
Lastly, 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.
Value-add Capital and Maintenance Capital Expenditures
As discussed above, value-add capital investments include building improvements, suite upgrades, technology initiatives, and other
investments which support NOI growth. Building improvements include investments which improve energy efficiency, enhance
building envelopes, increase curb appeal of the property, as well as renovations of common areas and amenity spaces. Suite upgrades
included in value-add capital result in revenue growth above market growth. In addition, internal capital required to complete
building improvements and suite upgrades is considered value-add capital.
Maintenance CAPEX are expenditures which relate to sustaining and maintaining the existing asset. Boardwalk’s determination of
Maintenance CAPEX is based on an estimated reserve amount per suite based on a three-year average of the capital invested to
maintain and sustain the existing properties. The allocations below were the result of a detailed review of the Trust’s historical capital
investment. As previously discussed, significant judgement was required to allocate capital between value-add and Maintenance
CAPEX. Capital budget amounts for 2023, revised, if necessary, based on actual expenditures for the year, are initially used to
calculate Maintenance CAPEX for the three-year rolling average. For 2022, the three-year rolling average is based on actual
expenditures invested from 2020 to 2022.
The Trust’s calculation of standardized Maintenance CAPEX per suite is outlined in the following table:
52
BOARDWALK REIT 2023 ANNUAL REPORT Category
2023 Capital
Expenditures ($000’s)
2022 Capital
Expenditures ($000’s)
2021 Capital
Expenditures ($000’s)
2020 Capital
Expenditures ($000’s)
Building Exterior, Grounds & Parking
$
36,136
$
40,794
$
26,151
$
20,990
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
Investment in capital assets
Cash Flow from Investing Activities
Improvements to Investment Properties
Additions to Property, Plant & Equipment
Investment in capital assets
8,999
3,605
9,023
3,978
2,204
63,945
6,575
$
$
8,512
5,495
4,419
1,287
980
27,268
33,810
125,023
949
125,972
119,012
6,960
125,972
$
$
$
$
$
$
6,628
2,160
6,086
3,707
1,342
60,717
8,891
10,823
6,760
4,799
1,549
771
33,593
34,435
128,745
607
129,352
123,885
5,467
129,352
$
$
$
$
$
$
$
$
8,093
2,826
6,901
4,428
1,636
50,035
13,072
12,824
7,957
5,145
1,659
1,198
41,855
34,237
126,127
876
127,003
121,492
5,511
127,003
$
$
$
$
$
$
$
$
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
108,653
4,963
113,616
$
$
$
$
$
$
$
$
Number of suites
33,846
33,722
33,264
33,396
Value-add Capital Investment
Building Improvements
Common Area Renovations
Suite Upgrades
Internal Capital
Other – Information Technology
Maintenance CAPEX
Investment in capital assets
Maintenance CAPEX per Suite
Three-year Rolling Average Reserve
2021
2022
2023
2023 Maintenance CAPEX Per Suite
Three-year Rolling Average Reserve
2020
2021
2022
2022 Maintenance CAPEX Per Suite
53
$
34,786
$
34,443
$
25,194
$
8,999
20,749
27,873
996
93,403
32,569
125,972
962
$
$
$
6,628
25,999
28,289
927
96,286
33,066
129,352
981
$
$
$
8,093
33,493
28,664
1,107
96,551
30,452
127,003
915
915
981
962
953
$
$
$
$
$
$
$
$
$
$
$
$
$
$
19,474
6,816
29,104
27,195
1,106
83,695
29,921
113,616
896
896
915
981
931
Using the three-year rolling average reserve, Boardwalk’s 2023 estimate of Maintenance CAPEX is $32.3 million, or $953 per suite, for
the year. For 2022, Boardwalk’s estimate of Maintenance CAPEX, using the three-year average reserve, was $31.3 million, or $931 per
suite, for the year. The increase in the three-year rolling average reserve of $931 per suite in 2022 to $953 per suite in 2023 is due to a
higher Maintenance CAPEX per suite in part due to rising costs from inflationary increases experienced over the past year.
The following table provides management of the Trust’s estimate of these expenditure categories for the three and 12 months ended
December 31, 2023 and 2022.
(In $000’s, except for per suite amounts)
Dec. 31, 2023 Per Suite
3 Months
3 Months
Dec. 31, 2022
12 Months
Per Suite
Dec. 31, 2023 Per Suite
12 Months
Dec. 31, 2022
Per Suite
Maintenance Capital Expenditures
$
8,651 $
255 $
6,994 $
207 $
32,255 $
953 $
31,263 $
931
Value-add Capital
30,418
895
30,426
902
93,717
2,769
98,089
2,921
Investment in capital assets
$
39,069 $ 1,150 $
37,420 $ 1,109 $ 125,972 $ 3,722 $
129,352 $ 3,852
Management of the Trust has estimated that for the fourth quarter of fiscals 2023 and 2022, the amount allocated to maintenance capital
was approximately $8.7 million, or $255 per suite, and $7.0 million, or $207 per suite, respectively, with investment in value-add capital
expenditures to its investment properties totaling $30.4 million and $30.4 million, respectively, or $895 and $902 per suite, respectively.
For the years ended December 31, 2023 and 2022, the amount allocated to maintenance capital was approximately $32.3 million, or
$953 per suite, and $31.3 million, or $931 per suite, respectively, with investment in value-add capital expenditures to its investment
properties totaling $93.7 million and $98.1 million, respectively, or $2,769 and $2,921 per suite, respectively.
Investment Properties
The Trust has elected to use the fair value model in accordance with IAS 40 – Investment Properties (“IAS 40”) 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. Appraisals were obtained as follows:
Date
December 31, 2023
September 30, 2023
June 30, 2023
March 31, 2023
December 31, 2022
September 30, 2022
June 30, 2022
March 31, 2022
Number
of Properties
6
6
4
4
5
4
6
5
$
$
$
$
$
$
$
$
Aggregate
Fair Value
874,525
196,708
210,300
100,235
879,913
160,628
176,883
175,019
Percentage of Portfolio
as of that Date
11.4%
2.6%
2.8%
1.4%
12.8%
2.3%
2.6%
2.6%
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.
54
BOARDWALK REIT 2023 ANNUAL REPORT
The key valuation metrics for the Trust's investment properties using the stabilized approach are set out in the following table:
As at
Dec. 31, 2023
Dec. 31, 2022
Alberta
British Columbia
Saskatchewan
Ontario
Quebec
Land Leases
Total
Capitalization Rate
Weighted Average
Forecasted Total
Stabilized Net
Operating Income
Capitalization Rate
Weighted Average
Forecasted Total
Stabilized Net
Operating Income
5.13%
$
247,297
5.01%
$
206,176
4.30%
5.67%
4.27%
4.94%
5.06%
4.96%
5.05%
$
$
5,518
39,326
30,922
18,944
342,007
39,807
381,814
4.25%
5.67%
4.01%
4.81%
4.95%
4.69%
4.92%
$
$
2,350
35,049
27,354
17,965
288,894
36,198
325,092
Overall portfolio weighted average stabilized capitalization rate (“Cap Rate”) was 5.05% as at December 31, 2023 and 4.92% as at
December 31, 2022, using a forecasted stabilized NOI.
The “Overall Capitalization Rate” method requires 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 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. The tables below summarize the sensitivity impact of changes in both Cap Rates and forecasted stabilized NOI on
the Trust’s fair value of its investment properties (excluding building acquisitions valued at Level 2 inputs, developments, and the
right-of-use assets related to lease liabilities) as at December 31, 2023 and December 31, 2022:
As at December 31, 2023
Stabilized Net Operating Income
Cap Rate
-0.25%
Cap Rate As Reported
+0.25%
-3%
-1% As Forecasted
+1%
+3%
$ 370,360
$
377,996
$ 381,814
$ 385,632
$ 393,268
4.80%
$ 154,907
$ 313,923
$ 393,431
$ 472,939
$ 631,955
5.05%
5.30%
(226,721)
(572,361)
(75,574)
7,557,359
75,574
226,721
(428,341)
(356,330)
(284,320)
(140,299)
As at December 31, 2022
Stabilized Net Operating Income
Cap Rate
-0.25%
Cap Rate As Reported
+0.25%
-3%
-1%
As Forecasted
+1%
$
$
315,339
145,324
$
$
321,841
284,676
$
$
325,092
354,353
$
$
328,343
424,029
$
$
(198,398)
(508,851)
(66,133)
(382,987)
6,613,279
(320,054)
66,133
(257,122)
+3%
334,845
563,382
198,398
(131,258)
4.67%
4.92%
5.17%
Investment properties with a fair value of $802.0 million as at December 31, 2023 (December 31, 2022 – $772.5 million) are situated on
land held under ground (or land) leases.
Investment properties with a fair value of $1.0 billion as at December 31, 2023 (December 31, 2022 – $808.6 million) are pledged as
security against the Trust’s committed revolving credit facility. In addition, investment properties with a fair value of $7.4 billion as at
December 31, 2023 (December 31, 2022 – $6.6 billion) are pledged as security against the Trust’s mortgages payable.
For the year ended December 31, 2023, the Trust capitalized $119.0 million in improvements to investment properties (and
$23.3 million in development of investment properties) and recorded a fair value gain of $598.8 million on its financial statements
as a result of changes in the fair value of investment properties. For the year ended December 31, 2022, the Trust capitalized
$123.9 million in improvements to investment properties (and $17.7 million in development of investment properties) and recorded a
fair value gain of $106.4 million. 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.
55
Joint Arrangements
Boardwalk and RioCan Real Estate Investment Trust (“RioCan”) completed their first joint operation development project known as
BRIO, located in Calgary, Alberta, in February 2020. The joint operation is an equal 50% interest between the parties, with RioCan
managing the retail component and Boardwalk managing the residential component, each on a cost basis.
Boardwalk continues to move forward with its 50:50 joint venture partnership, with a private partner, to develop a 365-suite
multi-residential, purpose-built rental complex, located near downtown Brampton, Ontario. It is estimated that total development
costs for the project are approximately $200 to $215 million. The 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 years ended December 31, 2023 and 2022, the Trust invested $nil in capital contributions in equity accounted investment to
this limited partnership. The project is substantially tracking on time and on budget. During the fourth quarter of 2022, one of the
high-rise towers, which includes 176 residential suites, was substantially completed and as of December 31, 2023, the tower was 99%
leased. During the fourth quarter of 2023, the second high-rise tower, which includes 189 residential suites, was substantially
completed and as of December 31, 2023, the tower was 33% leased. The partnership has committed to a construction facility loan for
60% of the budgeted costs to construct. As at December 31, 2023, $112.6 million has been drawn on this loan, of which Boardwalk’s
portion is $56.3 million. On January 12, 2024, the Trust made a loan to the joint venture for $57.2 million with the proceeds used by the
joint venture to repay 50% of the revolving construction facility loan payable. The loan made by the Trust to the joint venture was
made on the same terms as the revolving construction facility loan.
Development
Boardwalk’s development opportunities include additional projects to be built on the Trust’s excess land density, as well as new land
that was acquired in Victoria, British Columbia. These developments are in various stages of market analysis, planning and approval,
and will further add newly constructed assets to the Trust’s portfolio.
For the year ended December 31, 2023, the Trust expended $23.3 million on development of investment properties compared to
$17.7 million for the prior year. Interest costs of $1.5 million were capitalized to properties under development for the year ended
December 31, 2023 (December 31, 2022 – $1.7 million).
On June 1, 2022, the Trust purchased three adjacent parcels of land in Victoria, British Columbia, in the community of View Royal,
for a purchase price of $12.0 million (excluding transaction costs).
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 valuations is the building of oversupply in a particular
market, which results in significant corrections of property values market-wide.
Property Acquisitions and Dispositions
On January 24, 2024, the Trust closed on the purchase of one property, The Circle, in Calgary, Alberta. The property, totaling
295 suites, was purchased for $77.8 million and was financed with proceeds from the Offering. Please refer to the section titled
“Capital Structure and Liquidity – Unitholders’ Equity”.
On April 25, 2023, the Trust acquired a property in Victoria, British Columbia. The property is comprised of 124 suites and had a
purchase price of $60.3 million (including transaction costs).
On August 8, 2022, the Trust acquired a property in Calgary, Alberta. The property is comprised of 158 suites and had a purchase price
of $40.9 million (including transaction costs).
On March 30, 2022, the Trust acquired a property in Brampton, Ontario comprised of 152 suites and a property in Canmore, Alberta
comprised of 148 suites. The combined purchase price for these two properties was $118.8 million (including transaction costs).
56
BOARDWALK REIT 2023 ANNUAL REPORT Financing Activities
Distributions
Boardwalk distributes payments monthly to its Unitholders and holders of LP Class B Units. These payments are referred to as regular
distributions. The distinct nature and classification of these payments are unique to each real estate investment trust and the
components of these distributions may have differing tax treatments. For the year ended December 31, 2023, the Trust declared regular
distributions of $58.3 million, a slight increase from the $53.7 million declared in 2022. The increase is due to the increased distribution
rate to $1.17 per Trust Unit as previously noted. Regular distributions declared for both the twelve months ended December 31, 2023
and 2022, represent an FFO payout ratio of 32.2% and 34.1%, respectively. For the year ended December 31, 2023, the Trust recorded
profit of $666.1 million (year ended December 31, 2022 – profit of $283.1 million).
Financing of Revenue Producing Properties
During the 12 months ended December 31, 2023, proceeds from mortgage financings, excluding mortgages assumed on new
acquisitions, totaled $236.6 million (year ended December 31, 2022 - $352.7 million). During the financing and refinancing process, the
weighted average interest rate on its mortgage portfolio increased from 2.72% at December 31, 2022, to 3.00% at December 31, 2023.
Due to the nature of multi-family residential real estate, the amount paid for apartments 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 2022, $29.2 million of mortgage financing was assumed on an acquisition.
The mortgage had an in-place rate below market rates, resulting in a market debt adjustment totaling $1.0 million that was made to
the book cost of the corresponding asset.
CAPITAL STRUCTURE AND LIQUIDITY
Liquidity refers to the Trust’s ability to generate, and have available, sufficient cash to fund its ongoing operations and capital
commitments as well as its distributions to Unitholders. Generally, distributions are funded from ACFO, a non-GAAP financial measure
cash flow metric as previously defined. In addition to ACFO, the Trust relies on a combination of debt capital and equity to fund a
portion of its capital expenditures, acquisitions, development, and other uses of capital. As previously mentioned, the DOT outlines
the investment and operating policies of the Trust, however, the Trust has no specific working capital requirements. 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 are discussed in detail in this MD&A. Approximately 96% of Boardwalk REIT’s secured mortgages
carry NHA insurance. In volatile times, the ability to access this product is very beneficial to the Trust as a whole.
The access to liquidity is an important element of the Trust as it allows the Trust to implement its overall strategy. The previous low
interest rate environment had allowed Boardwalk to renew its existing maturing mortgages at favourable interest rates. In addition,
Boardwalk has been able to access additional capital from its properties through the continued use of the current NHA insurance
program, which provides mortgage financing at attractive rates. During the early part of the COVID-19 pandemic we had seen
declining interest rates, however, as a result of inflation, global conflicts, and various other economic factors, interest rates have
dramatically increased from where they previously were during 2021 and at the beginning of 2022. As such, financing costs over the
near to medium term are expected to increase, as compared to maturing rates.
Boardwalk defines total available liquidity to include cash and cash equivalents on hand and any unused committed revolving credit
facility, plus any subsequent committed/funded financing. The Trust’s cash and cash equivalents was $331.2 million at December 31,
2023, compared to $52.8 million reported on December 31, 2022. As at December 31, 2023, the Trust also had $195.8 million of unused
committed revolving credit facility (December 31, 2022 – $196.1 million) and subsequent committed/funded financing of $nil
(December 31, 2022 – $7.4 million), bringing total available liquidity to $527.0 million (December 31, 2022 – $256.3 million).
57
The Trust’s liquidity position as at December 31, 2023 remains stable as the following table highlights:
($000)
Cash and cash equivalents
Unused committed revolving credit facility available
Total available liquidity
$
$
331,204
195,800
527,004
In addition to this, the Trust currently has 866 rental suites of unencumbered assets. It is estimated that, under current CMHC
underwriting criteria, the Trust could obtain an additional $97.2 million of new proceeds from the financing of its currently
unencumbered assets.
Of the $439.6 million of secured mortgages coming due in 2024 (as shown in the following table), approximately 100% have NHA
insurance, and represent in aggregate approximately 40% of current estimated "underwriting" values on those individual secured
assets. Interest rates on both five and 10-year NHA-insured mortgages as of February 2024 were 4.45%. 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 $26.9 million, or 6.1%, of its
$439.6 million of 2024 mortgage maturities. The weighted average contracted interest rate on these renewals is 4.36%, for an
average term of five 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.
Mortgages payable as at December 31, 2023, were $3.3 billion, compared to $3.2 billion as at December 31, 2022.
Boardwalk REIT’s overall weighted average interest rate on its long-term debt has decreased from the prior year. The weighted
average interest rate as at December 31, 2023, was 3.00% compared to 2.72% as at December 31, 2022. 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.
58
BOARDWALK REIT 2023 ANNUAL REPORT
Year of Maturity
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
Total mortgage principal outstanding
Unamortized deferred financing costs
Unamortized market debt adjustments
Mortgages payable
Principal
Outstanding as
at Dec. 31, 2023
Weighted Average
Interest Rate
By Maturity
$
439,606
580,381
620,466
623,596
355,013
288,901
157,795
23,179
80,544
76,211
201,109
3,446,801
(127,774)
(610)
$
3,318,417
2.92%
2.44%
2.33%
3.16%
3.66%
3.11%
2.55%
2.71%
4.13%
4.09%
4.68%
3.00%
% of Total
12.8%
16.8%
18.0%
18.1%
10.3%
8.4%
4.6%
0.7%
2.3%
2.2%
5.8%
100.0%
Other contractual obligations of the Trust include lease obligations (see NOTE 22(c) to the audited annual consolidated financial
statements for the years ended December 31, 2023 and 2022).
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, 2023, and December 31, 2022, based on
the most recently completed four fiscal quarters.
As at
Net operating income
Administration
Deferred unit-based compensation
EBITDA (1) from equity accounted investment
Consolidated EBITDA (12 months ended)
Interest expense
Interest expense from equity accounted investment
Consolidated interest expense (12 months ended)
Interest coverage ratio
Minimum threshold
(1) Earnings before interest, taxes, depreciation and amortization.
Dec. 31, 2023
Dec. 31, 2022
$
332,989
(41,172)
(3,328)
929
289,418 2
100,354
2,033
102,387
2.83
1.50
$
$
$
$
288,660
(33,859(33,859)
(2,556 (2,556)
$
$
$
(70)
252,175
86,759
176 176
86,935
2.90
1.50
For the year ended December 31, 2023, Boardwalk REIT’s overall interest coverage ratio of consolidated EBITDA to consolidated
interest expense, excluding distributions on LP Class B Units and fair value adjustments, was 2.83, compared to 2.90 for the year
ended December 31, 2022. Under IFRS, the distributions made to the holders of LP Class B Units are considered financing costs and
are the result of the reclassification of the LP Class B Units as financial liabilities. The calculation of the interest coverage ratio above
does not include these distribution payments in the calculation of consolidated interest expense.
