2021 Annual Report
TSX | MI.UN
The REIT is a growth-oriented real estate investment trust
that owns and operates high quality multi-residential rental
properties located in primary urban markets in Canada.
The REIT’s Objectives
• Provide Unitholders with the opportunity to invest in high quality income producing multi-residential rental properties
strategically located across urban centres in Canada
• Enhance asset value and maximize long-term Unitholder value through value-enhancing capital investments and active asset
and property management of the portfolio
• Provide Unitholders with predictable and sustainable cash distributions
• Expand the asset base across Canadian urban centres through acquisitions, intensification programs and development
Summary Information(1)
Portfolio Geographic Distribution(4)
Suites(2)
2021
2020
7,538
7,245
Average Monthly Rent per Suite(3)
$1,641
$1,623
Occupancy(3,5)
95.47%
93.42%
Total Assets
$2.4 Billion $2.2 Billion
Debt-to-Gross Book Value(3)
36.54%
38.57%
2%
5%
21%
2021
42%
Weighted Average Interest Rate(3,6)
2.82%
2.94%
Suites Under Development(2)
1,678
1,340
31%
Ottawa
Toronto
Montreal
Calgary
Edmonton
$0.475
$0.455
$0.440
$24.00
$22.26
$20.56
$17.54
$0.410
2018
2019
2020
2021
2018
2019
2020
2021
Annualized distributions per unit(7)
NAV per unit(3)
(1) All amounts are as at December 31, 2021 and December 31, 2020 respectively.
(2) Suite counts are presented at 100% ownership share rather than the REIT's proportionate share.
(3) Non-IFRS financial measure. See “Non-IFRS and Other Financial Measures” in the Management’s Discussion and Analysis included in this annual report.
(4) Geographic breakdown is based on share of the fair value of investment properties as at December 31, 2021.
(5) Occupancy - end of period.
(6) Weighted average term to maturity and weighted average interest rate are for fixed rate debt only.
(7) Distribution rates in efffect as at December 31.
Letter to Unitholders
Dear Fellow Unitholders,
In 2021, Minto Apartment REIT (the "REIT") successfully executed its strategic plan against the unpredictable backdrop of the
COVID-19 pandemic. Despite an environment of changing and ongoing restrictions, the REIT demonstrated steady financial
performance, realized on organic growth and broadened its footprint in Canada’s major urban markets.
The REIT continued to deliver financial results for its Unitholders. The REIT’s net asset value per unit increased 7.8% during the
year and on November 9, 2021, the REIT announced a 4.4% increase in its monthly distribution. This is the third consecutive year
since its inception that the REIT has increased its cash distribution and reflects the REIT's strong growth prospects, high level of
confidence in its business model, and overall business outlook. Over the course of the year, the REIT completed an $87 million
equity offering, reduced its financial leverage and finished the year with a strong liquidity position.
The REIT benefited from improving market conditions. Occupancy in our core urban markets, which had been negatively impacted
by pandemic restrictions, troughed in the second quarter and we saw consistent improvements throughout the balance of the
year. The REIT finished the year with an occupancy rate of 95.5%, an improvement of 195 basis points over 2020. Despite the slow
leasing conditions early in the year, the lease rate on new leases signed in 2021 was, on average, 5.4% higher than the expiring
rate.
The REIT’s suite renovation and repositioning program continued to deliver strong investment returns. Repositioning enhances
the quality and marketability of our suites and lowers future repair and maintenance costs. The REIT currently has repositioning
programs at 12 of its 30 properties and repositioned a record 367 suites in 2021. Strong tenant demand for these suites resulted
in annualized rent increases that generated a 9.1% return on invested capital. At the end of the year the REIT had 2,315 suites (31%
of its total suite count) remaining to reposition at the properties with repositioning programs.
The REIT made substantial progress on its development program. The REIT commenced construction on two intensification
projects and continued to work towards obtaining municipal planning approvals on a third project. The REIT also continued to
benefit from its strategic alliance with the Minto Group and advanced convertible development loans (“CDLs”) to two new Minto
Group development projects. In addition to insulating the REIT from construction and lease-up risks, the CDLs provide the REIT
with an attractive coupon during the development period and the option to purchase an interest in the property upon completion
and stabilization at a 5% discount to its then-appraised fair market value. The REIT’s total development pipeline (direct investments
and CDLs) comprised 1,678 suites at year-end with five of the seven pipeline projects under construction and one in the leasing
stage.
The REIT continued to grow through acquisition. Notwithstanding the highly competitive market for multi-residential rentals, the
REIT was able to acquire Le Hill-Park in Montreal. This property has an excellent urban location and its close proximity to the REIT’s
other Montreal properties offers the potential for management and leasing synergies.
The REIT also launched its inaugural environmental, social and governance (“ESG”) report in 2021. The report sets out the REIT’s
ESG strategy and highlights the integral part ESG plays in how we treat our customers, employees, investors and the environment.
The REIT’s ESG strategy was built around three strategic pillars (Business Resilience, Community Impact and Environmental
Impact) and comprises 18 specific initiatives. The REIT has established specific performance targets and will be reporting annually
against those targets. We are proud of the work that we have done and are deeply committed to pushing ourselves to do better.
The Board of Trustees and Management are excited about the opportunities for Minto Apartment REIT in 2022. The REIT will
continue to execute its growth strategy and adapt to ongoing developments relating to the COVID-19 pandemic. Although some
sectors of the economy continue to face challenges due to restrictions, overall employment levels have recovered from the initial
pandemic shock. The Federal Government has committed to higher immigration targets and our population will continue to grow.
The strong market fundamentals that existed before the pandemic are expected to return in 2022. We thank our Unitholders for
their confidence and support and look forward to another great year ahead.
Roger Greenberg
Chairman
Michael Waters
Chief Executive Officer and President
Table of Contents
Management's Discussion and Analysis
Section I - Overview
Business Overview
Business Strategy and Objectives
Declaration of Trust
Basis of Presentation
Forward-Looking Statements
Use of Estimates
Financial and Operating Highlights
Outlook
Section II - Financial Highlights and Performance
Key Performance Indicators
Review of Financial Performance
Summary of Quarterly Results
Summary of Annual Results
Section III - Assessment of Financial Position
Investment Properties
Class B LP Units
Class C LP Units
Secured Debt
Units
Distributions
Section IV - Liquidity, Capital Resources and Contractual Commitments
Liquidity and Capital Resources
Cash Flows
Reconciliation of Non-IFRS Financial Measures and Ratios
Section V - Accounting Estimates and Policies, Controls and Procedures and Risk Analysis
Critical Judgments in Applying Accounting Policies
Critical Accounting Estimates and Assumptions
Risks and Uncertainties
Financial Risk Management
Related Party Transactions
Contingencies and Commitments
Future Changes in Accounting Standards
Disclosure Controls and Internal Controls Over Financial Reporting
Section VI - Supplemental Information
Property Portfolio
Average Rent Per Square Foot
Non-IFRS and Other Financial Measures
Consolidated Financial Statements
Independent Auditors' Report
Consolidated Balance Sheets
Consolidated Statements of Net Income and Comprehensive Income
Consolidated Statements of Changes in Unitholders' Equity
Consolidated Statements of Cash Flows
Notes to the Consolidated Financial Statements
Unitholder Information
1
1
1
2
2
2
3
3
3
11
14
14
15
22
23
24
24
26
26
26
27
27
28
28
30
32
35
35
35
36
42
43
45
45
46
47
47
48
48
51
51
56
57
58
59
60
87
Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2021
(in thousands of Canadian dollars, except Unit and per Unit amounts, per suite amounts and other non-financial data)
Section I - Overview
Business Overview
Minto Apartment Real Estate Investment Trust (the "REIT") is an unincorporated, open-ended real estate investment trust
established pursuant to a Declaration of Trust dated April 24, 2018, which was amended and restated on June 27, 2018 and has
been further amended from time to time. The REIT owns, develops and operates a portfolio of income-producing multi-
residential rental properties located in Canada. The REIT was established under the laws of the Province of Ontario. The
principal and registered office of the REIT is 200-180 Kent Street, Ottawa, Ontario.
The REIT's portfolio, referred to herein as the "Total Portfolio", consists of 30 (December 31, 2020 - 29) multi-residential rental
properties located in Ontario, Quebec and Alberta, comprising an aggregate of 5,3751 (December 31, 2020 - 5,082) suites that
are wholly-owned by the REIT, 1,413 (December 31, 2020 - 1,413) suites that are 50% co-owned with institutional partners and
750 (December 31, 2020 - 750) suites that are 40% co-owned with an institutional partner. A discussion on the Same Property
Portfolio has not been provided within this Management's Discussion and Analysis as the impact is not considered material.
Management intends to resume providing information relating to the Same Property Portfolio in Q1 2022.
In addition, the REIT is currently developing three income-producing multi-residential projects on excess land available at three
properties. The completion of these development projects will add 1,067 suites to the portfolio2. The REIT has also provided
convertible development loans for the development of four income-producing multi-residential properties, which provide the
REIT the option ("CDL Options") to acquire direct or indirect interests in these properties upon stabilization. Once completed,
and subject to the exercise of the CDL Options, 611 suites would be added to the portfolio. Stabilization of the development
projects and exercise of the options in connection with the convertible development loans, would increase the portfolio suite
count by approximately 22% by 2029, as depicted below:
Suite Growth in the REIT's Portfolio2
The REIT continues to explore potential acquisitions and investments that meet its investment criteria. The growth through
future acquisitions and investments is not depicted in the chart above.
1 The aggregate of 5,375 wholly-owned suites include two additional suites created in December 2020 at the Carlisle, 32 suites in a new block at
Skyline completed in Q3 2020, to replace a block destroyed by fire prior to the REIT's initial public offering in 2018, and 261 suites acquired at Le
Hill-Park on December 7, 2021.
2 Suite counts, including co-owned properties, are presented at 100% rather than the REIT's ownership share.
7,5387,7017,8148,1498,3418,5669,216Existing PortfolioGrowth Through Exercise of CDL OptionsGrowth Through Development20212022202320242025202620291|2021 Annual ReportMinto Apartment REIT Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2021
(in thousands of Canadian dollars, except Unit and per Unit amounts, per suite amounts and other non-financial data)
Business Strategy and Objectives
The REIT's objectives are to:
•
•
•
•
provide Unitholders an opportunity to invest in high-quality income-producing multi-residential rental properties
strategically located across urban centres in Canada;
enhance the value of the REIT's assets and maximize long-term Unitholder value through value-enhancing capital
investment programs and active asset and property management of the REIT properties;
provide Unitholders with predictable and sustainable distributions; and
expand the REIT's asset base across Canadian urban centres through intensification programs, acquisitions and
developments.
Management believes it can accomplish these objectives given that it operates a high quality portfolio in an attractive asset
class with compelling supply and demand characteristics. Furthermore, the REIT has several strategic avenues for growth and
benefits from its strategic alliance with Minto Properties Inc. ("MPI").
Declaration of Trust
The investment guidelines and operating policies of the REIT are outlined in the REIT’s Amended and Restated Declaration of
Trust dated June 27, 2018, as amended from time to time (collectively, the "DOT"). A copy of the DOT is available on SEDAR at
www.sedar.com.
As of March 8, 2022, the REIT was in compliance with its investment guidelines and operating policies.
Basis of Presentation
The following Management's Discussion and Analysis of the REIT's results of operations and financial condition should be read
in conjunction with the REIT's consolidated financial statements and accompanying notes for the years ended December 31,
2021 and 2020, prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International
Accounting Standards Board ("IASB").
This Management's Discussion and Analysis also contains certain non-IFRS and other financial measures including funds from
operations ("FFO"), FFO per unit, adjusted funds from operations ("AFFO"), AFFO per unit, AFFO payout ratio, net operating
income ("NOI"), debt-to-Gross Book Value ratio, debt-to-adjusted earnings before interest, taxes, depreciation and amortization
("Adjusted EBITDA") ratio, debt service coverage ratio, net asset value ("NAV"), and NAV per unit, which are measures
commonly used by publicly traded entities in the real estate industry. Management believes that these metrics are useful for
measuring different aspects of performance and assessing the underlying operating performance on a consistent basis.
However, these measures do not have a standardized meaning prescribed by IFRS and are not necessarily comparable to similar
measures presented by other publicly traded entities. These measures should strictly be considered supplemental in nature and
not a substitute for financial information prepared in accordance with IFRS. See "Non-IFRS and Other Financial Measures" under
Section VI - "Supplemental Information" for definitions of these measures.
The REIT's Board of Trustees approved the content of this Management's Discussion and Analysis on March 8, 2022. Disclosure
in this document is current to that date unless otherwise stated. Additional information relating to the REIT can be found on
SEDAR at www.sedar.com and also on the REIT's website at www.mintoapartments.com.
22021 Annual Report|Minto Apartment REIT Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2021
(in thousands of Canadian dollars, except Unit and per Unit amounts, per suite amounts and other non-financial data)
Forward-Looking Statements
This Management's Discussion and Analysis may contain forward-looking statements (within the meaning of applicable
Canadian securities laws) relating to the business of the REIT. Forward-looking statements are identified by words such as
"believe", "anticipate", "project", "expect", "intend", "plan", "will", "may", "estimate" and other similar expressions. These
statements are based on the REIT's expectations, estimates, forecasts and projections. They are not guarantees of future
performance and involve risks and uncertainties that are difficult to control or predict. A number of factors could cause actual
results to differ materially from the results discussed in the forward-looking statements, including, but not limited to, the
factors discussed under the heading "Risks and Uncertainties". There can be no assurance that forward-looking statements will
prove to be accurate as actual outcomes and results may differ materially from those expressed in these forward-looking
statements. Readers, therefore, should not place undue reliance on any such forward-looking statements. Further, these
forward-looking statements are made as of the date of this Management's Discussion and Analysis and, except as expressly
required by applicable law, the REIT assumes no obligation to publicly update or revise any forward-looking statement, whether
as a result of new information, future events or otherwise.
Use of Estimates
The preparation of the consolidated financial statements in conformity with IFRS requires Management to make judgments,
estimates and assumptions that affect the application of accounting policies and the amounts reported in the consolidated
financial statements and accompanying note disclosures. Although these estimates are based on Management’s knowledge of
current events and actions the REIT may undertake in the future, actual results may differ from the estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in
the period in which the estimates are revised and in any future periods affected.
Financial and Operating Highlights
Financial Performance
Since the onset of the pandemic, the REIT’s first and foremost priority has been the health and safety of its residents,
employees, trade partners and communities. The REIT continues to take the necessary steps and precautions in order to lessen
the spread of COVID-19 and to prioritize good health.
At the start of 2021, Canada experienced a surge in COVID-19 cases, along with challenges to secure vaccine supply, which
prompted provincial governments to implement stricter restrictions to slow the spread of COVID-19. The measures
implemented, including border and business closures, negatively impacted the REIT's operating results. As more and more
Canadians were vaccinated, provincial governments eased lockdowns and proceeded with re-opening plans. The Canadian
rental market continues to benefit from the lifting of lockdowns, increase in immigration and resumption of international travel.
The REIT continuously refined and adjusted its targeted marketing efforts and initiatives to optimize leasing, occupancy and
rents.
For Q4 2021, revenue, NOI1, FFO1 and AFFO1 for the Total Portfolio were higher by 4.8%, 5.2%, 10.2% and 11.4%%, respectively,
compared to Q4 2020. Average monthly rent1 for unfurnished suites increased to $1,641 at December 31, 2021, compared to
$1,623 for December 31, 2020, however it declined compared to $1,651 at September 30, 2021. The quarterly sequential
decline in average monthly rent for unfurnished suites was due to the acquisition of Le-Hill Park in Montreal. Average monthly
rent for unfurnished suites excluding Le Hill-Park was $1,664 at December 31, 2021. Average occupancy for the period1
improved to 95.04% for Q4 2021, compared to 92.29% for Q4 2020 and up from 92.87% for Q3 2021. Move-ins1 continued to
trend higher than move-outs1: there were 514 move-ins during the quarter, outpacing the 420 move-outs. This made Q4 2021
the third sequential quarter with positive net move-ins, driving occupancy growth and building strong momentum into 2022.
Furnished suites revenue increased 6.7% compared to Q4 2020 as business travel continued to increase and strategies to
change the client mix achieved positive results. Furnished suite occupancy1 was 80.50% in Q4 2021, an improvement from
77.29% in Q4 2020. Average monthly rent for furnished suites1 reached $4,078 in Q4 2021 compared to $3,571 in Q4 2020.
Performance for the full year was impacted by COVID-related restrictions and lockdowns in the early part of the year. For FY
2021, revenue, NOI, FFO and AFFO for the Total Portfolio were lower by 1.1%, 3.0%, 2.9% and 3.4% respectively, compared to
FY 2020. Average occupancy was 92.49% for FY 2021, compared to 94.75% for FY 2020.
1 Refer to "Section VI - Supplemental Information - Non-IFRS and Other Financial Measures"
3|2021 Annual ReportMinto Apartment REIT Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2021
(in thousands of Canadian dollars, except Unit and per Unit amounts, per suite amounts and other non-financial data)
The REIT continued to execute its strategy to create organic growth by realizing on the gain-to-lease potential1 in the portfolio
and by repositioning suites in properties where there is demand for renovated units. The REIT was able to realize, on average,
an increase of 7.2% and 5.4% on the 444 and 2,003 new leases it signed in Q4 2021 and FY 2021, respectively, which represent
annualized revenue growth of approximately $472 and $1,815, respectively. The REIT repositioned 113 and 367 suites in Q4
2021 and FY 2021, respectively, generating an average annual unlevered return1 of 9.4% and 9.1%, respectively.
NAV per unit1 grew by 7.8% from $22.26 as at December 31, 2020 to $24.00 at December 31, 2021. Fair value gain on
investment properties of $89,188 was recognized in the year mainly as a result of compression of capitalization rates for
properties located in Ottawa and Toronto.
Further Expansion into the Montreal Market
Consistent with the REIT's growth initiatives, the REIT closed on its acquisition of a 261-suite multi-residential rental property in
Montreal, Quebec ("Le Hill-Park") on December 7, 2021. Le Hill-Park is centrally located in Montreal, Quebec and in close
proximity to the Université de Montreal, McGill University, three major hospitals, Mont-Royal Park and the Côte-des-Neiges
metro station. Le Hill-Park is the REIT's fourth acquisition in Montreal, which is also the largest rental market in the country, and
provides a significant repositioning opportunity. Additionally, Le Hill-Park is located near the REIT's existing Montreal properties
(Rockhill, Haddon Hall and Le 4300), which may offer opportunities for operating synergies. The addition of Le Hill-Park is on
point with the REIT's long-term strategy and provides further geographic diversification for the portfolio.
Convertible Development Loans
Convertible development loans provide the REIT with an option to purchase new, high-quality purpose-built rental properties in
attractive urban locations. The financing structure insulates the REIT from development and construction risks, while the REIT
earns an attractive return during the development period. These transactions highlight the unique benefits of the REIT's
relationship with MPI and its affiliates.
On April 29, 2021, the REIT committed to advance up to $51,400 including interest thereon to an affiliate of MPI for the
development of a nine-storey mixed-use multi-residential property on Beechwood Avenue and Barrette Street in Ottawa,
Ontario ("Beechwood"). The property will comprise 227 suites and 6,039 square feet of retail space. The REIT has an option to
acquire the property upon stabilization at 95% of its then-appraised fair market value.
On November 30, 2021, the REIT committed to advance up to $19,650 including interest thereon to finance MPI's 85% interest
in a joint venture for the development of a six-storey mixed-use multi-residential property at 810 Kingsway in Vancouver, British
Columbia ("810 Kingsway"). The property will comprise 108 suites and 11,500 square feet of at-grade retail. The REIT has an
option to acquire MPI's 85% interest in the joint venture upon stabilization at 95% of its then-appraised fair market value.
Bought Deal Offers Liquidity and Flexibility
On October 29, 2021, the REIT closed on its equity offering including the full exercise of the over-allotment option and issued
3,795,000 Units at a price of $22.85 per Unit for gross proceeds of approximately $86,716. The REIT used the net proceeds of
this offering to fund its equity requirement for the acquisition of Le Hill-Park, to make advances under its commitments relating
to convertible development loans for Beechwood and Phase I of Lonsdale Square in North Vancouver, British Columbia
("Lonsdale Square") and to pay down a portion of the amount outstanding on its credit facility, thus generating significant
available capacity and flexibility to evaluate additional deal flow and opportunities for growth.
Distribution Increase
On November 9, 2021, the Board of Trustees approved a 4.4% increase to the REIT's annual distribution, resulting in an increase
from $0.4550 per Unit on an annualized basis to $0.4750 per Unit. The monthly distribution of $0.03958 per Unit, an increase
from $0.03792 per Unit, was effective for the REIT's November 2021 cash distribution paid on December 15, 2021. The
distribution increase reflects the REIT's low AFFO payout ratio1, strong liquidity position and Management's view of future
growth prospects. The increase is also an indication of Trustee's confidence in the REIT's business model, execution of its long-
term strategy and it's future outlook. The REIT expects to maintain a low AFFO payout ratio, allowing it to continue to reinvest
capital to fuel future growth.
1 Refer to "Section VI - Supplemental Information - Non-IFRS and Other Financial Measures"
42021 Annual Report|Minto Apartment REIT Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2021
(in thousands of Canadian dollars, except Unit and per Unit amounts, per suite amounts and other non-financial data)
Organic Growth — Gain-to-Lease1
The REIT realized on organic growth for the three months ended December 31, 2021 through effective leasing activities and
revenue management strategies. As new tenants take occupancy, the REIT is able to move rental rates from older in-place
levels to current market rates. During the period, new leases resulted in annualized revenue growth of approximately $472. A
summary of leasing activities and the gains to be realized from new leases signed for Q4 2021 is set out in the table below:
Geographic Node
Toronto
Ottawa
Alberta
Montreal
New Leases
Signed1
152
173
63
56
Average Monthly
Expiring Rent per Suite
$2,045
1,513
1,249
1,946
Average Monthly
New Rent per Suite
$2,167
1,651
1,325
2,030
Percentage
Gain-to-Lease
5.9%
9.1%
6.1%
4.3%
Annualized Gain-
to-Lease2,3
$144
273
21
34
Total/Average
444
$1,652
$1,770
7.2%
$472
The REIT realized an average gain-to-lease of 7.2% on the 444 new leases it signed in Q4 2021. The REIT realized gains in all
markets, with the majority of the contributions stemming from the Ottawa and Toronto markets. As the Canadian economy
continued to recover from the impacts of the pandemic and immigration surpassed pre-pandemic levels, the need for special
pricing discounts to drive occupancy was reduced. This resulted in an increase in percentage gain-to-lease in all geographic
nodes, except for Montreal where select discounts continue to be used in order to optimize rental performance. The REIT
realized an annualized gain-to-lease of $34 in Montreal which was lower than the $69 realized in Q3 2021, mainly as a result of
lower suite repositionings and the leasing of a different suite mix.
The REIT realized an average gain-to-lease3 of 5.4% on the 2,003 new leases it signed in FY 2021. The REIT realized gains in all
markets. The following table summarizes the leasing activities and the gains to be realized from new leases signed for FY 2021:
Geographic Node
Toronto
Ottawa
Alberta
Montreal
New Leases
Signed1
501
931
283
288
Average Monthly
Expiring Rent per Suite
$2,106
1,535
1,235
1,902
Average Monthly
New Rent per Suite
$2,193
1,627
1,255
2,082
Percentage
Gain-to-Lease
4.1%
6.0%
1.6%
9.5%
Annualized Gain-
to-Lease2,3
$328
1,029
67
391
Total/Average
2,003
$1,629
$1,717
5.4%
$1,815
The annualized gains realized from new leases signed in the last four quarters are as follows:
Fiscal Quarter
Q1 2021
Q2 2021
Q3 2021
Q4 2021
New Leases
Signed1
470
534
555
444
Average Monthly
Expiring Rent per Suite
$1,618
1,593
1,630
1,652
Average Monthly
New Rent per Suite
$1,741
1,686
1,701
1,770
Percentage
Gain-to-Lease
7.6%
5.9%
4.4%
7.2%
Annualized Gain-
to-Lease2,3
$576
375
392
472
Total/Average
2,003
$1,629
$1,717
5.4%
$1,815
The above table highlights the cyclical nature of the business, with the peak leasing season taking place during the second and
third quarters of a calendar year while there is typically less leasing activity through the winter period. This seasonality was
slightly distorted through COVID and the REIT had to adapt its strategy accordingly. In response to the leasing challenges
brought about by COVID-19, the REIT offered discounts in Q2 and Q3 2021, resulting in a record number of new leases signed
but at lower realized gain-to-lease3. As occupancy levels continued to stabilize, reduced discounts resulted in a higher gain-to-
lease3 realized during Q4 2021.
1 New leases signed includes 100% of new leases from co-ownerships and excludes new leases of furnished suites.
2 For co-owned properties, reflects the REIT's co-ownership interest only.
3 Refer to "Section VI - Supplemental Information - Non-IFRS and Other Financial Measures"
5|2021 Annual ReportMinto Apartment REIT Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2021
(in thousands of Canadian dollars, except Unit and per Unit amounts, per suite amounts and other non-financial data)
While rental market conditions continue to improve, the REIT will continue to refine and adjust promotions and discounts to
achieve optimal occupancy levels. For more details, see Section II, "Financial Highlights and Performance - Review of Financial
Performance - Revenue from Investment Properties".
Gain-to-Lease and Average Monthly Rent1,2
The increase in average rent over the past eight quarters is supported by favourable rental market conditions for urban rentals.
The slight decrease in average monthly rent for Q4 2021 was due to the addition of Le Hill-Park in Montreal. Excluding Le Hill-
Park average monthly rent for the REIT's portfolio was $1,664.
Management continually reviews market conditions and updates its estimates of market rent for the properties in its portfolio.
The high level of leasing activity in Q4 2021 reflects an improvement in the rental market conditions as the economy re-opened
and restrictions were eased, as supported by the vaccination rollout, increase in immigration and travel resumption.
Management is optimistic and anticipates the recovery will accelerate in the coming quarters, with the REIT operating at pre-
pandemic levels by mid-2022. However, new COVID variants may disrupt the recovery in the short term.
Management also monitors market conditions for condominium suites being offered as rentals and considers this information
when setting its estimate of monthly market rent. The REIT's suites continue to compare favourably to condominiums on a size
and rental rate basis. For example, the average size and rental rate of the REIT's Toronto suites is 797 square feet and $2.40 per
square foot respectively, compared to 722 square feet and $3.27 per square foot for the average condo rental3.