59
Unitholders’ Equity
The following table discloses the changes in Trust Units issued and outstanding:
Summary of Unitholders’ Capital Contributions
December 31, 2021
Trust Units issued for vested deferred units
Trust Units purchased and cancelled
December 31, 2022
Trust Units issued under equity offering
Trust Units issued for vested deferred units
December 31, 2023
Trust Units
46,137,112
25,810
(440,000)
45,722,922
3,662,750
2,502
49,388,174
Boardwalk REIT has one class of publicly traded voting securities, being the Trust Units. As at December 31, 2023, there were
49,388,174 Trust Units issued and outstanding. In addition, there were 4,475,000 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 53,863,174. 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, 2023 and 2022.
On December 14, 2023, the Trust entered into an agreement to issue 2,190,000 Trust Units on a bought deal basis at a price of
$68.50 per Trust Unit for aggregate gross proceeds of $150.0 million to a syndicate of underwriters (the “Offering”). On December 15,
2023, the Trust agreed to increase the total size of the Offering to 3,185,000 Trust Units. The Trust also granted the underwriters an
over-allotment option to purchase up to an additional 477,750 Trust Units, which was exercised in full. On December 22, 2023, the
Offering closed and the Trust issued 3,662,750 Trust Units at a price of $68.50 per Trust Unit for total gross proceeds of $250.9 million.
Transaction costs for Offering totaled $10.9 million resulting in net proceeds to the Trust of $240.0 million. In January 2024, the Trust
used a portion of the net proceeds to finance the purchase price for The Circle, a 295-suite newly built construction apartment
complex in Calgary, Alberta, to repay its portion of a floating rate construction loan facility on the joint venture partnership in
Brampton, Ontario. The Trust intends to use the remainder of the net proceeds to fund future acquisition and development
opportunities in its existing pipeline.
On November 17, 2022, the Trust received regulatory approval for the renewal of its Normal Course Issuer Bid (“Bid”) to purchase and
cancel up to 3,693,497 Trust Units, representing 10% of the public float at the time of the TSX approval. The Bid commenced on
November 22, 2022, and terminated on November 21, 2023. The Trust’s daily purchases pursuant to the Bid was limited to 30,116
Trust Units. The Bid was renewed effective November 22, 2023 and terminates on November 21, 2024, or when the maximum number
of Trust Units have been purchased, and allows the REIT to purchase up to 3,696,000 Trust Units, representing approximately 10% of
its public float, as of that date, over the next 12 months. The Trust’s daily purchases under this Bid are limited to 98,985 Trust Units.
During 2023, the Trust did not purchase any Trust Units under the Bid. During 2022, the Trust purchased and cancelled 440,000
Trust Units at an average purchase cost of $49.25 per Trust Unit under the NCIB.
60
BOARDWALK REIT 2023 ANNUAL REPORT Equity
Boardwalk has an equity market capitalization of $3.8 billion based on the Trust Unit closing price of $71.34 on the TSX on
December 31, 2023.
With an enterprise value of approximately $7.2 billion (comprised of total mortgage principal outstanding of $3.4 billion and equity
market capitalization of $3.8 billion) as at December 31, 2023, Boardwalk’s total mortgage principal outstanding is approximately
47% enterprise value.
Net Asset Value per Unit
The Trust’s NAV per Unit is calculated below:
Investment properties
Equity accounted investment
Cash and cash equivalents
Adjusted Real Estate Assets (1)(2)
Total mortgage principal outstanding
Total lease liabilities attributable to land leases (3)
Adjusted Real Estate Debt (1)(2)
Net Asset Value (1)(2)
Net Asset Value per Unit (2)
Reconciliation of Unitholders’ Equity to Net Asset Value
Unitholders' Equity
Total Assets
Investment properties
Equity accounted investment
Cash and cash equivalents
Total Liabilities
Total mortgage principal outstanding
Total lease liabilities attributable to land leases (3)
Net Asset Value (1)(2)
Dec. 31, 2023
Dec. 31, 2022
$
7,702,214
$
6,900,745
39,758
331,204
40,871
52,816
$
8,073,176
$
6,994,432
$
(3,446,801)
$
(3,336,026)
(72,860)
(74,502)
$
(3,519,661)
$
(3,410,528)
$
$
4,553,515
84.41
$
$
3,583,904
71.35
Dec. 31, 2023
Dec. 31, 2022
$
4,320,072
$
3,466,998
(8,141,876)
7,702,214
39,758
331,204
3,821,804
(3,446,801)
(72,860)
(7,067,275)
6,900,745
40,871
52,816
3,600,277
(3,336,026)
(74,502)
$
4,553,515
$
3,583,904
(1) This is a non-GAAP financial measure.
(2) Please refer to the section titled “Presentation of Non-GAAP Measures” in this MD&A for more information.
(3) Total lease liabilities attributable to land leases is a component of lease liabilities as calculated in accordance with IFRS.
Overall NAV per Unit has increased 18.3% to $84.41 as at December 31, 2023, compared to $71.35 as at December 31, 2022, due to an
increase in investment properties. NAV is a key metric used by real estate entities to measure the value of an organization.
61
Risks and Risk Management
Boardwalk REIT, like most other 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.sedarplus.ca, where additional
risks are discussed.
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 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 British Columbia, Alberta, Saskatchewan, Ontario, and Quebec. Neither of Alberta
nor Saskatchewan is subject to rent control legislation; however, under Alberta legislation, a landlord is only entitled to increase rents
once every 12 months. Please refer to the section titled "Risks and Risk Management – Specific Risks – Rent Control Risk" in this MD&A
for a more detailed discussion on rent controls. 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 apartments located 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, to a lesser extent, 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, utilities, 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 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 than the existing lease. To mitigate this risk, the Trust does not have any one or small
group of significant tenants. The majority of operating leases signed are for a period of 12 months or less. The Trust is dependent on
leasing markets to ensure vacant residential space is leased, expiring leases are renewed and new tenants are found to fill vacancies.
More recently, the markets in which the Trust operates have had job growth in various industries, however, a disruption in the
economy could still have an 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.
62
BOARDWALK REIT 2023 ANNUAL 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 adversely 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, which could further have a material
adverse effect on our business, financial condition, or results of operations.
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 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 operations.
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 Trust 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.
Ground Lease Risk: Five of our properties, two located in Banff, Alberta, one in Edmonton, Alberta, and two in Montreal, Quebec, 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 2029 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 intends to
actively seek to either renew the terms of such leases or purchase the freehold interest in the lands forming the subject matter of such
leases prior to the expiry of their terms. However, if the Trust cannot or chooses not to renew such leases or buy the land of which they
form the subject matter, as the case may be, the net operating income and cash flow associated with such properties would no longer
63
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 were based on 75% of the land value in its current use. After that revision, the land rent remains
constant 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, which could have a
material adverse effect on our business, financial condition, or results of operations.
General Uninsured Losses or Catastrophic Loss: 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 on the Trust Units, 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 was 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 were 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.
64
BOARDWALK REIT 2023 ANNUAL 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, development, 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 our business, financial condition, or results of operations.
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 and Talent Management: 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.
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
34,029 rental suites. As a result, 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 suites 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, supply chain
price increases, utility price increases, property tax increases, higher interest rates, and mortgage renewal risk.
65
Supply Risk is the risk that the Trust would be negatively affected by the new supply of, and demand for, multi-family residential
suites 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. While there
has been some new rental construction in our existing markets, total housing completions are expected to fall short of household
formation over the medium term. 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 or newly acquired land. Despite a rise in
interest rates, market value of apartments has remained consistent as the increased demand for rental housing has led to NOI growth.
The balance of housing supply relative to demand is a risk factor for operating and financial performance. The potential for reduced
rental revenue exists in the event that Boardwalk REIT is not able to competitively optimize occupancy levels or rental rates in an
increased competitive housing environment. Boardwalk REIT attempts to minimize these risks by:
•
Increasing Resident Members’ satisfaction;
• Diversifying its portfolio across Canada, thus lowering its exposure to regional economic swings;
• Acquiring properties 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 suites;
• 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 interest 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, enables 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. The previous low interest rate environment had allowed the Trust to renew its
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BOARDWALK REIT 2023 ANNUAL REPORT existing maturing mortgages at favourable interest rates, however, as a result of inflation, interest rates have dramatically increased
from where they previously were during 2021 and at the beginning of 2022. As such, financing costs over the near to medium term are
expected to increase.
Currently, the Canadian government has capped the total amount of insurance that CMHC can have in force at $750 billion. This
primarily affects 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 cap on the amount of
CMHC insurance will not affect mortgages for multi-family residential properties in future periods.
If any changes are made by the Government of Canada on the NHA insurance product, such changes could have a negative impact on
the Trust. However, it is management of the Trust’s understanding that any change to the cap would not affect any pre-existing
insurance agreements. Over 96% of Boardwalk’s secured debt has this insurance on it with an average of 32 years of amortization
remaining. The larger risk to the Trust 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, Repositioning and Renovations
Property redevelopment, re-positioning and major renovation work are subject to a number of risks, including:
(a)
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;
(b)
the potential that Boardwalk REIT may expend funds on and devote management time to projects, which it does not complete;
(c)
(d)
(e)
construction or redevelopment costs of a project may exceed original estimates, possibly making the project less profitable than
originally estimated, or unprofitable;
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;
the cost and timely completion of construction or renovations (including risks beyond Boardwalk REIT’s control, such as weather,
labour conditions or material shortages);
(f)
contractor and subcontractor disputes, strikes, labour disputes or supply disruptions;
(g) the failure to achieve expected occupancy and/or rent levels within the projected time frame, if at all;
(h)
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;
(i)
occupancy rates and rents of a completed project or renovation may not be sufficient to make the project or initiative profitable;
(j)
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
(k)
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.
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Joint Arrangements and Co-ownerships
Boardwalk participates in joint arrangements and partnerships that may involve risks and uncertainties associated with third-party
involvement, including, but not limited to, Boardwalk’s dependency on partners, co-tenants or co-venturers that are not under our
control and that might compete with Boardwalk for opportunities, become bankrupt or otherwise fail to fund their share of required
capital contributions, or suffer reputational damage that could have an adverse impact on the Trust. Additionally, our partners might
at any time have economic or other business interests or goals that are different than or inconsistent with those of the Trust and may
require Boardwalk to take actions that are in the interest of the partners collectively, but not in Boardwalk’s sole best interests.
Accordingly, Boardwalk may not be able to favourably resolve issues with respect to such decisions, or the Trust could become
engaged in a dispute with any of them that might affect its ability to operate the business or assets in question.
Structural Subordination
Liabilities of a parent entity with assets held by various subsidiaries may result in the structural subordination of the lenders of the
parent entity. The parent entity is entitled only to the residual equity of its subsidiaries after all debt obligations of its subsidiaries are
discharged. In the event of 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 provide a form of guarantee pursuant to which a trustee will, subject to the documentation governing
the guarantee, 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 have provided a guarantee, not all subsidiaries of the Trust provide such a guarantee. In
addition, there can be no assurance such a 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 2022 and
2023, the guideline amounts have been established at 1.2% and 2.5%, respectively, and for 2024 the guideline amount has been set at
2.5%. Further details on Ontario’s Annual Rental Increase Guidelines can be found at https://www.ontario.ca/page/residential-rent-
increases. 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 suites. Previously, rent control in Ontario applied only to rental suites constructed before November 1, 1991. The new
legislation did not have a material impact on Boardwalk, as almost all of its Ontario properties were built prior to November 1, 1991.
When a suite is vacated, however, the landlord is entitled to lease the suite 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 suite
under certain circumstances, including, for example, where extra expenses have been incurred as a result of a renovation of that suite.
In November 2018, the Ontario Government removed such rent control for new residential suites 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 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 2023 this return is 3.8% compared to 2.0% for 2022 and
compared to 2.3% for 2021), 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, 2023, and before April 2, 2024, before any consideration for increases to municipal and
school taxes as well as capital expenditures, are: 2.3% for electricity heated dwellings, 26.2% for gas heated dwellings, and 40.1% for oil
heated dwellings, plus 5.7%, 4.6%, and 3.5% to cover the cost of maintenance, service, and management contracts, respectively. Tools to
calculate the Quebec rent increase can be found at https://www.rdl.gouv.qc.ca/en/calculation-for-the-fixing-of-rent.
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BOARDWALK REIT 2023 ANNUAL REPORT Presently, rent control legislation does not exist in, and, to the knowledge of management of the Trust, 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.
Utility and Property 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 Boardwalk, 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 water, natural gas and electricity 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 Alberta Carbon Tax increased the costs associated with natural gas usage. Beginning in 2020, Alberta
began to participate in the federal carbon levy, which currently is at a price of $3.42/gigajoule and expected to increase to $4.21/gigajoule
on April 1, 2024. 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.
Aging Portfolio Risk relates to the decrease in demand for Boardwalk’s asset portfolio due to the age of the asset.
Boardwalk’s primary exposure to aging portfolio risk relates to an increase in demand for new product.
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CERTAIN TAX RISKS
SIFT Legislation
Management of the Trust believe the Trust currently qualifies as a “mutual fund trust” and a “real estate investment trust” for Canadian
income tax purposes. If the Trust were not to qualify the consequences could be material and adverse. The Tax Act contains the SIFT
Legislation, which tax certain publicly traded or listed trusts in a manner similar to corporations and tax certain distributions from such
trusts as taxable dividends from a taxable Canadian corporation. The SIFT Legislation applies to a trust that is a “SIFT trust” and a
partnership that is a “SIFT partnership”, each as defined in the Tax Act. Distributions paid by a specified investment flow-through (“SIFT”)
trust as return of capital will generally not be subject to the tax. The SIFT Legislation is not applicable to a real estate investment trust
that meets the REIT Exemption conditions relating to the nature of its assets and revenue. Unless the Trust qualifies for exclusion from
the definition of “SIFT trust” in the Tax Act (i.e., REIT Exemption), the SIFT Legislation could impact the level of cash distributions which
would otherwise be made by the Trust and the taxation of such distributions to Unitholders. If the Trust were to no longer qualify for the
REIT Exemption, it would not be able to flow through all of its taxable income to Unitholders and the Trust would therefore be subject to
tax. The REIT Exemption is applied on an annual basis. As such, it will not be possible to determine if the Trust will satisfy the conditions
of the REIT Exemption for 2024 or any subsequent year until the end of the particular year.
Management of the Trust believes that each direct or indirect subsidiary of the Trust that is a partnership or trust currently qualifies as
an excluded subsidiary entity (as defined in the Tax Act) for Canadian income tax purposes. If any subsidiary were to not so qualify, the
SIFT Legislation could apply to such entities. The SIFT Legislation (if such rules were to apply) may have an adverse impact on the
Trust, on the Unitholders, on the value of the Trust Units and on the ability of the Trust to undertake financings and acquisitions, and if
the SIFT Legislation were to apply, the distributable cash of the Trust may be materially reduced. The effect of the SIFT Legislation, if
such rules were to apply, on the market for the Trust Units is uncertain. The Declaration of Trust provides that a sufficient amount of
Boardwalk REIT's net income and net realized capital gains will be distributed each year to Unitholders, in cash or otherwise, in order
to eliminate Boardwalk REIT's liability for tax under Part I of the Tax Act. Where such amount of net income and net realized capital
gains of Boardwalk REIT in a taxation year exceeds the cash available for distribution in the year, such excess net income and net
realized capital gains will be distributed to Unitholders in the form of additional Trust Units. Unitholders will generally be required to
include an amount equal to the fair market value of those Trust Units in their taxable income, in circumstances where they do not
directly receive a cash Distribution.
Limits on Interest Deductibility
The Department of Finance (Canada) proposals to amend the Tax Act that are intended, where applicable, to limit the deductibility of
certain interest and financing expenses (the “EIFEL Proposals”). Under the EIFEL Proposals, for taxation years beginning on or after
October 1, 2023, the amount of net interest and financing expenses incurred by a corporation or trust, whether incurred directly or
through a partnership, that may be deducted in computing its income for Canadian income tax purposes will generally be limited to
no more than a fixed ratio of its adjusted taxable income, which is intended to reflect the taxable income generated by its activities in
Canada. If the EIFEL Proposals are enacted as proposed, the income of the REIT for Canadian income tax purposes may be increased
which could change the taxable component of Distributions to Unitholders and have an adverse impact on the after tax return of a
Unitholder and on the value of Units in the REIT. The EIFEL Proposals may also apply to a corporation or trust held directly or
indirectly by the REIT. Further, a Unitholder who makes a leveraged investment in Units of the REIT may be adversely affected.
Change of Tax Laws
There can be no assurance that Canadian tax laws, the judicial interpretation thereof, the terms of any income tax treaty applicable to
the Trust or its affiliates or the administrative policies and assessing practices of the CRA will not change in a manner that adversely
affects the Trust, its affiliates or Unitholders. Any such change could affect the Trust’s eligibility for the REIT Exemption, increase the
amount of tax payable by the Trust or its affiliates, or otherwise adversely affect Unitholders by reducing the amount available to pay
distributions or changing the tax treatment applicable to Unitholders in respect of such distributions.
In addition, tax authorities having jurisdiction over the Trust, its affiliates or Unitholders may disagree with the manner in which the Trust
calculates its income for tax purposes or could change their administrative practices to the Trust’s detriment or the detriment of
Unitholders. Boardwalk files all required income tax returns and believes that it is in full compliance with the applicable tax legislation.
However, such returns are subject to audit and reassessment by the applicable taxation authority. Any such reassessment may have an
impact on current and future taxes payable and incur penalties and interest on such amounts payable which could be material.
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BOARDWALK REIT 2023 ANNUAL REPORT In December 2023, the CRA notified the Trust that the CRA will be issuing notices of reassessment of tax for the Trust’s taxation years
ended December 31, 2011, 2012, 2013 and 2014. While the Trust intends to file a notice of objection to each proposed reassessment as
it disagrees with the CRA’s position, there can be no assurance that such objection will be successful. Further, the position adopted by
the CRA in its expected reassessment may have implications for other taxation years resulting in additional taxes, penalties and
interest payable which, in aggregate, could be material. Any reassessment that cannot be successfully challenged could increase the
amount of tax payable by the Trust, its affiliates or any Unitholders during the applicable taxation years of the Trust, adversely affect
Unitholders by reducing the amount available to pay distributions, or otherwise adversely affect the Trust or the Unitholders. Please
refer to the section titled “Other Income and Expenses – Income Tax Expense” in this MD&A for more information.
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 operations, financial condition, or
liquidity. Additionally, controls may be circumvented by unauthorized acts of individuals, by collusion of two or more people, or by
management override. The design of any control system is also based in part upon certain assumptions about the likelihood of future
events and there can be no assurance that any design will succeed in achieving its stated goals under all potential conditions.
Projections of any evaluations of effectiveness to future periods are subject to the risk that controls may become inadequate because
of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
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Accounting and Control Matters
CRITICAL ACCOUNTING POLICIES
The Trust adopted IFRS as its basis of financial reporting, effective January 1, 2011. The material accounting policies adopted by the Trust
are included in NOTE 2 to the audited annual consolidated financial statements for the years ended December 31, 2023 and 2022.
The preparation of the audited annual consolidated financial statements requires management to make estimates and judgements
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 judgements 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 judgements that are involved in the preparation of
the audited annual consolidated financial statements and the uncertainties that could affect the reported results.
(a)
Investment Properties
Investment properties consist of multi-family residential properties held to earn rental income and properties being constructed or
developed for future use to earn rental income, and include interests held under long-term operating land leases. Investment
properties are measured initially at cost (which is equivalent to fair value). Cost includes all amounts relating to the acquisition
(excluding transaction costs related to a business combination) 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. 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 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 to the audited annual consolidated financial statements for the years ended
December 31, 2023 and 2022).
An investment property is derecognized upon disposal or when the investment property is permanently withdrawn from use and no
future economic benefits are expected from the disposal. Prior to its disposal, the carrying value of the investment property is
adjusted to reflect its fair value as outlined in the purchase and sale agreement (as the purchase and sale agreement is the best
evidence of fair value). This adjustment shall be recorded as a fair value gain or loss. Any remaining gain or loss arising on
derecognition of the property (calculated as the difference between the net disposal proceeds and the carrying amount of the asset)
is included in profit or loss in the period in which the property is derecognized.
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BOARDWALK REIT 2023 ANNUAL REPORT Excess land represents land owned by the Trust located contiguous to land included as investment property. For some of the Trust’s
excess land, 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, redevelopment or repositioning of
buildings the Trust currently owns that require substantial renovations, and incomplete apartment suites acquired from third parties
that will take 12 months or longer to complete. The cost of land, if applicable, and buildings under development or redevelopment
(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
redevelopment 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 redevelopment. Additions to investment properties consist of costs of a capital
nature and, in the case of properties under development and/or redevelopment, capitalized interest. Directly attributable borrowing
costs are also capitalized on land or properties acquired specifically for development or redevelopment when activities necessary to
prepare the asset for development or redevelopment are in progress in accordance with IAS 23 – Borrowing Costs (“IAS 23”). Where
borrowings are associated with specific developments, the amount capitalized is the total cost incurred on those borrowings.
The capitalization of borrowing costs commences when the activities necessary to prepare an asset for development or
redevelopment begins, and continues until the date that substantially all of the construction is complete and all necessary occupancy
and related permits have been received, whether or not the space is leased. If the Trust is required, as a condition of a lease, to
construct tenant improvements that enhance the value of the property, then capitalization of costs continues until such
improvements are completed. Capitalization ceases if there is a prolonged period where development activity is interrupted.
Properties under active development are generally valued at market land values, if applicable, plus costs invested to date. Where
significant leasing and construction is in place and the future income stream is reasonably determinable, the valuation methodology
used is similar to that of revenue-producing properties, less estimates of future capital outlays, construction and development costs,
to determine a net “as-is” market value. Development risks such as planning, zoning, licenses, and building permits are considered in
the valuation process. Properties not under active development, such as land parcels held for future development, are valued based
on comparable sales of land. Significant increases (decreases) in construction costs, cost escalation rates, and estimated time to
complete construction in isolation would result in a significantly lower (higher) fair value for properties under development.
(c)
Property, Plant and Equipment
Tangible assets that are held for use in the production or supply of goods and services, or for administrative purposes, and are
expected to be used during more than one period, except when another accounting standard requires or permits a different
accounting treatment, are recorded in accordance with IAS 16 using the cost model. IAS 16, therefore, excludes tangible assets that
are accounted for in accordance with IFRS 5 and IAS 40 (see NOTE 2(f) to the audited annual consolidated financial statements for the
years ended December 31, 2023 and 2022).
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. 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”).
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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
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 and corporate assets
Site equipment and other assets
Computer hardware
Computer software (1)
Corporate technology assets
Corporate technology assets
40 years
15%
20%
10% to 20%
35%
35%
Straight-line
Declining balance
Declining balance
Declining balance
Declining balance
Declining balance
(1)
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)
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 measurement 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(n) to the audited
annual consolidated financial statements for the years ended December 31, 2023 and 2022 for definition of effective interest method).
The Trust remeasures the lease liability (and makes a corresponding adjustment to the related right-of-use asset) whenever:
• The lease term has changed or there is a change in the assessment of exercise of a purchase option, in which case the lease liability
is remeasured by discounting the revised lease payments using a revised discount rate;
• The lease payments change due to changes in an index or rate or a change in expected payment under a guaranteed residual value,
in which cases the lease liability is remeasured by discounting the revised lease payments using the initial discount rate; or
• A lease contract is modified and the lease modification is not accounted for as a separate lease, in which case the lease liability is
remeasured by discounting the revised lease payments using a revised discount rate.
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BOARDWALK REIT 2023 ANNUAL REPORT The right-of-use assets comprise the initial measurement of the corresponding lease liability, lease payments made at or before the
commencement day and any initial direct costs. They are subsequently measured either at fair value (in the case of right-of-use assets
which are considered part of investment properties) or at cost less accumulated depreciation and impairment losses (for right-of-use
assets which are considered property, plant and equipment). Right-of-use assets are depreciated over the shorter period of the lease
term and the useful life of the underlying asset. The depreciation starts at the commencement date of the lease. The Trust applied
IAS 36 to determine whether a right-of-use asset is impaired.
Variable rents that do not depend on an index or rate are not included in the measurement of the lease liability and the right-of-use
asset. The related payments are recognized as an expense in the period in which the event or condition that triggers those payments
and are included in operating expenses in the consolidated statement of comprehensive income.
As a practical expedient, IFRS 16 permits a lessee not to separate non-lease components, and instead account for any lease and
associated non-lease components as a single arrangement. The Trust has used this practical expedient on those contracts
(warehouse space and office space) which contain both lease and non-lease components.
The Trust as a Lessor
The Trust enters into lease agreements as a lessor with respect to its investment properties. Leases for which the Trust is a lessor are
classified as finance or operating leases. Whenever the terms of the lease transfer substantially all the risks and rewards of ownership
to the lessee, the contract is classified as a finance lease. All other leases are classified as operating leases. As the Trust has retained
substantially all of the risks and benefits of ownership of its investment properties, it accounts for leases with its tenants as operating
leases. As operating leases, lease payments are recognized as revenue when the tenant has a right to use the leased asset. The leased
asset is recognized in the consolidated statement of financial position according to the nature of the underlying asset.
(e)
Taxation
For fiscal 2023 and 2022, 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. The Trust
establishes provisions for taxes when, despite the belief that its tax positions are fully supportable, it is probable that its positions
may be challenged and disallowed by the relevant tax authorities. The consolidated tax expense (recovery) and related accruals
include the impact of such reasonably estimated disallowances as deemed appropriate. To the extent that the probable tax outcome
of these matters changes, such changes in estimates will impact the income tax expense (recovery) in the period in which such
determination is made.
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 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.
75
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.
(f)
Provisions
In accordance with IAS 37 – Provisions, contingent liabilities and contingent assets, a provision is a liability of uncertain timing or
amount. Provisions are recognized when the entity has a present legal or constructive obligation as a result of past events and when it
is probable that an outflow of resources will be required to settle the obligation and the amount can be reliably estimated. Provisions
are not recognized for future operating losses. Provisions are measured at the present value of the expenditures expected to be
required to settle the obligation using a discounted rate that reflects current market assessment of the time value of money and the
risks and uncertainties specific to the obligation. Provisions are remeasured 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.
(g) Unit-based Payments
Deferred 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 IFRS 2 – Share-based payments (“IFRS 2”), 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 2, the deferred units are measured at each reporting period at fair value with changes in fair value recognized in the
consolidated statement of comprehensive income. Fair value of the deferred units is calculated based on the observable market price
of the Trust Units.
76
BOARDWALK REIT 2023 ANNUAL REPORT (h) 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 16 and NOTE 26 to the audited annual consolidated financial statements for the years ended
December 31, 2023 and 2022).
(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.
(i)
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.
77
Financial Assets
Financial assets are classified and measured on the basis of the Trust’s business model for managing the financial assets and the
contractual cash flow characteristics of the financial assets. As such, after initial recognition, financial assets are classified and
measured based on three categories: (i) amortized cost, (ii) fair value through other comprehensive income (FVTOCI), or (iii) fair value
through profit and loss (FVTPL). The classification depends on the nature and purpose of the financial asset and is determined at the
time of initial recognition. Financial assets are classified as at FVTPL when the financial asset either is held for trading or is designated
as at FVTPL. Financial assets categories are defined and measured as follows:
Classification
Definition
Measurement
Amortized cost
FVTOCI
FVTPL
Debt instrument is held within a business model whose objective
is to hold financial assets in order to collect contractual cash flows;
and the contractual terms of the financial asset give rise on specified
dates to cash flows that are solely payments of principal and interest
on the principal amount outstanding.
Measured at amortized cost using
the effective interest rate method
less any expected credit loss. (1)(2)
Debt instrument is held within a business model whose objective is
achieved by both collecting contractual cash flows and selling the
financial assets; and the contractual terms of the financial asset
give rise on specified dates to cash flows that are solely payments of
principal and interest on the principal amount outstanding.
Stated at fair value, with gains
or losses arising on measurement
recognized in other
comprehensive income.
Financial assets that do not meet the criteria for being measured
at amortized cost 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)
(2)
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.
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
FVTPL
Trade and other receivables
Segregated tenants’ security deposits
Cash and cash equivalents
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.
78
BOARDWALK REIT 2023 ANNUAL REPORT Financial Liabilities and Equity
Debt and equity instruments issued are classified either as financial liabilities or as equity in accordance with the substance of the
contractual arrangements and the definitions of a financial liability and an equity instrument. An equity instrument is any contract
that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Trust
are recognized at the proceeds received, net of direct issue costs. Repurchase of Boardwalk REIT’s own equity instruments is
recognized and deducted directly in equity. No gain or loss is recognized in profit or loss on the purchase, sale, issue, or cancellation
of the Trust’s own equity instruments. Distributions paid on the Trust’s equity instruments subsequent to, declared prior to, and with
a record date at or prior to, the reporting date, are recorded as a liability.
Financial liabilities are classified and measured as either amortized cost 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.
Stated at fair value, with gains or
losses arising on measurement
recognized in profit or loss.
Classified as FVTPL upon initial recognition if: such designation
eliminates or significantly reduces a measurement or recognition
inconsistency that would otherwise arise; or the financial liability
forms part of a group which is managed and its performance
is evaluated on a fair value basis; or it forms part of a contract
containing one or more embedded derivatives.
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
Refundable tenants’ security deposits
Trade and other payables
Classification and Measurement
Amortized cost
FVTPL
Amortized cost
Amortized cost
79
The Trust derecognizes a financial liability when, and only when, the Trust’s obligations are discharged, cancelled or they expire.
The difference between the carrying amount of the financial liability derecognized and the consideration paid and payable is
recognized in profit or loss.
Derivatives
The Trust may enter into a variety of derivative financial instruments to manage its exposure to interest rate risks, including interest
rate swaps and bond forward contracts. Derivatives are initially recognized at fair value at the date the derivative contracts are
entered into and are subsequently measured at their fair value at the end of each reporting period. The resulting gain or loss is
recognized in profit or loss immediately unless the derivative is designated and effective as a hedging instrument, in which case the
timing of the recognition in profit or loss depends on the nature of the hedge relationship. Derivatives embedded in host contracts are
treated as separate derivatives when their risks and characteristics are not closely related to the host contracts and the host
contracts are not measured at FVTPL. For the years ended December 31, 2023 and 2022, the Trust had no embedded derivatives
requiring separate recognition.
(j)
Cash and Cash Equivalents
Cash is comprised of bank balances, interest-earning bank accounts, and term deposits with maturities of 90 days or less.
(k) Critical Judgment in Applying Accounting Policies
The following are the critical judgements, apart from those involving estimations (see NOTE 2(q) to the audited annual consolidated
financial statements for the years ended December 31, 2023 and 2022), 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)
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 for the years ended December 31, 2023 and 2022. In applying this policy, 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.
(ii)
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.
(iii)
Taxation Provisions
The Trust's accounting policy relating to provisions is described in (f) above. In applying this policy, judgement is applied in
determining if the Trust has a present legal or constructive obligation as a result of past events and if it is probable that an
outflow of resources will be required to settle the obligation and if the amount can be reliably estimated. For uncertain tax
items no provision has been recorded based on the interpretation of tax legislation. Due to the uncertainty associated with
such tax items, there is a possibility that, on conclusion of open matters at a future date, the final outcome may differ
significantly from the Trust’s judgements or estimates. Please refer to NOTE 19 for additional details.
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BOARDWALK REIT 2023 ANNUAL REPORT
(l) Material 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.
(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 for the
years ended December 31, 2023 and 2022. 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 rents, 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 the
years ended December 31, 2023 and 2022 for sensitivity analysis.
(ii)
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.
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 IFRS
For the year ended December 31, 2023, the Trust has applied a number of revised IFRS 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
IAS 1 – Presentation of
Financial Statements
The amendment deals with the disclosure of material
accounting policy information. Specifically, the amendment
specifies the requirement to disclose material accounting
policy information rather than significant accounting
policies and provides guidance on when accounting policy
information is likely to be considered material.
Impact on Consolidated
Financial Statements
This amendment was applied
prospectively on January 1, 2023 and
there was no material impact on the
consolidated financial statements.
IAS 8 – Accounting Policies, Changes
in Accounting Estimates and Errors
The amendment deals with the definition of accounting
estimates. Specifically, the amendment adds a definition
of an accounting estimate and provides clarification on the
relationship between accounting policy and an accounting
estimate as well as on use of inputs or measurement
techniques and treatment in case of changes therein.
This amendment was applied
prospectively on January 1, 2023 and
there was no impact on the consolidated
financial statements.
81
(b)
Future Accounting Policies
The following accounting standards under IFRS have been issued or revised; however, they were not yet effective for the years ended
December 31, 2023 and 2022, and, as such, have not been applied to the audited annual consolidated financial statements:
New or Amended Standards
Summary of Requirements
Amendments to IFRS 10 and
IAS 28 – Sale or Contribution
of Assets between an Investor
and its Associate or Joint Venture
IAS 1 – Presentation of
Financial Statements
IAS 7 – Statement of Cash
Flows and IFRS 7 – Financial
Instruments: Disclosures
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.
In addition, a second amendment deals with non-current
liabilities with covenants. Specifically, the amendment
clarifies how conditions with which an entity must comply
within 12 months after the reporting period affect the
classification of a liability.
Both amendments are effective for annual reporting periods
beginning on or after January 1, 2024 and are to be applied
retrospectively, with earlier application permitted.
The amendments deal with the disclosure requirements to
enhance the transparency of supplier finance arrangements
and their effects on a company’s liabilities, cash flows and
exposure to liquidity risk.
The effective date of the amendments is for annual reporting
periods beginning on or after January 1, 2024, however, earlier
application is permitted.
Possible Impact on Consolidated
Financial Statements
The Trust is assessing the potential
impact but does not expect any
significant impact.
The Trust is currently evaluating the
impact of the amendments. The Trust
expects that the LP Class B Units will be
required to be presented as a current
liability as a result of this amendment.
The Trust is assessing the potential
impact but does not expect any
significant impact.
IFRS S1 – General Requirements
for Disclosure of Sustainability-
related Financial Information
The standard sets out general requirements for the
disclosure of material information about sustainability-
related financial risks and opportunities and other general
reporting requirements.
The Trust is currently evaluating the
impact of the new standards. Currently,
the Canadian Sustainability Standards
Board has not set an effective date.
These new standards will not impact
accounting policies.
IFRS S2 – Climate-related Disclosures
The standard sets out disclosure requirements that are
specific to climate-related matters. Specifically, the
objective of climate-related financial disclosures on strategy
is to enable users of general purpose financial reports to
understand an entity’s strategy for managing climate-related
risks and opportunities.
The effective date for these new standards is the later of
annual reporting periods beginning on or after January 1,
2024 or upon jurisdiction endorsement effective date which
has yet to be set.
82
BOARDWALK REIT 2023 ANNUAL REPORT In addition to those referenced, the following amendments are not expected to have any impact on the Trust’s annual audited
consolidated financial statements:
• IFRS 16 – Leases
• IAS 21 – The Effects of Changes in Foreign Exchange Rates
INTERNATIONAL FINANCIAL REPORTING STANDARDS
The Trust’s audited annual consolidated financial statements have been prepared in accordance with IFRS as issued by the IASB.
DISCLOSURE CONTROLS AND PROCEDURES ("DC&P") & 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 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 2023, 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, 2023. 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, 2023. 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, 2023, 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, 2023, that have materially affected, or are reasonably likely to materially affect, our
ICFR, which have been designed using the Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission (“COSO”).
83
2024 Financial Outlook
and Market Guidance
As is customary, the Trust is providing its outlook and financial guidance for the upcoming 2024 fiscal year as part of its year end
results. The Trust’s 2024 objectives are as follows:
Description
2024 Guidance
2023 Actual
Same Property NOI Growth
10.0% to 14.0%
Profit
FFO (1)(2)
AFFO (1)(2)
FFO Per Unit (2)
AFFO Per Unit (2)
N/A
N/A
N/A
$3.93 to $4.18
13.7%
$666,099
$181,353
$149,098
$3.60
$3.30 to $3.55 utilizing a Maintenance
CAPEX of $1,003/suite/year
$2.96 utilizing a Maintenance CAPEX of
$953/suite/year
(1) This is a non-GAAP financial measure.
(2) Please refer to the section titled “Presentation of Non-GAAP Measures” in this MD&A for more information.
In deriving these forecasts, the Trust has adjusted for the treatment of the LP Class B Units to be treated as equity (versus debt under
IFRS) and their related treatment of the distributions paid (which are classified as financing costs under IFRS).
This information is forward-looking and actual results may vary materially from those reported. One of the key estimates is the
performance of the Trust’s same properties. Any significant change in assumptions deriving “Same property NOI performance”
would have a material effect on the final reported amount. The Trust reviews these key assumptions quarterly and, based on this
review, may change its outlook on a going-forward basis. Please refer to the section titled “General and Forward-Looking Statements
Advisory – Forward-Looking Statements Advisory” in this MD&A.
In addition to the above financial guidance for 2024, the Board of Trustees approved the 2024 Capital Budget as follows:
Capital Budget ($000’s)
Maintenance Capital Expenditures
Value-add Capital
Investment in capital assets
Development of investment properties
2024 Budget
Per Suite
2023 Actual
Per Suite
$
34,131 $
1,003 $
32,255 $
105,019
3,086
93,717
$
139,150 $
4,089 $
125,972 $
$
72,760
$
23,325
953
2,769
3,722
In total, the Trust expects to invest $139.2 million (or $4,089 per suite) in capital assets in 2024, compared to $126.0 million (or
$3,722 per suite) actually spent in 2023. The Trust has estimated its Maintenance Capital Expenditures for 2024 at $1,003 per suite
per year, compared to $953 per suite per year in 2023, using a three-year rolling average. Additionally, for 2024, Boardwalk is
estimating $72.8 million will be spent on development of investment properties.
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BOARDWALK REIT 2023 ANNUAL REPORT
SELECTED CONSOLIDATED FINANCIAL INFORMATION
The following selected financial information should be read in conjunction with this MD&A and the audited annual consolidated
financial statements for the years ended December 31, 2023 and 2022, and the applicable unaudited condensed consolidated
interim financial statements of the Trust for the various quarterly interim periods, which are available under the Trust’s profile at
www.sedarplus.ca.
The consolidated statements of comprehensive income and consolidated statements of financial position information set forth in the
following tables has been derived from the audited annual consolidated financial statements referred to above and the unaudited
condensed consolidated interim financial statements of the Trust for various quarterly interim periods.