Factoring in the new estimates of market rent, the estimated gain-to-lease potential on existing tenancies for the REIT's
portfolio as at December 31, 2021 is as follows:
Geographic Node
Total Suites4
Toronto
Ottawa
Alberta
Montreal
Total/Average
1,800
2,895
633
1,663
6,991
Average Monthly
In-Place Rent per
Suite
$1,910
1,542
1,287
1,805
Management's
Estimate of Monthly
Market Rent per Suite
$2,010
1,656
1,368
1,940
Percentage
Gain-to-Lease
Potential
5.2%
7.4%
6.4%
7.5%
Annualized
Estimated Gain-to-
Lease Potential5
$1,406
3,944
621
1,942
$1,641
$1,753
6.8%
$7,913
1 New leases signed includes 100% of new leases from co-ownerships and excludes new leases of furnished suites.
2 Refer to "Section VI - Supplemental Information - Non-IFRS and Other Financial Measures"
3 Source: Urbanation Q4 2021 UrbanRental Greater Toronto Area Rental Market Report.
4 Excludes 203 furnished suites, 249 vacant suites, 90 suites offline for repositioning and 5 suites offline for enhanced turn.
5 For co-owned properties, reflects the REIT's co-ownership interest only.
13.6%9.1%9.4%2.1%7.6%5.9%4.4%7.2%$1,599$1,609$1,613$1,623$1,630$1,640$1,651$1,641Realized Gain-on-New Leases (%)Average Monthly Rent ($)Q1 2020Q2 2020Q3 2020Q4 2020Q1 2021Q2 2021Q3 2021Q4 2021$1,050$1,200$1,350$1,500$1,650$1,800—%5.0%10.0%15.0%62021 Annual Report|Minto Apartment REIT Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2021
(in thousands of Canadian dollars, except Unit and per Unit amounts, per suite amounts and other non-financial data)
Management currently estimates that the portfolio has annualized estimated gain-to-lease potential of approximately $7,913,
compared to $7,271 at September 30, 2021 and $8,049 at December 31, 2020. Earlier in the pandemic, Management opted to
preserve value by holding rents, leveraging promotions and spot pricing to manage conversion and occupancy. With discounts
being offered by competitors in various markets and potential tenants' tendency to favour discounts compared to promotions,
Management adapted its strategy beginning in Q2 2021 to balance discounts and promotions in the Toronto, Ottawa and
Montreal markets. In Q4 2021, Management continued to offer discounts and promotions selectively to maintain and improve
occupancy. The application of discounts and promotions continues to be tapered as occupancy levels stabilize.
The REIT continues to realize on gain-to-lease opportunities as suites turnover and expects to continue doing so going forward.
The REIT's ability to realize the gain-to-lease potential is dependent on suite move-outs and overall market conditions.
Management expects that the REIT will be able to realize a significant portion of the gain-to-lease potential over a period of
three to five years.
Value Creation
Repositionings
In order to take advantage of market demand for repositioned properties, the REIT’s asset management strategy targets
improvements to suites, common areas and amenities. As part of an asset management plan for each building, Management
will renovate test suites in order to gauge market demand for different improvements or combinations of improvements. Test
suites also assist Management in mitigating capital risk by confirming and refining cost estimates, value engineering and
uncovering potential construction and design issues prior to a broader roll-out of the program. Once an optimal combination of
suite improvements is determined, a repositioning plan is executed for all of the suites in the building as suites turn over. The
rate at which Management can complete the repositioning plan depends on the rate of turnover of unrenovated suites.
The REIT has active repositioning programs at: Minto Yorkville, Leslie York Mills, High Park Village, Roehampton and Martin
Grove in Toronto; Castle Hill and Carlisle in Ottawa; and Rockhill, Le 4300, Haddon Hall and Le Hill-Park in Montreal. The
repositioning of suites at the Edmonton properties remains on hold as lower market rental rates are negatively impacting
returns on repositioning activities.
A summary of the repositioning activities for the three months and year ended December 31, 2021 is set out below1.
Property
Minto Yorkville
Leslie York Mills
High Park Village
Edmonton properties2
Carlisle
Castle Hill
Rockhill
Le 4300
Haddon Hall
Roehampton
Martin Grove
Le Hill-Park
Suites Repositioned and Leased
Ownership
Interest
100%
50%
40%
100%
100%
100%
50%
100%
100%
100%
100%
100%
Three months ended
December 31, 2021
2
25
21
—
5
6
7
7
1
36
3
—
Year ended
December 31, 2021
10
53
66
—
35
28
56
28
29
56
6
—
Remaining
Suites to
Reposition
35
245
292
73
94
79
806
231
162
92
26
180
Total Suites
in the
Program
99
409
407
171
191
176
934
261
191
148
32
261
Proportion
Complete
65%
40%
28%
57%
51%
55%
14%
11%
15%
38%
19%
31%
Total
113
367
2,315
3,280
29%
Le Hill-Park was acquired on December 7, 2021 and was immediately added to the repositioning portfolio. 81 of the 261 suites
were renovated prior to the date of acquisition. Management believes that there is a potential to increase average market rents
by approximately 20 to 25% over the unrenovated market rents. Eight suites were under renovation as of December 31, 2021.
1 All suite counts, including co-owned properties, are presented at 100% rather than the REIT's ownership share.
2 Edmonton repositioning program is currently on hold due to market conditions.
7|2021 Annual ReportMinto Apartment REIT Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2021
(in thousands of Canadian dollars, except Unit and per Unit amounts, per suite amounts and other non-financial data)
The REIT completed the feasibility study on the Roehampton suites in early 2021 and 56 suites were repositioned and leased as
of December 31, 2021. The REIT plans to reposition the entire property as suites become available, including converting
furnished suites to unfurnished suites, subject to turnover and availability of materials and trades.
Martin Grove suites before (upper) and after (lower) renovations
The REIT is exploring repositioning opportunities at two other wholly-owned properties in the portfolio, with a combined count
of nearly 418 suites with repositioning potential.
The following table summarizes costs and average annualized returns from repositioning activities for the past four quarters:
Fiscal Quarter
Suites Renovated1
Q1 2021
Q2 2021
Q3 2021
Q4 2021
Total/Average
46
88
120
113
367
Average Cost
per Suite
$52,277
51,223
48,432
47,362
$49,311
Average Annual Rental
Increase per Suite
$4,531
4,279
4,298
4,475
$4,465
Average Annual
Un-Levered Return
8.7%
8.4%
8.9%
9.4%
9.1%
Management targets a return in the range of 8% to 15% on suites renovated and leased.
The REIT's repositioning program presents the best risk-to-return profile of all investment opportunities, generating NAV
growth with only modest, near-term earnings dilution. Repositioning programs are flexible, with relatively small, discrete capital
commitments and short project durations that are easily accelerated or slowed as market conditions dictate. The REIT's high
volume of repositioning programs generates a number of efficiencies through volume purchasing, repeatable design concepts
and material selection, and transferable lessons learned from other projects.
1 All suite counts, including co-owned properties, are presented at 100% rather than the REIT's ownership share.
82021 Annual Report|Minto Apartment REIT Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2021
(in thousands of Canadian dollars, except Unit and per Unit amounts, per suite amounts and other non-financial data)
Enhanced Turns
In addition to its repositioning program, the REIT continues to
take advantage of turnover at certain properties to make
more extensive improvements than typical for a regular
turnover (defined as an enhanced turn). An enhanced turn
involves replacing carpets with modern flooring, as well as
improvements to trim and fixtures and new appliances in
some instances. The scope of work is narrower than in the
repositioning program but early results reflect un-levered
returns consistent with the REIT's broader repositioning
program. The timing to complete the enhanced turn depends
on the condition of the suite and the specific work being
performed, but typically ranges from two to four weeks. For
FY 2021, 75 suites were leased after completing enhanced
turns and the annualized rental rate increases generated
returns in excess of 8% on cost.
Before (upper) and after (lower) enhanced turns
- Parkwood Hills, Ottawa
Environmental, Social and Governance Initiatives
As approved by the Board of Trustees for implementation beginning in 2021, the Environmental, Social, and Governance (ESG)
Strategy is comprised of three strategic pillars (environmental impact, community impact, and business resilience), including
eighteen initiatives with milestones and/or measurable targets to be achieved within a five-year horizon, enhanced governance
measures for oversight of the ESG strategy, and reporting and disclosure commitments. Implementation of the strategy is
underway. Progress highlights are provided below:
Environmental Impact
•
•
•
•
•
•
•
•
Implementation of capital projects to reduce portfolio energy and water use continued including the renewal of
internal toilet components, boiler replacements, building automation system upgrades, and installation of lighting
controls, suite heating controls and variable frequency drives;
To support setting energy efficiency targets for new developments, draft energy modelling guidelines were issued and
an energy modelling template was developed and circulated to consultants for testing in Q4;
Pilot project sites for installation of sub-meters and connection to an energy consumption monitoring platform were
identified;
A preliminary report was made by the consultant performing a pilot embodied carbon analysis for a new development
project;
Draft guidelines for renewable energy feasibility studies during preliminary design of new developments were
circulated and reviewed;
A baseline waste intensity for new construction projects was calculated using data from Minto Communities Ottawa
and Greater Toronto Area projects completed from 2016 to 2020;
A partner to support waste reduction and increase diversion for operated properties commenced work at selected
REIT properties in December 2021; and
Plans were developed to support waste diversion and waste data collection for major renovation projects.
9|2021 Annual ReportMinto Apartment REIT Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2021
(in thousands of Canadian dollars, except Unit and per Unit amounts, per suite amounts and other non-financial data)
Community Impact
•
•
An ESG e-learning course for staff was launched in October 2021 to support expansion of employee ESG competency;
Roll-out of the ESG communication plan continued with on-going communication to staff on the ESG Strategy and
strategic pillars;
• Working with our diversity, equity, and inclusion partner, in November 2021 we launched a survey to collect diversity
data and gather input from employees on their experience; the survey results are being analyzed and will guide
development of an action plan;
• Work toward certification of One80five in Ottawa to the Fitwel standard is in progress; lessons from this process will
inform development of a health and well-being framework for the REIT’s new developments and stabilized properties;
and
•
Third party resident surveys were conducted in Q4 2021 at select REIT properties to obtain feedback relating to
amenities, services, and general tenant experience.
Business Resilience
•
•
•
•
Planning for extreme weather resilience continued with updates made to the resilience strategy template which will
be used by design teams for new mid- and high-rise developments;
Existing ESG requirements in procurement partner agreements were inventoried, best practices for considering ESG in
procurement of trades were identified, and a gap analysis was conducted;
Evaluation of lessons learned from pandemic plan implementation continued with an exercise completed in
December; and
An external partner was selected to support business continuity planning.
Governance Framework
The Board receives quarterly updates on ESG and an executive team ESG Steering Committee meets quarterly. ESG training was
provided to the Board in Q1 2021. ESG performance targets drive 50% of employee annual incentive compensation.
Reporting and Disclosure Commitments
The REIT participated in the 2021 GRESB Real Estate Assessment. The GRESB benchmark results were released in October 2021
and the REIT received a score of 70, GRESB 2-Star rating and Green Star designation. The REIT's inaugural ESG report was
released November 16, 2021. The report is aligned with the Global Reporting Initiative ("GRI") and Sustainability Accounting
Standards Board ("SASB") disclosure standards.
102021 Annual Report|Minto Apartment REIT Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2021
(in thousands of Canadian dollars, except Unit and per Unit amounts, per suite amounts and other non-financial data)
Outlook
In the current operating environment, Management is focused on the health and safety of its residents, employees and
business partners and on limiting the spread of COVID-19. Notwithstanding the challenges resulting from COVID-19,
Management has been able to operate safely while continuing to realize on growth from:
•
•
•
•
Organic growth opportunities including realization of gain-to-lease potential;
Value creation from the repositioning of existing assets by investing in in-suite and common area improvements to
drive higher revenue;
Capitalizing on our strategic alliance with MPI and its affiliates by accessing its pipeline of assets and deal flow; and
A strategic acquisition in a major urban centre in Canada.
At the same time, Management is actively looking for opportunities to develop purpose-built rental properties and engage in
intensification of existing properties which have the capacity for additional density.
As the COVID vaccination roll-out progressed, government restrictions on businesses were gradually eased over the course of
the year. With a high number of new immigrants entering Canada and reduced restrictions on international travel, the rental
market continued to strengthen in Q4 2021. Towards the end of Q4 2021, in the face of soaring COVID-19 cases from the
Omicron variant, some restrictions were re-introduced, including putting a limit on indoor gatherings and capacity limits in
restaurants and stores. However, these measures were temporary and lifted as the case count started to decline at the end of
January 2022. Management believes that 2022 will be centred around living with COVID and expects a return to pre-COVID
norms.
The federal government has reiterated its commitment to immigration and has increased its targets for new permanent
residents over the next three years in order to catch up on the immigration that was delayed in 2020 and the first half of 2021
due to border closures. The federal government's new targets, along with natural growth, should push net population growth to
more than 500,000 people per year for the next three years, returning to historically high population growth that was last
reached in 2019 before the onset of the pandemic.
Overall, Management believes that the favourable supply and demand fundamentals that existed prior to the pandemic remain.
With the rising cost of home ownership, the affordability gap between rental housing and home ownership has widened in
most Canadian cities. The supply of new housing remains constrained and inelastic to housing demand and population growth.
As population growth increases in 2021 and beyond, rental housing demand is expected to strengthen and occupancy rates will
gradually improve. Management is optimistic and anticipates the recovery will accelerate in the coming quarters, with the REIT
operating at pre-pandemic levels by mid-2022. However, new variants may disrupt the recovery in the short term.
Organic Growth Opportunities
The REIT expects to continue to see organic growth on turnover of suites in the near term in all markets. Management expects
to realize on the gap between market rent and average sitting rent on new leases as suites turnover and rent is adjusted to
current market rates. The average gain-to-lease potential for the portfolio is 6.8% (as set out in the detailed gain-to-lease table
in the previous section). Management expects to realize a much higher gain-to-lease potential as rental markets improve and
rental pricing pressures begin to subside.
Value Creation from Repositioning Existing Assets
The REIT has been able to drive higher revenue by investing in in-suite and common area improvements. Management
continuously evaluates the existing properties and the need for repositioning. The REIT has an extensive repositioning program
with more than 2,300 suites eligible for repositioning. The REIT's ability to execute its repositioning program is highly dependent
on the turnover of unrenovated suites and market conditions at the time suite renovations are completed. Subject to
unrenovated suites becoming available, the REIT expects to reposition approximately 250 to 300 suites in 2022.
Development of Purpose-Built Rental Properties and Intensification on Existing Sites
Management evaluates and prioritizes potential development projects that can generate NAV and long-term earnings growth
for its Unitholders. Development and construction entails some risk, however Management believes the REIT can effectively
mitigate this risk through its strategic alliance with MPI and the Minto Group's extensive experience and track record of
successful developments and construction.
11|2021 Annual ReportMinto Apartment REIT Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2021
(in thousands of Canadian dollars, except Unit and per Unit amounts, per suite amounts and other non-financial data)
The REIT is in the process of developing additional rental suites on available excess land at the following properties:
Location and Property
Name
Ownership
Estimated
Suites
Estimated
Project Costs
Construction
Start Date
Estimated
Stabilization
Anticipated
Yield
Toronto, ON
Richgrove
Leslie York Mills
High Park Village
100%
50%
40%
225
192
650
$
114,000
172,000
455,000
Q4 2021
Q4 2021
Q1 2023
Q1 2026
Q4 2025
Q2 2029
4.25% - 4.75%
3.75% - 4.25%
4.25% - 4.75%
The Richgrove community includes Richgrove, comprising two mid-rise residential apartment buildings with a total of 258
suites, and a high-rise residential apartment building with a total of 237 suites. The intensification involves the addition of a
new tower consisting of approximately 225 suites, including 100 affordable housing suites, and 213 parking stalls. The REIT has
a contribution agreement with the City of Toronto to build affordable housing on the surplus land at the property. In connection
with the terms of the agreement, development charges and other fees amounting to $3,794 were exempted or waived by the
City of Toronto. On November 30, 2021, a construction financing agreement was executed between the REIT and CMHC with a
maximum financing of $93,745. The land was fully-zoned in 2021 and demolition and site mobilization commenced in Q4 2021.
Leslie York Mills comprises three 18-storey towers with a total of 409 suites. The intensification entails the development of 192
rental terrace homes on four blocks, creating an indoor pool, gym and recreational area and replacing the existing parking
structure with a new two-level underground parking garage. The land was fully-zoned in 2021 and demolition and site
mobilization commenced in Q4 2021.
High Park Village consists of three buildings comprising 750 rental suites. The REIT is finalizing planning approvals with the City
of Toronto to develop two new towers comprising an estimated 650 suites and 335 underground parking stalls. The
development remains subject to municipal as well as investment partner approval. The planning process timing is uncertain
owing to the City of Toronto's municipal planning processes.
The construction of the three development projects would add approximately 1,100 suites to the REIT's portfolio at an
estimated total cost of $741,000, generating an expected average yield between 3.75% and 4.75%.
Exploring Strategic Acquisitions in Major Canadian Urban Centres and Capitalizing on our Relationship
with MPI and Affiliates
The REIT is continuously exploring opportunities to acquire additional properties or to dispose of existing properties if the
proceeds can be deployed more productively in other investments. Acquisition efforts are focused on major urban markets in
Canada, with an emphasis on properties that present opportunities with embedded gain-to-lease potential, repositioning
potential, intensification potential or a combination of all these opportunities. Although the REIT will pursue any opportunity
that fits its strategic mandate, it is devoting time and resources in key markets.
On December 7, 2021, the REIT acquired Le Hill-Park in Montreal. The property comprises 261 suites and has a gain-to-lease
potential of approximately 20% and significant repositioning potential as only 72 of the 261 suites have undergone a
repositioning, potentially providing an additional upside of approximately 20-25% upon completion of renovation. The addition
of Le Hill-Park aligns with the REIT's long-term strategy and provides further geographic diversification for the portfolio.
In addition to third party acquisitions, the REIT is also focused on capitalizing on its strategic partnership with MPI and its
affiliates. MPI holds interests in a variety of investment vehicles with institutional investors and some of these interests may be
candidates for transfer to the REIT over time.
122021 Annual Report|Minto Apartment REIT Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2021
(in thousands of Canadian dollars, except Unit and per Unit amounts, per suite amounts and other non-financial data)
The REIT has entered into agreements to extend convertible development loans for the following developments:
Location and
Project Name
Estimated
Suites
Estimated
Project Costs
Status
Construction
Start Date
Estimated
Stabilization
Maximum
Loan
Amount
Ottawa, ON
Fifth + Bank
Beechwood
North Vancouver, BC
Lonsdale Square
Vancouver, BC
810 Kingsway
163
227
113
108
$91,000
123,000
Pre-leasing
Rezoning complete
Q3 2020
Q4 2021
Q2 2022
Q4 2024
$30,000
51,400
83,000
Under construction
Q2 2021
Q4 2023
14,000
77,000
Pre-Construction
Q1 2022
Q3 2024
19,650
Fifth + Bank involves the redevelopment of a commercial property located at 99 Fifth Avenue in Ottawa, Ontario into a mixed-
used multi-residential rental and retail property. Construction of 163 rental suites commenced in Q3 2020 and had its first
occupants in Q4 2021. The property is approximately 60% leased-up and is expected to be stabilized in the first half of 2022.
Beechwood involves the development of a nine-storey structure comprising 227 suites and 6,039 square feet of retail space on
a land assembly located at 78-88 Beechwood Avenue and 69-93 Barrette Street in Ottawa. Rezoning approval was received in
July 2021. Construction on the project commenced in Q4 2021 with stabilization expected by Q4 2024.
Lonsdale Square is part of a large master-planned community on a 99-year land lease with the City of North Vancouver. The
building will comprise 113 rental suites and approximately 8,000 square feet of retail space. The excavation of the site is
complete and shoring and formation of the garage is underway. Construction completion is expected by Q2 2023 and the
property is expected to be stabilized in Q4 2023.
810 Kingsway involves the development of a six-storey mixed-used building comprising 108 unfurnished suites and
approximately 11,500 square feet of at-grade retail space. Site mobilization and demolition commenced in February 2022.
The agreements provide the REIT with an exclusive option to purchase the properties or MPI's interest in the project upon
stabilization, at 95% of its then-fair market value as determined by independent and qualified third-party appraisers. If all of the
purchase options are exercised, these projects will add 611 suites to the REIT's portfolio.
13|2021 Annual ReportMinto Apartment REIT Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2021
(in thousands of Canadian dollars, except Unit and per Unit amounts, per suite amounts and other non-financial data)
Section II - Financial Highlights and Performance
Key Performance Indicators
The REIT's operating results are affected by seasonal variations and other factors, including the impacts of COVID-19. As a
result, the operating performance and metrics in one quarter may not be indicative of future quarters.
The following tables highlight certain information about the REIT for the periods presented for the Total Portfolio and Total
Portfolio - excluding furnished suites. The information in the table below and throughout this Management's Discussion and
Analysis is on a Total Portfolio basis, except where specifically stated otherwise:
Three months ended December 31,
Year ended December 31,
2021
2020
Change
2021
2020
Change
Operating
Number of properties
Total suites1
Average monthly rent per suite2
Occupancy - end of the period2
Occupancy - average for the period2
Financial
Revenue
NOI2
NOI margin2
Net income and comprehensive
income
Revenue - Total Portfolio - excluding
furnished suites
NOI2 - Total Portfolio - excluding
furnished suites
NOI margin2 - Total Portfolio -
excluding furnished suites
FFO2
FFO per unit2
AFFO2
AFFO per unit2
AFFO Payout Ratio2
Distribution per unit
Distribution yield2 based on Unit
closing price
30
7,538
1,641
95.47 %
95.04 %
32,429
19,940
61.5 %
24,933
30,321
18,823
62.1 %
13,245
0.2147
11,656
0.1890
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
29
7,245
1,623
93.52 %
92.29 %
1
293
1.1 % $
195 bps
275 bps
30
7,538
1,641
95.47 %
92.49 %
$
29
7,245
1,623
93.52 %
94.75 %
1
293
1.1 %
195 bps
(226) bps
30,930
18,946
4.8 % $ 123,547
5.2 % $
76,247
$ 124,929
78,620
$
61.3 %
20 bps
61.7 %
62.9 %
(1.1) %
(3.0) %
(120) bps
23,010
8.4 % $
94,161
$ 179,638
(47.6) %
28,955
4.7 % $ 115,869
$ 117,183
17,996
4.6 % $
72,412
$
74,432
62.2 %
(10) bps
62.5 %
63.5 %
12,022
0.2036
10,459
0.1771
10.2 % $
5.5 % $
11.4 % $
6.7 % $
48,530
0.8128
42,234
0.7073
$
$
$
$
49,981
0.8465
43,733
0.7407
(1.1) %
(2.7) %
(100) bps
(2.9) %
(4.0) %
(3.4) %
(4.5) %
480 bps
2.7 %
63.1 %
64.2 %
(110) bps
65.1 %
60.3 %
$
0.1171
$
0.1138
2.9 % $
0.4584
$
0.4463
2.14 %
2.23 %
(9) bps
2.09 %
2.19 %
(10) bps
1 At December 31, 2021, includes 2,163 (December 31, 2020 - 2,163) suites co-owned with institutional partners.
2 Refer to "Section VI - Supplemental Information - Non-IFRS and Other Financial Measures"
142021 Annual Report|Minto Apartment REIT Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2021
(in thousands of Canadian dollars, except Unit and per Unit amounts, per suite amounts and other non-financial data)
As at
Leverage
Debt-to-Gross Book Value ratio1
Debt Service Coverage ratio1
Debt-to-Adjusted EBITDA ratio1
Weighted average term to maturity on fixed rate debt1
Weighted average interest rate on fixed rate debt1
December 31, 2021
December 31, 2020
Change
36.54 %
1.76 x
12.25 x
4.69
2.82 %
38.57 %
1.91 x
11.51 x
5.81
2.94 %
203 bps
(0.15)x
(0.74)x
(1.12) years
12 bps
Valuation
NAV1
NAV per unit1
$
$
1,508,416
24.00
$
$
1,314,030
22.26
14.8 %
7.8 %
Review of Financial Performance
The following tables highlight selected financial information for the REIT's Total Portfolio and Total Portfolio - excluding
furnished suites for the three months and years ended December 31, 2021 and 2020:
Total Portfolio - excluding furnished suites
Three months ended December 31,
Year ended December 31,
Revenue from investment properties2 $
Property operating costs
Property taxes
Utilities
NOI1
NOI margin1
$
Total Portfolio
$
Revenue from investment properties
Property operating costs
Property taxes
Utilities
NOI1
NOI margin1
2021
30,321
5,451
3,345
2,702
18,823
2020
% Change
2021
2020
% Change
$
$
28,955
5,416
2,987
2,556
17,996
4.7 % $ 115,869
(0.6) %
21,256
(12.0) %
12,644
(5.7) %
9,557
4.6 % $
72,412
$ 117,183
20,685
12,737
9,329
74,432
$
62.1 %
62.2 %
(10) bps
62.5 %
63.5 %
(1.1) %
(2.8) %
0.7 %
(2.4) %
(2.7) %
(100) bps
Three months ended December 31,
Year ended December 31,
2020
% Change
2021
2020
% Change
2021
32,429
6,161
3,508
2,820
19,940
$
30,930
6,142
3,162
2,680
18,946
61.5 %
61.3 %
4.8 % $ 123,547
(0.3) %
23,952
(10.9) %
13,322
(5.2) %
10,026
5.2 %
76,247
20 bps
61.7 %
$ 124,929
23,221
13,346
9,742
78,620
62.9 %
(1.1) %
(3.1) %
0.2 %
(2.9) %
(3.0) %
(120) bps
General and administrative expenses
Finance costs - operations
Fair value loss (gain) on:
Investment properties
Class B LP Units
Interest rate swap
Unit-based compensation
Fees and other income
Net income and comprehensive
income
1,849
7,919
1,598
8,330
(15.7) %
4.9 %
7,602
32,181
6,634
33,767
(3,133)
(10,701)
(421)
(98)
(408)
(61,231)
47,587
(174)
239
(413)
94.9 %
122.5 %
(142.0) %
141.0 %
(1.2) %
(89,188)
34,609
(1,625)
137
(1,630)
(78,701)
(63,298)
2,429
(249)
(1,600)
(14.6) %
4.7 %
(13.3) %
154.7 %
166.9 %
155.0 %
1.9 %
$
24,933
$
23,010
8.4 % $
94,161
$ 179,638
(47.6) %
1 Refer to "Section VI - Supplemental Information - Non-IFRS and Other Financial Measures"
2 Includes rental revenue from the lease of unfurnished suites, commercial space, parking revenue and other property income.
15|2021 Annual ReportMinto Apartment REIT Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2021
(in thousands of Canadian dollars, except Unit and per Unit amounts, per suite amounts and other non-financial data)
Net Operating Income
For Q4 2021, NOI for Total Portfolio and Total Portfolio excluding furnished suites increased by 5.2% and 4.6%, respectively,
primarily as a result of higher revenue from improvement in average occupancy1 of 275 bps and higher average monthly rent by
$18, partially offset by higher property taxes stemming from changes in assessed values and rates as well as higher utilities
mainly from higher rates.
For FY 2021, NOI for Total Portfolio and Total Portfolio excluding furnished suites decreased by 3.0% and 2.7%, respectively,
primarily as a result of lower revenue from reduced average occupancy1 of 226 bps and higher use of promotions. In addition,
NOI was impacted by higher property operating costs and utilities compared to the previous year. The increase in property
operating costs was mainly a result of increase in salaries and wages, insurance premiums and advertising expenses while the
increase in utilities was mainly due to higher rates. Stabilization of 32 rebuilt suites at Skyline in Q2 2021 and the acquisition of
Le Hill-Park in Montreal in December 2021 contributed $487 to NOI.
Revenue from Investment Properties
Rental revenue
Unfurnished suites
Furnished suites
Commercial leases
Parking revenue
Other property income
Three months ended December 31,
Year ended December 31,
2021
2020
% Change
2021
2020
% Change
$
27,420 $
2,108
644
1,168
1,089
26,379
1,975
557
1,064
955
3.9 % $
6.7 %
15.6 %
9.8 %
14.0 %
105,415 $
7,678
2,268
4,431
3,755
106,925
7,746
2,165
4,253
3,840
(1.4) %
(0.9) %
4.8 %
4.2 %
(2.2) %
$
32,429 $
30,930
4.8 % $
123,547 $
124,929
(1.1) %
Revenue from investment properties consists of rental revenue from residential lease agreements relating to unfurnished suites
and furnished suites, commercial lease agreements, parking revenue and other property income. Other property income
consists of ancillary revenue from laundry facilities, telecommunication commission revenue, membership fee revenue, other
fee income from tenants and recoveries of utility charges, operating costs and property taxes.
Rental Revenue from Unfurnished Suites
Total Portfolio rental revenue from unfurnished suites for Q4 2021 was 3.9% higher than Q4 2020, mainly as a result of higher
occupancy and average rents, additional revenue from the 32 rebuilt suites at Skyline and the acquisition of Le Hill-Park,
partially offset by higher promotions. Total portfolio average occupancy1 for Q4 2021 was 95.04% compared to 92.29% for Q4
2020.
For FY 2021, Total Portfolio rental revenue from unfurnished suites was 1.4% lower than FY 2020, primarily as a result of lower
occupancy particularly in the first half of 2021, which pushed average occupancy down by 226 bps, and higher promotions. This
was partially offset by a year-over-year increase in average monthly rents. The majority of the revenue decline was attributable
to a handful of core urban properties which bore the brunt of the negative impact of COVID-19. Occupancy climbed through the
year since the low point in Q1 2021. While the use of promotions tapered as occupancy improved, the amortization of
promotions continued to weigh on revenue in the latter half of 2021. Total portfolio average occupancy1 for FY 2021 was
92.49% compared to 94.75% for FY 2020.
Total Portfolio average monthly rent per suite1 of $1,641 as at December 31, 2021 was $18 per month higher than the previous
year, primarily due to higher rents achieved in Toronto, Ottawa and Alberta.
The REIT entered into 444 and 2,003 new leases in Q4 2021 and FY 2021, respectively, which represents a 9% and 33% increase
in leasing activity compared to 406 and 1,501 new leases for the comparable periods in the previous year, marking a significant
improvement in leasing activity.
162021 Annual Report|Minto Apartment REIT Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2021
(in thousands of Canadian dollars, except Unit and per Unit amounts, per suite amounts and other non-financial data)
For Q4 2021, there were 420 move-outs and 514 move-ins, compared to 521 move-outs and 435 move-ins for Q4 2020. The
graph below sets out the REIT's quarterly move-in/move-out metrics for the past four quarters (100% basis):
Quarterly Move-ins/Move-outs
In Q4 2021, move-ins continued to outpace move-outs for the third straight quarter, contributing to the improvement in
occupancy of 275 bps compared to Q4 2020, reflecting a return towards more normal occupancy levels.
Total Portfolio Revenue and Occupancy1
Rental Revenue from Furnished Suites
For Q4 2021, rental revenue from furnished suites was 6.7% higher than Q4 2020, primarily due to the higher average rents and
an improvement in occupancy. The improvement in occupancy and average rent comes as a result of the recovery in demand
from business travel, corporate relocations and easing restrictions on non-essential travel. This was partially offset by the
reduction in number of furnished suites to 203 suites as compared to 232 suites for the same period in previous year. For FY
2021, rental revenue from furnished suites was 0.9% lower primarily due to the reduction in furnished suites in the portfolio,
offset by increased average monthly rent and occupancy, compared to FY 2020.
Suites
Average monthly rent
Occupancy - average for the period1
$
Q4 2021
203
4,078
$
Q3 2021
212
3,997
$
Q2 2021
215
3,572
$
Q1 2021
216
3,540
$
Q4 2020
232
3,571
80.50 %
86.30 %
74.44 %
62.49 %
77.29 %
1 Average for the period based on proportional ownership basis.
427441517420362477615514Move-outsMove-insQ1 2021Q2 2021Q3 2021Q4 202120030040050060070031,52531,31931,15530,93029,99929,88531,23432,42996.59%96.16%93.97%92.29%91.12%91.50%92.87%95.04%Revenue ($)Occupancy (%)Q1 2020Q2 2020Q3 2020Q4 2020Q1 2021Q2 2021Q3 2021Q4 2021$15,000$18,000$21,000$24,000$27,000$30,000$33,00088%90%92%94%96%98%100%17|2021 Annual ReportMinto Apartment REIT Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2021
(in thousands of Canadian dollars, except Unit and per Unit amounts, per suite amounts and other non-financial data)
Rental Revenue from Commercial Leases
For Q4 2021 and FY 2021, revenue from commercial leases was 15.6% and 4.8% higher as compared to the same periods in
2020. This increase was mainly as a result of higher operating cost recoveries from commercial tenants which include property
taxes, insurance and other costs, partially offset by lower base rent revenue.
Parking Revenue
For Q4 2021 and FY 2021, parking revenue increased by 9.8% and 4.2% compared to the same periods in 2020, mainly as a
result of increases in parking use and rates charged to tenants and higher visitor parking revenue.
Other Property Income
For Q4 2021, the Total Portfolio other property income increased by 14.0% primarily as a result of increase in utility recoveries,
energy rebates, laundry revenue, and guest suite, party room and storage rental revenue. For FY 2021, the decrease of 2.2%
was mainly as a result of lower revenue from fitness centres, laundry and a one-time hydro rebate received in prior year,
partially offset by an increase in energy rebates from implementation of sustainability projects.
Property Operating Costs
Three months ended December 31,
Year ended December 31,
2021
2020
% Change
2021
2020
% Change
Property operating costs
$
6,161 $
6,142
(0.3) % $
23,952 $
23,221
(3.1) %
Property operating costs relate to direct costs associated with operating the properties and providing services to tenants,
including repairs and maintenance, insurance, site staff salaries, cleaning costs, leasing costs, supplies, waste removal and bad
debt expense. The REIT maintains cost discipline and tight controls on property operating costs.
For Q4 2021, property operating costs for the Total Portfolio were 0.3% higher compared to Q4 2020, primarily as a result of
additional property operating costs for the rebuilt Skyline property and the Le Hill-Park acquisition, an increase in insurance
premiums, advertising expenses, repairs and maintenance. The increase was offset by lower furnished suite expenses, bad debt
expense, interest on tenant deposits, legal and administrative expenses.
For FY 2021, property operating costs for the Total Portfolio were 3.1% higher compared to FY 2020, mainly as a result of higher
salaries and wages, insurance premiums, advertising expenses and additional property operating costs for the rebuilt Skyline
suites and Le Hill-Park acquisition, partially offset by lower repairs and maintenance, bad debts expense, legal and
administrative expenses and interest on tenant deposits. The increase in salaries was mainly a result of increased staffing at
certain properties and annual salary increases. Higher insurance premiums were driven by increases in insurance rates across
the portfolio. Higher advertising and marketing expenses were incurred to generate new leads and higher expenses on resident
promotions were incurred to maintain existing tenants. The reduction in repairs and maintenance is mainly due to reduced
snow removal, landscaping, recreation and limited repairs and maintenance work done in the earlier part of the year due to the
pandemic.
For Q4 2021 and FY 2021, Total Portfolio property operating costs were 19.0% and 19.4% of revenue, compared to 19.9% and
18.6% for the same periods in 2020.
Property Taxes
Three months ended December 31,
Year ended December 31,
2021
2020
% Change
2021
2020
% Change
Property taxes
$
3,508 $
3,162
(10.9) % $
13,322 $
13,346
0.2 %
For Q4 2021, Total Portfolio property taxes were 10.9% higher as compared to Q4 2020, mainly as a result of changes in
assessed values and changes in tax rates across the portfolio, the additional property taxes for the rebuilt Skyline property in
Ottawa which stabilized in Q2 2021 and the acquisition of Le Hill-Park in Montreal.
For FY 2021, Total Portfolio property taxes were 0.2% lower as compared to FY 2020, mainly as a result of successful property
tax appeals resulting in refunds of taxes relating to certain properties in Ottawa, partially offset by changes in assessed values
and tax rates across the portfolio, additional property taxes for the rebuilt Skyline property and the acquisition of Le Hill-Park.
182021 Annual Report|Minto Apartment REIT Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2021
(in thousands of Canadian dollars, except Unit and per Unit amounts, per suite amounts and other non-financial data)
Total Portfolio property taxes were 10.8% of revenue for Q4 2021 and FY 2021, compared to 10.2% and 10.7% for 2020.
Utilities
Electricity
Natural gas
Water
Three months ended December 31,
Year ended December 31,
$
2021
941 $
1,154
725
2020
976
1,021
683
% Change
3.6 % $
(13.0) %
(6.1) %
2021
3,943 $
3,106
2,977
2020
3,958
2,866
2,918
% Change
0.4 %
(8.4) %
(2.0) %
$
2,820 $
2,680
(5.2) % $
10,026 $
9,742
(2.9) %
Utilities consist of electricity, natural gas and water for the rental properties. Utility costs are seasonal and can be highly
variable from one period to the next. In addition to seasonality-driven usage, utility rates and commodity prices impact costs.
Total Portfolio utilities for Q4 2021 and FY 2021 were 5.2% and 2.9% higher than 2020 as a result of higher natural gas and
water expense partially offset by lower electricity expense. Natural gas expense was higher mainly as a result of higher gas rates
due to federal carbon taxes, partially offset by lower consumption from milder weather as compared to the same periods in
2020. Water expense was also higher primarily due to an increase in rates partially offset by lower consumption. The additional
suites at Skyline and the acquisition of Le Hill-Park also contributed to higher utilities costs. The slight decrease in electricity was
mainly as a result of savings from sustainability projects, including LED lighting and building automation systems, and milder
weather partially offset by higher rates.
Total Portfolio utilities for Q4 2021 and FY 2021 represent 8.7% and 8.1% of revenue, compared to 8.7% and 7.8% for 2020.
General and Administrative Expenses
General and administrative expenses relate to the administration of the REIT, including: audit fees, legal fees, salaries and
benefits for REIT employees, Trustee fees and costs associated with support services provided under the Administrative Support
Agreement ("ASA") between the REIT and MPI.
The general and administrative expenses of $1,849 for Q4 2021 were 15.7% higher compared to Q4 2020, primarily due to an
increase in the amount charged under the ASA by $141, unit-based compensation expense, salaries and benefits, professional
fees, travel expenses and directors and officers insurance.
For FY 2021, general and administrative expenses were 14.6% higher compared to FY 2020, primarily as a result of an increase
in the amount charged under the ASA by $565, unit-based compensation expense, salaries and benefits, professional fees,
directors and officers insurance and investor relations costs.
Finance Costs - Operations
Interest expense on mortgages
Interest expense and standby fees on
credit facility
$
Amortization of financing charges
Amortization of mark-to-market
adjustments
Interest income
Capitalized interest expense
Interest expense and other financing
charges
Distributions on Class B LP Units
Distributions on Class C LP Units
Three months ended December 31,
Year ended December 31,
2021
4,161 $
2020
4,281
% Change
2.8 % $
2021
16,605 $
2020
16,735
% Change
0.8 %
410
145
(192)
(879)
(68)
3,577
2,665
1,677
288
165
(194)
(520)
—
4,020
2,591
1,719
(42.4) %
12.1 %
1.0 %
69.0 %
— %
11.0 %
(2.9) %
2.4 %
1,750
640
(769)
(3,129)
(95)
15,002
10,436
6,743
1,838
548
(770)
(1,653)
—
16,698
10,162
6,907
4.8 %
(16.8) %
0.1 %
89.3 %
— %
10.2 %
(2.7) %
2.4 %
$
7,919 $
8,330
4.9 % $
32,181 $
33,767
4.7 %
19|2021 Annual ReportMinto Apartment REIT Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2021
(in thousands of Canadian dollars, except Unit and per Unit amounts, per suite amounts and other non-financial data)
Finance costs comprise interest expense on secured debt; interest expense and standby fees on the revolving credit facility;
amortization of financing charges and mark-to-market adjustments on the debt; and distributions on Class B LP Units ("Class B
LP Units") and Class C LP Units ("Class C LP Units") of Minto Apartment Limited Partnership (the "Partnership"); offset by
interest income and capitalized interest expense.
Finance costs for Q4 2021 were lower by $411 compared to Q4 2020, primarily as a result of higher interest income earned on
convertible development loans, lower interest expense on mortgages mainly due to lower interest rates on refinanced
mortgages, capitalized interest relating to development projects, and a decrease in distributions on Class C LP Units. This was
partially offset by additional interest expense and standby fees on the credit facility and an increase in distributions on Class B
LP Units.
Finance costs for FY 2021 were $1,586 lower compared to FY 2020, primarily as a result of higher interest income from
convertible development loans, lower interest expense on refinanced mortgages, lower interest expense and standby fees on
the credit facility, lower distributions on Class C LP Units and capitalized interest relating to development projects. This was
partially offset by increased distributions on Class B LP Units and higher amortization of financing charges from additional
mortgages obtained.
Fair Value Gain (Loss) on Investment Properties
Fair value of residential investment properties is determined using the direct capitalization approach, by applying an
appropriate capitalization rate which reflects the characteristics, location and market conditions to the estimated 12 month
stabilized forecasted NOI for each property, reduced by an estimate of future capital expenditures.
Management has been monitoring the impact of the pandemic on operations since Q1 2020. It is not possible to forecast with
certainty the duration or full scope of the economic impact of COVID-19 on the REIT's business and operations, both in the short
and long term. With the vast majority of the Canadian population vaccinated, border restrictions continuing to be eased, and
businesses, offices and in-class learning at post-secondary institutions slowly resuming operations, Management is optimistic
for continued rental market improvements and therefore eliminated its COVID valuation reserve in Q2 2021.
The fair value gain on investment properties of $3,133 and $89,188 for the three months and the year ended December 31,
2021 was a result of movement in the following:
Forecast NOI
Capitalization rates
Capital expenditure reserve
COVID-19 reserve
Three months ended December 31,
Year ended December 31,
$
$
2021
6,605 $
10,262
(13,734)
—
2020
10,400 $
62,771
(13,096)
1,156
2021
11,682 $
122,753
(47,928)
2,681
2020
51,697
59,442
(29,757)
(2,681)
3,133 $
61,231 $
89,188 $
78,701
The fair value gain for Q4 2021 was due to capitalization rate compression primarily driven by properties located in Ottawa and
Toronto and higher forecast NOI as a result of higher revenues. The increase was partially offset by increased capital
expenditure reserve primarily due to ongoing capital expenditure requirements and the advancement of various repositioning
programs. The capital expenditure reserve as of December 31, 2021 was $83,852 representing an increase of $1,751 over Q3
2021 after consideration of actual capital expenditures incurred in Q4 2021.
The fair value gain on investment properties for FY 2021 was a result of compression in capitalization rates for properties
located in Ottawa and Toronto, increase in forecast NOI as a result of higher rental rates on turnover and on newly leased
repositioned suites in properties in Ottawa and Toronto and the elimination of the COVID-19 valuation reserve. The weighted
average capitalization rate for the portfolio decreased to 3.60% as at December 31, 2021 compared to 3.81% for December 31,
2020. See Section III - "Assessment of Financial Position - Investment Properties" for changes in capitalization rates by market.
This was partially offset by increased capital expenditure reserve primarily due to ongoing capital expenditure requirements
and the advancement of various repositioning programs. The capital expenditure reserve as of December 31, 2021 was $83,852
representing an increase of $12,363 for 2021 after consideration of actual capital expenditures incurred in FY 2021.
202021 Annual Report|Minto Apartment REIT Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2021
(in thousands of Canadian dollars, except Unit and per Unit amounts, per suite amounts and other non-financial data)
Fair Value Loss (Gain) on Class B LP Units
The Class B LP Units are owned by a limited partnership wholly-owned by MPI. The Class B LP Units are economically equivalent
to Units, in that they receive distributions equal to the distributions paid on Units and are exchangeable into Units at the
holder's option. The Class B LP Units are classified as financial liabilities and measured at fair value with any changes in fair value
recorded in net income. The fair value gain or loss on Class B LP Units is measured every period by reference to the closing
trading price of the Units. An increase in the Unit closing price over the period results in a fair value loss, whereas a decrease in
the Unit closing price over the period results in a fair value gain.
For Q4 2021, the Unit price decreased from $22.36 to $21.89, resulting in a fair value gain of $10,701. For the same period in
2020, the Unit price increased from $18.28 to $20.37, resulting in a fair value loss of $47,587.
For FY 2021, the Unit price increased from $20.37 to $21.89, resulting in a fair value loss of $34,609. For the previous year, the
opening Unit price was $23.15 and the closing Unit price was $20.37, resulting in a fair value gain of $63,298.
Fair Value Loss (Gain) on Interest Rate Swap
The REIT has an interest rate swap to receive variable interest based on one month bankers' acceptance plus 185 bps and pay
fixed interest at 3.38%. The swap is remeasured at each reporting date using discounted cash flow analysis.
For Q4 2021 and FY 2021, the REIT recognized a fair value gain of $421 and $1,625 compared to a fair value gain of $174 and a
fair value loss of $2,429 for the same periods in 2020. The fair value gains were primarily a result of an increase in variable
interest rates whereas the fair value loss mainly resulted from a decrease in variable interest rates.
Fair Value Loss (Gain) on Unit-Based Compensation
The REIT has issued Deferred Units to its Trustees and executives. The liability is remeasured at each reporting date based on
the closing Unit price with changes in the value recorded in net income.
For Q4 2021, the REIT recognized a fair value gain of $98 from the decrease in Unit price from $22.36 to $21.89. For the same
period in 2020, the Unit price increased from $18.28 to $20.37, resulting in a fair value loss of $239.
For FY 2021, the REIT experienced a fair value loss of $137 from an increase in the Unit price for Deferred Units outstanding
from $20.37 at December 31, 2020 to $21.89 at December 31, 2021, and the Deferred Units issued and redeemed during the
period. For the previous year, the Unit price decreased from $23.15 to $20.37, resulting in a fair value gain of $249.
Fees and Other Income
Fees and other income represent revenue from asset, project and property management services provided by the REIT in
connection with three properties co-owned with institutional partners. For Q4 2021, these fees were 1.2% lower compared to
Q4 2020. The decrease is mainly due to a small decrease in property and project management fees.
For FY 2021, these fees were 1.9% higher compared to FY 2020 mainly as a result of an increase in project management fees
and asset management fees, partially offset by a decrease in property management fees. Project management fees increased
due to the ramping up of repositioning projects in 2021 as government-imposed COVID restrictions were relaxed, whereas asset
management fees increased due to the increase in the value of the assets compared to 2020. The decrease in property
management fees is mainly due to a decrease in revenues from properties compared to prior year.
21|2021 Annual ReportMinto Apartment REIT Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2021
(in thousands of Canadian dollars, except Unit and per Unit amounts, per suite amounts and other non-financial data)
Summary of Quarterly Results
Total assets
Investment properties
Total liabilities
Total non-current liabilities
Revenue from investment
properties
NOI1
NOI margin1
Net income (loss) and
comprehensive income (loss)
FFO1
FFO per unit1
AFFO1
AFFO per unit1
Distributions declared2
AFFO Payout Ratio1
Distribution per unit
Q3 2021
Q2 2021
Q4 2021
Q1 2020
$ 2,440,714 $ 2,326,515 $ 2,286,697 $ 2,211,191 $ 2,203,284 $ 2,123,708 $ 2,085,271 $ 2,166,295
$ 2,360,565 $ 2,252,643 $ 2,206,078 $ 2,145,174 $ 2,138,101 $ 2,063,520 $ 2,036,213 $ 2,020,748
$ 1,430,713 $ 1,419,443 $ 1,456,426 $ 1,385,520 $ 1,353,060 $ 1,292,367 $ 1,306,479 $ 1,396,196
$ 1,248,071 $ 1,331,990 $ 1,394,275 $ 1,273,525 $ 1,243,761 $ 1,202,911 $ 1,141,192 $ 1,219,829
Q3 2020
Q1 2021
Q4 2020
Q2 2020
$
$
$
$
$
$
$
$
$
32,429 $
19,940 $
61.5%
31,234 $
19,405 $
62.1%
29,885 $
19,018 $
63.6%
29,999 $
17,884 $
59.6%
30,930 $
18,946 $
61.3%
31,155 $
20,161 $
64.7%
31,319 $
20,024 $
63.9%
31,525
19,489
61.8%
24,933 $
13,245 $
0.2147 $
11,656 $
0.1890 $
7,356 $
63.11%
0.1171 $
80,928 $
12,453 $
0.2109 $
10,883 $
0.1842 $
6,718 $
61.73%
0.1138 $
8,727 $
11,941 $
0.2022 $
10,373 $
0.1757 $
6,717 $
64.75%
0.1138 $
(20,427) $
10,891 $
0.1845 $
9,322 $
0.1579 $
6,716 $
72.04%
0.1138 $
23,010 $
12,022 $
0.2036 $
10,459 $
0.1771 $
6,718 $
64.23%
0.1138 $
56,630 $
13,183 $
0.2233 $
11,619 $
0.1968 $
6,642 $
57.16%
0.1125 $
12,054 $
12,659 $
0.2144 $
11,097 $
0.1879 $
6,496 $
58.54%
0.1100 $
87,944
12,117
0.2052
10,558
0.1788
6,495
61.52%
0.1100
The REIT's operating results are affected by seasonal variations and other factors, including the impacts of the COVID-19
pandemic. As a result, the operating performance and metrics in one quarter may not be indicative of future quarters. The
winter months typically tend to generate weaker performance due to higher energy consumption and snow clearing costs. The
best performing quarters in any given year are typically the second and third quarters, where stronger leasing demand and
higher turnovers provide an opportunity to realize the gain-to-lease potential.
With the COVID-19 outbreak in early 2020, conditions in the REIT's markets began to be impacted by reduced immigration and
travel, government restrictions and uncertain market and economic conditions. The social and economic realities of the
pandemic led to reduced demand for rentals in urban centres, thus reducing occupancy and resulting in lower revenue and NOI1
for the REIT with the full impact to the REIT's operating results beginning in Q4 2020. In addition to the reduced occupancy for
the Total Portfolio, furnished suites which have historically enhanced yield and property returns were negatively impacted by
business and travel restrictions and contributed to the decrease in revenue and NOI1. Management further implemented
targeted marketing efforts and initiatives in an effort to turn suites, including incentives and focused leasing promotions, which
also contributed to reduced revenues and NOI1.
Market conditions bottomed out in late Q1 2021 and early Q2 2021. The REIT's operating performance began to slowly improve
in Q2 2021 as reflected in the sequential quarterly improvement in NOI1, with a more pronounced improvement noted in Q3
and Q4 2021 as reflected by higher revenues and NOI1 from improved occupancy and average rents both on the furnished and
unfurnished suite portfolio. The REIT also added Le Hill-Park in Montreal to its portfolio in Q4 2021.
1 Refer to "Section VI - Supplemental Information - Non-IFRS and Other Financial Measures"
2 Includes distributions on Units and Class B LP Units.
222021 Annual Report|Minto Apartment REIT Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2021
(in thousands of Canadian dollars, except Unit and per Unit amounts, per suite amounts and other non-financial data)
Summary of Annual Results
As at and for the year ended December 31,
Total assets
Investment properties
Total liabilities
Total non-current liabilities
Revenue from investment properties
NOI1
NOI margin1
Net income and comprehensive income
FFO1
FFO per unit1
AFFO1
AFFO per unit1
Distributions declared2
AFFO Payout Ratio1
Distribution per unit
NAV1
NAV per unit1
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
2021
2,440,714 $
2,360,565 $
1,430,713 $
1,248,071 $
123,547 $
76,247 $
61.7%
94,161 $
48,530 $
0.8128 $
42,234 $
0.7073 $
27,507 $
65.13%
0.4584 $
1,508,416 $
24.00 $
2020
2,203,284 $
2,138,101 $
1,353,060 $
1,243,761 $
124,929 $
78,620 $
62.9%
179,638 $
49,981 $
0.8465 $
43,733 $
0.7407 $
26,351 $
60.25%
0.4463 $
1,314,030 $
22.26 $
2019
2,050,300
2,016,328
1,363,525
1,306,124
104,438
65,297
62.5%
19,966
39,632
0.8414
34,142
0.7248
19,994
58.56%
0.4225
1,213,879
20.56
The REIT commenced 2019 with a portfolio of 23 multi-residential rental properties with a valuation of $1,197,811, comprising
4,350 suites across Ottawa, Toronto, Calgary and Edmonton. Six new properties were added to the portfolio in 2019: two in
Toronto, three in Montreal and one in Calgary. Repositioning and gain-to-lease continued to be realized providing significant
organic growth to the REIT. Despite the challenges presented in 2020 with the onset of the pandemic, the REIT continued to
generate rental revenue gains on suite turnovers as new leases were set to market rates, albeit at a slower pace than pre-
pandemic.
While COVID-19 impacts continued to weigh on rental demand in early 2021, with the strong momentum on vaccinations,
reduced COVID case counts and improved market outlook, rental market conditions began rebounding. Revenues and NOI1
increased from improved occupancy and average rents in the latter half of the year.
1 Refer to "Section VI - Supplemental Information - Non-IFRS and Other Financial Measures"
2 Includes distributions on Units and Class B LP Units.
23|2021 Annual ReportMinto Apartment REIT Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2021
(in thousands of Canadian dollars, except Unit and per Unit amounts, per suite amounts and other non-financial data)
Section III - Assessment of Financial Position
Investment Properties
The following table summarizes the changes in investment properties:
Balance, December 31, 2020
Additions
Acquisition of investment property
Development expenditures
Capital expenditures
Fair value gain
Balance, December 31, 2021
Acquisition of Investment Property
$
$
2,138,101
82,604
14,219
36,453
89,188
$
2,360,565
On December 7, 2021, the REIT completed the acquisition of Le Hill-Park, a multi-residential property in Montreal, Quebec for a
total acquisition cost of $82,604. The acquisition was financed from the proceeds of issuance of Units and mortgage financing.