Annual Comparative
(Cdn$ Thousands, except per Unit amount)
Rental revenue
Profit
FFO (1)(2)
Profit per Trust Unit
– Basic
– Diluted
FFO per Unit (2)
– Basic
– Diluted
Mortgages payable
Total assets
Number of suites (1)
Rentable square feet (000's)
(1) Includes 183 suites related to the Trust’s joint venture in Brampton, Ontario.
Twelve Months Ended
Dec. 31, 2023
Dec. 31, 2022
Dec. 31, 2021
$
545,658
$
496,360
$
666,099
181,353
283,096
157,444
$
$
$
$
14.54
14.54
3.96
3.60
$
$
$
$
6.17
5.23
3.43
3.13
$
$
$
$
3,318,417
8,141,876
34,029
29,515
3,214,554
7,067,275
33,722
29,310
472,312
446,267
150,207
9.59
9.59
3.00
2.94
2,978,437
6,660,653
33,264
28,888
Variations on an annual basis are primarily attributable to reported fair value gains/losses. Please refer to the section titled
“Executive Summary – Financial Performance Summary” for additional details.
Quarterly Comparative
(Cdn$ Thousands, except per Unit amount)
Dec. 31,
2023
Sep. 30,
2023
Jun. 30,
2023
Mar. 31,
2023
Dec. 31,
2022
Sep. 30,
2022
Jun. 30,
2022
Mar. 31,
2022
Rental revenue
$ 141,907 $ 138,268 $ 134,553 $ 130,931 $ 129,171 $ 125,849 $ 122,667 $ 118,673
Three Months Ended
Profit
FFO (1)(2)
Profit per Trust Unit
– Basic
– Diluted
FFO per Unit (2)
173,130
48,897
39,417
48,266
232,163
221,389
44,595
39,595
14,137
39,973
47,043
42,705
152,488
40,281
69,428
34,488
$
$
$
3.75 $
0.86 $
5.08 $
4.84 $
0.31 $
1.03 $
3.32 $
3.75 $
0.86 $
5.08 $
4.84 $
0.31 $
1.02 $
1.54 $
0.96 $
0.96 $
0.89 $
0.79 $
0.80 $
0.85 $
0.80 $
1.51
1.51
0.68
(1) This is a non-GAAP financial measure.
(2) Please refer to the section titled “Presentation of Non-GAAP Measures” in this MD&A for more information.
Variations in the quarterly comparative results presented above are primarily attributable to reported fair value gains/losses and from
seasonality in total rental expenses in the first and fourth quarters when demand for natural gas is at the highest. Please refer to the
section titled “Executive Summary – Financial Performance Summary” for additional details.
Additional Information
Additional information relating to Boardwalk Equities Inc. and Boardwalk REIT, including the AIF, is available under the Trust’s profile
on SEDAR+ at www.sedarplus.ca.
85
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, 2023 and 2022, and the consolidated statements of comprehensive
income, changes in unitholders’ equity and cash flows for the years then ended, and notes to the consolidated financial statements,
including material accounting policy information (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, 2023 and 2022, 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 consolidated financial
statement for the year ended December 31, 2023. This matter was addressed in the context of our audit of the consolidated 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.
86
BOARDWALK REIT 2023 ANNUAL 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 and the Annual Report 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.
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.
87
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Trust’s internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures
made by management.
• Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence
obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Trust’s ability
to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s
report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our
conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions
may cause the Trust to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the
financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
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 consolidated 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 Andrew Coutts.
/s/ Deloitte LLP
Chartered Professional Accountants
Calgary, Alberta
February 21, 2024
88
BOARDWALK REIT 2023 ANNUAL REPORT Consolidated Statements
of Financial Position
(CDN $ THOUSANDS)
As at
ASSETS
Non-current assets
Investment properties
Equity accounted investment
Other
Current assets
Other
Cash and cash equivalents
Total Assets
LIABILITIES
Non-current liabilities
Mortgages payable
Lease liabilities
LP Class B Units
Other
Current liabilities
Mortgages payable
Lease liabilities
Other
Total Liabilities
Equity
Unitholders’ equity
Total Equity
Note
Dec. 31, 2023
Dec. 31, 2022
4
5
6
6
8
9
10
11
12
9
10
12
15
$
7,702,214
$
6,900,745
39,758
31,367
40,871
35,514
7,773,339
6,977,130
37,333
331,204
368,537
37,329
52,816
90,145
$
8,141,876
$
7,067,275
$
2,818,045
$
2,709,601
73,818
319,247
10,173
76,602
221,199
7,933
3,221,283
3,015,335
500,372
2,978
97,171
600,521
3,821,804
4,320,072
4,320,072
504,953
3,396
76,593
584,942
3,600,277
3,466,998
3,466,998
Total Liabilities and Equity
$
8,141,876
$
7,067,275
See accompanying notes to these consolidated financial statements.
On behalf of the Trust:
[signed]
SAM KOLIAS
Trustee
[signed]
GARY GOODMAN
Trustee
89
Consolidated Statements
of Comprehensive Income
(CDN $ THOUSANDS)
Rental revenue
Rental expenses
Operating expenses
Utilities
Property taxes
Total rental expenses
Net operating income
Financing costs
Administration
Deferred unit-based compensation
Depreciation
Profit before the undernoted
Loss from equity accounted investment
Loss on sale of asset
Fair value gains
Interest income
Other income
Profit before income tax
Income tax expense
Profit
Other comprehensive income
Total comprehensive income
See accompanying notes to these consolidated financial statements.
Note
Year Ended Dec. 31, 2023
Year Ended Dec. 31, 2022
16
$
545,658
$
496,360
106,190
53,392
53,087
212,669
332,989
111,172
41,172
3,328
7,921
169,396
(1,113)
(928)
494,877
3,059
886
666,177
(78)
666,099
-
17
13
5
6
18
14
$
666,099
$
104,081
52,572
51,047
207,700
288,660
97,021
33,859
2,556
7,782
147,442
(247)
-
132,256
935
2,788
283,174
(78)
283,096
-
283,096
90
BOARDWALK REIT 2023 ANNUAL 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, 2021
$
214,689
$ 4,581,580
$ (1,543,091)
$ 3,038,489
$ 3,253,178
Units issued for vested deferred units
Units purchased and cancelled
Profit
Total comprehensive income
Distributions
1,293
(4,083)
-
-
-
-
(17,588)
283,096
283,096
-
-
-
-
-
(48,898)
-
(17,588)
283,096
283,096
(48,898)
1,293
(21,671)
283,096
283,096
(48,898)
Balance, December 31, 2022
$
211,899
$ 4,847,088
$ (1,591,989)
$ 3,255,099
$ 3,466,998
Units issued under equity offering, net of issue costs
Units issued for vested deferred units
Profit
Total comprehensive income
Distributions
239,992
152
-
-
-
-
-
666,099
666,099
-
-
-
-
-
(53,169)
-
-
666,099
666,099
(53,169)
239,992
152
666,099
666,099
(53,169)
Balance, December 31, 2023
$ 452,043
$ 5,513,187
$ (1,645,158)
$ 3,868,029
$ 4,320,072
See accompanying notes to these consolidated financial statements.
91
Consolidated Statements
of Cash Flows
(CDN $ THOUSANDS)
Operating activities
Profit
Loss on sale of asset
Other income
Financing costs
Interest paid
Deferred unit-based compensation
Loss from equity accounted investment
Fair value gains
Income tax expense
Income tax paid
Government grant amortization
Depreciation
Net change in operating working capital
Cash flow from operating activities
Investing activities
Purchase of investment properties, net of financing
Investment in capital assets
Development of investment properties
Proceeds from sale of investment in private technology
venture fund
Distributions from investment in private technology
venture fund, net of capital contribution
Principal repayments on lease receivable
Net change in investing working capital
Cash flow used in investing activities
Financing activities
Issuance of Trust Units, net of issue costs
Distributions paid
Unit repurchase program
Proceeds from mortgage financings
Mortgage payments upon refinancing
Scheduled mortgage principal repayments
Repayment of construction loan financing
Deferred financing costs incurred
Principal repayments on lease liabilities
Net change in financing working capital
Cash flow from financing activities
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.
Note
Year Ended Dec. 31, 2023
Year Ended Dec. 31, 2022
$
666,099
$
6
17
13
5
18
14
25
4
25
4
6
25
15
25
15
25
928
(886)
111,172
(103,084)
3,328
1,113
(494,877)
78
(3)
(378)
7,921
191,411
8,385
199,796
(13,782)
(125,972)
(23,325)
929
990
321
6,005
(154,834)
239,992
(52,469)
-
236,627
(97,912)
(74,448)
-
(14,234)
(3,397)
(733)
233,426
278,388
52,816
8
$
331,204
$
283,096
-
(2,788)
97,021
(88,574)
2,556
247
(132,256)
78
(2)
(378)
7,782
166,782
(5,878)
160,904
(52,159)
(129,352)
(17,747)
-
2,994
725
(1,519)
(197,058)
-
(48,631)
(21,671)
352,712
(139,665)
(74,588)
(21,187)
(17,076)
(3,965)
(1,259)
24,670
(11,484)
64,300
52,816
92
BOARDWALK REIT 2023 ANNUAL REPORT
Notes to the Consolidated
Financial Statements
For the Years Ended, December 31, 2023 and 2022
(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”) 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 (or “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: MATERIAL 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(b).
Certain comparative figures have been reclassified to conform to the presentation of the current year. Specifically, the rental revenue
note as presented in NOTE 16 has been updated to present revenue in appropriate categories when considering the definitions of
lease revenue and non-lease revenue. In addition, non-lease revenue from the Trust's retirement communities that was netted
against retirement service costs has been reclassified from operating expenses to rental revenue. Lastly, interest income that was
previously included in financing costs has been presented separately.
(c) Basis of Consolidation
These consolidated financial statements include the accounts of the Trust and its consolidated subsidiaries 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.
93
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.
(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 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) 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.
94
BOARDWALK REIT 2023 ANNUAL REPORT 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.
An investment property is derecognized upon disposal or when the investment property is permanently withdrawn from use and no
future economic benefits are expected from the disposal. Prior to its disposal, the carrying value of the investment property is
adjusted to reflect its fair value as outlined in the purchase and sale agreement (as the purchase and sale agreement is the best
evidence of fair value). This adjustment shall be recorded as a fair value gain or loss. Any remaining gain or loss arising on
derecognition of the property (calculated as the difference between the net disposal proceeds and the carrying amount of the asset)
is included in profit or loss in the period in which the property is derecognized.
Excess land represents land owned by the Trust located contiguous to land included as investment property. For some of the Trust's
excess land, 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, redevelopment or repositioning of
buildings the Trust currently owns that require substantial renovations, and incomplete apartment suites acquired from third parties
that will take 12 months or longer to complete. The cost of land, if applicable, and buildings under development or redevelopment
(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 redevelopment 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 redevelopment. 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. 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.
95
(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 IFRS 5 and IAS 40 (see NOTE 2(f)).
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. 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.
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 7)
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 and corporate assets
Site equipment and other assets
Computer hardware
Computer software (1)
Corporate technology assets
Corporate technology assets
40 years
15%
20%
10% to 20%
35%
35%
Straight-line
Declining balance
Declining balance
Declining balance
Declining balance
Declining balance
(1)
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)
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 measurement 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.
96
BOARDWALK REIT 2023 ANNUAL 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(n) for definition of
effective interest method).
The Trust remeasures the lease liability (and makes a corresponding adjustment to the related right-of-use asset) whenever:
• The lease term has changed or there is a change in the assessment of exercise of a purchase option, in which case the lease liability
is remeasured by discounting the revised lease payments using a revised discount rate;
• The lease payments change due to changes in an index or rate or a change in expected payment under a guaranteed residual value,
in which cases the lease liability is remeasured by discounting the revised lease payments using the initial discount rate; or
• A lease contract is modified and the lease modification is not accounted for as a separate lease, in which case the lease liability is
remeasured by discounting the revised lease payments using a revised discount rate.
The right-of-use assets comprise the initial measurement of the corresponding lease liability, lease payments made at or before the
commencement day and any initial direct costs. They are subsequently measured either at fair value (in the case of right-of-use assets
which are considered part of investment properties) or at cost less accumulated depreciation and impairment losses (for right-of-use
assets which are considered property, plant and equipment). Right-of-use assets are depreciated over the shorter period of the lease
term and the useful life of the underlying asset. The depreciation starts at the commencement date of the lease. The Trust applied
IAS 36 to determine whether a right-of-use asset is impaired.
Variable rents that do not depend on an index or rate are not included in the measurement of the lease liability and the right-of-use
asset. The related payments are recognized as an expense in the period in which the event or condition that triggers those payments
and are included in operating expenses in the consolidated statement of comprehensive income.
As a practical expedient, IFRS 16 permits a lessee not to separate non-lease components, and instead account for any lease and
associated non-lease components as a single arrangement. The Trust has used this practical expedient on those contracts
(warehouse space and office space) which contain both lease and non-lease components.
The Trust as a Lessor
The Trust enters into lease agreements as a lessor with respect to its investment properties. Leases for which the Trust is a lessor are
classified as finance or operating leases. Whenever the terms of the lease transfer substantially all the risks and rewards of ownership
to the lessee, the contract is classified as a finance lease. All other leases are classified as operating leases. As the Trust has retained
substantially all of the risks and benefits of ownership of its investment properties, it accounts for leases with its tenants as operating
leases. As operating leases, lease payments are recognized as revenue when the tenant has a right to use the leased asset. The leased
asset is recognized in the consolidated statement of financial position according to the nature of the underlying asset.
(j)
Taxation
For fiscal 2023 and 2022, 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. The Trust establishes provisions for taxes when, despite the belief that its tax positions are fully supportable, it is
probable that its positions may be challenged and disallowed by the relevant tax authorities. The consolidated tax expense (recovery)
and related accruals include the impact of such reasonably estimated disallowances as deemed appropriate. To the extent that the
probable tax outcome of these matters changes, such changes in estimates will impact the income tax expense (recovery) in the
period in which such determination is made.
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 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.
97
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.
(k) Provisions
In accordance with IAS 37 – Provisions, contingent liabilities and contingent assets (“IAS 37”), a provision is a liability of uncertain
timing or amount. Provisions are recognized when the entity has a present legal or constructive obligation as a result of past events
and when it is probable that an outflow of resources will be required to settle the obligation and the amount can be reliably
estimated. Provisions are not recognized for future operating losses. Provisions are measured at the present value of the expenditures
expected to be required to settle the obligation using a discounted rate that reflects current market assessment of the time value of
money and the risks and uncertainties specific to the obligation. Provisions are remeasured 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.
(l)
Unit-based Payments
Deferred 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 IFRS 2 – Share-based payments (“IFRS 2”), 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 2, the deferred units are measured at each reporting period at fair value with changes in fair value recognized in the
consolidated statement of comprehensive income. Fair value of the deferred units is calculated based on the observable market price
of Boardwalk REIT’s Trust Units.
(m) Revenue Recognition
(i)
Rental Revenue
The Trust has retained substantially all of the risks and benefits of ownership of its investment properties, and, therefore,
accounts for leases with its tenants as operating leases. Revenue recognition under a lease commences when the tenant has
a right to use the leased asset. Generally, this occurs on lease inception date when the tenant occupies their leased space.
Rental revenue is recognized systematically over the term of the lease, which is generally not more than 12 months.
Any suite specific incentives offered or initial direct costs incurred in negotiating and arranging an operating lease are also
amortized over the term of the operating lease. Rental revenue is recorded based on the amount received or to be received
in accordance with the operating lease.
Lease revenue earned directly from leasing the asset is recognized and measured in accordance with IFRS 16. In addition to
revenue generated directly from the operating lease, rental revenue includes non-lease revenue earned from the tenant,
which is recognized and measured under IFRS 15 – Revenue from Contracts with Customers (“IFRS 15”). Non-lease revenue
includes parking revenue, other service revenue and fees, and recovery of certain operating costs, including retirement
services and cable (internet and television). These revenues are recognized when earned.
98
BOARDWALK REIT 2023 ANNUAL REPORT
IFRS 15 requires revenue recognized from customer contracts (non-lease components) to be disclosed separately from its
other sources of revenue (NOTE 16 and NOTE 26).
(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.
(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.
Financial Assets
Financial assets are classified and measured on the basis of the Trust’s business model for managing the financial assets and the
contractual cash flow characteristics of the financial assets. As such, after initial recognition, financial assets are classified and
measured based on three categories: (i) amortized cost, (ii) fair value through other comprehensive income (FVTOCI), or (iii) fair value
through profit and loss (FVTPL). The classification depends on the nature and purpose of the financial asset and is determined at the
time of initial recognition. Financial assets are classified as at FVTPL when the financial asset either is held for trading or is designated
as at FVTPL. Financial assets categories are defined and measured as follows:
Classification
Definition
Measurement
Amortized cost
FVTOCI
FVTPL
Debt instrument is held within a business model whose objective is to
hold financial assets in order to collect contractual cash flows and the
contractual terms of the financial asset give rise on specified dates to
cash flows that are solely payments of principal and interest on the
principal amount outstanding.
Measured at amortized cost using
the effective interest rate method
less any expected credit loss. (1)(2)
Debt instrument is held within a business model whose objective is
achieved by both collecting contractual cash flows and selling the
financial assets; and the contractual terms of the financial asset
give rise on specified dates to cash flows that are solely payments of
principal and interest on the principal amount outstanding.
Stated at fair value, with gains
or losses arising on measurement
recognized in other
comprehensive income.
Financial assets that do not meet the criteria for being measured
at amortized cost 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)
(2)
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.
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.
99
Boardwalk REIT’s financial assets are as follows:
Financial Asset
Classification and Measurement
Investment in private technology venture fund
FVTPL
Trade and other receivables
Segregated tenants’ security deposits
Cash and cash equivalents
Amortized cost
Amortized cost
Amortized cost
The Trust derecognizes a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers
the financial asset and substantially all the risks and rewards of ownership of the asset to another entity.
Financial Liabilities and Equity
Debt and equity instruments issued are classified either as financial liabilities or as equity in accordance with the substance of the
contractual arrangements and the definitions of a financial liability and an equity instrument. An equity instrument is any contract
that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Trust
are recognized at the proceeds received, net of direct issue costs. Repurchase of Boardwalk REIT’s own equity instruments is
recognized and deducted directly in equity. No gain or loss is recognized in profit or loss on the purchase, sale, issue, or cancellation
of the Trust’s own equity instruments. Distributions paid on the Trust’s equity instruments subsequent to, declared prior to, and with
a record date at or prior to, the reporting date, are recorded as a liability.
Financial liabilities are classified and measured as either amortized cost 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.
Stated at fair value, with gains or
losses arising on measurement
recognized in profit or loss.
Classified as FVTPL upon initial recognition if: such designation
eliminates or significantly reduces a measurement or recognition
inconsistency that would otherwise arise; or the financial liability
forms part of a group which is managed and its performance
is evaluated on a fair value basis; or it forms part of a contract
containing one or more embedded derivatives.
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.
100
BOARDWALK REIT 2023 ANNUAL REPORT Boardwalk REIT’s financial liabilities are as follows:
Financial Liability
Mortgages payable
LP Class B Units
Refundable tenants’ security deposits
Trade and other payables
Classification and Measurement
Amortized cost
FVTPL
Amortized cost
Amortized cost
The Trust derecognizes a financial liability when, and only when, the Trust’s obligations are discharged, cancelled or they expire.
The difference between the carrying amount of the financial liability derecognized and the consideration paid and payable is
recognized in profit or loss.