The acquisition was accounted for as an asset acquisition and contributed to the operating results effective from the acquisition
date.
Capital and Development Expenditures
The REIT has a capital improvement program in place that is designed to extend the useful life of its investment properties,
improve operating efficiency, increase curb appeal, enhance and maintain earnings capacity and meet the expectations of its
tenants. The REIT’s capital expenditures are classified into two main categories: value-enhancing capital expenditures and
maintenance capital expenditures.
Total expenditures
Development expenditures
Value-enhancing capital expenditures
$
Building improvements
Suite upgrades
Maintenance capital expenditures
Maintenance capital expenditures per
suite
Three months ended December 31,
Year ended December 31,
2021
22,185 $
11,835
6,039
2,523
8,562
1,788
2020
13,350 $
1,417
6,647
3,314
9,961
1,972
2021
50,672 $
14,219
15,518
14,640
30,158
6,295
2020
41,467
12,087
15,775
8,442
24,217
5,163
$
288 $
324 $
1,025 $
848
Development expenditures are a component of the REIT's growth and value-creation strategy. These include projects which add
to the REIT's existing suite count through intensification or redevelopment of existing assets in order to deliver NAV growth to
Unitholders. There are currently three intensification projects on going, as discussed under Section I, "Outlook - Development of
Purpose-Built Rental Properties and Intensification on Existing Sites".
Development and value-enhancing renovations are intended to generate NAV accretion, long term AFFO accretion and increase
tenant satisfaction, however value-enhancing capital expenditures tend to be AFFO dilutive in the short term owing to vacancy
during renovation.
242021 Annual Report|Minto Apartment REIT Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2021
(in thousands of Canadian dollars, except Unit and per Unit amounts, per suite amounts and other non-financial data)
Value-enhancing capital expenditures consist of either building improvements or suite upgrades. Building improvements include
common area and amenity space upgrades, energy conservation projects, building envelope enhancements and suite
enhancements performed, when necessary, as suites turn over. Suite upgrades represent capital expenditures incurred on
larger repositioning programs that are designed to generate incremental returns. The repositioning programs include full-scale
suite renovations that strategically target certain properties or certain geographic locations, as discussed previously in this
Management's Discussion and Analysis under Section I, "Overview - Financial and Operating Highlights - Value Creation -
Repositioning" and Section I, "Overview - Outlook". The REIT’s active repositioning programs for FY 2021 included Minto
Yorkville, Roehampton, Leslie York Mills, Martin Grove and High Park Village in Toronto, Castle Hill and Carlisle in Ottawa, and
Rockhill, Le 4300, Haddon Hall and Le Hill-Park in Montreal. The repositioning of suites at its Edmonton properties remains on
hold as lower rental rates are negatively impacting returns on repositioning activities.
Maintenance capital expenditures include expenditures that are incurred in order to maintain the existing earning capacity of
the REIT’s investment properties. Any exterior work is highly dependent on favourable weather conditions and as a result, a
significant portion of the exterior work is performed between the months of May and September and therefore actual
maintenance capital expenditures in a given quarter may not be indicative of future quarters.
The actual maintenance capital expenditures for Q4 2021 and FY 2021 were $1,788 and $6,295, or $288 and $1,025 and per
suite, and primarily related to maintenance of fire-life safety systems, roofing, parking garages and mechanical, plumbing and
electrical work at various buildings, including common areas.
Due to the various government restrictions imposed during 2020, certain projects were deferred which resulted in 2020's
annual per suite expenditure being slightly below target. As provincial restrictions continued to ease in 2021, maintenance
capital expenditure projects were accelerated in order to complete projects that were previously deferred in addition to current
year projects, resulting in per suite spend exceeding the general target of $900 per suite.
Management expects to spend approximately $900 per suite on average for maintenance capital expenditures on an annual
basis, subject to costing pressures from inflation, availability of trades and supply chain.
Valuation
Fair value for residential properties is determined using the direct capitalization approach. Estimated 12 month stabilized
forecasted net operating income is based on the respective property’s forecasted results, less estimated aggregate future
capital expenditures. Capitalization rates reflect the characteristics, location and market of each property. Fair value is
determined based on internal valuation models incorporating market data and valuations performed by external appraisers.
Due to the COVID-19 vaccine roll-out resulting in the easing of provincial restrictions, return of in-class learning at post-
secondary institutions and the return to higher immigration levels, Management eliminated the portfolio-level valuation
reserve in Q2 2021 that was meant to account for the near-term income losses resulting from the global pandemic.
Capitalization rates fluctuate depending on market conditions. The capitalization rates of the portfolio for each of the REIT's
residential rental markets were as follows:
As at
Ottawa, Ontario
Toronto, Ontario
Edmonton, Alberta
Calgary, Alberta
Montreal, Quebec
Weighted-average capitalization rate
December 31, 2021
December 31, 2020
Low
3.63%
3.13%
4.25%
4.15%
3.50%
High
4.00%
3.25%
4.25%
4.50%
3.75%
3.60%
Low
4.00%
3.25%
4.25%
4.15%
3.50%
High
4.25%
3.75%
4.25%
4.25%
3.75%
3.81%
25|2021 Annual ReportMinto Apartment REIT Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2021
(in thousands of Canadian dollars, except Unit and per Unit amounts, per suite amounts and other non-financial data)
Class B LP Units
The Class B LP Units receive distributions equivalent to the distributions paid on Units and are exchangeable at the holder’s
option into Units. One Special Voting Unit in the REIT is issued to the holder of Class B LP Units for each Class B LP Unit held. The
limited IAS 32 exception for presentation as equity does not extend to Class B LP Units. As a result, the Class B LP Units are
classified as financial liabilities.
As at December 31, 2021, there were 22,769,073 (December 31, 2020 - 22,769,073) Class B LP Units outstanding.
Class C LP Units
The Class C LP Units provide for monthly distributions to the holder of such Class C LP Units to be paid in priority to distributions
to holders of the Units and Class B LP Units. Due to the nature of such distributions, the Class C LP Units are classified as
financial liabilities.
As at December 31, 2021, there were 22,978,700 (December 31, 2020 - 22,978,700) Class C LP Units outstanding.
The mortgages of investment properties to which the distributions on the Class C LP Units relate bear a weighted average
contractual interest rate of 3.16% (December 31, 2020 - 3.16%) and mature at various dates between 2023 and 2030.
Secured Debt
Secured debt includes mortgages and the REIT's revolving credit facility. The REIT maintains mortgages with both fixed and
variable interest rates that are secured by investment properties. The fixed rate mortgages bear interest at a weighted average
contractual interest rate of 2.71% (December 31, 2020 - 2.85%) and mature at various dates between 2022 to 2030. The REIT's
fixed rate mortgages include a variable rate mortgage that is fixed at 3.38% through an interest rate swap.
On January 28, 2021, the REIT renewed a mortgage of $22,077 secured by Leslie York Mills. The renewed mortgage bears
interest at 1.63% and matures on April 1, 2025.
On November 30, 2021, the REIT entered into an agreement with CMHC for a non-revolving construction loan of $93,745 to
finance the development at Richgrove. On February 24, 2022, the interest rate for the construction loan was locked at 2.39%
with a maturity of March 1, 2032. On March 1, 2022, a first draw of $0.7 million was made on the construction loan.
On December 7, 2021, in connection with the acquisition of Le Hill-Park, the REIT secured conventional mortgage financing of
$41,000, bearing interest at 1.22% and maturing on April 1, 2022. Management is in the process of obtaining CMHC insurance
for this mortgage.
On February 10, 2022, the REIT refinanced its existing mortgages on its properties in Edmonton with CMHC-insured mortgages
of $32,975, bearing interest at 2.85% and maturing on September 1, 2032.
The REIT has a committed revolving credit facility of $200,000 (December 31, 2020 - $200,000) that is secured by several
investment properties, matures on July 3, 2024 and is used to fund working capital requirements, acquisitions, letters of credit
and for general corporate purposes. The credit facility bears interest at bankers' acceptance rate plus 175 bps or prime plus 75
bps and as at December 31, 2021, the weighted average variable interest rate was 2.19% (December 31, 2020 - 2.25%).
Committed
Utilized
Amounts drawn
Letter of credit
Amount available
December 31, 2021
200,000 $
December 31, 2020
200,000
51,754
442
52,196
147,804 $
31,948
—
31,948
168,052
$
$
262021 Annual Report|Minto Apartment REIT Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2021
(in thousands of Canadian dollars, except Unit and per Unit amounts, per suite amounts and other non-financial data)
Units
The following table presents the change in and outstanding amount of Units for the year ended December 31, 2021:
Authorized
Units issued and outstanding:
Balance, December 31, 2020
Issued, October 29, 2021, net
Balance, December 31, 2021
Units
Unlimited
$
36,274,839
631,434
3,795,000 $
40,069,839 $
82,687
714,121
On October 29, 2021, the REIT completed the issuance of 3,795,000 Units from treasury through a bought deal offering at a
price of $22.85 per Unit for net proceeds of $82,687. The issuance included 495,000 Units sold pursuant to the full exercise of
an over-allotment option granted to the underwriters. Underwriters' fees and expenses relating to the issuance were $4,029.
Distributions
On November 9, 2021, the Board of Trustees approved a 4.4% increase to the REIT's annual distribution from $0.4550 per Unit
to $0.4750 per Unit. The increase was effective for the REIT's November 2021 cash distribution paid on December 15, 2021.
Distributions are paid monthly, to Unitholders of record at the close of business on the last day of a month, on or about the
15th day of the following month. Distributions must be approved by the Board of Trustees and are subject to change depending
on the general economic outlook and financial performance of the REIT.
For the year ended December 31, 2021, distributions to Unitholders of $17,071 (December 31, 2020 - $16,189) were declared
based on approved monthly distributions of $0.03792 per Unit for the months of January to October and $0.03958 for the
month of November and December 2021 (December 31, 2020 - $0.03667 per Unit for the months of January to July 2020 and
$0.03792 per Unit for the months of August to December 2020).
27|2021 Annual ReportMinto Apartment REIT Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2021
(in thousands of Canadian dollars, except Unit and per Unit amounts, per suite amounts and other non-financial data)
Section IV - Liquidity, Capital Resources and Contractual
Commitments
Liquidity and Capital Resources
The REIT's capital structure, shown in the table below, is comprised of mortgages, a credit facility, Class B LP Units, Class C LP
Units and Unitholders' equity.
As at
Liabilities (principal amounts outstanding):
Class B LP Units
Class C LP Units
Mortgages
Credit facility
Unitholders' equity
December 31, 2021
December 31, 2020
$
498,415 $
212,183
627,534
51,754
1,389,886
1,010,001
$
2,399,887 $
463,806
217,524
599,413
31,948
1,312,691
850,224
2,162,915
Class B LP Units are economically equivalent to Units and are exchangeable for Units at the Class B LP unitholder’s option. Due
to their exchange feature, IAS 32 requires Class B LP Units to be accounted for as a financial liability. Class B LP Units are not
indebtedness for borrowed money and are not included in the determination of Debt-to-Gross Book Value ratio.
The objective of the REIT’s capital strategy is to arrange capital at the lowest possible cost while maintaining diversity in its
lending base, balance in its maturity schedule and sufficient liquidity to fund the ongoing operations of the REIT and pay
distributions. At December 31, 2021, 72% (December 31, 2020 - 77%) of the REIT's total debt is CMHC insured and
approximately 94% (December 31, 2020 - 96%) is fixed rate including variable rate debt fixed through an interest rate swap.
The REIT uses a prudent amount of debt financing in its capital structure. Pursuant to the REIT’s DOT, overall indebtedness, as
measured by the Debt-to-Gross Book Value ratio, is not to exceed 65% (or 70% of Gross Book Value including convertible
debentures). Notwithstanding this limit, it is Management’s current intention to maintain a more conservative Debt-to-Gross
Book Value ratio. The REIT’s Debt-to-Gross Book Value ratio and liquidity as a percentage of total debt are calculated as follows:
As at
Class C LP Units
Mortgages
Credit facility
Total debt1
Total assets
Debt-to-Gross Book Value ratio1
Total liquidity
Liquidity as a percentage of total debt
$
December 31, 2021
214,069 $
626,120
51,754
891,943
2,440,714
36.5%
150,655
16.9%
December 31, 2020
219,885
598,079
31,948
849,912
2,203,284
38.6%
170,659
20.1%
The REIT continues to maintain a conservative overall leverage position with a Debt-to-Gross Book Value ratio of 36.5% at
December 31, 2021, a slight improvement from December 31, 2020.
The REIT has sufficient liquidity and is well positioned to capture potential growth opportunities. The REIT's liquidity ratio (total
liquidity as a percentage of total debt) was 16.9% at December 31, 2021, compared to 20.1% at December 31, 2020 and 14.26%
at September 30, 2021.
282021 Annual Report|Minto Apartment REIT Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2021
(in thousands of Canadian dollars, except Unit and per Unit amounts, per suite amounts and other non-financial data)
Management measures the Debt-to-Adjusted EBITDA ratio as a measure of the REIT's financial health and liquidity. Generally,
the lower the ratio, the lower the credit risk. The REIT’s Debt-to- Adjusted EBITDA ratio is calculated as follows:
As at
NOI1
General and administrative expenses
Fees and other income
Impact on NOI of stabilized earnings from acquisitions and new
developments
Adjusted EBITDA1
Total debt, net of cash
Debt-to-Adjusted EBITDA ratio1
$
December 31, 2021
76,247 $
(7,602)
1,630
70,275
2,286
72,561
889,092
12.25x
December 31, 2020
78,620
(6,634)
1,600
73,586
—
73,586
847,305
11.51x
The REIT's Debt-to-Adjusted EBITDA ratio increased by 0.74x compared to December 31, 2020. The REIT finances the
intensification of existing sites and the extension of convertible loans for development of investment properties (refer to
Section I - "Overview - Outlook") with a combination of equity and debt. Any increased debt arising from these investments is
not immediately matched by increased NOI1 until the investments stabilize, resulting in temporary increase to the Debt-to-
Adjusted EBITDA ratio.
The REIT has staggered the maturities of its debt financings, including distributions payable on the Class C LP Units, to reduce
interest rate risk and its risk related to refinancing. As at December 31, 2021, the weighted average term to maturity on the
REIT’s fixed rate debt1 was 4.69 years (December 31, 2020 - 5.81) and the weighted average interest rate on fixed rate debt1
was 2.82% (December 31, 2020 - 2.94%). The contractual payments under the REIT’s debt financing is summarized in the table
below.
Principal Repayments
Principal at Maturity
Year
2022
2023
2024
2025
2026
2027
Thereafter
Mortgages
Class C LP
Units
Mortgages
Credit facility
$
12,771 $
11,262
9,689
8,668
7,536
7,343
18,571
5,510 $
5,298
4,321
3,067
1,283
1,327
1,596
127,876 $
47,620
48,182
41,016
32,651
—
254,349
— $
—
51,754
—
—
—
—
Class C LP
Units
— $
44,936
46,178
60,474
—
21,425
16,768
Total
146,157
109,116
160,124
113,225
41,470
30,095
291,284
% of
Total
16.4 %
12.2 %
18.0 %
12.7 %
4.7 %
3.4 %
32.7 %
Interest
Rate1
2.59 %
3.05 %
2.74 %
2.91 %
3.38 %
3.31 %
2.46 %
$
75,840 $
22,402 $
551,694 $
51,754 $
189,781 $
891,471
100 %
As of December 31, 2021, current liabilities of $182,642 (December 31, 2020 - $109,299) exceeded current assets of $38,909
(December 31, 2020 - $15,854), resulting in a net working capital deficit of $143,733 (December 31, 2020 - $93,445). The REIT's
immediate liquidity needs are met through cash-on-hand, cash flow from operations, refinancing of maturing mortgages and
availability on its credit facility. As of December 31, 2021, liquidity was $150,655 (December 31, 2020 - $170,659) consisting of
cash of $2,851 (December 31, 2020 - $2,607) and $147,804 (December 31, 2020 - $168,052) of available borrowing capacity
under the credit facility. Management believes that there is sufficient liquidity to meet the REIT’s financial obligations for the
foreseeable future.
The REIT has a short form base shelf prospectus, allowing for the issuance, from time to time, of Units, debt securities and
subscription receipts, or any combination thereof, for an aggregate amount of up to $800,000. This prospectus is effective for a
25-month period from the date of issuance on December 8, 2020. The net proceeds from the sale of securities for cash may be
used for potential future acquisitions, capital expenditures, to repay indebtedness and general working capital purposes. On
October 29, 2021, the REIT raised gross proceeds of $86,716 from the issuance of Units under the short form base shelf
prospectus. As at December 31, 2021, the amount available to be raised pursuant to the short form base shelf prospectus is
$713,284.
1 Weighted average interest rates for maturing mortgages, credit facility and Class C LP Units.
29|2021 Annual ReportMinto Apartment REIT Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2021
(in thousands of Canadian dollars, except Unit and per Unit amounts, per suite amounts and other non-financial data)
Cash Flows
The REIT held a cash balance of $2,851 as at December 31, 2021 (December 31, 2020 - $2,607). The sources and use of cash
flow for the three months and years ended December 31, 2021 and 2020 are as follows:
Operating activities
Financing activities
Investing activities
Three months ended December 31,
Year ended December 31,
$
2021
27,295 $
80,401
(107,932)
2020
24,652 $
983
(26,033)
2021
72,119 $
81,238
(153,113)
2020
69,857
(17,939)
(51,239)
Cash provided by operating activities and cash distributions
The following table outlines the differences between cash from operating activities, net income and cash distributions in
accordance with National Policy 41-201, Income Trusts and Other Indirect Offerings:
Net income and comprehensive income
Add: distributions on Class B LP Units
Less: distributions paid
Excess of net income and comprehensive
income over total distributions paid
Cash provided by operating activities
Add: interest received
Less: interest paid
$
$
$
Less: distributions paid
Excess of cash provided by operating
activities over total distributions and
interest paid
Three months ended December 31,
Year ended December 31,
2021
24,933 $
2,665
27,598
(7,109)
2020
23,010 $
2,591
25,601
(6,717)
2021
94,161 $
10,436
104,597
(27,260)
2020
179,638
10,162
189,800
(26,277)
20,489 $
18,884 $
77,337 $
163,523
27,295 $
603
(6,153)
21,745
(7,109)
24,652 $
578
(6,291)
18,939
(6,717)
72,119 $
1,829
(25,150)
48,798
(27,260)
14,636
12,222
21,538
69,857
1,775
(25,286)
46,346
(26,277)
20,069
26,351
Distributions declared
$
7,356 $
6,718 $
27,507 $
For Q4 2021 and FY 2021, net income and comprehensive income was in excess of total distributions paid. Distributions are
better evaluated in the context of operating cash flows rather than net income as it is impacted by several non-cash items,
including fair value gains or losses on investment properties, Class B LP Units, Unit-based compensation and an interest rate
swap.
While cash flows provided by operating activities are generally sufficient to cover distribution requirements, the timing of
expenses and fluctuations in non-cash working capital may result in a temporary shortfall. In these cases, some portion of
distributions may come from the REIT's capital or financing sources other than cash flows provided by operating activities. For
Q4 2021 and FY 2021, cash generated by operating activities exceeded total distributions and interest paid.
302021 Annual Report|Minto Apartment REIT Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2021
(in thousands of Canadian dollars, except Unit and per Unit amounts, per suite amounts and other non-financial data)
Cash provided by (used in) financing activities
Proceeds from issuance of Units, net of
issue costs
Proceeds from mortgage financing
Net (repayments) proceeds on credit
facility
Financing costs
Principal repayments on mortgages
Distributions paid on various classes of
units
Interest paid
Three months ended December 31,
Year ended December 31,
2021
2020
2021
2020
$
82,726 $
41,000
— $
3,370
82,726 $
49,558
(25,246)
(199)
(3,265)
(8,462)
(6,153)
15,112
(30)
(3,150)
(8,028)
(6,291)
19,806
(222)
(12,879)
(32,601)
(25,150)
—
225,576
(59,061)
(5,117)
(122,597)
(31,454)
(25,286)
$
80,401 $
983 $
81,238 $
(17,939)
For Q4 2021, cash flow from financing activities included net proceeds from the Unit offering in October 2021 and proceeds
from new mortgage financing associated with the Le Hill-Park acquisition, partially offset by repayments on the credit facility,
payments of principal and interest on mortgages, payment of distributions on various classes of units and payments of interest
on credit facility.
For FY 2021, cash flow from financing activities included net proceeds from the Unit offering in October 2021, proceeds from
new mortgage financing associated with Le Hill-Park, the release of funds held in escrow since July 2020 in connection with
Minto one80five and draws on the credit facility, partially offset by payments of principal and interest on mortgages, payments
of interest on credit facility and payment of distributions on various classes of units.
Cash used in investing activities
Acquisition of investment property
Capital additions to investment properties
$
Development expenditures
Convertible development loans advanced
to related parties
Interest received
Three months ended December 31,
Year ended December 31,
2021
(80,007) $
(10,842)
(6,742)
(10,944)
603
2020
— $
(10,582)
(1,417)
(14,612)
578
2021
(80,007) $
(37,429)
(17,482)
(20,024)
1,829
2020
—
(27,095)
(3,731)
(22,188)
1,775
$
(107,932) $
(26,033) $
(153,113) $
(51,239)
Cash flows used in investing activities for Q4 2021 and FY 2021 include the acquisition of Le Hill-Park, capital expenditures on
investment properties, development expenditures on the three intensification projects at Richgrove, Leslie York Mills and High
Park Village in Toronto and advances on the convertible development loans for the Beechwood and 810 Kingsway
developments, partially offset by interest received primarily from the loans advanced to related parties.
31|2021 Annual ReportMinto Apartment REIT Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2021
(in thousands of Canadian dollars, except Unit and per Unit amounts, per suite amounts and other non-financial data)
Reconciliation of Non-IFRS Financial Measures and Ratios
The following section includes reconciliations of Non-IFRS Financial Measures and Ratios used by the REIT. Refer to Section VI,
"Supplemental Information - Non-IFRS and Other Financial Measures" for definitions of each of these measures.
FFO and AFFO
FFO and AFFO are non-IFRS Financial Measures. The REIT's method of calculating FFO and AFFO are in accordance with
REALPAC’s recommendations, but may differ from other issuers’ methods and, accordingly, may not be comparable to FFO and
AFFO reported by other issuers. FFO and AFFO are used for evaluating operating performance and are calculated as follows:
Net income and comprehensive income
Distributions on Class B LP Units
$ 24,933 $ 80,928 $
8,727 $ (20,427) $ 23,010 $ 56,630 $ 12,054 $ 87,944
2,665
2,591
2,590
2,590
2,591
2,561
2,505
2,505
Q4 2021
Q3 2021
Q2 2021
Q1 2021
Q4 2020
Q3 2020
Q2 2020
Q1 2020
Fair value loss (gain) on:
Investment properties
Class B LP Units
Interest rate swap
Unit-based compensation
(3,133)
(34,663)
(50,478)
(914)
(61,231)
(8,831)
(11,402)
2,763
(10,701)
(35,976)
50,775
30,511
47,587
(36,886)
9,108
(83,107)
(421)
(98)
(145)
(282)
3
324
(1,062)
193
(174)
239
(57)
(234)
361
33
2,299
(287)
Funds from operations (FFO)
$ 13,245 $ 12,453 $ 11,941 $ 10,891 $ 12,022 $ 13,183 $ 12,659 $ 12,117
Maintenance capital expenditure reserve
(1,397)
(1,377)
(1,377)
(1,376)
(1,369)
(1,370)
(1,369)
(1,370)
Amortization of mark-to-market
adjustments
(192)
(193)
(191)
(193)
(194)
(194)
(193)
(189)
Adjusted funds from operations (AFFO)
$ 11,656 $ 10,883 $ 10,373 $
9,322 $ 10,459 $ 11,619 $ 11,097 $ 10,558
Distributions on Class B LP Units
Distributions on Units
2,665
4,691
7,356
2,591
4,127
6,718
2,590
4,127
6,717
2,590
4,126
6,716
2,591
4,127
6,718
2,561
4,081
6,642
2,505
3,991
6,496
2,505
3,990
6,495
AFFO Payout Ratio
63.1%
61.7%
64.8%
72.0%
64.2%
57.2%
58.5%
61.5%
Weighted average number of Units and
Class B LP Units issued and outstanding
FFO per unit
AFFO per unit
61,683,912 59,043,912 59,043,912 59,043,912 59,043,912 59,043,912 59,043,912 59,043,912
$ 0.2147 $ 0.2109 $ 0.2022 $ 0.1845 $ 0.2036 $ 0.2233 $ 0.2144 $ 0.2052
$ 0.1890 $ 0.1843 $ 0.1757 $ 0.1579 $ 0.1771 $ 0.1968 $ 0.1879 $ 0.1788
For Q4 2021, FFO was higher as compared to Q4 2020, reflecting a 5.2% increase in NOI driven mainly by improvement in
occupancy and average rent and the additional revenues from the 32 rebuilt suites at Skyline and the acquisition of Le Hill-Park.
AFFO was higher as compared to the same period in previous year, primarily as a result of higher FFO, partially offset by an
increase in maintenance capital expenditure reserve from the addition of the 32 rebuilt Skyline suites and the Le Hill-Park
acquisition. The 32 rebuilt Skyline suites and the Le Hill-Park acquisition added $198 and $171 to the FFO and AFFO for Q4 2021.
322021 Annual Report|Minto Apartment REIT
Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2021
(in thousands of Canadian dollars, except Unit and per Unit amounts, per suite amounts and other non-financial data)
For the year ended December 31,
Net income and comprehensive income
Distributions on Class B LP Units
Fair value loss (gain) on:
Investment properties
Class B LP Units
Interest rate swap
Unit-based compensation
Funds from operations (FFO)
Maintenance capital expenditure reserve
Amortization of mark-to-market adjustments
Adjusted funds from operations (AFFO)
Distributions on Class B LP Units
Distributions on Units
AFFO Payout Ratio
Weighted average number of Units and Class B
LP Units issued and outstanding
FFO per unit
AFFO per unit
$
$
$
$
$
2021
94,161 $
10,436
(89,188)
34,609
(1,625)
137
2020
179,638 $
10,162
(78,701)
(63,298)
2,429
(249)
48,530 $
49,981 $
(5,527)
(769)
(5,478)
(770)
42,234 $
43,733 $
10,436
17,071
27,507
65.1%
10,162
16,189
26,351
60.3%
2019
19,966
9,195
(93,216)
104,241
(879)
325
39,632
(4,712)
(778)
34,142
9,195
10,799
19,994
58.6%
59,709,337
59,043,912
0.8128 $
0.7073 $
0.8465 $
0.7407 $
47,103,691
0.8414
0.7248
For FY 2021, FFO was lower as compared to FY 2020, reflecting a 3.0% decrease in NOI driven mainly by lower occupancy. AFFO
was lower for FY 2021 as compared to FY 2020, primarily as a result of lower FFO and an increase in the maintenance capital
expenditure reserve from the addition of the 32 rebuilt Skyline suites and Le Hill-Park. The 32 rebuilt Skyline suites and the Le
Hill-Park acquisition added $453 and $405 to the FFO and AFFO for FY 2021.
Maintenance capital expenditures include expenditures that are incurred in order to maintain the existing earning capacity of
the REIT’s investment properties. The maintenance capital expenditure reserve amount included in the AFFO calculation is
based on the REIT's expectation of spending $900 per suite on an annual basis, which is slightly lower than the three-year
historical average of actual maintenance capital expenditures of $927. The pandemic has caused temporary disruptions in
supply chain and availability of labour, resulting in cost increases. Management believes that the impact of the pandemic will
slowly dissipate and expects the estimated annual maintenance capital expenditure per suite to be approximately $900 per
suite, subject to costing pressures from inflation, and further distributions from the availability of trades and supply chain. Refer
to Section III, "Assessment of Financial Position - Investment Properties - Capital and Development Expenditures" for a more
detailed discussion of maintenance capital expenditures.
NOI and NOI Margin
Total Portfolio - excluding furnished suites
Revenue from investment properties
Property operating costs
NOI
NOI margin
$
Three months ended December 31,
Year ended December 31,
$
2021
30,321
11,498
18,823
62.1 %
2020
28,955
10,959
17,996
62.2 %
$
$
2021
115,869
43,457
72,412
$
$
62.5 %
2020
117,183
42,751
74,432
63.5 %
33|2021 Annual ReportMinto Apartment REIT Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2021
(in thousands of Canadian dollars, except Unit and per Unit amounts, per suite amounts and other non-financial data)
Total Portfolio
Revenue from investment properties
Property operating costs
NOI
NOI margin
$
Debt-to-Gross Book Value Ratio
Three months ended December 31,
Year ended December 31,
$
2021
32,429
12,489
19,940
61.5 %
2020
30,930
11,984
18,946
61.3 %
$
$
2021
123,547
47,300
76,247
$
$
61.7 %
2020
124,929
46,309
78,620
62.9 %
Refer to Section IV, "Liquidity, Capital Resources and Contractual Commitments - Liquidity and Capital Resources" for a
reconciliation of Debt-to-Gross Book Value ratio.
Debt Service Coverage Ratio
The Debt Service Coverage ratio is calculated as follows:
NOI
Interest expense and standby fees on credit facility
Distributions on Class C LP Units:
Principal repayments
Finance costs
Mortgages:
Principal repayments
Finance costs
Total debt service
Debt Service Coverage ratio
Year ended
December 31, 2021
Year ended
December 31, 2020
76,247 $
1,750
5,341
6,743
12,879
16,605
43,318 $
1.76x
78,620
1,838
5,177
6,907
10,503
16,735
41,160
1.91x
$
$
The decline in the FY2021 Debt Service Coverage ratio compared to FY2020 was primarily a result of lower NOI due to lower
occupancy, and higher mortgage principal repayments.
Debt-to-Adjusted EBITDA Ratio
Refer to Section IV, "Liquidity, Capital Resources and Contractual Commitments - Liquidity and Capital Resources" for a
reconciliation of Debt-to-Adjusted EBITDA ratio.
NAV and NAV per unit
As at
Net assets (Unitholders' equity)
Add: Class B LP Units
NAV
Number of Units and Class B LP Units
NAV per unit
December 31, 2021
December 31, 2020
1,010,001
498,415
1,508,416
62,838,912
$
$
850,224 $
463,806
1,314,030 $
59,043,912
December 31, 2019
686,775
527,104
1,213,879
59,043,912
24.00
$
22.26 $
20.56
$
$
$
342021 Annual Report|Minto Apartment REIT Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2021
(in thousands of Canadian dollars, except Unit and per Unit amounts, per suite amounts and other non-financial data)
Section V - Accounting Estimates and Policies, Controls and
Procedures and Risk Analysis
Critical Judgments in Applying Accounting Policies
The following are the critical judgments that have been made in applying the REIT’s accounting policies:
Investment property acquisitions
The REIT must assess whether an acquisition transaction should be accounted for as an asset acquisition or a business
combination under IFRS 3. This assessment requires the REIT to make judgments on whether the assets acquired and liabilities
assumed constitute a business as defined in IFRS 3 and if the integrated set of activities, including inputs and processes
acquired, are capable of being conducted and managed as a business and the REIT obtains control of the business.
Income taxes
The REIT is a "mutual fund trust" and a "real estate investment trust" as defined in the Income Tax Act (Canada). The REIT is not
liable to pay Canadian income taxes provided that its taxable income is fully distributed to Unitholders each year. The REIT is a
"real estate investment trust" if it meets the prescribed conditions under the Income Tax Act (Canada) relating to the nature of
its assets and revenue. The REIT uses judgment in reviewing the real estate investment trust conditions and assessing their
interpretation and application to the REIT’s assets and revenue, and it has determined that it qualifies as a "real estate
investment trust" for the current period.
Interest in joint operations
The REIT assesses whether an arrangement should be accounted for as a joint operation or a joint venture under IFRS 11, Joint
Arrangements. This assessment requires the REIT to make judgments on whether the REIT's rights and obligations arising from
the arrangement constitute a joint operation or a joint venture.
Recognition of government grants
For acquired residential properties financed through forgivable loans, the REIT assesses whether throughout the remaining
term of forgivable loans the REIT is expected to meet the conditions for forgiveness, that the outflow of economic resources is
not probable and that in accordance with IAS 37 – Provision, Contingent Liabilities and Contingent Assets no financial liability is
required to be recorded. For development properties financed through forgivable loans to support affordable housing, the REIT
assesses whether throughout the remaining term of the forgivable loans there is reasonable assurance that the REIT will meet
the conditions for forgiveness and if this is not the case that the balance that is forgiven is to be recognized over time.
Critical Accounting Estimates and Assumptions
The REIT makes estimates and assumptions that affect the carrying amounts of assets and liabilities and the reported amount of
income for the period. Actual results could differ from estimates. The estimates and assumptions that the REIT considers critical
include the valuation of residential investment properties. In applying the REIT's policy with respect to investment properties,
estimates and assumptions are required to determine the valuation of the properties under the fair value model.
The REIT has used the best information available as at December 31, 2021, in determining the potential impact of the COVID-19
outbreak on the carrying amounts of assets and liabilities, earnings for the period and risks disclosed in the consolidated
financial statements for the years ended December 31, 2021 and 2020. The estimates that could be most significantly impacted
by COVID-19 include those underlying the valuation of investment properties and the estimated credit losses on accounts
receivable. Actual results may differ from those estimates.
35|2021 Annual ReportMinto Apartment REIT Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2021
(in thousands of Canadian dollars, except Unit and per Unit amounts, per suite amounts and other non-financial data)
Risks and Uncertainties
The REIT faces a variety of diverse risks, many of which are inherent in the business conducted by the REIT. They include the
following:
COVID-19 - Contagious Disease Risk
COVID-19 was declared a pandemic by the World Health Organization on March 11, 2020. It or a similar contagious disease
outbreak at a local, regional or national level may have a material adverse effect on the business, financial condition and results
of operations of the REIT. In particular, a contagious disease outbreak like COVID-19 may result in a general or acute decline in
economic activity in the regions in which the REIT operates, increased unemployment, decreased immigration, decreased in-
person post-secondary school attendance, reduced tenant traffic and turnover, reduced rents and/or increased tenant
incentives, supply shortages and other supply chain disruptions, labour disruptions, staff shortages, increased government
regulation, mobility restrictions and other quarantine measures. These and similar consequences of a contagious disease
outbreak like COVID-19 may adversely impact tenants’ ability to pay rent and the REIT’s ability to capture gains-to-lease,
reposition suites and pursue construction and development activities. Increased government regulation may also restrict the
REIT’s ability to enforce material provisions under its leases, including in respect of the collection of rent or other payment
obligations. The quarantine or contamination of one or more of the REIT’s properties or suites may negatively impact the REIT’s
occupancy or reputation.
Management implemented a business continuity plan in early 2020, continues to monitor the situation and proactively adjust
its plans as the COVID-19 pandemic evolves.
Changes in Legislation
The REIT is subject to laws and regulations governing the ownership and leasing of real property, zoning, building standards,
landlord/tenant relationships, construction, employment standards, environmental matters, taxes and other matters, including
laws and regulations imposing restrictions relating to or arising from the COVID-19 pandemic, which at times have included laws
and regulations limiting rent increases and imposing a moratorium on the ability of landlords to evict tenants for the non-
payment of rent a result of the economic disruption caused by the COVID-19 pandemic. 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 the REIT (including with retroactive effect). Any
changes in the laws to which the REIT is subject could materially adversely affect the REIT’s rights and title to its assets or its
ability to carry on its business in the ordinary course.
Rent Control Risk
Rent control exists in some provinces in Canada, limiting the percentage of annual rental increases to existing tenants. The REIT
is exposed to the risk of the implementation of, or amendments to, existing legislative rent controls in the markets in which it
operates, which may have an adverse impact on the REIT’s operations. Of the jurisdictions in which the REIT currently operates,
Ontario and Quebec have rent controls.
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 or regulations affecting the availability and cost of CMHC mortgage insurance), 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. The performance of the economy in each of the areas in which the REIT’s properties are
located, including the financial results and labour decisions of major local employers, can have an impact on revenues from the
properties and their underlying values.
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 may limit the REIT’s ability to vary its Portfolio promptly in
response to changing economic, investment or other conditions. If it were necessary to accelerate the liquidation of the REIT's
real property investments, the proceeds to the REIT might be significantly less than the aggregate carrying or Net Asset Value of
its properties. The REIT’s exposure to general risks associated with real estate investments is mitigated by its geographic
diversification.
362021 Annual Report|Minto Apartment REIT Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2021
(in thousands of Canadian dollars, except Unit and per Unit amounts, per suite amounts and other non-financial data)
Certain significant expenditures, including property taxes, maintenance costs, mortgage payments, insurance costs and related
charges, must be made regardless of whether or not a property is producing sufficient income to service these expenses. The
REIT’s properties are subject to mortgages, which require significant debt service payments. If the REIT 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.
Many of the REIT’s properties were constructed in the 1960’s and 1970’s and require ongoing capital expenditures. While
management has implemented comprehensive property maintenance programs and monitors property conditions constantly,
annual maintenance expenditures could exceed the REIT’s existing reserve estimates which could have a material adverse effect
upon distributable income.
The nature of the REIT’s business is such that refurbishment and structural repairs are required periodically, in addition to
regular on-going maintenance.
Current Economic Environment
The REIT is subject to risks involving the economy in general, including inflation, deflation or stagflation, unemployment,
geopolitical issues and a local, regional, national or international outbreak of a contagious disease, including coronavirus. Poor
economic conditions could adversely affect the REIT’s ability to generate revenues, thereby reducing its operating income and
earnings. It could also have an adverse impact on the ability of the REIT to maintain occupancy rates which could harm the
REIT’s financial condition. In weak economic environments, the REIT’s tenants may be unable to meet their rental payments and
other obligations due to the REIT, which could have a material and adverse effect on the REIT. In addition, fluctuation in interest
rates or other financial market volatility may adversely affect the REIT's ability to refinance existing Indebtedness on its maturity
or on terms that are as favourable as the terms of the existing Indebtedness, which may impact negatively on AFFO, may
restrict the availability of financing for future prospective purchasers of the REIT’s investments and could potentially reduce the
value of such investments, or may adversely affect the ability of the REIT to complete acquisitions on financially desirable terms.
Access to Capital
The real estate industry is highly capital intensive. The REIT will require access to capital to fund its growth strategy and certain
capital expenditures from time to time. There can be no assurances that the REIT will have access to sufficient capital or access
to capital on terms favourable to the REIT for future property acquisitions, financing or refinancing of properties, funding
operating expenses or other purposes. Market conditions and unexpected volatility or illiquidity in financial markets may inhibit
the REIT’s access to financing in the Canadian capital markets. As a result, it is possible that financing which the REIT 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 the REIT or otherwise, may not be available or, if it is available, may not be available on favourable terms to
the REIT. Failure by the REIT to access required capital could have a material adverse effect on the REIT’s business, cash flows,
financial condition and financial performance and ability to make distributions to Unitholders.
Competition for Real Property Investments
The REIT competes for suitable real property investments with a variety of investors (both Canadian and foreign) that are
presently seeking, or that may seek in the future, real property investments similar to those desired by the REIT. Many of these
investors will have greater financial resources than those of the REIT. An increase in the availability of investment funds, and an
increase in interest of real property investments, would tend to increase competition for real property investments, thereby
increasing purchase prices and reducing yields therefrom. In addition, the REIT may require additional equity and/or debt
financing to complete future real property acquisitions, which may not be available on terms acceptable to the REIT.
Cyber Security Risks
A cyber incident is any adverse event that threatens the confidentiality, integrity or availability of the REIT’s information
technology 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. The
REIT’s primary risks that could directly result from the occurrence of a cyber incident include operational interruption, damage
to its reputation, damage to relationships with its vendors and tenants and disclosure of confidential vendor or tenant
information. The REIT has implemented processes, procedures and controls to detect and mitigate these risks, but these
measures, as well as its increased awareness of a risk of a cyber incident, do not guarantee that a cyber incident will not occur
or that its financial results will not be negatively impacted by such an incident.
37|2021 Annual ReportMinto Apartment REIT Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2021
(in thousands of Canadian dollars, except Unit and per Unit amounts, per suite amounts and other non-financial data)
Property Acquisition Risk
The REIT’s business plan includes, among other things, growth through identifying suitable acquisition and/or development
opportunities, pursuing such opportunities, consummating acquisitions and leasing acquired properties. The acquisition of
properties entails general risks associated with any real estate investment, including the risk that the investments will fail to
perform in accordance with expectations, that the properties will not achieve anticipated occupancy levels and that estimates
of the costs of improvements to bring an acquired property up to standards established for the intended market position for
that property may prove inaccurate. If the REIT is unable to make accretive acquisitions or otherwise manage its growth
effectively, it could adversely impact the REIT’s financial position and financial performance and decrease the amount of cash
available for distribution. There can be no assurance as to the pace of growth through property acquisitions or that the REIT will
be able to acquire assets on an accretive basis and, as such, there can be no assurance that distributions to Unitholders will
increase in the future.
Increased Supply Risk
Each segment of the real estate business is competitive. Numerous other residential developers and apartment owners
compete in seeking tenants. Although the REIT’s strategy is to own multi-residential properties in desirable locations in each
market in which it operates, some of the properties of the REIT’s competitors may be newer, better located or better
capitalized. In addition, the desirability of property locations may change over time. The existence of alternative housing could
have a material adverse effect on the REIT’s ability to lease space in its properties and on the rents charged or concessions
granted, and could adversely affect the REIT’s revenues and its ability to meet its obligations.
Risks Associated with the Administrative Support Agreement
The REIT relies upon Minto with respect to the provision of certain services as described under "Arrangements with Minto -
Administrative Support Agreement". If the REIT were to lose the services provided by Minto, or if Minto fails to perform its
obligations under the Administrative Support Agreement, the REIT may experience an adverse impact on its business
operations. The REIT may be unable to duplicate the quality and depth or the cost of the services available to it by handling such
services internally or by retaining another service provider.
Utility and Property Tax Risk
Utility and property tax risk relates to the potential additional costs the REIT may experience as a result of higher commodity
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 higher property assessments of municipal properties and property tax rates. Utility expenses, mainly consisting of
natural gas and electricity service charges, have been subject to considerable price fluctuations over the past several years. Any
significant increase in these resource costs that the REIT cannot pass on to the tenant may have a negative material impact on
the REIT. The REIT mitigates part of this risk by submetering many of its suites to measure the consumption of electricity and
passing on the cost to tenants. Currently, approximately 95% of the suites in the Portfolio are submetered or directly metered
for electricity and approximately 81% of tenants pay the cost of electricity consumed in their suites. The REIT will seek to pass
on the cost of electricity for those suites that are submetered but where the tenants do not currently pay for electricity, as the
suites' tenancies turn over.
Rental Income Risks
The short-term nature of residential tenant leases exposes the REIT to the effects of a declining market rent, which could
materially adversely affect the REIT’s results from operations and ability to make distributions to Unitholders. Most of the REIT’s
residential tenant leases will be for a term of one year or less. Because the REIT’s residential tenant leases generally permit
residents to leave at the end of their lease term without any penalty, the REIT’s rental revenue may be materially adversely
affected by declines in market rents more quickly than if such leases were for longer terms. Further, the operating costs of a
suite or property may increase at a faster rate than the rental rate for such suite, which could negatively impact the financial
condition of the REIT.
Renovation and Development Risk
There is a risk that renovations or developments undertaken by the REIT will exceed original cost estimates or will experience
unforeseen delays and that renovated or new suites may not lease in the anticipated timeframe or at anticipated rents. During
suite renovations, suites are unavailable for occupancy and do not generate income.
382021 Annual Report|Minto Apartment REIT Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2021
(in thousands of Canadian dollars, except Unit and per Unit amounts, per suite amounts and other non-financial data)
Environmental Risk
As an owner of real estate, the REIT is subject to federal, provincial and municipal environmental regulations. These regulations
may require the REIT to fund the costs of removal and remediation of certain hazardous substances on its properties or releases
from its properties. The failure to remediate such properties, if any, could adversely affect the REIT’s ability to borrow using the
property as collateral or to sell the real estate. The REIT is not aware of any material non-compliance with environmental laws
at any of its properties nor is it currently aware of any environmental condition with respect to any properties that it believes
would involve material expenditures by the REIT. The REIT has made, and will continue to make, the necessary capital
expenditures to comply with environmental laws and regulations. The REIT conducts due diligence on all properties prior to
acquisition and this process includes independent expert assessment of environmental risk for each property. It is the REIT's
policy to obtain a Phase I environmental site assessment conducted by a qualified environmental consultant as a condition of
acquiring any additional property. See "Investment Guidelines and Operating Policies - Operating Policies".
Environmental laws and regulations can change rapidly, and the REIT may be subject to more stringent environmental laws and
regulations in the future.
Climate-Related Risk
The REIT's properties may be impacted by climate-related events. Among the most significant of those risks is the risk of
flooding, including flash flooding. Depending on the severity, these events could cause significant damage to the REIT's
properties, interrupt normal operations and threaten the safety of tenants. The REIT's ability to generate revenue from
impacted properties may also be significantly impaired.
Climate-related events also may negatively impact certain costs of operation of the REIT's properties, including the cost of utility
consumption due to abnormally hot or cold temperatures and the cost of snow removal. More generally, the increase in
catastrophic losses worldwide from climate-related events has resulted in significant payouts by property insurers. This has
resulted in a significant increases in property insurance premiums generally, including the property insurance premiums
payable by the REIT. There is a risk of insurers being required to make payments on account of future climate-related
catastrophic losses, which may result in further increases in the property insurance premiums payable by the REIT.
Joint Venture Risk
The REIT participates in co-ownerships for three of its properties and may participate in other co-ownerships or partnerships in
the future. There is a risk that the co-owners or partners may fail to fund their share of capital contributions or their economic
or business interests or goals may change in a manner to differ from or become inconsistent with those of the REIT. Disputes
with the co-owners or partners may negatively affect the operations of and returns from co-owned or partnership properties,
or give rise to an obligation to purchase the interest of the co-owner or partner or to sell the REIT's interest to the co-owner or
partner at a time or on terms that may adversely impact the REIT’s financial position and financial performance.
Potential Conflicts of Interest with Minto
Minto’s continuing businesses may lead to conflicts of interest between Minto and the REIT. The REIT may not be able to
resolve such conflicts, and, even if it does, the resolution may be less favourable to the REIT than if it were dealing with a party
that was not a holder of a significant interest in the REIT. In addition, the ongoing relationships between Minto and each of
Roger Greenberg, Philip Orsino and Michael Waters may lead to conflicts of interest between such persons and the REIT. In
order to mitigate part of the risk associated with conflicts of interest, all related party transactions with Minto are reviewed and
approved on behalf of the REIT by the REIT's independent trustees only.
Social Media Risk
The use of social media could cause the REIT to suffer brand damage or information leakage. Negative posts or comments about
the REIT or its properties on any social networking website could damage the REIT’s reputation. In addition, employees or
others might disclose non-public sensitive information relating to the REIT’s business through external media channels. The
continuing evolution of social media will present the REIT with new challenges and risks.
39|2021 Annual ReportMinto Apartment REIT Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2021
(in thousands of Canadian dollars, except Unit and per Unit amounts, per suite amounts and other non-financial data)
Appraisals of Properties
An appraisal is an estimate of market value and caution should be used in evaluating data with respect to appraisals. It is an
estimate of value based on information gathered in the investigation, appraisal techniques employed and reasoning both
quantitative and qualitative, leading to an opinion of value. The analysis, opinions and conclusions in an appraisal are typically
developed based on, and in conformity with, or interpretation of the guidelines and recommendations set forth in the Canadian
Uniform Standards of Appraisal Practice. Appraisals are based on various assumptions of future expectations of property
performance and while the appraiser’s internal forecast of net income for the properties appraised are considered to be
reasonable at that time, some of the assumptions may not materialize or may differ materially from actual experience in the
future. Appraisals are not guarantees of present or future value and there is no assurance that an appraised value actually
reflects an amount that would be realized upon a current or future sale of any of the properties or that any projections included
in the appraisal will be attainable. In addition, as prices in the real estate market fluctuate over time in response to numerous
factors, the value of a property as shown in an appraisal may be an unreliable indication of its current market value.
A publicly traded real estate investment trust will not necessarily trade at values determined solely by reference to the
underlying value of its real estate assets. Accordingly, the Units may trade at a premium or a discount to values implied by
appraisals.
General Litigation Risks
In the ordinary course of the REIT’s operations, whether directly or indirectly, it may become involved in, named as a party to or
be the subject of various legal proceedings, including regulatory proceedings, tax proceedings and legal actions relating to
personal injuries, property damage, property taxes, land rights, the environment and contract disputes. The outcome with
respect to outstanding, pending or future proceedings cannot be predicted with certainty and may be determined in a manner
adverse to the REIT and as a result, could have a material adverse effect on the REIT’s assets, liabilities, business, financial
condition and financial performance. Even if the REIT prevails in any such legal proceedings, the proceedings could be costly and
time-consuming and may divert the attention of management and key personnel from the REIT’s business operations.
General Uninsured Losses
The REIT carries comprehensive general liability, fire, flood, extended coverage and rental loss insurance with policy
specifications, limits and deductibles customarily carried for similar properties. The REIT will continue to procure insurance for
such risks, subject to certain standard policy limits and deductibles and will continue to carry such insurance if it is economical
to do so. 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. Should an uninsured or underinsured loss occur,
the 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. There is a risk that any significant
increase in insurance costs will impact negatively upon the profitability of the REIT.
Key Personnel
The REIT's executive and other senior officers have a significant role in the REIT's success and oversee the execution of the
REIT's strategy. The REIT's ability to retain its management team or attract suitable replacements should any members of
management leave is dependent on, among other things, the competitive nature of the employment market. The REIT has
experienced departures of key professionals in the past and may do so in the future, and it cannot predict the impact that any
such departures may have on its ability to achieve its objectives. The loss of services from key members of the management
team or a limitation on their availability could adversely impact the REIT's financial condition and cash flow. The REIT mitigates
key personnel risk through succession planning, but does not maintain key personnel insurance.
Tax-Related Risks
i) Mutual Fund Trust Status - The REIT intends to qualify at all relevant times as a “mutual fund trust” for purposes of
the Tax Act. There can be no assurance that Canadian federal income tax laws and the administrative policies and
practices of the CRA respecting the treatment of mutual fund trusts will not be changed in a manner that adversely
affects the Unitholders.
402021 Annual Report|Minto Apartment REIT Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2021
(in thousands of Canadian dollars, except Unit and per Unit amounts, per suite amounts and other non-financial data)
ii)
The REIT Exception - Canadian tax legislation relating to the federal income taxation of Specified Investment Flow
Through trusts or partnerships provide that certain distributions from a SIFT will not be deductible in computing the
SIFT’s taxable income and that the SIFT will be subject to tax on such distributions at a rate that is substantially
equivalent to the general tax rate applicable to Canadian corporations. However, distributions paid by a SIFT as return
of capital should generally not be subject to tax. Under the SIFT rules, the taxation regime will not apply to a real
estate investment trust that meets prescribed conditions relating to the nature of its assets and revenue (the “REIT
Exception”). The REIT Exception is comprised of a number of technical tests and the determination as to whether the
REIT qualifies for the REIT Exception in any particular taxation year can only be made with certainty at the end of that
taxation year. The REIT expects to qualify for the REIT Exception in 2021 and subsequent taxation years, such that it
will be exempt from the SIFT rules. However, no assurances can be given that the REIT will satisfy the REIT Exception
in any particular year. If the SIFT rules apply to the REIT, they may adversely affect the marketability of the Units, the
amount of cash available for distributions and the after-tax return to investors.
iii) Non-Resident Ownership - Under current law, a trust may lose its status under the Tax Act as a mutual fund trust if it
can reasonably be considered that the trust was established or is maintained primarily for the benefit of Non-
Residents, except in limited circumstances. Accordingly, the DOT provides that Non-Residents may not be the
beneficial owners of more than 49% of the Units (determined on a basic or a fully-diluted basis). The Trustees also
have various powers that can be used for the purpose of monitoring and controlling the extent of Non-Resident
ownership of the Units.
iv)
v)
Tax-Basis of Acquired Properties - The Partnership has acquired, and may from time to time in the future acquire,
certain properties on a fully or partially tax-deferred basis, such that the tax cost of these properties will be less than
their fair market value. If one or more of such properties are disposed of, the gain realized by the Partnership for tax
purposes (including any income inclusions arising from the recapture of previously claimed CCA on depreciable
property) will be in excess of that which it would have realized if it had acquired the properties at a tax cost equal to
their fair market values. For the purpose of claiming CCA, the UCC of such properties acquired by the Partnership will
be equal to the amounts jointly elected by the Partnership and the transferor on the tax-deferred acquisition of such
property. The UCC of such property will be less than the fair market value of such property. As a result, the CCA that
the Partnership may claim in respect of such properties will be less than it would have been if such properties had
been acquired with a tax cost basis equal to their fair market values.