Derivatives
The Trust may enter into a variety of derivative financial instruments to manage its exposure to interest rate risks, including interest
rate swaps and bond forward contracts. Derivatives are initially recognized at fair value at the date the derivative contracts are
entered into and are subsequently measured at their fair value at the end of each reporting period. The resulting gain or loss is
recognized in profit or loss immediately unless the derivative is designated and effective as a hedging instrument, in which case the
timing of the recognition in profit or loss depends on the nature of the hedge relationship. Derivatives embedded in host contracts
are treated as separate derivatives when their risks and characteristics are not closely related to the host contracts and the host
contracts are not measured at FVTPL. For the years ended December 31, 2023 and 2022, 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 Judgement in Applying Accounting Policies
The following are the critical judgements, apart from those involving estimations (see NOTE 2(q) 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)
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,
judgement 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 judgement in the estimated amount of directly attributable on-site wages to be allocated to capital improvements
and upgrades of its real estate assets.
(ii)
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.
101
(iii)
Taxation Provisions
The Trust’s accounting policy relating to provisions is described in NOTE 2(k) above. In applying this policy, judgement is
applied in determining if the Trust has a present legal or constructive obligation as a result of past events and if it is probable
that an outflow of resources will be required to settle the obligation and if the amount can be reliably estimated. For
uncertain tax items no provision has been recorded based on the interpretation of tax legislation. Due to the uncertainty
associated with such tax items, there is a possibility that, on conclusion of open matters at a future date, the final outcome
may differ significantly from the Trust’s judgements or estimates. Please refer to NOTE 19 for additional details.
(q) Material 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.
(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 rents,
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
materially alter the fair value of an investment property. Please refer to NOTE 4 for sensitivity analysis.
(ii)
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.
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 IFRS 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
IAS 1 – Presentation of
Financial Statements
The amendment deals with the disclosure of material
accounting policy information. Specifically, the amendment
specifies the requirement to disclose material accounting
policy information rather than significant accounting
policies and provides guidance on when accounting policy
information is likely to be considered material.
Impact on Consolidated
Financial Statements
This amendment was applied
prospectively on January 1, 2023 and
there was no material impact on the
consolidated financial statements.
IAS 8 – Accounting Policies, Changes
in Accounting Estimates and Errors
The amendment deals with the definition of accounting
estimates. Specifically, the amendment adds a definition
of an accounting estimate and provides clarification on the
relationship between accounting policy and an accounting
estimate as well as on use of inputs or measurement
techniques and treatment in case of changes therein.
This amendment was applied
prospectively on January 1, 2023 and
there was no impact on the consolidated
financial statements.
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BOARDWALK REIT 2023 ANNUAL REPORT
b)
Future Accounting Policies
The following accounting standards under IFRS have been issued or revised; however, they are not yet effective, and, as such, have not
been applied to these consolidated financial statements:
New or Amended Standards
Summary of Requirements
Amendments to IFRS 10 and
IAS 28 – Sale or Contribution
of Assets between an Investor
and its Associate or Joint Venture
IAS 1 – Presentation of
Financial Statements
IAS 7 – Statement of Cash
Flows and IFRS 7 – Financial
Instruments: Disclosures
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.
In addition, a second amendment deals with non-current
liabilities with covenants. Specifically, the amendment
clarifies how conditions with which an entity must comply
within 12 months after the reporting period affect the
classification of a liability.
Both amendments are effective for annual reporting periods
beginning on or after January 1, 2024 and are to be applied
retrospectively, with earlier application permitted.
The amendments deal with the disclosure requirements to
enhance the transparency of supplier finance arrangements
and their effects on a company's liabilities, cash flows and
exposure to liquidity risk.
The effective date of the amendments is for annual reporting
periods beginning on or after January 1, 2024, however, earlier
application is permitted.
Possible Impact on Consolidated
Financial Statements
The Trust is assessing the potential
impact but does not expect any
significant impact.
The Trust is currently evaluating the
impact of the amendments. The Trust
expects that the LP Class B Units will be
required to be presented as a current
liability as a result of this amendment.
The Trust is assessing the potential
impact but does not expect any
significant impact.
103
In addition to those referenced, the following amendments are not expected to have any impact on the Trust’s consolidated
financial statements:
• IFRS 16 – Leases
• IAS 21 – The Effects of Changes in Foreign Exchange Rates
NOTE 4: INVESTMENT PROPERTIES
Balance, beginning of year
Additions
Building acquisitions
Building improvements (incl. internal capital program)
Development of investment properties (1)
Fair value gains, unrealized
Balance, end of year
As at
Fair value of investment properties, before buildings valued at
Level 2 inputs, right-of-use assets, and developments
Buildings valued at Level 2 inputs
Fair value, right-of-use assets (IFRS 16 – Leases)
Revenue producing properties
Properties under development
Total
Year Ended
Dec. 31, 2023
Year Ended
Dec. 31, 2022
$
6,900,745
$
6,492,969
60,290
119,012
23,325
598,842
159,735
123,885
17,747
106,409
$
7,702,214
$
6,900,745
Dec. 31, 2023
Dec. 31, 2022
$
7,557,359
$
6,613,279
-
72,860
7,630,219
71,995
159,735
74,502
6,847,516
53,229
$
7,702,214
$
6,900,745
(1)
On June 1, 2022, the Trust purchased three adjacent parcels of land in Victoria, British Columbia for a purchase price of $12.0 million. The acquisition was funded with cash
on hand for a planned development of new rental suites.
On April 25, 2023, the Trust acquired a property in Victoria, British Columbia. The property is comprised of 124 suites and was
purchased for $60.3 million. The acquisition was funded with mortgage financing of $46.5 million and cash on hand of $13.8 million.
On August 8, 2022, the Trust acquired a property in Calgary, Alberta. The property is comprised of 158 suites and was purchased for
$41.9 million. The acquisition was funded with cash on hand of $12.7 million and the assumption of a mortgage for $29.2 million.
The mortgage assumed had an in-place interest rate below market rate, resulting in a market debt adjustment totaling $1.0 million
that was made to the cost of the acquisition.
On March 30, 2022, the Trust acquired a property in Brampton, Ontario and a property in Canmore, Alberta. The properties are
comprised of 152 suites and 148 suites, respectively, and were purchased for $118.8 million. The acquisition was funded with
mortgage financing of $79.4 million and cash on hand of $39.4 million.
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BOARDWALK REIT 2023 ANNUAL REPORT
Building Acquisitions
Purchase price
Transaction costs
Market debt adjustment
Total
Multi-family suites acquired
Purchase price
Transaction costs
Proceeds from mortgage financing
Net cash paid
Year Ended
Dec. 31, 2023
Year Ended
Dec. 31, 2022
$
60,000
$
159,370
290
-
1,378
(1,013)
$
60,290
$
159,735
124
458
$
60,000
$
159,370
290
(46,508)
1,378
(108,589)
$
13,782
$
52,159
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, 2023, 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:
Recurring measurements
Investment properties
Alberta
British Columbia
Saskatchewan
Ontario
Quebec
Land leases
Total
Year Ended December 31, 2023
Balance,
Beginning
of Year
Building
Acquisitions
Improvements
to Investment
Properties
Development
of Investment
Properties
Fair Value
Gains
(Losses)
Balance,
End of Year
$ 4,217,249 $
-
$
73,964
$
23
$ 536,678 $ 4,827,914
102,685
618,172
742,267
373,367
847,005
60,290
-
-
-
-
213
14,944
9,606
5,320
14,965
22,887
5
410
-
-
12,422
60,232
(28,513)
5,123
198,497
693,353
723,770
383,810
12,900
874,870
$ 6,900,745 $
60,290
$ 119,012
$
23,325
$ 598,842 $ 7,702,214
105
Recurring measurements
Investment properties
Alberta
British Columbia
Saskatchewan
Ontario
Quebec
Land leases
Total
Year Ended December 31, 2022
Balance,
Beginning
of Year
Building
Acquisitions
Improvements
to Investment
Properties
Development
of Investment
Properties
Fair Value
Gains
(Losses)
Balance,
End of Year
$ 3,962,993 $
104,518
$
80,325
$
9
$
69,404 $ 4,217,249
78,914
600,261
653,353
372,892
824,556
-
-
55,217
-
-
103
14,119
10,611
7,719
11,008
16,670
5
1,063
-
-
6,998
3,787
22,023
(7,244)
102,685
618,172
742,267
373,367
11,441
847,005
$ 6,492,969 $
159,735
$
123,885
$
17,747
$
106,409 $ 6,900,745
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, 2023, all of the Trust’s investment properties were Level 3 inputs, including the current year
building acquisition which was valued at Level 3 based on a third-party external valuation obtained for financing purposes as this was
more appropriate in the circumstances given underwriting considerations at the time of purchase. For investment properties measured
at fair value as at December 31, 2023 and December 31, 2022, transfers into Level 3 fair value measurements include the following:
(i)
(ii)
There were three investment properties transferred during the year ended December 31, 2023 from Level 2 into Level 3 fair
value measurements. The fair value of these three investment properties as at December 31, 2023, using Level 3 inputs
totaled $189.9 million (December 31, 2022 – $159.7 million valued using Level 2 inputs).
There were two investment properties transferred during the year ended December 31, 2022 from Level 2 into Level 3 fair
value measurements. The fair value of these two investment properties as at December 31, 2022, using Level 3 inputs totaled
$82.7 million (December 31, 2021 – $72.3 million valued using Level 2 inputs) .
These five investment properties were previously valued at Level 2 because they were newly acquired buildings and used inputs
which were directly observable for these assets, as the fair value was based on a purchase and sale agreement between two willing
market participants. Other than these five investment properties, there were no other transfers into or out of Level 3 fair value
measurements for investment properties held as at December 31, 2023 and December 31, 2022.
106
BOARDWALK REIT 2023 ANNUAL REPORT
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, 2023
September 30, 2023
June 30, 2023
March 31, 2023
December 31, 2022
September 30, 2022
June 30, 2022
March 31, 2022
Number
of Properties
6
6
4
4
5
4
6
5
$
$
$
$
$
$
$
$
Aggregate
Fair Value
874,525
196,708
210,300
100,235
879,913
160,628
176,883
175,019
Percentage of Portfolio
as of that Date
11.4%
2.6%
2.8%
1.4%
12.8%
2.3%
2.6%
2.6%
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 (“Cap Rate”) for each region (city) as well
as confirmation of the reasonableness of the assumptions used in determining stabilized net operating income (“NOI”) 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 NOI for each individual property be divided by a 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 Cap Rate was also determined for each property based on market
information related to the external sale of similar buildings within a similar geographic location. These factors were used to determine
the fair value of investment properties at each reporting date.
Five of the Trust’s properties: two in Banff, Alberta, one in Edmonton, Alberta, and two in Montreal, Quebec, 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 2029), 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.
For the other land lease in Montreal, which has an expiry date of 2064, a DCF approach was prepared to substantiate the income
approach that was used to derive fair value, with no significant differences between the two methods.
107
The key valuation metrics (and significant unobservable inputs in Level 3) for the Trust’s investment properties are set out in the
following table:
As at
Dec. 31, 2023
Dec. 31, 2022
Alberta
British Columbia
Saskatchewan
Ontario
Quebec
Land Leases
Total
Capitalization Rate
Weighted Average
Forecasted Total
Stabilized Net
Operating Income
Capitalization Rate
Weighted Average
Forecasted Total
Stabilized Net
Operating Income
5.13%
$
247,297
5.01%
$
206,176
4.30%
5.67%
4.27%
4.94%
5.06%
4.96%
5.05%
$
$
5,518
39,326
30,922
18,944
342,007
39,807
381,814
4.25%
5.67%
4.01%
4.81%
4.95%
4.69%
4.92%
$
$
2,350
35,049
27,354
17,965
288,894
36,198
325,092
The overall weighted average stabilized Cap Rates for measuring the Trust’s investment properties at fair value using a forecasted
stabilized NOI as at December 31, 2023 and 2022, was 5.05% and 4.92%, respectively.
The Overall Capitalization Rate method requires inputs of both stabilized NOI and Cap Rate to determine a fair value. As such,
fluctuations in both NOI and Cap Rates could materially 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 as the lower the Cap Rate, the larger
the impact. The following tables summarize the impact of changes in both the Cap Rates and forecasted stabilized 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, 2023
Stabilized Net Operating Income
Cap Rate
-0.25%
Cap Rate As Reported
+0.25%
-3%
-1% As Forecasted
+1%
+3%
$ 370,360
$
377,996
$ 381,814
$ 385,632
$ 393,268
4.80%
$ 154,907
$ 313,923
$ 393,431
$ 472,939
$ 631,955
5.05%
5.30%
(226,721)
(572,361)
(75,574)
7,557,359
75,574
226,721
(428,341)
(356,330)
(284,320)
(140,299)
As at December 31, 2022
Stabilized Net Operating Income
Cap Rate
-0.25%
Cap Rate As Reported
+0.25%
-3%
-1%
As Forecasted
+1%
$
$
315,339
145,324
$
$
321,841
284,676
$
$
325,092
354,353
$
$
328,343
424,029
$
$
(198,398)
(508,851)
(66,133)
(382,987)
6,613,279
(320,054)
66,133
(257,122)
+3%
334,845
563,382
198,398
(131,258)
4.67%
4.92%
5.17%
Investment properties with a fair value of $802.0 million (December 31, 2022 – $772.5 million) are situated on land held under
land leases.
Investment properties with a fair value of $1.0 billion (December 31, 2022 – $808.6 million) are pledged as security against the Trust’s
committed revolving credit facility. Assets pledged as security for the committed revolving credit facility may also be pledged as
security on mortgages. In addition, investment properties with a fair value of $7.4 billion (December 31, 2022 – $6.6 billion) are
pledged as security against the Trust’s mortgages payable. As at December 31, 2023, 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 related to the construction of the new development project in Victoria, British Columbia.
108
BOARDWALK REIT 2023 ANNUAL REPORT
For the years ended December 31, 2023 and 2022, investment properties earned rental revenue (including ancillary rental income) of
$545.7 million and $496.4 million, respectively. Total rental expenses in relation to investment properties were $212.7 million and
$207.7 million for the years ended December 31, 2023 and 2022, respectively.
NOTE 5: EQUITY ACCOUNTED INVESTMENT
The Trust is a participant in a joint venture with the principal activity to develop and operate a mixed-use property in Brampton,
Ontario. The mixed-use property includes residential space over two concrete high-rise towers, with one tower leased-up and the
other tower completing development in November 2023 and beginning the lease-up stage.
The following table shows the changes in the carrying value of the investment in the partnership:
Balance, beginning of year
Share of loss
Balance, end of year
Year Ended
Dec. 31, 2023
Year Ended
Dec. 31, 2022
$
$
40,871
(1,113)
39,758
$
$
41,118
(247)
40,871
The following tables present the Trust’s share of the summarized financial information of the partnership:
As at
Non-current assets
Current assets
Non-current liabilities
Current liabilities
Net assets
Trust’s share
Revenue
Expenses
Loss
Trust’s share
Dec. 31, 2023
Dec. 31, 2022
$
194,521
$
171,549
970
(112,655)
(3,321)
79,515
39,758
$
$
$
$
871
(80,539)
(10,140)
81,741
40,871
Year Ended
Dec. 31, 2023
Year Ended
Dec. 31, 2022
$
$
4,519
$
6,745
(2,226)
(1,113)
$
232
726
(494)
(247)
During 2021, the Trust, in conjunction with its joint venture partner, entered into a $122 million revolving construction facility loan
with a third-party financial institution. As at December 31, 2023, $112.6 million has been drawn on this loan (December 31, 2022 –
$80.5 million), of which Boardwalk's portion is $56.3 million (December 31, 2022 – $40.3 million). The facility is interest payable only
and has a maturity date of January 31, 2025. The facility bears interest at prime plus 0.25%, or a Bankers’ Acceptance stamping fee
of 1.23% and a standby fee of 0.15%. Subsequent to December 31, 2023, the joint venture repaid 50% of the outstanding loan
balance (NOTE 27).
The revolving construction facility loan contains three financial covenants. These covenants are consistent with those found in the
credit facility outlined in NOTE 22(d). As at December 31, 2023, the Trust was in compliance with these covenants.
109
NOTE 6: OTHER ASSETS
As at
Other non-current assets
Property, plant and equipment
Investment in private technology venture fund
Deferred tax assets
As at
Other current assets
Inventories
Prepaid expenses and other
Lease receivable
Trade and other receivables
Segregated tenants' security deposits
Note
Dec. 31, 2023
Dec. 31, 2022
7
$
30,585
$
31,352
14
-
782
3,303
859
$
31,367
$
35,514
Note
Dec. 31, 2023
Dec. 31, 2022
$
6,875
$
15,697
-
4,940
9,821
7,765
15,979
321
4,641
8,623
$
37,333
$
37,329
Investment in Private Technology Venture Fund
On December 31, 2023, the Trust disposed of the investment in the private real estate technology venture fund for the price of
$0.9 million. The cost of the investment was $1.8 million resulting in a loss on sale of asset of $0.9 million.
Prepaid Expenses and Other
The major components of prepaid expenses and other relate to property taxes, land leases, prepaid expenses, and deposits.
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. Refer to NOTE 22(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.
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.
NOTE 7: PROPERTY, PLANT AND EQUIPMENT
The carrying amounts of PP&E were as follows:
As at
Dec. 31, 2023
Accumulated
Depreciation
Cost
Carrying
Amount
Dec. 31, 2022
Cost
Accumulated
Depreciation
Administration building
$
7,163
$
(4,694)
$
2,469
$
6,990
$
(4,480)
$
Site equipment and other
Corporate technology assets
73,010
56,860
(53,554)
(48,200)
19,456
8,660
70,164
52,725
(49,403)
(44,644)
Carrying
Amount
2,510
20,761
8,081
Total
$ 137,033
$ (106,448)
$
30,585
$
129,879
$
(98,527)
$
31,352
110
BOARDWALK REIT 2023 ANNUAL REPORT
The following table outlines a reconciliation of the carrying amount of PP&E as at December 31, 2023:
Administration building
Site equipment and other
Corporate technology assets (1)
Total
Balance,
Beginning of Year
Additions
to PP&E
Depreciation
Balance
End of Year
$
2,510
$
172
$
(213)
$
20,761
8,081
2,846
4,136
(4,151)
(3,557)
2,469
19,456
8,660
$
31,352
$
7,154
$
(7,921)
$
30,585
(1)
Included in corporate technology assets for the year ended December 31, 2023, was $1.4 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, 2022:
Administration building
Site equipment and other
Corporate technology assets (1)
Total
Balance,
Beginning of Year
Additions
to PP&E
Depreciation
Balance
End of Year
$
2,586
$
139
$
(215)
$
19,444
7,847
5,498
3,620
(4,181)
(3,386)
2,510
20,761
8,081
$
29,877
$
9,257
$
(7,782)
$
31,352
(1)
Included in corporate technology assets for the year ended December 31, 2022, was $1.2 million of capitalized programmers’ salaries related to the internally developed
software applications used by the Trust in the normal course of its operations.
NOTE 8: CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash of $100.8 million and term deposits with maturities of 90 days or less of $230.4 million
(December 31, 2022 – cash of $52.8 million and term deposits of $nil).