Eligibility for Investment - The Tax Act imposes penalties for the acquisition or holding of investments that are not
“qualified investments” within the meaning of the Tax Act by registered retirement savings plans, registered
education savings plans, registered retirement income funds, deferred profit sharing plans, registered disability
savings plans or tax-free savings accounts (collectively, “Exempt Plans”). Although the REIT will endeavour to ensure
that the Units continue to be qualified investments for Exempt Plans, any property distributed to a Unitholder on an
in specie redemption of Units may not be qualified investments under the Tax Act.
vi) Non-Residents of Canada - The Tax Act may impose additional withholding or other taxes on distributions made by
the REIT to Unitholders who are Non-Residents. These taxes and any reduction thereof under a tax treaty between
Canada and another country may change from time to time. The tax consequences under the Tax Act for Non-
Resident Unitholders may be more adverse than the consequences to other Unitholders. Non-Resident Unitholders
should consult their own tax advisors.
vii) General Taxation - There can be no assurance that Canadian federal or provincial tax laws, the judicial interpretation
thereof, or the administrative and assessing practices and policies of the CRA, the Department of Finance (Canada)
and any other tax authority or tax policy agency will not be changed in a manner that adversely affects the REIT, its
affiliates or Unitholders, or that any such taxing authority will not challenge tax positions adopted by the REIT and its
affiliates. Any such change or challenge could increase the amount of tax payable by the REIT or its affiliates or could
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.
41|2021 Annual ReportMinto Apartment REIT Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2021
(in thousands of Canadian dollars, except Unit and per Unit amounts, per suite amounts and other non-financial data)
Financial Risk Management
The REIT's activities expose it to a variety of financial risks, including market risk, credit risk and liquidity risk.
Market Risk
Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in
market prices. Market risk consists of interest rate risk, currency risk and other price risk.
Interest rate risk
As the REIT’s interest-bearing assets mainly comprise fixed rate instruments, changes in market interest rates do not have any
significant direct effect on the REIT’s income.
The REIT's financial liabilities comprise both fixed rate and variable rate instruments.
The REIT faces interest rate risk on its fixed rate debt due to the expected requirement to refinance such debt in the year of
maturity or shortly thereafter. The REIT manages interest rate risk by structuring its financings to stagger the maturities of its
debt, thereby mitigating its exposure to interest rate and other credit market fluctuations.
For the portion of the REIT’s financial liabilities that comprise variable rate instruments, from time to time the REIT may enter
into interest rate swap contracts or other financial instruments to modify the interest rate profile of its outstanding debt
without an exchange of the underlying principal amount.
As at December 31, 2021, the REIT has a committed variable rate credit facility of $200,000 (December 31, 2020 - $200,000)
with an outstanding balance of $51,754 (December 31, 2020 - $31,948). A 100 bps change in prevailing variable interest rates
would change annualized interest charges incurred by $518 (December 31, 2020 - $319).
Currency risk
The REIT’s financial statement presentation currency is Canadian dollars. Operations are located in Canada and the REIT has
limited operational transactions in foreign-denominated currencies. As such, the REIT has no significant exposure to currency
risk.
Other price risk
Other price risk is the risk of variability in fair value due to movements in equity prices or other market prices such as
commodity prices and credit spreads.
The REIT is exposed to other price risk on its Class B LP Units. A 1% change in the prevailing market price of the Units as at
December 31, 2021 would have a $4,984 (December 31, 2020 - $4,638) change in the fair value of the Class B LP Units.
Credit Risk
Credit risk is the risk that tenants and/or debtors may experience financial difficulty and be unable to fulfill their lease
commitments or loan repayments. An allowance for impairment is taken for all expected credit losses.
The REIT’s risk of credit loss from tenants experiencing financial difficulties is mitigated through diversification. The REIT’s
residential rental business is carried on in the Toronto, Montreal, Ottawa, Calgary and Edmonton regions. The nature of this
business involves a high volume of tenants with individually small monthly rent amounts. The REIT monitors the collection of
residential rent receivables on a regular basis with strictly followed procedures designed to minimize credit loss in cases of non-
payment.
The REIT is also exposed to credit risk in relation to the loans advanced, in the event that the borrowers default on the
repayment of amounts owing to the REIT. Management mitigates this risk by ensuring adequate security has been provided.
Liquidity Risk
Liquidity risk is the risk that the REIT will encounter difficulty in meeting obligations associated with financial liabilities that are
settled by delivering cash or another financial asset. The REIT’s liquidity is subject to macroeconomic, financial, competitive and
other factors that are beyond the REIT’s control including the ongoing COVID-19 disruption.
422021 Annual Report|Minto Apartment REIT Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2021
(in thousands of Canadian dollars, except Unit and per Unit amounts, per suite amounts and other non-financial data)
Liquidity risk is managed through cash flow forecasting. Management monitors forecasts of the REIT’s liquidity requirements to
ensure it has sufficient cash to meet operational needs through maintaining sufficient cash and/or availability on the undrawn
credit facility and ensuring that it meets its financial covenants related to debt agreements. Such forecasting takes into
consideration the current and projected macroeconomic conditions, the REIT's cash collection efforts, debt financing plans and
covenant compliance required under the terms of debt agreements. There is a risk that such liquidity forecasts may not be
achieved and that currently available debt financing may no longer be available to the REIT at terms and conditions that are
favorable to the REIT, or at all.
The REIT mitigates liquidity risk by staggering the maturity dates of its borrowing, maintaining borrowing relationships with
various lenders, proactively renegotiating expiring credit agreements well in advance of the maturity date and by maintaining
sufficient availability on its credit facility.
As of December 31, 2021, liquidity was $150,655 (December 31, 2020 - $170,659) consisting of cash of $2,851 (December 31,
2020 - $2,607) and $147,804 (December 31, 2020 - $168,052) of available borrowing capacity under the credit facility.
An analysis of the contractual cash flows associated with the REIT's material financial liabilities is set out below:
Mortgages
Credit facility
Class C LP Units
Interest obligation
Tenant rental deposits
Due to related parties
Accounts payable and
accrued liabilities
2022
140,647 $
$
—
140,647
5,510
23,304
10,100
1,922
2023
58,882 $
—
58,882
50,234
19,646
—
—
2024
57,871 $
51,754
109,625
50,499
14,808
26
—
2025
49,684 $
—
49,684
63,541
11,745
—
—
2026
40,187 $
—
40,187
1,283
9,126
10
—
2027 and
thereafter
280,263 $
—
280,263
41,116
26,179
—
—
Total
627,534
51,754
679,288
212,183
104,808
10,136
1,922
23,776
501
172
54
—
3,794
28,297
$
205,259 $
129,263 $
175,130 $
125,024 $
50,606 $
351,352 $ 1,036,634
The contractual cash flows do not include any unamortized mark-to-market adjustments or unamortized deferred financing
costs.
Related Party Transactions
In the normal course of operations, the REIT enters into various transactions with related parties. In addition to the related
party transactions disclosed elsewhere in this Management's Discussion and Analysis, related party transactions include:
Administrative Support Agreement
On July 3, 2018, the REIT and MPI entered into a five year renewable agreement that provides the REIT with certain advisory,
transaction and support services, including clerical and administrative support, operational support for the administration of
day-to-day activities of the REIT and office space. These services are provided on a cost recovery basis, subject to a maximum
during the initial five year term, for all general and administrative expenses, excluding public company costs, of 32 bps of Gross
Book Value of the REIT's assets.
For the year ended December 31, 2021, the REIT incurred $2,260 (December 31, 2020 - $1,695) for services rendered by MPI
and its affiliates under the ASA.
The REIT monitors the administrative support fee, ensuring adherence with the requirements established under the ASA. For
the year ended December 31, 2021, annualized general and administrative expenses, excluding public company costs, represent
23 bps of Gross Book Value (December 31, 2020 - 21 bps).
43|2021 Annual ReportMinto Apartment REIT Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2021
(in thousands of Canadian dollars, except Unit and per Unit amounts, per suite amounts and other non-financial data)
Loans Receivable from Related Parties
Project
Related Party
Commitment1
Fifth + Bank
Affiliate of MPI
$
30,000
Interest Rate and
Maturity
6% per annum
March 31, 2022
Lonsdale Square
Limited partnership
jointly owned by MPI
and a subsidiary of
Darwin Properties
Limited
Beechwood
Affiliate of MPI
810 Kingsway
MPI
$
$
$
14,000
7% per annum
May 30, 2024
51,400
19,650
6% per annum
December 31, 2025
6% per annum
August 1, 2024
Amount Receivable as of
December 31, 2021 December 31, 2020
$
$
$
$
30,000 $
30,000
12,855 $
11,988
10,094 $
10,363 $
—
—
In connection with these financings, the REIT will have the exclusive option to purchase the property or MPI's ownership
interest in the project upon stabilization at 95% of its then-fair market value as determined by independent and qualified third-
party appraisers.
Due to Related Parties
Included in due to related parties are the following:
•
Distribution payable of $901 and $561 (December 31, 2020 - $863 and $575) to limited partnerships wholly owned by MPI
on Class B LP Units and Class C LP Units, respectively.
• Working capital receivable of $110 (December 31, 2020 - payable of $211) from MPI and its affiliates.
•
•
Development and construction management fee payable of $535 (December 31, 2020 - payable of $nil) to an affiliate of
MPI.
Distribution payable of $35 (December 31, 2020 - $34) on Units to MPI.
At December 31, 2020, amounts due to related parties included $8,356 payable to MPI for the reconstructed Skyline
Maisonettes. The amount was repaid on April 22, 2021.
Revenue and Expense
•
•
•
•
•
•
Included in rental revenue for the year ended December 31, 2021 is $716 (December 31, 2020 - $723) of revenue from MPI
and its affiliates as rent for office space, furnished suites, parking and other revenue at certain REIT properties.
Included in property operating expenses for the year ended December 31, 2021 is $713 (December 31, 2020 - $713) paid
to MPI and its affiliates for repairs and maintenance and other expenses at certain REIT properties.
For the year ended December 31, 2021, compensation to key management personnel includes $635 (December 31, 2020 -
$642) paid to executives, Unit-based compensation expense of $1,304 (December 31, 2020 - $1,160) for executives and
Unit-based compensation expense for the grant of Deferred Units to Trustees in lieu of annual retainer and meeting fees of
$560 (December 31, 2020 - $513), respectively. Additional compensation to key management personnel for services
provided to the REIT was paid by MPI and its affiliate.
Included in finance costs for the year ended December 31, 2021 are distributions on Class B LP Units of $10,436 paid or
payable to a limited partnership wholly-owned by MPI. For the year ended December 31, 2020, distributions on Class B LP
Units of $10,162 were paid or payable to MPI and a limited partnership wholly-owned by MPI.
Included in finance costs for the year ended December 31, 2021 are distributions on Class C LP Units of $6,743 (December
31, 2020 - $6,907), paid or payable to a limited partnership wholly-owned by MPI.
Included in finance costs for the year ended December 31, 2021 is interest income of $3,100 (December 31, 2020 - $1,617)
earned from the loans advanced to related parties.
1 All commitments include amounts to fund interest costs.
442021 Annual Report|Minto Apartment REIT Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2021
(in thousands of Canadian dollars, except Unit and per Unit amounts, per suite amounts and other non-financial data)
Distributions
•
•
For the year ended December 31, 2021, distributions of $5,341 (December 31, 2020 - $5,177) were made to a limited
partnership wholly-owned by MPI in order to repay principal on Class C LP Units.
For the year ended December 31, 2021, distributions on Units to MPI of $411 (December 31, 2020 - $401) were declared
and recorded as a reduction to Unitholders' equity.
Contingencies and Commitments
The REIT is subject to claims and legal actions that arise in the ordinary course of business. It is the opinion of Management that
any ultimate liability that may arise from such matters would not have a significant adverse effect on the consolidated financial
statements of the REIT. The contingencies and commitments of the REIT are set out in Note 17 of the consolidated financial
statements for the years ended December 31, 2021 and 2020.
Future Changes in Accounting Standards
The following accounting standards under IFRS have been issued or revised, however are not yet effective and as such have not
been applied by the REIT:
Classification of Liabilities as Current or Non-Current (Amendments to IAS 1, Presentation of Financial
Statements)
On January 23, 2020, the IASB issued amendments to IAS 1, Presentation of Financial Statements, providing a more general
approach to the classification of liabilities based on the contractual agreements in place at the reporting date. The amendments
apply to annual reporting periods beginning on or after January 1, 2023. Earlier adoption is permitted.
The amendments to IAS 1 affect only the presentation of liabilities in the balance sheet and seek to clarify that the classification
of liabilities as current or non-current should be based on the rights that are in existence at the end of the reporting period.
Further, the amendments make clear that classification is unaffected by expectations about whether an entity will exercise its
right to defer settlement of a liability and that the settlement of a liability refers to the transfer to the counterparty of cash,
equity instruments, other assets or services.
The REIT intends to adopt the amendments in its consolidated financial statements beginning on January 1, 2023, when the
amendments become effective. The REIT is assessing the potential impact of the amendments, however does not expect them
to have a material impact on the REIT's consolidated financial statements.
Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2)
On February 12, 2021, the IASB issued amendments to IAS 1, Presentation of Financial Statements, to assist entities in
determining which accounting policies to disclose in the financial statements. The amendments apply to annual reporting
periods beginning on or after January 1, 2023. Earlier adoption is permitted.
The amendments to IAS 1 require that an entity disclose its material accounting policies, instead of its significant accounting
policies. Further amendments explain how an entity can identify a material accounting policy.
The REIT intends to adopt the amendments in its consolidated financial statements beginning on January 1, 2023, when the
amendments become effective. The REIT is assessing the potential impact of the amendments, however does not expect them
to have a material impact on the REIT's consolidated financial statements.
Definition of Accounting Estimates (Amendments to IAS 8)
On February 12, 2021, the IASB issued amendments to IAS 8, Accounting Policies, Changes in Accounting Estimates and Errors,
to assist entities to distinguish between accounting policies and accounting estimates. The amendments apply to annual periods
beginning on or after January 1, 2023. Earlier adoption is permitted.
The amendments to IAS 8 replace the definition of a "change in accounting estimates" with a definition of "accounting
estimates". Under the new definition, accounting estimates are “monetary amounts in financial statements that are subject to
measurement uncertainty”. Entities develop accounting estimates if accounting policies require items in financial statements to
be measured in a way that involves measurement uncertainty. The amendments confirm that a change in an accounting
estimate that results from new information or new developments is not the correction of an error.
45|2021 Annual ReportMinto Apartment REIT Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2021
(in thousands of Canadian dollars, except Unit and per Unit amounts, per suite amounts and other non-financial data)
The REIT intends to adopt the amendments in its consolidated financial statements beginning on January 1, 2023, when the
amendments become effective. The REIT is assessing the potential impact of the amendments, however does not expect them
to have a material impact on the REIT's consolidated financial statements.
Disclosure Controls and Internal Controls Over Financial Reporting
Management is responsible for establishing and maintaining a system of disclosure controls and procedures ("DC&P") to
provide reasonable assurance that all material information relating to the REIT that is required to be publicly disclosed is
recorded, processed, summarized and reported on a timely basis and within the time period specified in securities legislation.
Management is also responsible for establishing and maintaining adequate internal controls over financial reporting ("ICFR") to
provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial reports for external
purposes in accordance with IFRS. In designing such controls, it should be recognized that due to inherent limitations, any
controls, no matter how well designed and operated, can provide only reasonable, not absolute, assurance of achieving the
desired control objectives and may not prevent or detect misstatements. Additionally, Management is required to use
judgment in evaluating controls and procedures.
The Chief Executive Officer and the Chief Financial Officer have evaluated, or caused an evaluation under their direct
supervision of, the design of disclosure controls and procedures and internal controls over financial reporting (as defined in
National Instrument 52-109, Certification of Disclosure in Issuers’ Annual and Interim Filings) as at December 31, 2021.
In accordance with the provisions of National Instrument 52-109 Certification of Disclosures in Issuers' Annual and Interim
Filings, the REIT’s Management, including the Chief Executive Officer and the Chief Financial Officer, have limited the scope of
their assessment of the REIT’s DC&P and ICFR to exclude controls, policies and procedures of Le Hill-Park acquired on December
7, 2021.
For the year ended and as at December 31, 2021, Le Hill-Park accounts for approximately 0.2% of revenue and 3.4% of
investment properties. The scope limitation is primarily based on the time required to integrate the acquired business into the
REIT's existing DC&P and ICFR effectiveness. The assessment of the design effectiveness of DC&P and ICFR of the acquired
business, and the implementation of any changes determined by Management to be desirable, is expected to be completed by
the fourth quarter of 2022. Further details related to the acquisition are disclosed in Note 5, "Acquisition of Investment
Properties", in the REIT’s consolidated financial statements for the year ended December 31, 2021.
Without contradiction of the scope limitation of Management's assessment and after evaluating the effectiveness of the REIT’s
DC&P, it is Management's belief that as of December 31, 2021, the design and operation of the REIT’s DC&P were effective to
ensure that material information relating to the REIT would have been known to them and that information required to be
disclosed by the REIT is recorded, processed, summarized, and reported on a timely basis and within the time period specified
in securities legislation. Without contradiction of the scope limitation of Management's assessment of the design and operating
effectiveness of the REIT's ICFR, Management has determined that as of December 31, 2021, the REIT's internal controls over
financial reporting were appropriately designed and operating effectively in accordance with the 2013 COSO framework as
published by the Committee of Sponsoring Organizations of the Treadway Commission. There were no significant changes to
the REIT's ICFR during the year ended December 31, 2021 that have materially affected, or are reasonably likely to materially
affect, the REIT’s ICFR.
462021 Annual Report|Minto Apartment REIT Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2021
(in thousands of Canadian dollars, except Unit and per Unit amounts, per suite amounts and other non-financial data)
Section VI - Supplemental Information
Property Portfolio
Property
Toronto
1 High Park Village
Leslie York Mills
2
3
Richgrove
4 Martin Grove
5 Minto Yorkville1
Roehampton1
6
Ottawa
Parkwood Hills Garden Homes & Townhomes
Aventura
7 Minto one80five1
8
9
10 Huron
11 Seneca
12 Castleview
13 Skyline Garden Homes, Maisonettes & Walkups
14 The Carlisle
15 Castle Hill
16 Grenadier
17 Tanglewood
18 Eleanor
19 Frontenac
20 Stratford
Montreal
21 Rockhill
22 Le 4300
23 Haddon Hall
24 Le Hill-Park
Edmonton
25 The Lancaster House
26 York House
27 Hi-Level Place
Calgary
28 The Quarters
29 The Laurier1
30 Kaleidoscope
Portfolio Total
Total Suites
REIT Ownership
Interest
Effective Ownership
Interest (Suites)
750
409
258
237
181
148
1,983
417
393
354
251
251
241
259
193
176
158
122
117
104
59
3,095
1,004
318
210
261
1,793
98
92
64
254
199
144
70
413
7,538
40%
50%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
50%
100%
100%
100%
100%
100%
100%
100%
100%
100%
300
205
258
237
181
148
1,329
417
393
354
251
251
241
259
193
176
158
122
117
104
59
3,095
502
318
210
261
1,291
98
92
64
254
199
144
70
413
6,382
1 Suite counts for Minto Yorkville, Roehampton, Minto one80five and The Laurier include furnished suites, representing approximately 23% of
the total suites at these properties.
47|2021 Annual ReportMinto Apartment REIT Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2021
(in thousands of Canadian dollars, except Unit and per Unit amounts, per suite amounts and other non-financial data)
Average Rent Per Square Foot
Geographic Node
Toronto
Ottawa
Alberta
Montreal
Average
$
Average monthly rent
per suite
1,910
1,542
1,287
1,805
$
1,641
Average sq. ft.
per suite
797 $
835
714
976
843 $
Average rent per sq.
ft per suite
2.40
1.85
1.80
1.85
1.95
Non-IFRS and Other Financial Measures
The REIT's financial statements are prepared in accordance with IFRS. Management's Discussion and Analysis also contains
certain non-IFRS and other financial measures which are measures commonly used by publicly traded entities in the real estate
industry. Management believes that these metrics are useful for measuring different aspects of performance and assessing the
underlying operating and financial performance on a consistent basis. However, these measures do not have a standardized
meaning prescribed by IFRS and are not necessarily comparable to similar measures presented by other publicly traded entities.
These measures should strictly be considered supplemental in nature and not a substitute for financial information prepared in
accordance with IFRS. The REIT has adopted the guidance under NI 52-112 Non-GAAP and Other Financial Measures Disclosure
for the purpose of this Management's Discussion and Analysis. These measures and ratios are defined below:
Non-IFRS Financial Measures and Ratios
•
"FFO" is defined as IFRS consolidated net income adjusted for items such as unrealized changes in the fair value of
investment properties, effects of puttable instruments classified as financial liabilities and changes in fair value of financial
instruments and derivatives. FFO should not be construed as an alternative to net income or cash flows provided by or
used in operating activities determined in accordance with IFRS. The REIT's method of calculating FFO is in accordance with
REALPAC’s recommendations under the revised publication titled ‘‘REALPAC Funds from Operations (FFO) & Adjusted
Funds from Operations (AFFO) for IFRS’’ published in January 2022, but may differ from other issuers’ methods and,
accordingly, may not be comparable to FFO reported by other issuers. The REIT regards FFO as a key measure of operating
performance. For reconciliation refer to Section IV – “Liquidity, Capital Resources and Contractual Commitments –
Reconciliation of Non-IFRS Financial Measures and Ratios”.
•
•
•
"FFO per unit" is calculated as FFO divided by the weighted average number of Units of the REIT and Class B LP Units of the
Partnership outstanding over the period. The REIT regards FFO per unit as a key measure of operating performance. For
reconciliation refer to Section IV – “Liquidity, Capital Resources and Contractual Commitments – Reconciliation of Non-IFRS
Financial Measures and Ratios”.
"AFFO" is defined as FFO adjusted for items such as maintenance capital expenditures and straight-line rental revenue
differences. AFFO should not be construed as an alternative to net income or cash flows provided by or used in operating
activities determined in accordance with IFRS. The REIT’s method of calculating AFFO is in accordance with REALPAC’s
recommendations under the revised publication titled ‘‘REALPAC Funds from Operations (FFO) & Adjusted Funds from
Operations (AFFO) for IFRS’’ published in January 2022, except that it adjusts for certain non-cash items (such as
adjustments for the amortization of mark-to-market adjustments related to debt), but may differ from other issuers’
methods and, accordingly, may not be comparable to AFFO reported by other issuers. The REIT regards AFFO as a key
measure of operating performance. The REIT also uses AFFO in assessing its capacity to make distributions. For
reconciliation refer to Section IV – “Liquidity, Capital Resources and Contractual Commitments – Reconciliation of Non-IFRS
Financial Measures and Ratios”.
"AFFO per unit" is calculated as AFFO divided by the weighted average number of Units of the REIT and Class B LP Units of
the Partnership outstanding over the period. The REIT regards AFFO per unit as a key measure of operating performance.
For reconciliation refer to Section IV – “Liquidity, Capital Resources and Contractual Commitments – Reconciliation of Non-
IFRS Financial Measures and Ratios”.
482021 Annual Report|Minto Apartment REIT Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2021
(in thousands of Canadian dollars, except Unit and per Unit amounts, per suite amounts and other non-financial data)
•
•
"AFFO Payout Ratio" is the proportion of the total distributions on Units and Class B LP Units to AFFO. The REIT uses AFFO
Payout Ratio in assessing its capacity to make distributions. For reconciliation refer to Section IV – “Liquidity, Capital
Resources and Contractual Commitments – Reconciliation of Non-IFRS Financial Measures and Ratios”.
"Debt-to-Adjusted EBITDA ratio" is calculated by dividing interest-bearing debt (net of cash) by Adjusted EBITDA. Adjusted
EBITDA is a non-IFRS Financial Measure and used for evaluation of the REIT's financial health and liquidity. Adjusted EBITDA
is calculated as the trailing twelve-month NOI adjusted for a full year of stabilized earnings, fees and other income and
general and administrative expenses from recently completed acquisitions, but excluding fair value adjustments. The REIT
regards Debt-to-Adjusted EBITDA ratio as a measure of financial health and liquidity. For reconciliation refer to Section IV –
“Liquidity, Capital Resources and Contractual Commitments – Liquidity and Capital Resources”.
Capital Management Measures
•
•
•
•
"Weighted average term to maturity on fixed rate debt" - Calculated as the weighted average of the term to maturity on
the outstanding fixed rate mortgages, a variable rate mortgage fixed through an interest rate swap and Class C LP Units.
"Weighted average interest rate on fixed rate debt" - Calculated as the weighted average of the stated interest rates on
the outstanding balances of fixed rate mortgages, a variable rate mortgage fixed through an interest rate swap and Class C
LP Units.
"Weighted average contractual interest rate" - Calculated as the weighted average contractual interest rate on mortgages.
"Weighted average variable interest rate" - Calculated as the weighted average interest rate on the revolving credit facility
for the period.
Supplementary Financial Measures
•
•
•
•
•
•
•
•
•
•
•
•
"NOI" is defined as revenue from investment properties less property operating costs, property taxes and utilities
(collectively referred to as "property operating expenses") prepared in accordance with IFRS. NOI should not be construed
as an alternative to net income determined in accordance with IFRS. The REIT’s method of calculating NOI may differ from
other issuers’ methods and, accordingly, may not be comparable to NOI reported by other issuers. The REIT regards NOI as
an important measure of the income generated from income-producing properties and is used by Management in
evaluating the performance of the REIT’s properties. It is also a key input in determining the value of the REIT’s properties.
"NOI margin" is defined as NOI divided by revenue.
"Gross Book Value" is defined as the total assets of the REIT as at the balance sheet date.
"Debt-to-Gross Book Value ratio" is calculated by dividing total interest-bearing debt consisting of mortgages, credit facility
and Class C LP Units of the Partnership by gross book value and is used as the REIT's primary measure of its leverage.
"Total debt service" is calculated as the sum of interest expense recorded as finance costs and principal payments on
mortgages, credit facility and distributions on Class C LP Units.
"Debt Service Coverage ratio" is the ratio of NOI to total debt service.
"NAV" is calculated as the sum of the value of Unitholders' equity and Class B LP Units as at the balance sheet date.
"NAV per unit" is calculated by dividing NAV by the number of Units and Class B LP Units outstanding as at the balance
sheet date.
"Property operating costs as a percentage of revenue" is calculated as property operating costs for the period, divided by
revenue from investment properties for the period.
"Property taxes as a percentage of revenue" is calculated as property taxes for the period, divided by revenue from
investment properties for the period.
"Utilities as a percentage of revenue" is calculated as Utilities expense for the period, divided by revenue from investment
properties for the period.
"Total debt" is calculated as the sum of value of interest bearing debt consisting of mortgages, credit facility and Class C LP
Units.
49|2021 Annual ReportMinto Apartment REIT Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2021
(in thousands of Canadian dollars, except Unit and per Unit amounts, per suite amounts and other non-financial data)
•
•
•
•
•
"Total debt, net of cash" is calculated as Total debt, reduced by cash balance.
"Distribution yield per unit" is calculated as the annualized distribution per Unit and Class B LP Units, divided by the Unit
closing price.
"Gain-to-lease" refers to the gap between rents achieved on new leases as compared to expiring leases.
"Gain to lease potential" refers to the gap between Management's estimate of monthly market rent and average monthly
in-place rent per suite.
"Average annual unlevered return" refers to the return on repositioning activities, and is calculated by dividing the average
annual rental increase per suite by the average cost per suite, excluding the impact of financing costs.
Operating Performance Measures
•
•
•
•
•
"Average monthly rent per suite for unfurnished suites" - Represents the average monthly rent for occupied unfurnished
suites at the end of the period.
"Occupancy for unfurnished suites, end of the period" - Effective from Q1 2021, Management revised its definition of
occupancy for unfurnished suites to include the number of suites not available due to renovation in the denominator when
calculating the ratio of occupied unfurnished suites to the total unfurnished suites in the portfolio. The numerator and
denominator used in the revised definition continues to exclude furnished suites. The revised definition is the ratio of
occupied unfurnished suites to the total unfurnished suites in the portfolio at the end of the period. See below for revised
calculations of occupancy at December 31, 2021 and 2020 determined using a consistent denominator.
Occupancy - end of the period
Occupancy - based on revised definition
Occupancy - as previously reported
December 31, 2021
December 31, 2020
95.47 %
not applicable
93.52 %
95.57 %
"Occupancy for unfurnished suites, average of the period" - Effective from Q1 2021, Management decided that it would
also disclose the average occupancy for the period in addition to occupancy for unfurnished suites as of the end of the
period. Occupancy as an average for the period is a useful indicator to evaluate the unfurnished rental revenue results. It is
defined as the ratio of occupied unfurnished suites to the total unfurnished suites in the portfolio for the period.
"Average monthly rent per suite for furnished suites" - Represents the average daily rent for furnished suites for the period
multiplied by 30.
"Occupancy for furnished suites" - The ratio of occupied furnished suites to the total furnished suites in the portfolio for
the period.
502021 Annual Report|Minto Apartment REIT KPMG LLP
Bay Adelaide Centre
333 Bay Street, Suite 4600
Toronto ON M5H 2S5
Canada
Tel 416-777-8500
Fax 416-777-8818
INDEPENDENT AUDITORS' REPORT
To the Unitholders of Minto Apartment Real Estate Investment Trust
Opinion
We have audited the consolidated financial statements of Minto Apartment Real
Estate Investment Trust (the Entity), which comprise:
the consolidated balance sheets as at December 31, 2021 and December 31,
2020
the consolidated statements of net income and comprehensive income for the
years then ended
the consolidated statements of changes in unitholders' equity for the years then
ended
the consolidated statements of cash flows for the years then ended
and notes to the consolidated financial statements, including a summary of
significant accounting policies
(Hereinafter referred to as the "financial statements").
In our opinion, the accompanying financial statements present fairly, in all material
respects, the consolidated financial position of the Entity as at December 31, 2021
and December 31, 2020, and its consolidated financial performance and its
consolidated 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. Our responsibilities under those standards are further described in the
"Auditors' Responsibilities for the Audit of the Financial Statements" section of
our auditors' report.
We are independent of the Entity 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.
KPMG LLP, an Ontario limited liability partnership and member firm of the KPMG global organization of independent
member firms affiliated with KPMG International Limited, a private English company limited by guarantee.
KPMG Canada provides services to KPMG LLP.
512021 Annual Report|Minto Apartment REIT Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most
significance in our audit of the financial statements for the year ended December 31,
2021. These matters were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we do not provide a
separate opinion on these matters.
We have determined the matters described below to be the key audit matters to be
communicated in our auditors' report.
Evaluation of the fair value of residential investment properties
Description of the matter
We draw attention to Note 2(f), Note 2(r) and Note 3 of the financial statements. The
Entity uses the fair value method to account for real estate classified as investment
property. The Entity has recorded residential investment properties for an amount of
$2,306,493 thousand, representing the most significant portion of investment
properties. Significant assumptions in determining the fair value of residential
properties include:
estimated 12-month stabilized forecasted net operating income for each property
capitalization rates.
Why the matter is a key audit matter
We identified the evaluation of the fair value of residential investment properties as a
key audit matter. This matter represented an area of significant risk of material
misstatement given the magnitude of residential investment properties and the high
degree of estimation uncertainty in determining the fair value of residential investment
properties. Additionally, significant auditor judgment and involvement of those with
specialized skills and knowledge were required in evaluating the results of our audit
procedures due to the sensitivity of the fair value of residential investment properties
to minor changes in significant assumptions.
How the matter was addressed in the audit
The primary procedures we performed to address this key audit matter included the
following:
For a selection of residential investment properties, we assessed the Entity's ability to
forecast by comparing the Entity's estimated 12-month stabilized forecasted net
operating income used in the prior year's estimate of the fair value of residential
investment properties to actual results.
522021 Annual Report|Minto Apartment REIT For a selection of residential investment properties, we compared the estimated
12-month stabilized forecasted net operating income for each selected property to the
actual historical net operating income by:
taking into account the changes in conditions and events affecting the residential
investment properties
considering the adjustments, or lack of adjustments, made by the Entity in arriving
at the estimated 12-month stabilized forecasted net operating income.
We involved valuations professionals with specialized skills and knowledge who
assisted in evaluating the capitalization rates of the overall portfolio of residential
investment properties. These rates were evaluated by comparing them to published
the various
reports of
characteristics of the portfolio.
industry commentators and considering
real estate
Other Information
Management is responsible for the other information. Other information comprises:
the information included in Management's Discussion and Analysis filed with the
relevant Canadian Securities Commissions
the information, other than the financial statements and the auditors' report
thereon, included in a document entitled "2021 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 and remain alert for indications that the other information
appears to be materially misstated.
We obtained the information included in Management's Discussion and Analysis filed
with the relevant Canadian Securities Commissions and the 2021 Annual Report as of
the date of the auditors' 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 the auditors' 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 International Financial Reporting Standards (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.
53|2021 Annual ReportMinto Apartment REIT In preparing the financial statements, management is responsible for assessing the
Entity'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 Entity or to cease operations, or has no
realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Entity's financial
reporting process.
Auditors' 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 auditors' 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 generally accepted auditing standards
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 the financial statements.
As part of an audit in accordance with Canadi an generally accepted auditing
standards, we exercise professional judgment and maintain professional skepticism
throughout the audit.
We also:
Identify and assess the risks of material misstatement of the financial statements,
whether due to fraud or error, design and perform audit procedures responsive to
those risks, and obtain audit evidence that is sufficient and appropriate to provide
a basis for our opinion.
The risk of not detecting a material misstatement resulting from fraud is higher
than for one resulting from error, as fraud may involve collusion, forgery,
intentional omissions, misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design
audit procedures that are appropriate in the circumstances, but not for the
purpose of expressing an opinion on the effectiveness of the Entity's internal
control.
Evaluate the appropriateness of accounting policies used and the reasonableness
of accounting estimates and related disclosures made by management.
542021 Annual Report|Minto Apartment REIT 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 Entity's ability to continue as a going concern. If we conclude that a
material uncertainty exists, we are required to draw attention in our auditors'
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 auditors' report. However, future events
or conditions may cause the Entity 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.
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.
Provide those charged with governance with a statement that we have complied
with relevant ethical requirements regarding independence and communicate with
them all relationships and other matters that may reasonably be thought to bear
on our independence, and where applicable, related safeguards.
Determine, from the matters communicated with those charged with governance,
those matters that were of most significance in the audit of the financial
statements of the current period and are therefore the key audit matters. We
describe these matters in our auditors' 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 auditors' report
because the adverse consequences of doing so would reasonably be expected to
outweigh the public interest benefits of such communication.
Chartered Professional Accountants, Licensed Public Accountants
The engagement partner on the audit resulting in this auditors' report is Thomas
Rothfischer.
Toronto, Canada
March 8, 2022
55|2021 Annual ReportMinto Apartment REIT Minto Apartment Real Estate Investment Trust
Consolidated Balance Sheets
(in thousands of Canadian dollars, except Unit and per Unit amounts)
Note
December 31, 2021
December 31, 2020
Assets
Investment properties
Loans receivable from related parties
Prepaid expenses and other assets
Resident and other receivables
Cash
Liabilities and Unitholders' Equity
Liabilities
Class B LP Units
Class C LP Units
Mortgages
Credit facility
Tenant rental deposits
Due to related parties
Accounts payable and accrued liabilities
Unitholders' equity
Contingencies and commitments
3
11
6
7
8
9
10
10
11
12
17
$
$
$
$
$
2,360,565 $
63,312
11,898
2,088
2,851
2,440,714 $
498,415 $
214,069
626,120
51,754
10,136
1,922
28,297
1,430,713 $
2,138,101
41,988
18,538
2,050
2,607
2,203,284
463,806
219,885
598,079
31,948
8,965
10,039
20,338
1,353,060
1,010,001
850,224
2,440,714 $
2,203,284
See accompanying notes to the consolidated financial statements.
562021 Annual Report|Minto Apartment REIT Minto Apartment Real Estate Investment Trust
Consolidated Statements of Net Income and Comprehensive Income
For the years ended December 31, 2021 and 2020
(in thousands of Canadian dollars, except Unit and per Unit amounts)
Revenue from investment properties
15
$
123,547 $
124,929
Note
December 31, 2021
December 31, 2020
Property operating expenses
Property operating costs
Property taxes
Utilities
Property operating income
Other expenses (income)
General and administrative
Finance costs - operations
Fair value loss (gain) on:
Investment properties
Class B LP Units
Interest rate swap
Unit-based compensation
Fees and other income
23,952
13,322
10,026
47,300
76,247
7,602
32,181
(89,188)
34,609
(1,625)
137
(1,630)
(17,914)
23,221
13,346
9,742
46,309
78,620
6,634
33,767
(78,701)
(63,298)
2,429
(249)
(1,600)
(101,018)
16
3
8, 16
6, 16
21
Net income and comprehensive income
$
94,161 $
179,638
See accompanying notes to the consolidated financial statements.
57|2021 Annual ReportMinto Apartment REIT Minto Apartment Real Estate Investment Trust
Consolidated Statements of Changes in Unitholders' Equity
For the years ended December 31, 2021 and 2020
(in thousands of Canadian dollars, except Unit and per Unit amounts)
Balance, December 31, 2019
$
631,434 $
(14,015) $
69,356 $
Note
Units
Distributions
Retained
earnings
Net income and comprehensive income
Distributions
Balance, December 31, 2020
Net income and comprehensive income
Units issued, net of issue costs
Distributions
13
13
13
—
—
—
179,638
(16,189)
—
$
631,434 $
(30,204) $
248,994 $
850,224
—
82,687
—
—
—
(17,071)
94,161
—
—
94,161
82,687
(17,071)
Balance, December 31, 2021
$
714,121 $
(47,275) $
343,155 $
1,010,001
See accompanying notes to the consolidated financial statements.
Total
686,775
179,638
(16,189)
582021 Annual Report|Minto Apartment REIT Minto Apartment Real Estate Investment Trust
Consolidated Statements of Cash Flows
For the years ended December 31, 2021 and 2020
(in thousands of Canadian dollars, except Unit and per Unit amounts)
Note
December 31, 2021
December 31, 2020
Cash provided by (used in):
Operating activities
Net income
Adjustments for:
Finance costs - operations
Fair value loss (gain) on:
Investment properties
Class B LP Units
Interest rate swap
Unit-based compensation
Change in non-cash working capital
Cash provided by operating activities
Financing activities
Proceeds from issuance of Units, net of issue costs
Proceeds from mortgage financing
CMHC premiums paid
Financing costs
Principal repayments on mortgages
Net proceeds (repayments) from credit facility
Distributions on Class B LP Units
Distributions on Class C LP Units, used to repay principal
Distribution on Units
Interest paid
Cash provided by (used in) financing activities
Investing activities
Acquisition of investment property
Capital additions to investment properties
Development of investment properties
Loans advanced to related parties
Interest received
Cash used in investing activities
Change in cash during the year
Cash, beginning of the year
Cash, end of the year
$
94,161 $
16
3
8, 16
6, 16
21
20
10
10
10
9
4
11
$
32,181
(89,188)
34,609
(1,625)
137
1,844
72,119
82,726
49,558
—
(222)
(12,879)
19,806
(10,399)
(5,341)
(16,861)
(25,150)
81,238
(80,007)
(37,429)
(17,482)
(20,024)
1,829
(153,113)
244
2,607
2,851 $
See accompanying notes to the consolidated financial statements.
179,638
33,767
(78,701)
(63,298)
2,429
(249)
(3,729)
69,857
—
225,576
(3,360)
(1,757)
(122,597)
(59,061)
(10,133)
(5,177)
(16,144)
(25,286)
(17,939)
—
(27,095)
(3,731)
(22,188)
1,775
(51,239)
679
1,928
2,607
59|2021 Annual ReportMinto Apartment REIT Minto Apartment Real Estate Investment Trust
Notes to the Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
(in thousands of Canadian dollars, except Unit and per Unit amounts)
1. Description of the entity
Minto Apartment Real Estate Investment Trust (the "REIT") is an unincorporated, open-ended real estate investment trust
established pursuant to a Declaration of Trust dated April 24, 2018, which was amended and restated on June 27, 2018, and is
amended from time to time. The REIT owns, develops and operates a portfolio of income-producing multi-residential rental
properties located in Canada.
The REIT was established under the laws of the Province of Ontario. The principal and registered office of the REIT is 200-180
Kent Street, Ottawa, Ontario.
At December 31, 2021, the REIT's portfolio consists of interests in 30 multi-residential rental properties, including three mixed-
use residential apartment and commercial buildings, all of which are held by Minto Apartment Limited Partnership (the
"Partnership"), which is consolidated by the REIT.
2. Significant accounting policies
(a) Basis of presentation and measurement
These consolidated financial statements have been prepared on a historical cost basis, except for investment properties,
Class B LP Units (Note 2g), Unit‑based compensation and interest rate swap, which have been measured at fair value. The
consolidated financial statements have been presented in Canadian dollars, which is the REIT's functional currency.
The COVID-19 outbreak has resulted in the federal and provincial governments enacting emergency measures to combat
the spread of the virus. These measures have included the implementation of travel bans, self-imposed quarantine periods
and social distancing, and have caused material disruption to businesses globally, resulting in an economic slowdown. With
the vast majority of the Canadian population vaccinated, businesses, offices and post-secondary institutions have slowly
resumed operations, albeit at a lower-than-normal pace. Government agencies continue to monitor COVID-19 case counts
and for the presence of variants which could pose significant risks to the public and require the imposition of new
restrictions to minimize the outbreak. The situation is dynamic and the ultimate duration and magnitude of the impact on
the economy remains unknown. The REIT continues to monitor and assess the impact that COVID-19 will have on its
business activities and financial results, including: rental income, occupancy, turnover, cash collections from tenants,
future demand and market rents, all of which impact the valuation of investment properties.
The REIT has used all information available as at December 31, 2021 that it considers relevant in determining the potential
impact of the COVID-19 pandemic on the carrying amounts of assets and liabilities, earnings for the year and risks disclosed
in the consolidated financial statements for the years ended December 31, 2021 and 2020. The estimates and judgements
that could be most significantly impacted by COVID-19 include those underlying the valuation of investment properties and
the estimated credit losses on accounts receivable. Actual results could differ from those estimates. Investment properties
(Note 3) and risk management (Note 18) include disclosures of the potential impacts of COVID-19 on fair value of
investment properties and liquidity risk.
(b) 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") and using the accounting policies
described herein.
These consolidated financial statements were approved by the Board of Trustees of the REIT and authorized for issuance
on March 8, 2022.
602021 Annual Report|Minto Apartment REIT Minto Apartment Real Estate Investment Trust
Notes to the Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
(in thousands of Canadian dollars, except Unit and per Unit amounts)
(c) Basis of consolidation
The consolidated financial statements include the financial statements of the REIT and its subsidiaries, including the
Partnership. Subsidiaries are consolidated from the date of acquisition, being the date on which the REIT obtains control,
and continue to be consolidated until the date when control is lost. Control exists when the REIT is exposed to, or has
rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power
over the entity. The accounting policies of subsidiaries have been modified when necessary to align them with the policies
adopted by the REIT. All intra‑group balances, transactions and unrealized gains and losses are eliminated in full upon
consolidation.
(d) Business combinations
At the time of acquisition of property, whether through a controlling share investment or directly, the REIT considers
whether a transaction results in an asset acquisition or a business combination. The amendments to IFRS 3, Business
Combinations ("IFRS 3"), adopted on January 1, 2020, include an election to use a concentration test. This is a simplified
assessment that results in an asset acquisition if substantially all of the fair value of the gross assets is concentrated in a
single identifiable asset or a group of similar identifiable assets. If the REIT chooses not to apply the concentration test, or
the test is failed, then the assessment focuses on the existence of a substantive process. If no substantive processes are
acquired, the acquisition is treated as an asset acquisition rather than a business combination.
The cost of a business combination is measured at the fair value of the assets given, equity instruments issued and
liabilities incurred or assumed at the acquisition date. Identifiable assets acquired and liabilities and contingent liabilities
assumed in a business combination are measured initially at fair value at the date of acquisition. The REIT recognizes assets
or liabilities, if any, resulting from a contingent consideration arrangement at their acquisition date fair value and such
amounts form part of the cost of the business combination.
Subsequent changes in the fair value of contingent consideration arrangements are recognized in the consolidated
statements of net income and comprehensive income. The difference between the purchase price and the fair value of the
acquired identifiable net assets and liabilities is goodwill. On the date of acquisition, positive goodwill is recorded as an
asset. A bargain purchase gain is recognized immediately in the consolidated statements of net income and comprehensive
income. The REIT expenses transaction costs associated with business combinations in the period incurred.
When an acquisition does not meet the criteria for business combination accounting treatment, it is accounted for as an
acquisition of a group of assets and liabilities, the cost of which includes transaction costs that are allocated upon initial
recognition to the assets and liabilities acquired based upon their relative fair values.
Measurement period adjustments are adjustments that arise from additional information obtained during the
“measurement period”, which cannot exceed one year from the acquisition date, about facts and circumstances that
existed at the acquisition date. Subsequent changes in fair value of contingent consideration classified as assets or
liabilities that do not qualify as measurement period adjustments are recognized as a gain or loss in the consolidated
statements of net income and comprehensive income.
(e)
Joint arrangements
The REIT has joint arrangements in and joint control of certain investment properties which it manages. The REIT has
assessed the nature of its joint arrangements and determined them to be joint operations. The REIT accounts for joint
operations by recognizing in relation to its interest its share of revenues, expenses, assets and liabilities, which are
included in their respective captions on the consolidated balance sheets and consolidated statements of net income and
comprehensive income. All balances and effects of transactions between joint operations and the REIT have been
eliminated to the extent of the REIT's interest in the joint operations.
61|2021 Annual ReportMinto Apartment REIT Minto Apartment Real Estate Investment Trust
Notes to the Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
(in thousands of Canadian dollars, except Unit and per Unit amounts)
(f)
Investment properties
The REIT uses the fair value method to account for real estate classified as investment property. Property that is held for
long term rentals or for capital appreciation or both is classified as investment property. Investment property also includes
property that is being constructed or developed for future use as investment property and land held for future
development to earn rental income. Subsequent capital expenditures are added to the carrying value of the investment
properties only when it is probable that future economic benefits will flow to the property and the cost can be measured
reliably. All repairs and maintenance costs are expensed as incurred.
The acquisition of investment properties is initially measured at cost including directly attributable acquisition costs,
except when acquired through a business combination, where such costs are expensed as incurred. Directly attributable
acquisition costs include professional fees, land transfer taxes and other transaction costs.
After initial recognition, investment properties are carried at fair value, which is determined based on available market
evidence at each reporting date, including capitalization rates that reflect the characteristics, location and market of each
property. Gains or losses arising from changes in fair value are included in the consolidated statements of net income and
comprehensive income during the period in which they arise. When an investment property is disposed of, the gain or loss
is determined as the difference between the disposal proceeds, net of selling costs and the carrying amount of the
property and is recognized in the consolidated statements of net income and comprehensive income in the period of
disposal.
Fair value for residential properties is determined using the direct capitalization approach by applying an appropriate
capitalization rate which reflects the characteristics, location and market of each property to the estimated 12 month
stabilized forecasted net operating income for each property, and deducting estimated aggregate future capital
expenditures. Estimated 12 month stabilized forecasted net operating income is based on the respective property's
forecasted results, adjusted to reflect market occupancy rates and expenditure levels. Fair value is determined based on
internal valuation models.
Fair value for commercial properties is determined using the discounted future cash flow approach over a term of ten
years plus a terminal value. Discount rates and terminal capitalization rates reflect the characteristics, location and market
of each property. Future cash flows are based on estimated rental revenue from future leases less related estimated future
cash outflows. Fair value is determined based on internal valuation models.
Fair value for land held for development is determined by reference to comparable market prices for similar assets.
Fair value for land under development is determined by reference to comparable market prices for similar assets plus
development costs incurred to date. These costs include costs directly attributable to the development, construction costs,
property taxes, directly attributable labour costs and borrowing costs on both specific and general debt. Direct and indirect
borrowing costs, development costs and property taxes are capitalized when the activities necessary to prepare an asset
for development or redevelopment begin, and continue until the date that construction is substantially complete and all
necessary occupancy and related permits have been received, whether or not the space is leased. Capitalization of
borrowing costs is suspended if there are prolonged periods when development activity is interrupted.
Interest is capitalized using the REIT's weighted average cost of borrowing after adjusting for borrowing associated with
specific developments. Where borrowing is associated with specific developments, the amount capitalized is the gross
interest incurred on such borrowing less any investment income arising on temporary investment of such borrowing.
As part of the internal valuation process, the REIT considers external valuations performed by independent national real
estate valuation firms for a cross-section of properties that represent different geographical locations across the REIT’s
portfolio. On a quarterly basis, Management reviews and updates, as deemed necessary, the valuation models to reflect
current market data.
622021 Annual Report|Minto Apartment REIT Minto Apartment Real Estate Investment Trust
Notes to the Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
(in thousands of Canadian dollars, except Unit and per Unit amounts)
(g) Financial instruments
Financial instruments are generally measured at fair value on initial recognition. The classification and measurement of
financial assets consists of the following categories: (i) measured at amortized cost, (ii) fair value through profit and loss
("FVTPL"), and (iii) fair value through other comprehensive income (‘‘FVTOCI’’). Financial assets classified at amortized cost
are measured using the effective interest method. Financial assets classified as FVTPL are measured at fair value with gains
and losses recognized in the consolidated statements of net income and comprehensive income. Financial assets classified
as FVTOCI are measured at fair value with gains or losses recognized through other comprehensive income, except for
gains and losses pertaining to impairment or foreign exchange which are recognized through the consolidated statements
of net income and comprehensive income.
The classification and measurement of financial liabilities consists of the following categories: (i) measured at amortized
cost and (ii) FVTPL. Financial liabilities classified at amortized cost are measured using the effective interest method.
Financial liabilities classified as FVTPL are measured at fair value with changes in fair value attributable to changes in the
credit risk of the liability recognized in other comprehensive income, and the remaining amount of change in fair value
recognized in the consolidated statements of net income and comprehensive income.
The REIT has made the following classifications for its financial instruments:
Amount
Loans receivable from related parties
Restricted cash
Interest rate swap
Resident and other receivables
Cash
Class B LP Units
Class C LP Units
Mortgages
Credit facility
Tenant rental deposits
Due to related parties
Accounts payable and accrued liabilities
Measurement
Amortized cost
Amortized cost
FVTPL
Amortized cost
Amortized cost
FVTPL
Amortized cost
Amortized cost
Amortized cost
Amortized cost
Amortized cost
Amortized cost
The REIT 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. The REIT
derecognizes a financial liability when, and only when, the REIT's obligations are discharged, canceled or they expire. The
difference between the carrying amount of the financial liability derecognized and the consideration paid and payable is
recognized in the consolidated statements of net income and comprehensive income.
Transaction costs other than those related to financial instruments classified as FVTPL, which are expensed as incurred, are
capitalized to the carrying amount of the instrument and amortized using the effective interest method. These costs
include interest, amortization of discounts or premiums relating to borrowings, fees and commissions paid to agents,
brokers and advisers, transfer taxes and duties, and a portion of Canada Mortgage and Housing Corporation ("CMHC")
insurance premiums related to current mortgages.
Units
Trust units of the REIT ("Units") are redeemable at the holder's option and therefore are considered to be a puttable
instrument in accordance with IAS 32, Financial Instruments: Presentation ("IAS 32"). Puttable instruments are required to
be accounted for as financial liabilities, except where certain conditions are met in accordance with IAS 32, in which case
the puttable instruments may be presented as equity. The Units meet the exemption conditions of IAS 32 and are
presented as equity.
63|2021 Annual ReportMinto Apartment REIT Minto Apartment Real Estate Investment Trust
Notes to the Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
(in thousands of Canadian dollars, except Unit and per Unit amounts)
Units represent a Unitholder's proportionate undivided beneficial interest in the REIT. No Unit has any preference or
priority over another. No Unitholder has or is deemed to have any right of ownership in any of the assets of the REIT. Each
Unit confers the right to one vote at any meeting of Unitholders and to participate pro rata in any distributions and, on
liquidation, to a pro rata share of the residual net assets remaining after preferential claims thereon of debtholders.
The REIT does not report an earnings per unit calculation, as per IAS 33, Earnings Per Share, as the Units meet the
definition of a financial liability under IAS 32.
Unitholders have the right to redeem their Units at the lesser of (i) 90% of the market price of the Units and (ii) 100% of
the closing market price on the redemption date. The redemption price will be satisfied by cash up to a limit of $50 for all
redemptions in a calendar month, which can be waived at the discretion of the REIT's Trustees.
Class B LP Units
The Class B units of the Partnership ("Class B LP Units") are economically equivalent to Units, receive distributions equal to
the distributions paid on Units and are exchangeable at the holder’s option into Units. One Special Voting Unit in the REIT
is issued to the holder of Class B LP Units for each Class B LP Unit held, which entitles the holder to one vote per Special
Voting Unit at any meeting of the Unitholders. The limited IAS 32 exception for presentation as equity does not extend to
the Class B LP Units. As a result, the Class B LP Units have been classified as financial liabilities and are measured at FVTPL.
The fair value of the Class B LP Units is measured every period by reference to the traded value of the Units, with changes
in measurement recorded in the consolidated statements of net income and comprehensive income. Distributions on the
Class B LP Units are recorded as a finance cost in the consolidated statements of net income and comprehensive income in
the period in which the distributions become payable.
Class C LP Units
The Class C units of the Partnership ("Class C LP Units") provide for monthly distributions from the Partnership to the
holder of such Class C LP Units to be paid in priority to distributions to holders of the Units and Class B LP Units. Due to the
nature of such distributions, the Class C LP Units have been classified as financial liabilities and are carried at amortized
cost. Distributions on the Class C LP Units consist of principal repayments and interest expense, with principal repayments
reducing the outstanding liability and interest expense recorded in finance costs in the consolidated statements of net
income and comprehensive income in the period in which the distributions become payable.