NOTE 9: MORTGAGES PAYABLE
As at
Dec. 31, 2023
Dec. 31, 2022
Weighted
Average Interest
Debt Balance
Weighted
Average Interest
Debt Balance
Mortgages payable
Fixed rate
Total
Current
Non-current
3.00%
$
$
$
3,318,417
3,318,417
500,372
2,818,045
$
3,318,417
2.72%
$
$
$
$
3,214,554
3,214,554
504,953
2,709,601
3,214,554
111
Estimated future principal payments required to meet mortgage obligations as at December 31, 2023 are as follows:
12 months ending December 31, 2024
12 months ending December 31, 2025
12 months ending December 31, 2026
12 months ending December 31, 2027
12 months ending December 31, 2028
Subsequent
Total mortgage principal outstanding
Unamortized deferred financing costs
Unamortized market debt adjustments
Secured By
Investment Properties
$
500,372
612,714
620,788
606,070
348,259
758,598
3,446,801
(127,774)
(610)
$
3,318,417
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 various dates between January 19,
2005 and April 22, 2021, 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 $0.25 million under a Letter of Credit issued in favor of CMHC. This agreement matured on April 25,
2023 and the Letter of Credit was released.
During the years ended December 31, 2023 and 2022, 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, 2023 (December 31, 2022 – $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 25, 2028.
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, 2023 (December 31, 2022 – $nil) under this facility, except for Letters of Credit
(“LCs”) issued and outstanding. The LCs totaled $4.2 million as at December 31, 2023 (December 31, 2022 – $3.9 million). As such,
approximately $195.8 million was unused and available from this facility on December 31, 2023 (December 31, 2022 – $196.1 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 22(d).
112
BOARDWALK REIT 2023 ANNUAL REPORT
NOTE 10: LEASE LIABILITIES
As lessee, the Trust leases several assets which are secured by the lessor’s title to the leased assets for such leases. The following
represents the major type of leases the Trust maintains as lessee:
(i) Land Leases
The Trust has entered into non-cancellable land leases for land related to five of its properties, which sit on land that is not
owned by the Trust. Approximate remaining terms of the Trust’s land leases range from five to 72 years as at December 31, 2023.
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 four years.
As at
Lease liabilities
Fixed rate
Total
Current
Non-current
Dec. 31, 2023
Dec. 31, 2022
Weighted
Average Interest
Lease Balance
Weighted
Average Interest
Lease Balance
3.32%
3.30%
$
$
$
$
76,796
76,796
2,978
73,818
76,796
Estimated future principal payments required to meet lease liabilities as at December 31, 2023 are as follows:
12 months ending December 31, 2024
12 months ending December 31, 2025
12 months ending December 31, 2026
12 months ending December 31, 2027
12 months ending December 31, 2028
Subsequent
Total lease liabilities
$
$
$
$
$
$
79,998
79,998
3,396
76,602
79,998
Amount
2,978
2,743
2,674
2,606
1,882
63,913
76,796
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, 2023, lease payments on short-term leases or leases of low value assets totaled $1.9 million (year ended December 31,
2022 – $2.0 million).
NOTE 11: LP CLASS B UNITS
The Class B Limited Partnership Units (“LP Class B Units”), as defined in NOTE 15, representing an aggregate fair value of $319.2 million
at December 31, 2023 (December 31, 2022 – $221.2 million), are non-transferable, except under certain circumstances, but are
exchangeable, on a one-for-one basis, into 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 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 income and are included in NOTE 18.
As at December 31, 2023 and December 31, 2022, there were 4,475,000 LP Class B Units issued and outstanding.
113
NOTE 12: OTHER LIABILITIES
As at
Other non-current liabilities
Deferred unit-based compensation
Deferred tax liabilities
Deferred government grant
As at
Other current liabilities
Deferred unit-based compensation
Deferred government grant
Refundable tenants' security deposits
Trade and other payables
Note
Dec. 31, 2023
Dec. 31, 2022
13
$
6,801
$
14
-
3,372
$
10,173
$
4,181
2
3,750
7,933
Note
Dec. 31, 2023
Dec. 31, 2022
13
$
9,007
$
378
13,732
74,054
$
97,171
$
3,878
378
12,363
59,974
76,593
Trade and Other Payables
Trade and other payables are comprised of trade payables, accrued liabilities, distribution payable, and provisions. As at December 31,
2023, the Trust’s most significant provision relates to vacation payable to its employees within each employee’s individual
employment agreement totaled $6.2 million (December 31, 2022 – $5.7 million).
NOTE 13: DEFERRED UNIT-BASED COMPENSATION
As at
Current
Non-current
Dec. 31, 2023
Dec. 31, 2022
$
$
9,007
6,801
15,808
$
$
3,878
4,181
8,059
The total of $15.8 million represents the fair value of the underlying deferred units at December 31, 2023 (December 31, 2022 –
$8.1 million). Gains or losses resulting from changes in the fair value at each reporting date are recorded in the consolidated statement
of comprehensive income and are included in NOTE 18.
Details of the Deferred Unit-based Compensation Plan
During 2006, the Trust implemented a deferred unit-based compensation plan. The plan entitles executives, leaders, and the Board of
Trustees 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 June 9, 2021.
114
BOARDWALK REIT 2023 ANNUAL REPORT
As at December 31, 2023 and 2022, the deferred units outstanding, in whole or in part, were granted as follows:
Deferred Units
Granted in
2015
2016
2017
2018
2019
2020
2021
2022
2023
Additional deferred
units earned on units
Number
55,236
63,697
34,858
41,238
51,692
99,357
65,270
77,908
75,940
Grant Date
Fair Value at
Grant Date
Vesting Date
Deferred Units
Outstanding
February, June & December 2015
$
February, June & December 2016
June & December 2017
June & December 2018
March, June & December 2019
March, June & December 2020
March, June & December 2021
March, June & December 2022
March, June & December 2023
3,094
3,065
1,614
1,771
2,188
3,710
2,676
3,966
4,627
February, June & December 2020
February, June & December 2021
June & December 2022
June & December 2023
March, June & December 2024
March, June & December 2025
March, June & December 2026
March, June & December 2027
March, June & December 2028
$
26,711
1,345
3,252
6,620
12,430
20,266
74,784
52,824
73,724
74,290
319,535
18,550
338,085
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, 2021
Deferred units granted
Additional deferred units earned on units
Deferred units forfeited
Deferred units converted to Trust Units
Balance, December 31, 2022
Deferred units granted
Additional deferred units earned on units
Deferred units forfeited
Deferred units converted to Trust Units
Balance, December 31, 2023
# of Units Outstanding
# of Units Vested
216,754
77,908
5,208
(8,074)
(25,824)
265,972
75,940
5,686
(7,011)
(2,502)
338,085
26,524
28,540
5,911
-
(25,824)
35,151
44,651
7,257
-
(2,502)
84,557
For the year ended December 31, 2023, total costs of $3.3 million (year ended December 31, 2022 – $2.6 million) were recorded in
expenses related to executive bonuses, leader bonuses, and trustee fees under the deferred unit plan.
115
NOTE 14: INCOME TAXES
Current Income Tax
For the years ended December 31, 2023 and 2022, none of the Trust’s corporate entities had current tax expense. The Trust’s
partnerships had a tax expense from the 2023 Underused Housing Tax filings. The Trust had a tax expense from the 2022 annual
tax filing. As such, $3,000 of current income tax expense was recorded for the Trust for the year ended December 31, 2023
(year ended December 31, 2022 – $2,000). 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 2023 and 2022, 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
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
Other
Net deferred tax assets
Deferred tax assets
Deferred tax liabilities
Net deferred tax assets
Dec. 31, 2022
Recognized
in Profit
Dec. 31, 2023
$
$
$
$
$
$
$
$
859
(2)
857
859
(2)
857
Dec. 31, 2021
933
-
933
933
-
933
$
$
$
$
$
$
$
$
(77)
2
(75)
(77)
2
(75)
Recognized
in Profit
(74)
(2)
(76)
(74)
(2)
(76)
$
$
$
$
$
$
$
$
782
-
782
782
-
782
Dec. 31, 2022
859
(2)
857
859
(2)
857
No current income taxes or deferred income taxes were recognized in equity, other than through profit or other comprehensive
income, for the years ended December 31, 2023 and 2022.
As at December 31, 2023, wholly-owned Canadian corporate subsidiaries have deferred tax assets of $0.8 million (December 31, 2022 –
$0.9 million) related to operating losses, which expire over the next eight 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.
The major components of income tax expense include the following:
Current tax expense
Deferred tax expense
Total income tax expense
Year Ended
Dec. 31, 2023
Year Ended
Dec. 31, 2022
$
$
3
75
78
$
$
2
76
78
116
BOARDWALK REIT 2023 ANNUAL REPORT
The income tax expense for the year can be reconciled to the accounting profit as follows:
Profit before income tax
Remove (profit) from non-taxable entities
Accounting profit subject to tax
Deduct management fee charged to corporate entities
Taxable profit
Weighted average substantively enacted tax rate
Calculated income tax expense
Changes to other deferred tax balances
Total income tax expense
Year Ended
Dec. 31, 2023
Year Ended
Dec. 31, 2022
$
666,177
$
283,174
(611,654)
54,523
(54,468)
55
26.50%
15
63
$
78
$
(232,048)
51,126
(51,122)
4
26.51%
1
77
78
NOTE 15: UNITHOLDERS' EQUITY
The Plan of Arrangement (the “Arrangement”) converting the Corporation to a real estate investment trust was completed on May 3,
2004. Under the Arrangement, the former shareholders of the Corporation received Boardwalk REIT Trust Units or 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 11.
(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)
(ii)
90% of the “market price” of the Trust Units on the principal market on which the Trust Units are quoted for trading
during the 20-day period ending on the trading day prior to the day on which the Trust Units were surrendered to
Boardwalk REIT for redemption; and,
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.
By virtue of Boardwalk REIT being an open-ended mutual fund trust, Unitholders of Trust Units are entitled to redeem their Trust
Units at any time at prices determined and payable in accordance with the conditions specified in the DOT. As a result, under IFRS,
Trust Units are defined as financial liabilities; however, the Trust Units meet the limited exemption conditions set out in IAS 32 and
are therefore presented as equity in the consolidated statements of financial position.
The DOT authorizes Boardwalk REIT to issue an unlimited number of Trust Units for the consideration and on terms and conditions
established by the Board of Trustees without the approval of any Unitholders.
117
The Trust has the following capital securities outstanding:
As at
Dec. 31, 2023
Dec. 31, 2022
Trust Units
Amount
Trust Units
Amount
Trust Units outstanding, beginning of year
45,722,922
$ 211,899
46,137,112
$
214,689
Trust Units issued under equity offering, net of issue costs
3,662,750
239,992
Trust Units issued for vested deferred units
Trust Units purchased and cancelled
Trust Units outstanding, end of year
2,502
-
152
-
-
25,810
(440,000)
-
1,293
(4,083)
49,388,174
$ 452,043
45,722,922
$
211,899
On December 22, 2023, Boardwalk REIT issued 3,662,750 Trust Units under a bought-deal equity offering at a price of $68.50 per Trust
Unit for total gross proceeds of $250.9 million. Transaction costs for this equity offering totaled $10.9 million resulting in net proceeds
to the Trust of $240.0 million.
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.
On November 14, 2023, Boardwalk REIT requested and received regulatory approval for a Normal Course Issuer Bid (a “Bid”), which
commenced on November 22, 2023 and terminates on November 21, 2024. The Bid allows Boardwalk REIT to purchase and cancel
up to 3,696,997 Trust Units.
On November 17, 2022, Boardwalk REIT requested and received regulatory approval for a Bid, which commenced on November 22,
2022 and terminated on November 21, 2023. The Bid allowed Boardwalk REIT to purchase and cancel up to 3,693,497 Trust Units.
On November 18, 2021, Boardwalk REIT requested and received regulatory approval for a Bid, which commenced on November 22,
2021 and terminated on November 21, 2022. The Bid allowed Boardwalk REIT to purchase and cancel up to 3,780,351 Trust Units.
For the year ended December 31, 2023, Boardwalk REIT did not purchase and cancel any Trust Units.
For the year ended December 31, 2022, Boardwalk REIT purchased and cancelled the following Trust Units:
Number of Trust Units Purchased and Cancelled
440,000
Purchase Cost
$
21,671
Cost per Trust Unit
$
49.25
Year Ended December 31, 2022
Since the Trust began utilizing normal course issuer bids in 2007, Boardwalk REIT has purchased and cancelled 7,300,047 Trust Units
at a total purchase cost of $317.6 million, or an average cost of $43.51 per Trust Unit.
118
BOARDWALK REIT 2023 ANNUAL REPORT
(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:
Boardwalk REIT Trust Units
Special Voting Units
Distributions
Units Outstanding
Dec. 31, 2023
Monthly
Distribution
Units Outstanding
Dec. 31, 2022
49,388,174
$0.0975/unit
4,475,000
N/A
45,722,922
4,475,000
Monthly
Distribution
$0.0900/unit
N/A
Monthly distributions and special distributions are determined at the discretion of the Board of Trustees, however the total income
distributed will not be less than the amount necessary to ensure the Trust will not be liable to pay income taxes under the Tax Act.
The taxable income allocated to the Unitholders and holders of LP Class B Units may vary in certain taxation years. Over time, such
differences, in aggregate, are expected to be minimal.
The Trust increased cash distributions from $0.0900 per Trust Unit on a monthly basis ($1.08 on an annualized basis) in January
and February 2023, to $0.0975 per Trust Unit on a monthly basis ($1.17 on an annualized basis) beginning March 2023, for total
declared cash distributions for the year ended December 31, 2023 of $53.2 million (year ended December 31, 2022 – $1.08 per Unit or
$48.9 million). The Board of Trustees declares distributions to be paid on, or about, the 15th of the month following the record date.
Distributions to be paid on the Boardwalk REIT Trust Units with a record date of January 31, 2024 (to be paid on February 15, 2024)
totaled $4.8 million ($0.0975 per unit) and have not been included as a liability in the consolidated statement of financial position as
at December 31, 2023.
(c)
Profit per Trust Unit
Numerator
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
Profit – diluted
Denominator
Weighted average Trust Units outstanding – basic
Conversion of LP Class B Units
Unexercised deferred units
Weighted average Trust Units outstanding – diluted
Profit per Trust Unit
– basic
– diluted
119
Year Ended
Dec. 31, 2023
Year Ended
Dec. 31, 2022
$
666,099
$
283,096
-
-
-
4,774
(24,165)
(190)
$
666,099
$
263,515
45,824,819
-
-
45,856,070
4,475,000
25,718
45,824,819
50,356,788
$
$
14.54
14.54
$
$
6.17
5.23
All dilutive elements were included in the calculation of diluted per Trust Unit amounts. For the year ended December 31, 2023, all
items were anti-dilutive as the conversion of the LP Class B Units and the exercise of deferred units would have increased profit per
Trust Unit. As such, they were excluded in the calculation of diluted profit per Trust Unit. For the year ended December 31, 2022, both
the conversion of the LP Class B Units and the exercise of the deferred units were dilutive and were included in the calculation of
diluted profit per Trust Unit.
NOTE 16: 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 $545.7 million for the year ended December 31, 2023 (year ended
December 31, 2022 – $496.4 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
Total
Year Ended
Dec. 31, 2023
Year Ended
Dec. 31, 2022
$
520,918
$
472,852
9,601
7,327
4,613
3,199
8,838
7,114
4,193
3,363
$
545,658
$
496,360
As at December 31, 2023, under its non-cancellable operating leases, Boardwalk REIT was entitled to the following minimum
future payments:
Operating leases
NOTE 17: FINANCING COSTS
Within 12 months
2 to 5 years
Over 5 years
$
282,145
$
19,125
$
2,312
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 liabilities under IFRS 16, and the amortization of deferred financing costs. Financing costs total $111.2 million
for the year ended December 31, 2023 (year ended December 31, 2022 – $97.0 million) and can be summarized as follows:
Interest on secured debt (mortgages payable)
Interest capitalized to properties under development
LP Class B Unit distributions
Other interest charges
Interest on lease liabilities
Amortization of deferred financing costs
Total
Year Ended
Dec. 31, 2023
Year Ended
Dec. 31, 2022
$
95,928
$
(1,549)
5,169
1,831
2,594
7,199
82,312
(1,704)
4,774
1,902
2,545
7,192
$
111,172
$
97,021
120
BOARDWALK REIT 2023 ANNUAL REPORT
For the year ended December 31, 2023, interest was capitalized to properties under development at a weighted average effective
interest rate of 4.02% (year ended December 31, 2022 – 3.06%).
NOTE 18: FAIR VALUE GAINS (LOSSES)
Investment properties (NOTE 4)
Financial asset designated as FVTPL
Year Ended
Dec. 31, 2023
Year Ended
Dec. 31, 2022
$
598,842
$
106,409
Investment in private technology venture fund
(1,344)
1,490
Financial liability designated as FVTPL
LP Class B Units
Deferred unit-based compensation
Total fair value gains
(98,048)
(4,573)
24,165
192
$
494,877
$
132,256
NOTE 19: GUARANTEES, CONTINGENCIES, COMMITMENTS
AND OTHER
As discussed in NOTE 10, the Trust has five properties that are situated on land leases. One of the land leases situated in Montreal,
Quebec is set to expire in 2029. The Trust is 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.
From time to time, the Trust enters into various physical supply contracts for energy commodities to hedge its own usage, which is
summarized below:
Natural Gas:
Area
Alberta
Alberta
Alberta
Alberta
Saskatchewan
Saskatchewan
Verdun, Quebec
London, Ontario
Electrical:
Area
Alberta
Alberta
Alberta
Estimated Usage Coverage
Term
Cost
25%
25%
25%
23%
60%
40%
74%
69%
November 1, 2018 to October 31, 2023
$2.08/Gigajoule ("GJ")
November 1, 2019 to October 31, 2024
November 1, 2020 to October 31, 2025
November 1, 2023 to October 31, 2026
November 1, 2018 to October 31, 2022
November 1, 2020 to October 31, 2025
November 1, 2021 to October 31, 2025
November 1, 2021 to October 31, 2024
$2.21/GJ
$2.78/GJ
$3.83/GJ
$2.56/GJ
$2.99/GJ
$4.29/GJ
$4.52/GJ
Estimated Usage Coverage
Term
Cost
49%
45%
53%
October 1, 2017 to September 30, 2022
$0.05/Kilowatt-hour (“kWh”)
November 1, 2020 to October 31, 2024
October 1, 2022 to September 30, 2027
$0.06/kWh
$0.10/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, 2023 will not have a material impact on the Trust.
121
Boardwalk REIT has received a letter from the Canada Revenue Agency (“CRA”) informing the Trust that the CRA will be issuing notices
of reassessment of tax (“CRA Letter”). The CRA Letter outlines that when issuing its notices of reassessment, the CRA will be increasing
the Trust’s taxable income by $5.6 million, $20.6 million, $14.1 million, and $0.06 million for its taxation years ended December 31,
2011, 2012, 2013, and 2014, respectively, on the basis that the Trust did not report deemed taxable capital gains in each of those
taxation years resulting from alleged negative adjusted cost base in the Trust's units of Top Hat Operating Trust, a Trust 100% owned
by Boardwalk REIT. Management of the Trust is assessing the implications of the CRA Letter and once it receives the notices of
reassessment, the Trust has 90 days to file a notice of objection to the expected reassessments. The Trust intends to file an objection
with the CRA Appeals Division as it disagrees with the CRA’s proposed assessment. The Trust will not be required to pay any amount to
the CRA in order to dispute this matter. It is difficult to estimate the amount of time it could take to resolve the dispute with the CRA
Appeals Division and it is possible that an appeal to the Tax Court of Canada could be required in order to resolve this dispute.
NOTE 20: 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 costs.
The following table highlights Boardwalk REIT’s interest coverage ratio in accordance with the DOT:
As at
Net operating income
Administration
Deferred unit-based compensation
EBITDA (1) from equity accounted investment
Consolidated EBITDA (12 months ended)
Interest expense
Interest expense from equity accounted investment
Consolidated interest expense (12 months ended)
Interest coverage ratio
Minimum threshold
(1)
Earnings Before Interest, Taxes, Depreciation and Amortization.
Dec. 31, 2023
Dec. 31, 2022
$
332,989
$
288,660
(41,172)
(3,328)
929
289,418
100,354
2,033
102,387
2.83
1.50
(33,859)
(2,556)
(70)
252,175
86,759
176
86,935
2.90
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, 2023, the Trust’s weighted average
cost of capital was calculated to be 3.63%.
122
BOARDWALK REIT 2023 ANNUAL REPORT
The following schedule details the components of the Trust’s capital and the related costs thereof:
As at
Dec. 31, 2023
Dec. 31, 2022
Cost of Capital (1)
Underlying Value (2)
Cost of Capital (1)
Underlying Value (2)
Liabilities
Mortgages payable
LP Class B Units
Deferred unit-based compensation
Unitholders’ equity
Boardwalk REIT Trust Units
Total
3.00%
$
3,200,899
2.72%
$
3,035,528
4.15%
4.15%
4.15%
3.63%
$
319,247
15,808
3,523,352
7,059,306
5.08%
5.08%
5.08%
3.78%
$
221,199
8,059
2,260,084
5,524,870
(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 Units.
Mortgages payable – The debt is primarily fixed rate debt and approximately 96% of this debt at December 31, 2023 is insured under
the National Housing Act (“NHA”) and administered by CMHC (December 31, 2022 – approximately 96%). 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 43% of the fair value of the Trust’s investment properties (December 31, 2022 – approximately 47%). This level of
indebtedness is considered by the Trust to be within its target.
LP Class B Units – These units are non-transferable, except under certain circumstances, but are exchangeable, on a one-for-one
basis, into Boardwalk REIT 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 Trust Units of Boardwalk REIT
been issued. Each LP Class B Unit was accompanied by a Special Voting Unit, which entitles the holder to receive notice of, attend, and
vote at all meetings of Unitholders. There is no value assigned to the Special Voting Units. The LP Class B Units have been classified as
FVTPL financial liabilities in accordance with IFRS 9. Gains or losses resulting from changes in the fair value at each reporting date are
recorded in the consolidated statement of comprehensive income.
As outlined in NOTE 22(d), Boardwalk REIT’s committed revolving credit facility agreements contain financial covenants.
The Trust had $527.0 million in total available liquidity as at December 31, 2023 (December 31, 2022 – $256.3 million), consisting of
cash and cash equivalents on hand of $331.2 million (December 31, 2022 – $52.8 million), subsequent committed/funded financing of
$nil (December 31, 2022 – $7.4 million), as well as an unused committed revolving credit facility of $195.8 million (December 31,
2022 – $196.1 million). The Trust monitors its ratios and as at December 31, 2023 and December 31, 2022, the Trust was in compliance
with all covenants in both its DOT and all existing debt facilities.
NOTE 21: 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, and trade and other payables approximate their fair values due
to their short-term nature.
the fair value of the Trust’s investment in private technology venture fund was based on information provided from
the organization managing the investments.
123
(iii)
(iv)
the fair value of the Trust’s mortgages payable is an estimate made at a specific point in time, based on relevant
market information. These estimates is based on quoted market prices for the same or similar issues or on the
current rates offered to the Trust for similar financial instruments subject to similar risks and maturities.
the fair value of 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 judgement and therefore, cannot be
determined with precision. Changes in estimates could materially affect fair values. The significant financial instruments of Boardwalk
REIT and their carrying values as at December 31, 2023 and December 31, 2022 are as follows:
As at
Dec. 31, 2023
Dec. 31, 2022
Carrying Value
Fair Value
Carrying Value
Fair Value
Financial asset carried at FVTPL
Investment in private technology venture fund
$
-
$
-
$
3,303
$
3,303
Financial liability carried at amortized cost
Mortgages payable
Financial liability carried at FVTPL
LP Class B Units
3,318,417
3,200,899
3,214,554
3,035,528
319,247
319,247
221,199
221,199
The fair value of the Trust’s mortgages payable was lower than the recorded value by approximately $117.5 million at December 31,
2023 (December 31, 2022 – lower by $179.0 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, 2023 and December 31, 2022, 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, 2023 and December 31, 2022, 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 22.
(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 statements of financial
position is as follows:
As at
Assets
Dec. 31, 2023
Dec. 31, 2022
Level 1
Level 2
Level 3
Level 1
Level 2
Level 3
Investment properties
$
-
$
-
$ 7,702,214
$
-
$
159,735
$ 6,741,010
Investment in private technology
venture fund
Liabilities
LP Class B Units
Deferred unit-based compensation
-
319,247
15,808
-
-
-
-
-
-
-
221,199
8,059
-
-
-
3,303
-
-
The three levels of the fair value hierarchy are described in NOTE 4.
124
BOARDWALK REIT 2023 ANNUAL REPORT
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, 2023 and December 31, 2022, transfers into Level 3 fair
value measurements are discussed in NOTE 4. Other than those discussed in NOTE 4, there were no other transfers between Level 1,
Level 2, and Level 3 assets and liabilities.
NOTE 22: 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 NHA mortgage program. This added level of insurance offered to lenders allows
the Trust to receive advantageous interest rates while minimizing the risk of mortgage renewals or extensions, and significantly
reduces the potential for a lender to call a loan prematurely. In addition, management is constantly reviewing its committed revolving
credit facility (floating-rate debt) and, if market conditions warrant, the Trust has the ability to convert its existing floating-rate debt
to fixed rate debt.
As at December 31, 2023, the Trust had no amount outstanding on its committed revolving credit facility and its mortgages payable
are fixed-rate debt. However, the Trust's equity accounted investment has a revolving construction facility loan which is carried at
variable-rate interest with $112.6 million outstanding, of which Boardwalk’s portion is $56.3 million, that is exposed to interest rate
risk (NOTE 5). As such, for the year ended December 31, 2023, all else being equal, the increase or decrease in net earnings for each 1%
change in market interest rates would be $0.5 million (year ended December 31, 2022 – $0.4 million). For the mortgages payable that
have fixed-rate debt, the Trust is exposed to interest rate risk on renewals. Please refer to NOTE 22(c) for details on the Trust's
remaining contractual maturity for its mortgages payable listed by year of maturity date.
(b) Credit Risk
The Trust is exposed to credit risk as a result of its 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, 2023 and December 31, 2022, no balance relating to mortgage holdbacks, refundable mortgage fees,
or accounts receivable from significant customers and insurers was past due.
In relation to mortgage holdbacks and refundable mortgage fees, the Trust’s exposure to credit risk is low given the nature of
these balances. These funds will be advanced when the Trust has met the conditions pursuant to the mortgage agreement (in the
case of the mortgage holdback) or when financing is completed (in the case of refundable mortgage fees), both of which are expected
to occur.
Similar to mortgage holdbacks and refundable mortgage fees, the Trust assesses the credit risk on accounts receivable to be low due
to the assured collection of these balances. The majority of the balance relates to money owing from the Trust’s revenue sharing
initiatives. Given the Trust’s collection history and the nature of these customers, credit risk is assessed as low. Additionally, an
amount is owed by insurance companies in relation to current outstanding claims (NOTE 6). 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.
125
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 income as part of operating expenses. Subsequent recoveries of amounts
previously written off are credited against operating expenses during the period of settlement. As tenant receivables are typically
written off after 60 days, none of the balance is considered to be past due by the Trust. For the year ended December 31, 2023, bad
debt expense totaled $3.5 million (year ended December 31, 2022 – $4.9 million).
The credit risk of both Boardwalk REIT and the counter party have been taken into account in determining the fair value of Boardwalk
REIT’s trade and other receivables.
(c)
Liquidity Risk
Liquidity risk is the risk that the Trust will not be able to meet its financial obligations as they become due. The Trust maintains what it
believes to be conservatively leveraged assets and can finance any future growth through one or a combination of internally
generated cash flows, borrowing under an existing committed revolving credit facility, the issuance of debt, or the issuance of equity,
according to its capital management objectives. In addition, the Trust structures its financings so as to stagger the maturities of its
debt, thereby minimizing the Trust’s exposure to liquidity risk in any one year. In addition, cash flow projections are completed and
reviewed on a regular basis to ensure the Trust has sufficient cash flows to make its monthly distributions to Unitholders. Finally,
financial assets, such as cash and trade and other receivables, will be realized within the next 12 months and can be utilized to satisfy
the Trust’s financial liabilities. Given the Trust’s currently available liquid resources (from both financial assets and on-going
operations) as compared to its contractual obligations, Management assesses the Trust’s liquidity risk to be low.
The following table details the Trust’s remaining contractual maturity for its financial liabilities listed by year of maturity date:
Year of Maturity
2024
2025
2026
2027
2028
Subsequent
Unamortized deferred
financing costs
Unamortized market
debt adjustments
Weighted
Average
Interest
Rate
Mortgage
Principal
Outstanding
Mortgage
Interest (1)
Lease
Liabilities
Principal
Outstanding
Tenants’
Security
Deposits
Distribution
Payable (2)
Trades
and Other
Payables
Total
2.92% $
439,606 $ 95,857 $
128 $
13,732 $
5,252 $
68,802 $ 623,377
2.44%
2.33%
3.16%
3.66%
3.56%
3.00%
580,381
620,466
623,596
355,013
827,739
81,516
66,390
51,184
34,657
75,881
3,446,801
405,485
(127,774)
(610)
-
-
586
-
3,222
-
72,860
76,796
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
662,483
686,856
678,002
389,670
976,480
13,732
5,252
68,802
4,016,868
-
-
-
-
-
-
(127,774)
(610)
$ 3,318,417 $ 405,485 $
76,796 $
13,732 $
5,252 $
68,802 $ 3,888,484
(1) Based on current in-place interest rates for the remaining term to maturity.
(2) Distribution payable includes distributions owed on the Boardwalk REIT Trust Units and the LP Class B Units.
126
BOARDWALK REIT 2023 ANNUAL REPORT
(d) Debt Covenants
As outlined in its mortgages payable agreements, the Trust is required to make equal monthly payments of principal and interest
based on the respective amortization period. Additionally, the Trust must ensure that all property taxes have been paid in full when
they become due and that no arrears exist.
CMHC provides mortgage loan insurance in connection with mortgages made to Boardwalk REIT. In an agreement dated September 13,
2002, and as amended and restated on January 19, 2005, April 25, 2006, and April 22, 2021, 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. This agreement matured on April 25, 2023 and the Letter of Credit was released.
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, 2023 of approximately $1.0 billion). 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 $195.8 million as at December 31, 2023 (December 31, 2022 – $196.1 million). The revolving facility requires
monthly interest payments, is for a five-year term maturing on July 25, 2028, 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)
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, 2023, this ratio was 1.62 (December 31, 2022 – 1.53).
The Trust will maintain a Debt Service Coverage Ratio, specific to the Security Portfolio of at least 1.15, calculated on the most
recent completed trailing four fiscal quarter basis. As at December 31, 2023, this ratio was 2.35 (December 31, 2022 – 2.07).
(iii) Total indebtedness of the Trust will not exceed 75% of the Gross Book Value of all assets for the two most recent quarters as
defined in the credit agreement. As at December 31, 2023, this ratio was 42.4% (December 31, 2022 – 46.2%).
As at December 31, 2023 and December 31, 2022, the Trust was in compliance with all financial covenants.
(e) Market Risk
The Trust is exposed to market risk related to utilities as a result of fluctuations in the prices of natural gas and electricity. As outlined in
NOTE 19, the Trust has commitments to certain utility contracts to reduce the risk of exposure to adverse changes in commodity prices.
127
NOTE 23: SUBSIDIARIES
The entities included in the Trust’s consolidated financial statements are as follows:
Entity
Boardwalk Real Estate Investment Trust (“BREIT”)
Type
Trust
Relationship
Parent
Boardwalk Real Estate Management Ltd.
Corporation
100% owned by BREIT
Top Hat Operating Trust (“TOT”)
BPCL Holdings Inc. (“BPCL”)
Boardwalk REIT Limited Partnership (“BLP”)
Boardwalk REIT Properties Holdings (Alberta) Ltd.
Boardwalk REIT Quebec Inc.
Boardwalk Quebec Trust
Boardwalk St. Laurent Limited Partnership
9108-4749 Quebec Inc.
9165-5795 Quebec Inc.
Nun’s Island Trust 1
Nun’s Island Trust 2
Metropolitan Structures (MSI) Inc.
Boardwalk GP Holding Trust
6222285 Canada Inc.
Boardwalk GP Operating Trust
Boardwalk General Partnership (“BGP”)
Boardwalk REIT Properties Holdings Ltd.
Helmcken Rd. Development B.C Ltd.
Carlisle Ave Development B.C. Ltd.
Island Highway Development (B.C.) Ltd.
Watkiss Eagle Creek Property Ltd.
BRIO Holdings Ltd.
Redwalk Brampton Limited Partnership
Redwalk Brampton Inc.
1082116 B.C. Ltd.
Trust
Corporation
Partnership
Corporation
Corporation
Trust
Partnership
Corporation
Corporation
Trust
Trust
100% owned by BREIT
Meets the principle of control
A Units are 100% owned by TOT
B Units and C Units are 100% owned by BPCL
100% owned by BLP
100% owned by BLP
100% owned by BLP
99.99% owned by Boardwalk Quebec Trust
0.01% owned by 9165-5795 Quebec Inc.
100% owned by BLP
100% owned by 9108-4749 Quebec Inc.
100% owned by BLP
100% owned by BLP
Corporation
100% owned by BLP
Trust
100% owned by BLP
Corporation
100% owned by BLP
Trust
Partnership
Corporation
Corporation
Corporation
Corporation
Corporation
Corporation
Partnership
Corporation
Corporation
100% owned by 6222285 Canada Inc.
99.99% owned by Boardwalk GP Holding Trust
0.01% owned by Boardwalk GP Operating Trust
100% owned by BGP
100% owned by BGP
100% owned by BGP
100% owned by BGP
100% owned by BGP
50% Owned by BGP
49.99% owned by BGP
0.01% owned by Redwalk Brampton Inc.
50% owned by Boardwalk REIT Properties Holdings Ltd.
100% 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.
128
BOARDWALK REIT 2023 ANNUAL REPORT NOTE 24: 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, which are related parties of the Trust, have been eliminated on
consolidation and are not disclosed in this note disclosure.
The individuals considered key management personnel of the Trust as at December 31, 2023 are listed below. These key management
personnel have not changed since December 31, 2022.
Chief Executive Officer
President
Chief Financial Officer
CIO, VP, Technology
Senior VP, Quality Control
VP, People
Members of the Board of Trustees
The remuneration of the Trust’s key management personnel was as follows:
Short-term benefits
Post-employment benefits
Other long-term benefits
Year Ended
Dec. 31, 2023
Year Ended
Dec. 31, 2022
$
$
2,753
$
2,699
50
4
53
4
2,807
$
2,756
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, 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 financing costs under IFRS.
For the year ended December 31, 2023, distributions on the LP Class B Units totaled $5.2 million (year ended December 31, 2022 –
$4.8 million). Distributions on the LP Class B Units are made on terms equal to distributions made on Boardwalk REIT Trust Units.
As at December 31, 2023, there was $0.4 million owed to related parties (December 31, 2022 – $0.4 million) 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 was 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 provides for services over a three-year term with
a total cost of $1.1 million. In addition, during 2021, the Trust entered into a second agreement with this related party to design,
develop, and implement an IT application to enhance operations. For the year ended December 31, 2022, payments to this related
party totaled $0.4 million. During the fourth quarter of 2022, the company providing the IT services is no longer considered a related
party as the largest shareholder sold the company to a third party and no longer retains a controlling interest in the company.
129
NOTE 25: OTHER INFORMATION
(a)
Supplemental Cash Flow Information
Net change in operating working capital
Net change in inventories
Net change in prepaid assets
Net change in trade and other receivables
Net change in segregated and refundable tenants’ security deposits
Net change in trade and other payables
Net change in investing working capital
Net change in trade and other payables
Net change in financing working capital
Net change in trade and other payables
Investment in capital assets
Improvements to investment properties
Additions to property, plant and equipment
Distributions paid
Distributions declared
Distributions declared in prior year paid in current year
Distributions declared in current year paid in next year
Note
Year Ended
Dec. 31, 2023
Year Ended
Dec. 31, 2022
$
890
$
282
(299)
171
7,341
8,385
6,005
$
$
250
(9,501)
1,514
436
1,423
(5,878)
(1,519)
(733)
$
(1,259)
$
$
$
4
$
(119,012)
(6,960)
$
(125,972)
$
$
(123,885)
(5,467)
(129,352)
$
(53,169)
$
(48,898)
(4,115)
4,815
(3,848)
4,115
$
(52,469)
$
(48,631)
(b)
(c)
Included in administration costs was $3.7 million relating to Registered Retirement Savings Plan matching for the year ended
December 31, 2023 (year ended December 31, 2022 – $3.2 million).
The Trust declared regular distributions of $58.4 million for the year ended December 31, 2023, which includes $53.2 million
of distributions on the Trust Units and $5.2 million of distributions on the LP Class B Units, which under IFRS are considered
financing costs (year ended December 31, 2022 – $53.7 million, which includes $48.9 million of distributions on the Trust
Units and $4.8 million of distributions on the LP Class B Units).
NOTE 26: SEGMENTED INFORMATION
Boardwalk REIT specializes in multi-family residential housing and operates within one business segment in five 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 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 renewed or new tenants
are found.
130
BOARDWALK REIT 2023 ANNUAL REPORT
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, development of investment
properties, and certain comparative data for divested assets.
Details of segmented information are as follows:
As at
Assets
Liabilities
As at
Assets
Liabilities
Alberta
British Columbia
Saskatchewan
Ontario
Quebec
Corporate
Total
$ 4,922,321
$
128,253
$ 694,290
$ 764,466
$ 1,180,899
$ 451,647
$ 8,141,876
2,205,582
75,836
311,060
275,313
569,275
384,738
3,821,804
December 31, 2023
Alberta
British Columbia
Saskatchewan
Ontario
Quebec
Corporate
Total
$ 4,302,151
$
55,317
$
619,216
$
738,642
$ 1,151,525
$
200,424
$ 7,067,275
2,167,511
31,003
305,278
252,578
573,956
269,951
3,600,277
December 31, 2022
Rental revenue (a)
Rental expenses
Operating expenses
Utilities
Property taxes
Total rental expenses
Net operating income (loss)
Financing costs (b)
Administration
Deferred unit-based compensation
Depreciation (c)
Twelve Months Ended December 31, 2023
Alberta
British
Columbia
Saskatchewan
Ontario
Quebec
Corporate
Total
$ 346,368 $
5,487
$
57,508 $ 45,355 $ 89,873 $
1,067 $ 545,658
65,520
34,374
34,399
134,293
212,075
67,357
2,644
-
788
488
220
345
1,053
4,434
2,482
6
-
2
9,764
6,852
4,590
21,206
36,302
8,650
460
-
151
8,310
4,676
4,593
17,579
27,776
7,503
125
-
69
15,632
6,894
8,952
31,478
58,395
19,254
466
-
145
6,476
106,190
376
208
53,392
53,087
7,060
212,669
(5,993)
332,989
5,926
111,172
37,471
41,172
3,328
6,766
3,328
7,921
Profit (loss) before the undernoted
141,286
1,944
27,041
20,079
38,530
(59,484)
169,396
Loss from equity accounted investment
Loss on sale of asset
Fair value gains (losses)
Interest income
Other income
-
-
-
-
-
-
(1,113)
-
-
-
-
(1,113)
(928)
(928)
544,686
12,422
60,232
(28,513)
10,015
(103,965)
494,877
28
-
-
-
-
-
-
-
-
-
3,031
886
3,059
886
Profit (loss) before income tax
$ 686,000 $
14,366
$
87,273 $ (9,547) $ 48,545 $ (160,460) $ 666,177
Income tax expense (d)
Profit (loss)
-
-
-
-
-
(78)
(78)
$ 686,000 $
14,366
$
87,273 $ (9,547) $ 48,545 $ (160,538) $ 666,099
Other comprehensive income
-
-
-
-
-
-
-
Total comprehensive income (loss)
$ 686,000 $
14,366
Additions to non-current assets (e)
$ 75,594 $
60,513
$
$
87,273 $ (9,547) $ 48,545 $ (160,538) $ 666,099
15,047 $ 9,694 $ 18,547 $
30,387 $ 209,782
131
Rental revenue (a)
Rental expenses
Operating expenses
Utilities
Property taxes
Total rental expenses
Net operating income (loss)
Financing costs (b)
Administration
Deferred unit-based compensation
Depreciation (c)
Profit (loss) before the undernoted
Loss from equity accounted investment
Fair value gains (losses)
Interest income
Other income
Twelve Months Ended December 31, 2022
Alberta
British
Columbia
Saskatchewan
Ontario
Quebec
Corporate
Total
$ 311,908 $
2,691
$
52,952 $ 42,332 $ 85,184 $
1,293 $ 496,360
66,067
34,107
33,232
133,406
178,502
58,014
3,020
-
801
116,667
-
73,828
4
-
241
103
164
508
2,183
779
-
-
1
1,403
-
6,998
-
-
9,321
6,510
4,380
20,211
32,741
8,166
712
-
161
7,722
4,275
4,340
16,337
25,995
6,547
159
-
57
14,653
7,157
8,708
30,518
54,666
18,225
427
-
139
6,077
104,081
420
223
52,572
51,047
6,720
207,700
(5,427)
288,660
5,290
29,541
2,556
6,623
97,021
33,859
2,556
7,782
23,702
19,232
35,875
(49,437)
147,442
-
(247)
3,786
21,776
-
-
-
-
-
(227)
-
-
-
(247)
26,095
132,256
931
2,788
935
2,788
Profit (loss) before income tax
$ 190,499 $
8,401
Income tax expense (d)
Profit (loss)
-
-
$ 190,499 $
8,401
Other comprehensive income
-
-
Total comprehensive income (loss)
$ 190,499 $
8,401
Additions to non-current assets (e)
$ 186,644 $
107
$
$
$
$
27,488 $ 40,761 $ 35,648 $
(19,623) $ 283,174
-
-
-
(78)
(78)
27,488 $ 40,761 $ 35,648 $
(19,701) $ 283,096
-
-
-
-
-
27,488 $ 40,761 $ 35,648 $
(19,701) $ 283,096
14,205 $ 62,913 $ 16,316 $
30,438 $ 310,623
(a)
Rental Revenue
Lease revenue
Parking revenue
Recoveries (cable, retirement) and revenue
from telephone and cable providers
Revenue from coin laundry machines
Other
Total
Twelve Months Ended December 31, 2023
Alberta
British
Columbia
Saskatchewan
Ontario
Quebec Corporate
Total
$ 329,833 $
5,395
$
55,202 $ 44,346 $ 85,476 $
666 $ 520,918
5,989
5,326
3,038
2,182
109
9
-
(26)
640
424
2,439
1,039
279
348
125
547
(87)
737
747
474
-
91
2
308
9,601
7,327
4,613
3,199
$ 346,368 $
5,487
$
57,508 $ 45,355 $ 89,873 $ 1,067 $ 545,658
Lease revenue
Parking revenue
Recoveries (cable, retirement) and revenue
from telephone and cable providers
Revenue from coin laundry machines
Other
Total
Twelve Months Ended December 31, 2022
Alberta
British
Columbia
Saskatchewan
Ontario
Quebec
Corporate
Total
$ 296,117 $
2,605
$
50,712 $ 41,410 $ 80,985 $
1,023 $ 472,852
5,461
5,132
2,739
2,459
105
6
-
(25)
599
973
257
411
356
2,316
1
8,838
113
523
(70)
766
674
443
124
-
145
7,114
4,193
3,363
$ 311,908 $
2,691
$
52,952 $ 42,332 $ 85,184 $
1,293 $ 496,360
132
BOARDWALK REIT 2023 ANNUAL REPORT
(b)
Financing Costs
Twelve Months Ended December 31, 2023
Alberta
British
Columbia
Saskatchewan
Ontario
Quebec Corporate
Total
Interest on secured debt (mortgages payable)
$ 62,863 $
2,420
$
7,961 $ 6,868 $ 15,816 $
- $ 95,928
Interest capitalized to properties
under development
LP Class B Unit distributions
Other interest charges
Interest on lease liabilities
Amortization of deferred financing costs
-
-
(213)
-
4,707
-
-
2
-
60
-
-
(64)
-
753
-
-
55
-
580
-
-
(14)
2,353
1,099
(1,549)
(1,549)
5,169
2,065
241
-
5,169
1,831
2,594
7,199
Total
$ 67,357 $
2,482
$
8,650 $ 7,503 $ 19,254 $ 5,926 $ 111,172
Twelve Months Ended December 31, 2022
Alberta
British
Columbia
Saskatchewan
Ontario
Quebec
Corporate
Total
Interest on secured debt (mortgages payable)
$ 53,454 $
724
$
7,485 $
5,891 $ 14,758 $
- $ 82,312
Interest capitalized to properties
under development
LP Class B Unit distributions
Other interest charges
Interest on lease liabilities
Amortization of deferred financing costs
-
-
(144)
-
4,704
-
-
-
-
55
-
-
(53)
-
734
-
-
32
-
624
-
-
(11)
2,403
1,075
(1,704)
(1,704)
4,774
2,078
142
-
4,774
1,902
2,545
7,192
Total
$ 58,014 $
779
$
8,166 $
6,547 $ 18,225 $
5,290 $ 97,021
(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 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 27: SUBSEQUENT EVENTS
On January 12, 2024, with respect to the equity accounted investment in the joint venture, the Trust made a loan to the joint venture
for $57.2 million with the proceeds used by the joint venture to repay 50% of the revolving construction facility loan payable. The loan
made by the Trust to the joint venture was made on the same terms as the revolving construction facility loan (NOTE 5).
On January 24, 2024, the Trust closed on the purchase of one property located in Calgary, Alberta. The property, totaling 295 suites,
was purchased for $77.8 million and was financed with cash on hand.
NOTE 28: APPROVAL OF CONSOLIDATED FINANCIAL STATEMENTS
The consolidated financial statements were approved by the Board of Trustees and authorized on February 21, 2024.
133
Five Year Summary
($000's except per Unit and per square foot)
2019
2020
2021
2022
2023
Assets
Total Assets
Liabilities
Total Liabilities
Equity
Unitholders' equity
$ 6,276,384
$ 6,107,744
$ 6,660,653
$ 7,067,275
$ 8,141,876
$ 3,158,329
$ 3,231,295
$ 3,407,475
$ 3,600,277
$ 3,821,804
3,118,055
2,876,449
3,253,178
3,466,998
4,320,072
Total Liabilities and Equity
$ 6,276,384
$ 6,107,744
$ 6,660,653
$ 7,067,275
$ 8,141,876
Trust unit outstanding (000) (including LP B Units)
50,936
51,024
50,612
50,198
53,863
Trust unit price at year-end ($)
Market capitalization ($MM)
Number of rental suites
Total Assets per suite ($000)
Total Liabilities per suite ($000)
Net rentable square feet (000)
Total Assets per square foot ($)
Total Liabilities per square foot ($)
Average net rentable SF per unit
$
45.93
$
33.74
$
54.83
$
49.43
$
71.34
2,339.5
33,263
189
95
1,721.5
33,396
183
97
2,775.1
33,264
200
102
2,481.3
33,810
209
106
3,842.6
34,029
239
112
28,674
28,879
28,888
29,390
29,515
219
110
862
211
112
865
231
118
868
240
123
869
276
129
867
L/T debt weighted average interest rate
2.74%
2.58%
2.46%
2.72%
3.00%
134
BOARDWALK REIT 2023 ANNUAL REPORT
Five Year Summary
($000's except per Unit)
Rental revenue
Rental expenses
Operating expenses
Utilities
Property taxes
Total rental expenses
Net operating income
Operating margin
Financing costs
Administration
Deferred unit-based compensation
Depreciation
Profit from continuing operations before
the undernoted
Loss from equity accounted investment
Loss on sale of assets
Adjustment to right-of-use asset related to
lease receivable
Fair value gains (losses)
Interest income
Other income
Profit (loss) before income taxes
Income tax (expense) recovery
Profit (loss)
Other comprehensive income
Total comprehensive income (loss)
Profit per Trust Unit – diluted
Funds from operations (1)(2)
Funds from operations per Unit – fully diluted (2)
Interest Coverage Ratio
2019
2020
2021
2022
2023
$
457,434
$
467,583
$
472,312
$
496,360
$ 545,658
103,229
47,883
47,529
198,641
258,793
57%
89,540
38,645
2,268
8,809
98,349
48,938
51,152
198,439
269,144
58%
92,385
36,069
3,255
8,195
98,626
49,751
49,595
197,972
274,340
58%
90,080
33,282
2,392
7,809
104,081
52,572
51,047
207,700
288,660
58%
97,021
33,859
2,556
7,782
106,190
53,392
53,087
212,669
332,989
61%
111,172
41,172
3,328
7,921
119,531
129,240
140,777
147,442
169,396
-
(714)
-
(86,132)
1,342
-
34,027
754
34,781
-
$
$
$
$
34,781
0.75
130,967
2.57
2.71
-
(1,136)
(159)
-
(1,953)
-
(247)
-
-
(1,113)
(928)
-
(326,134)
307,002
132,256
494,877
763
75
331
-
935
2,788
3,059
886
(197,351)
446,157
283,174
666,177
72
110
(78)
(78)
(197,279)
446,267
283,096
666,099
$
$
$
$
-
(197,279)
(4.85)
139,736
2.74
2.77
$
$
$
$
-
446,267
9.59
150,207
2.94
2.96
$
$
$
$
-
-
283,096
$ 666,099
5.23
$
14.54
157,444
$ 181,353
3.13
$
2.90
3.60
2.83
(1) This is a non-GAAP financial measure.
(2) Please refer to the section titled “Presentation of Non-GAAP Measures” in the MD&A for more information.
135
2023 Quarterly Results
Rental revenue
Rental expenses
Operating expenses
Utilities
Property taxes
Total rental expenses
Net operating income
Financing costs
Administration
Deferred unit-based compensation
Depreciation and amortization
Profit before the undernoted
(Loss) income from equity accounted investment
Loss on sale of assets
Fair value gains (losses)
Interest income
Other income
Profit before income tax
Income tax (expense) recovery
Profit for the period
Other comprehensive income
Total comprehensive income
Profit per unit – diluted
Funds from operations(1)(2)
Funds from operations per unit – fully diluted(2)
Q1
Q2
Q3
Q4
Dec. 31, 2023
$
130,931
$
134,553
$
138,267
$
141,907
$ 545,658
25,867
16,428
12,844
55,139
75,792
26,638
9,847
575
1,800
36,932
(315)
-
26,720
12,235
12,992
51,947
82,606
27,501
10,054
1,242
1,893
41,916
(309)
-
27,236
10,857
13,531
51,624
86,643
28,128
10,922
590
1,984
45,019
83
-
26,367
13,872
13,720
53,959
87,948
28,905
10,349
921
2,244
45,529
(572)
(928)
106,190
53,392
53,087
212,669
332,989
111,172
41,172
3,328
7,921
169,396
(1,113)
(928)
183,362
189,981
(6,315)
127,849
494,877
649
818
560
-
221,446
232,148
(57)
15
221,389
232,163
-
221,389
4.84
39,595
0.79
$
$
$
$
-
232,163
5.08
44,595
0.89
$
$
$
$
$
$
$
$
660
-
39,447
(30)
39,417
-
39,417
0.86
48,266
0.96
1,190
68
3,059
886
173,136
666,177
(6)
(78)
173,130
666,099
-
-
$
$
$
$
173,130
$ 666,099
3.75
$
14.54
48,897
$ 181,353
0.96
$
3.60
(1) This is a non-GAAP financial measure.
(2) Please refer to the section titled “Presentation of Non-GAAP Measures” in the MD&A for more information.
136
BOARDWALK REIT 2023 ANNUAL REPORT
2022 Quarterly Results
Rental revenue
Rental expenses
Operating expenses
Utilities
Property taxes
Total rental expenses
Net operating income
Financing costs
Administration
Deferred unit-based compensation
Depreciation and amortization
Profit before the undernoted
Loss from equity accounted investment
Fair value gains (losses)
Interest income
Other income
Profit before income tax
Income tax (expense) recovery
Profit for the period
Other comprehensive income
Total comprehensive income
Profit per unit – diluted
Funds from operations (1)(2)
Funds from operations per unit – fully diluted (2)
Q1
Q2
Q3
Q4
Dec. 31, 2022
$
118,673
$
122,667
$
125,848
$
129,172
$ 496,360
25,193
16,048
12,517
53,758
64,915
22,639
7,735
469
1,826
32,246
-
35,850
106
1,321
69,523
(95)
69,428
-
69,428
1.51
34,488
0.68
$
$
$
$
$
$
$
$
25,569
11,832
12,663
50,064
72,603
23,620
8,276
952
1,911
37,844
-
113,649
135
834
152,462
26
152,488
-
152,488
1.54
40,281
0.80
26,395
10,136
12,979
49,510
76,338
24,971
8,876
457
1,976
40,058
-
6,254
286
444
47,042
1
47,043
-
47,043
1.02
42,705
0.85
$
$
$
$
26,924
14,556
12,888
54,368
74,804
25,791
8,972
678
2,069
37,294
(247)
(23,497)
408
189
14,147
(10)
14,137
-
104,081
52,572
51,047
207,700
288,660
97,021
33,859
2,556
7,782
147,442
(247)
132,256
935
2,788
283,174
(78)
283,096
-
$
$
$
$
14,137
$ 283,096
0.31
$
5.23
39,973
$ 157,444
0.80
$
3.13
(1) This is a non-GAAP financial measure.
(2) Please refer to the section titled “Presentation of Non-GAAP Measures” in the MD&A for more information.
137
Market & 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:
Eric Bowers
Vice-President, Finance and Investor Relations
Telephone: 403-531-9255
Toll Free: 855-626-6739
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 and Special Meeting of the Unitholders
of Boardwalk REIT will be held at the Calgary Petroleum Club:
319 – 5th Avenue SW, Calgary, Alberta at 4:00 PM (MT) on
Monday, May 6, 2024.
Unitholders are encouraged to attend. Those unable to do
so are requested to complete the Form of Proxy and forward
it at their earliest convenience. Information available on
www.bwalk.com/investors.
EXCHANGE LISTINGS
The Toronto Stock Exchange
Symbol: BEI.UN
TRADING PROFILE
TSX: January 1, 2023 to December 31, 2023
High: $74.78
Low: $49.03
Year-end Closing Price: $71.34
MONTHLY DISTRIBUTIONS
Month
Per Unit Annualized
Record Date Distribution Date
Jan-23
Feb-23
Mar-23
Apr-23
$0.0900
$0.0900
$0.0975
$0.0975
May-23
$0.0975
Jun-23
$0.0975
Jul-23
Aug-23
Sep-23
Oct-23
$0.0975
$0.0975
$0.0975
$0.0975
Nov-23
$0.0975
Dec-23
Jan-24
Feb-24
Mar-24
Apr-24
May-24
$0.0975
$0.0975
$0.0975
$0.1200
$0.1200
$0.1200
$1.08
$1.08
$1.17
$1.17
$1.17
$1.17
$1.17
$1.17
$1.17
$1.17
$1.17
$1.17
$1.17
$1.17
$1.44
$1.44
$1.44
31-Jan-23
28-Feb-23
31-Mar-23
28-Apr-23
31-May-23
30-Jun-23
31-Jul-23
31-Aug-23
29-Sep-23
31-Oct-23
30-Nov-23
29-Dec-23
31-Jan-24
29-Feb-24
29-Mar-24
30-Apr-24
31-May-24
15-Feb-23
15-Mar-23
17-Apr-23
15-May-23
15-Jun-23
17-Jul-23
15-Aug-23
15-Sep-23
16-Oct-23
15-Nov-23
15-Dec-23
15-Jan-24
15-Feb-24
15-Mar-24
15-Apr-24
15-May-24
17-Jun-24
138
BOARDWALK REIT 2023 ANNUAL REPORT Notes
139
Corporate Information
Leonora Davids
Senior Vice President,
Operations
James Ha
President
Bhavnesh Jairam
CIO, Vice President,
Technology
Haroon Khan
Vice President,
Operations, British Columbia,
Southern Alberta & Saskatchewan
Jeff Klaus
Vice President,
Asset Management & Development
Sam Kolias
Chief Executive Officer
Samantha Kolias
Senior Vice President,
Corporate Development & Governance
Van Kolias
Senior Vice President,
Quality Control
Helen Mix
Vice President,
People
Lisa Smandych
Chief Financial Officer
Nandini Somayaji
General Counsel & Corporate Secretary
EXECUTIVE OFFICE
First West Professional Building
200, 1501 – 1st Street SW
Calgary, Alberta T2R 0W1
Phone: 403-531-9255
BOARD OF TRUSTEES
Sam Kolias
Chairman of the Board
Calgary, Alberta
Mandy Abramsohn (2)(3)
Toronto, Ontario
Andrea Goertz (2)(3)
Calgary, Alberta
Gary Goodman (2)
Toronto, Ontario
Samantha Kolias-Gunn
Calgary, Alberta
Scott Morrison (2)
Toronto, Ontario
Brian Robinson (1)(3)
Calgary, Alberta
(1) Lead Trustee
(2)
(3)
Member of the Audit & Risk Management Committee
Compensation, Governance, Nominations
& Sustainability Committee
SENIOR MANAGEMENT
Boyd Belisle
Vice President,
Community & Culture
Eric Bowers
Vice President,
Finance & Investor Relations
Razvan Costin
Vice President,
Operations,
Northern Alberta
Arvinder Dhol
Vice President, Special Projects,
Engineering & Design
140
BOARDWALK REIT 2023 ANNUAL REPORT 200–1501 1 St. SW
Calgary, Alberta T2R 0W1
T 403.531.9255
F 403.531.9565