Derivative financial instruments
The REIT uses derivative financial instruments to manage risks from fluctuations in interest rates. All derivative instruments
are designated and valued at FVTPL in the consolidated financial statements.
Impairment of financial assets
The REIT has adopted the practical expedient to estimate the expected credit loss ("ECL") on resident and other receivables
using a provision matrix based on historical credit loss experience adjusted for current and forecasted future economic
conditions. Resident and other receivables are initially measured at fair value and are subsequently measured at amortized
cost less a provision for impairment.
The REIT recognizes loss allowances for ECL on the remaining financial assets measured at amortized cost, unfunded loan
commitments and financial guarantee contracts. The REIT applies a three-stage approach to measure allowance for credit
losses. The REIT measures loss allowance at an amount equal to 12 months of expected losses for performing loans if the
credit risk at the reporting date has not increased significantly since initial recognition (Stage 1) and at an amount equal to
lifetime expected losses on performing loans that have experienced a significant increase in credit risk since origination
(Stage 2) and at an amount equal to lifetime expected losses which are credit impaired (Stage 3).
642021 Annual Report|Minto Apartment REIT Minto Apartment Real Estate Investment Trust
Notes to the Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
(in thousands of Canadian dollars, except Unit and per Unit amounts)
(h) Fair value measurement
The REIT measures financial instruments, such as Class B LP Units, interest rate swap and Unit-based compensation, and
non‑financial assets, such as investment properties, at fair value at each balance sheet date. Fair value is 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 under current market conditions. The fair value measurement is based on the presumption that the
transaction to sell the asset or transfer the liability takes place either:
•
•
In the principal market for the asset or liability; or
In the absence of a principal market, in the most advantageous market for the asset or liability.
The principal or the most advantageous market must be accessible by the REIT.
The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing
the asset or liability assuming that market participants act in their economic best interests.
A fair value measurement of a non‑financial asset takes into account a market participant’s ability to generate economic
benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset
in its highest and best use.
The REIT uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to
measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the consolidated financial statements are
categorized within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the
fair value measurement as a whole:
•
•
•
Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities
Level 2 - Valuation techniques for which the lowest level input that is significant to the fair value
measurement is directly or indirectly observable
Level 3 - Valuation techniques for which the lowest level input that is significant to the fair value
measurement is unobservable
For assets and liabilities that are recognized in the consolidated financial statements on a recurring basis, the REIT
determines whether transfers have occurred between levels in the hierarchy by re‑assessing categorization (based on the
lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.
Cash, restricted cash, resident and other receivables, due to related parties, tenant rental deposits and accounts payable
and accrued liabilities are carried at amortized cost, which, due to their short term nature, approximates fair value.
Additionally, the credit facility is carried at amortized cost, which, due to its variable rate, approximates fair value.
The REIT estimates the fair value of its mortgages and Class C LP Units based on the rates that could be obtained for similar
debt instruments with similar terms and maturities. Their fair value qualifies as level 2 in the fair value hierarchy above.
The fair value of Class B LP Units and Unit-based compensation is measured every period by reference to the traded value
of Units and is considered Level 2 in the fair value hierarchy.
The fair value of the interest rate swap is determined using widely accepted valuation techniques, including discounted
cash flow analysis on expected cash flows of the derivatives, using observable market-based inputs including interest rate
curves and implied volatilities, and is considered level 2 in the fair value hierarchy.
The fair value of the loans receivable from related parties is determined by reference to rates that could be obtained for
similar instruments with similar terms and maturities and is considered level 2 in the fair value hierarchy.
There were no transfers of assets or liabilities between fair value levels during the period presented herein.
65|2021 Annual ReportMinto Apartment REIT Minto Apartment Real Estate Investment Trust
Notes to the Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
(in thousands of Canadian dollars, except Unit and per Unit amounts)
(i) CMHC premiums
CMHC mortgage insurance premiums provide coverage over the loan amortization period, typically 25 to 40 years. The
portion related to the term of currently outstanding mortgages is accounted for as a financing charge and amortized over
the life of respective mortgages using the effective interest method. The remaining portion of the CMHC mortgage
insurance premiums is classified as a prepaid expense.
(j) Restricted cash
Restricted cash consists of tenant security deposits and a capital asset replacement reserve fund held in trust accounts.
The capital asset replacement reserve fund was established as a condition of a forgivable loan provided by the City of
Toronto to support affordable housing at a certain Toronto property.
(k) Cash
Cash includes cash on hand and cash maintained in bank accounts.
(l)
Income taxes
The REIT is a "mutual fund trust" and a "real estate investment trust" as defined in the Income Tax Act (Canada). Under
current tax legislation, a “real estate investment trust” is entitled to deduct distributions of taxable income such that it is
not liable to pay income taxes provided that its taxable income is fully distributed to Unitholders. The REIT qualifies as a
“real estate investment trust” and intends to make distributions not less than the amount necessary to ensure that the
REIT will not be liable to pay income taxes. Accordingly, no net current tax expenses or current or deferred income tax
asset or liability has been recorded in the consolidated financial statements.
(m) Revenue recognition
The REIT retains substantially all of the risks and benefits of ownership of its investment properties and therefore accounts
for leases with its tenants as operating leases.
Rental revenue includes base rents earned from tenants under operating lease agreements which is allocated to lease
components based on relative stand‑alone selling prices. The stand‑alone selling prices of the rental component are
determined using an adjusted market assessment approach and the stand‑alone selling prices of the service components
are determined using an expected cost plus a margin approach.
Rental revenue from the rental component is recognized on a straight‑line basis over the lease term. When the REIT
provides incentives to its tenants, the cost of incentives is recognized over the lease term, on a straight‑line basis, as a
reduction of revenue.
Revenue from services represents the service component of the REIT’s leases and is accounted for in accordance with IFRS
15, Revenue from Contracts with Customers (‘‘IFRS 15’’). These services consist primarily of the recovery of utility, property
maintenance and amenity costs where the REIT has determined it is acting as a principal and is recognized over time when
the services are provided. Payments are due at the beginning of each month and any payments made in advance of
scheduled due dates are recorded as contract liabilities.
Management fees are earned from asset, project and property management of jointly controlled properties. Management
fees are recorded in fees and other income as the services are provided. Payments for property management fees are due
at the beginning of each month, asset management fees are due at the beginning of each quarter and project management
fees are due 30 days in arrears.
(n) Expenses
Operating expenses and general and administrative expenses are recognized in the consolidated statements of net income
and comprehensive income in the period in which they are incurred.
662021 Annual Report|Minto Apartment REIT Minto Apartment Real Estate Investment Trust
Notes to the Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
(in thousands of Canadian dollars, except Unit and per Unit amounts)
(o) Finance costs
Finance costs are comprised of interest expense on secured debt and unsecured debt, amortization of mark‑to‑market
adjustments and financing charges, distributions on Class B LP Units and Class C LP Units, fair value loss (gain) on Class B LP
Units and fair value loss (gain) on an interest rate swap. Finance costs associated with financial liabilities presented at
amortized cost are presented in the consolidated statements of net income and comprehensive income using the effective
interest method. Finance costs also includes interest income which is recognized as earned.
(p) Unit-based compensation
The REIT maintains an Amended and Restated Omnibus Equity Incentive Plan (the "Plan") for its Trustees and executives
pursuant to which eligible participants may receive Deferred Units, Performance Units, Restricted Units or other similar
types of security based compensation. Awards under the Plan may be settled by Units issued from treasury or, if so elected
by the participant and subject to the approval of the Board of Trustees, cash payable upon settlement. The grant date
value of the amount payable is recognized as part of general and administrative expenses over the vesting period, with a
corresponding increase in liabilities over the service period related to the award. The grant date value is calculated using
the market price of the Units on the grant date. Market price is defined as the volume weighted average closing price of
the Units on the Toronto Stock Exchange for the five trading days immediately preceding such date. The liability is
remeasured at each reporting date and settlement date using the closing market price of the Units as defined in the Plan
as of the date of measurement. Any changes in the value of the liability are recognized as fair value adjustments through
the consolidated statements of net income and comprehensive income.
(q) Government grant
The REIT receives financial assistance from the government to help fund the development and operation of affordable
rental suites. Government grants are not recognized until there is reasonable assurance that the REIT will comply with the
conditions attached to them and that the grants will be received. In accordance with IAS 20 – Accounting for Government
Grants and Disclosure of Government Assistance (“IAS 20”), grant proceeds related to development properties will be
recognized in profit or loss on a systematic basis over the periods in which the REIT recognizes revenue or incurs expenses.
(r)
Significant judgments in applying accounting policies
The following are the significant judgments that have been made in applying the REIT’s accounting policies and that have
the most significant effect on the amounts in the consolidated financial statements:
Investment property acquisitions
The REIT must assess whether an acquisition transaction should be accounted for as an asset acquisition or a business
combination under IFRS 3. This assessment requires the REIT to make judgments on whether the assets acquired and
liabilities assumed constitute a business as defined in IFRS 3 and if the integrated set of activities, including inputs and
processes acquired, are capable of being conducted and managed as a business and the REIT obtains control of the
business.
Income taxes
The REIT is a "mutual fund trust" and a "real estate investment trust" as defined in the Income Tax Act (Canada). The REIT
is not liable to pay Canadian income taxes provided that its taxable income is fully distributed to Unitholders each year.
The REIT is a "real estate investment trust" if it meets the prescribed conditions under the Income Tax Act (Canada)
relating to the nature of its assets and revenue. The REIT uses judgment in reviewing the real estate investment trust
conditions and assessing their interpretation and application to the REIT’s assets and revenue, and it has determined that it
qualifies as a "real estate investment trust" for the current period.
Interest in joint operations
The REIT assesses whether an arrangement should be accounted for as a joint operation or a joint venture under IFRS 11,
Joint Arrangements. This assessment requires the REIT to make judgments on whether the REIT's rights and obligations
arising from the arrangement constitute a joint operation or a joint venture.
67|2021 Annual ReportMinto Apartment REIT Minto Apartment Real Estate Investment Trust
Notes to the Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
(in thousands of Canadian dollars, except Unit and per Unit amounts)
Recognition of government grants
For acquired residential properties financed through forgivable loans, the REIT assesses whether throughout the remaining
term of forgivable loans the REIT is expected to meet the conditions for forgiveness, that the outflow of economic
resources is not probable and that in accordance with IAS 37 – Provision, Contingent Liabilities and Contingent Assets no
financial liability is required to be recorded. For development properties financed through forgivable loans to support
affordable housing, the REIT assesses whether throughout the remaining term of the forgivable loans there is reasonable
assurance that the REIT will meet the conditions for forgiveness and if this is not the case that the balance that is forgiven
is to be recognized over time.
(s) Significant accounting estimates and assumptions
The REIT makes estimates and assumptions that affect the carrying amounts of assets and liabilities and the reported
amount of income for the period. Actual results could differ from estimates. The estimates and assumptions that have the
most significant effect on the reported amounts in the consolidated financial statements include:
Residential Investment properties valuation
In applying the REIT’s policy with respect to investment properties, significant accounting estimates and assumptions are
required to determine the valuation of the residential properties under the fair value model. Significant accounting
estimates and assumptions used in the REIT's internal valuation model include the estimated 12 month stabilized
forecasted net operating income for each property and the capitalization rates that reflect the characteristics, location and
market for each property.
(t) Adoption of new standards, amendments and interpretations
Interest Rate Benchmark Reform
In August 2020, the IASB issued Interest Rate Benchmark Reform ("IBOR") and the Effects on Financial Reporting – Phase II
(amendments to IFRS 9 – Financial Instruments, IFRS 7 – Financial Instruments: Disclosures, IAS 39 – Financial Instruments:
Recognition and Measurement, IFRS 4 – Insurance Contracts and IFRS 16 – Leases ("IFRS 16")). The objective of the second
phase of the IASB's project was to assist entities in providing useful information about the effects of the transition to
alternative benchmark rates and support preparers in applying the requirements of the IFRS Standards when changes are
made to contractual cash flows or hedging relationships as a result of the transition to an alternative benchmark interest
rate. The amendments affect the basis for determining the contractual cash flows as a result of benchmark interest rate
reform, hedge accounting and disclosures.
The amendments were adopted by the REIT when they became effective on January 1, 2021. The adoption of this standard
did not have a material impact on the REIT’s consolidated financial statements.
(u) Future changes in accounting standards
Classification of Liabilities as Current or Non-Current (Amendments to IAS 1)
On January 23, 2020, the IASB issued amendments to IAS 1 – Presentation of Financial Statements, providing a more
general approach to the classification of liabilities based on the contractual agreements in place at the reporting date. The
amendments apply to annual reporting periods beginning on or after January 1, 2023. Earlier adoption is permitted.
The amendments to IAS 1 affect only the presentation of liabilities in the balance sheet and seek to clarify that the
classification of liabilities as current or non-current should be based on the rights that are in existence at the end of the
reporting period. Further, the amendments make clear that classification is unaffected by expectations about whether an
entity will exercise its right to defer settlement of a liability and that the settlement of a liability refers to the transfer to
the counterparty of cash, equity instruments, other assets or services.
The REIT intends to adopt the amendments in its consolidated financial statements beginning on January 1, 2023, when
the amendments become effective. The REIT is assessing the potential impact of the amendments, however does not
expect them to have a material impact on the REIT's consolidated financial statements.
682021 Annual Report|Minto Apartment REIT Minto Apartment Real Estate Investment Trust
Notes to the Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
(in thousands of Canadian dollars, except Unit and per Unit amounts)
Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2)
On February 12, 2021, the IASB issued amendments to IAS 1 to assist entities in determining which accounting policies to
disclose in the financial statements. The amendments apply to annual reporting periods beginning on or after January 1,
2023. Earlier adoption is permitted.
The amendments to IAS 1 require that an entity disclose its material accounting policies, instead of its significant
accounting policies. Further amendments explain how an entity can identify a material accounting policy.
The REIT intends to adopt the amendments in its consolidated financial statements beginning on January 1, 2023, when
the amendments become effective. The REIT is assessing the potential impact of the amendments, however does not
expect them to have a material impact on the REIT's consolidated financial statements.
Definition of Accounting Estimates (Amendments to IAS 8)
On February 12, 2021, the IASB issued amendments to IAS 8 – Accounting Policies, Changes in Accounting Estimates and
Errors, to assist entities to distinguish between accounting policies and accounting estimates. The amendments apply to
annual periods beginning on or after January 1, 2023. Earlier adoption is permitted.
The amendments to IAS 8 replace the definition of a "change in accounting estimates" with a definition of "accounting
estimates". Under the new definition, accounting estimates are “monetary amounts in financial statements that are
subject to measurement uncertainty”. Entities develop accounting estimates if accounting policies require items in
financial statements to be measured in a way that involves measurement uncertainty. The amendments confirm that a
change in an accounting estimate that results from new information or new developments is not the correction of an error.
The REIT intends to adopt the amendments in its consolidated financial statements beginning on January 1, 2023, when
the amendments become effective. The REIT is assessing the potential impact of the amendments, however does not
expect them to have a material impact on the REIT's consolidated financial statements.
3. Investment properties
The following table presents the change in investment properties by type:
Balance, December 31, 2019
Additions
Capital expenditures
Development expenditures
Fair value gain (loss)
Other
Residential
properties
1,979,657 $
$
Commercial
properties
Land under
development
22,840 $
13,831 $
Total
2,016,328
29,302
9,444
79,649
—
78
—
(428)
—
—
2,643
(520)
1,605
29,380
12,087
78,701
1,605
Balance, December 31, 2020
$
2,098,052 $
22,490 $
17,559 $
2,138,101
Additions
Acquisition (Note 4)
Capital expenditures
Development expenditures
Fair value gain (loss)
82,604
36,404
—
89,433
—
49
—
(3,689)
—
—
14,219
3,444
82,604
36,453
14,219
89,188
Balance, December 31, 2021
$
2,306,493 $
18,850 $
35,222 $
2,360,565
69|2021 Annual ReportMinto Apartment REIT
Minto Apartment Real Estate Investment Trust
Notes to the Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
(in thousands of Canadian dollars, except Unit and per Unit amounts)
Development expenditures in residential properties for 2020 include costs relating to the reconstruction of the Skyline
Maisonettes following a fire.
For the year ended December 31, 2021, the REIT capitalized $95 (December 31, 2020 - $nil) in interest costs associated with the
REIT's general borrowings to the respective developments using the REIT's weighted average borrowing rate of 2.21%.
The fair value methodology for the REIT’s investment properties is considered level 3, as significant unobservable inputs are
required to determine fair value. The fair value of investment properties is based on internal valuations and as at December 31,
2021, the entire portfolio was internally valued. The REIT's internal valuation team consists of qualified individuals who hold
recognized relevant professional qualifications and have recent experience in the location and category of the respective
properties.
The REIT also engaged leading independent national real estate appraisal firms with representation and expertise across
Canada, and specifically in the markets in which the REIT operates, in order to ensure that every REIT property is externally
appraised at least once every three years. These external appraisals were used by Management to assist in the validation of the
market assumptions and market data used as part of its internal valuation model. For the year ended December 31, 2021, the
REIT obtained external property appraisals representing approximately 52% (December 31, 2020 - 54%) of the REIT's
investment properties.
The REIT continues to review market capitalization, discount and terminal capitalization rates, as well as its future cash flow
projections and their impact on the valuation of its properties in light of the COVID-19 pandemic (Note 2). The carrying value of
the REIT's investment properties reflects Management's best estimate of fair value in terms of the assessed highest and best
use as at December 31, 2021. It is not possible to forecast with certainty the duration or full scope of the economic impact
COVID-19 will have on the REIT's business and operations, both in the short and long term. Any long-term effects on market
rents, occupancy, turnover and future demand would ultimately impact the underlying valuation of investment properties and
such impact may be material.
Fair value for residential properties is determined using the direct capitalization approach and includes a deduction for the
estimated aggregate future capital expenditures. For the year ended December 31, 2021, the aggregate future capital
expenditures deducted was $83,852 (December 31, 2020 - $71,489) in determining the fair value of residential properties.
The following table summarizes the significant unobservable inputs in determining fair value of residential properties:
Significant unobservable inputs
Capitalization rates
Inter-relationship between significant unobservable inputs and fair value measurement
There is an inverse relationship between the capitalization rates and the fair value; in other
words, the higher the capitalization rates, the lower the estimated fair value.
Estimated 12 month stabilized
forecasted net operating income
("NOI")
There is a direct relationship between the estimated 12 month stabilized forecasted NOI
and the fair value; in other words, the higher the estimated 12 month stabilized forecasted
NOI, the higher the estimated fair value.
The following table summarizes the capitalization rates used in determining the fair value of the REIT's residential properties:
Capitalization rate
December 31, 2021
December 31, 2020
Min
3.13%
Max
4.50%
Weighted
average
3.60%
Min
3.25%
Max
4.25%
Weighted
average
3.81%
702021 Annual Report|Minto Apartment REIT Minto Apartment Real Estate Investment Trust
Notes to the Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
(in thousands of Canadian dollars, except Unit and per Unit amounts)
The following table summarizes the sensitivity of the fair value of residential properties to changes in capitalization rates and
estimated 12 month stabilized forecasted NOI as at December 31, 2021:
December 31, 2021
Capitalization rate
-50 basis points
-25 basis points
Base rate
+25 basis points
+50 basis points
-3 %
-1 %
NOI
+1 %
+3 %
$
2,608,163 $
2,407,561
2,234,782
2,084,414
1,952,361
2,663,669 $
2,458,930
2,282,589
2,129,120
1,994,345
2,691,421 $
2,484,615
2,306,493
2,151,474
2,015,337
2,719,174 $
2,510,300
2,330,396
2,173,827
2,036,329
2,774,679
2,561,669
2,378,203
2,218,533
2,078,312
The following table summarizes the sensitivity of the fair value of residential properties to changes in capitalization rates and
estimated 12 month stabilized forecasted NOI as at December 31, 2020:
December 31, 2020
Capitalization rate
-50 basis points
-25 basis points
Base rate
+25 basis points
+50 basis points
-3 %
-1 %
NOI
+1 %
+3 %
$
2,350,915 $
2,180,741
2,032,885
1,903,225
1,788,598
2,400,916 $
2,227,234
2,076,329
1,943,997
1,827,006
2,425,917 $
2,250,481
2,098,052
1,964,382
1,846,210
2,450,918 $
2,273,727
2,119,774
1,984,768
1,865,414
2,500,920
2,320,221
2,163,218
2,025,539
1,903,821
4. Acquisition of investment property
The REIT completed the following investment property acquisition for the year ended December 31, 2021, which was accounted
for as an asset acquisition and has contributed to the operating results effective from the acquisition date.
Property
4530 Chemin de la Côte-des-Neiges
Montreal, QC ("Le Hill-Park")
Date of
acquisition
Total
acquisition cost
Mortgage
financing
Interest rate
and maturity
Ownership
interest
December 7, 2021 $
82,604 $
41,000
1.22%
April 1, 2022
100%
Cash used in the acquisition of investment property was as follows:
Total acquisition cost
Transaction costs payable
Working capital assumed
Cash consideration paid on close
There were no acquisitions for the year ended December 31, 2020.
December 31, 2021
(82,604)
2,431
166
(80,007)
$
$
71|2021 Annual ReportMinto Apartment REIT Minto Apartment Real Estate Investment Trust
Notes to the Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
(in thousands of Canadian dollars, except Unit and per Unit amounts)
5. Joint operations
The REIT jointly owns and operates three investment properties. The REIT has determined them to be joint operations.
Accordingly, the consolidated financial statements of the REIT include its share of revenues, expenses, assets and liabilities from
the joint operations. The REIT's ownership interests in the joint operations are as follows:
Property
Leslie York Mills
Rockhill
High Park Village
Date of acquisition
May 1, 2019
May 7, 2019
August 1, 2019
Location
Toronto, ON
Montreal, QC
Toronto, ON
Ownership interest
50%
50%
40%
6. Prepaid expenses and other assets
Prepaid expenses
Prepaid CMHC premiums
Restricted cash
Funds held in escrow (Note 10)
Deposits and other prepayments
Interest rate swap
Current
Non-current
December 31, 2021
2,305 $
6,940
1,218
—
1,128
307
11,898 $
3,970
7,928
11,898 $
December 31, 2020
1,467
6,940
1,180
8,558
393
—
18,538
11,197
7,341
18,538
$
$
$
The following table is a summary of the REIT's interest rate swap and the respective fair value of the asset (liability):
Instrument
Maturity
Fixed
rate
Original notional
amount
Notional
amount
December 31, 2021 December 31, 2020
Interest rate swap1
April 2026
3.38%
$42,360
$37,262
$
307 $
(1,318)
The fair value of the interest rate swap is determined using widely accepted valuation techniques, including discounted cash
flow analysis on expected cash flows of the derivatives, using observable market-based inputs including interest rate curves and
implied volatilities, and is considered level 2 in the fair value hierarchy.
The following table summarizes the beginning and ending fair value of the swap for the periods presented:
Opening balance
Non-cash movement
Fair value gain (loss)
Closing balance
December 31, 2021
(1,318) $
1,625
307 $
December 31, 2020
1,111
(2,429)
(1,318)
$
$
1 The REIT has a 40% ownership interest in this contract through the ownership of a joint operation.
722021 Annual Report|Minto Apartment REIT Minto Apartment Real Estate Investment Trust
Notes to the Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
(in thousands of Canadian dollars, except Unit and per Unit amounts)
7. Resident and other receivables
Current
Resident receivables
Other receivables
Less: Allowance for credit losses
December 31, 2021
December 31, 2020
$
$
1,388 $
1,294
(594)
2,088 $
1,240
1,422
(612)
2,050
There is no significant concentration of credit risk with respect to resident receivables as the REIT has a high volume of tenants
with individually small monthly rent amounts.
8. Class B LP Units
The following table reconciles the changes in cash flows and outstanding units for the Class B LP Units of the Partnership:
Balance, December 31, 2019
Non-cash movement
Fair value gain
Balance, December 31, 2020
Non-cash movement
Fair value loss
Balance, December 31, 2021
Class B LP Units
22,769,073 $
—
22,769,073 $
—
22,769,073 $
$
527,104
(63,298)
463,806
34,609
498,415
For the year ended December 31, 2021, distributions of $10,436 (December 31, 2020 - $10,162) to Class B LP Unitholders were
declared.
The fair value methodology for the Class B LP Units is considered level 2 within the fair value hierarchy.
9. Class C LP Units
Class C LP Units
Unamortized mark-to-market adjustments
Current
Non-current
December 31, 2021
December 31, 2020
212,183 $
1,886
214,069 $
5,982
208,087
214,069 $
217,524
2,361
219,885
5,816
214,069
219,885
$
$
$
73|2021 Annual ReportMinto Apartment REIT Minto Apartment Real Estate Investment Trust
Notes to the Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
(in thousands of Canadian dollars, except Unit and per Unit amounts)
The following table reconciles the changes in cash flows and outstanding units for the Class C LP Units of the Partnership:
Balance, December 31, 2019
Cash flows
Distributions used to repay principal
Non-cash movement
Amortization of mark-to-market adjustments
Balance, December 31, 2020
Cash flows
Distributions used to repay principal
Non-cash movement
Amortization of mark-to-market adjustments
Class C LP Units
22,978,700 $
—
—
—
22,978,700 $
—
—
—
Balance, December 31, 2021
22,978,700 $
$
225,537
(5,177)
(475)
(5,652)
219,885
(5,341)
(475)
(5,816)
214,069
For the year ended December 31, 2021, the REIT made distributions of $6,743 (December 31, 2020 - $6,907) to the Class C LP
Unitholder that were accounted for as finance costs.
The mortgages of investment properties to which the distributions on the Class C LP Units relate bear a weighted average
contractual interest rate of 3.16% (December 31, 2020 - 3.16%) and mature at various dates between 2023 and 2030
(December 31, 2020 - 2023 and 2030).
Distributions on Class C LP Units as at December 31, 2021, excluding unamortized mark-to-market adjustments, are due as
follows:
2022
2023
2024
2025
2026
2027 and thereafter
$
5,510
50,234
50,499
63,541
1,283
41,116
Fair value for the Class C LP Units is calculated based on current market rates plus risk-adjusted spreads on discounted cash
flows. As at December 31, 2021, the current market rates plus risk-adjusted spreads ranged from 1.65% to 3.26% (December
31, 2020 - 1.06% to 2.49%) and the fair value of the Class C LP Units was $218,599 (December 31, 2020 - $232,188) and is
considered level 2 within the fair value hierarchy.
742021 Annual Report|Minto Apartment REIT Minto Apartment Real Estate Investment Trust
Notes to the Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
(in thousands of Canadian dollars, except Unit and per Unit amounts)
10. Secured Debt
Mortgages - fixed rate¹
Unamortized mark-to-market adjustment
Unamortized deferred financing costs
Total mortgages
Credit facility2
Current
Non-current
December 31, 2021
627,534 $
1,152
(2,566)
626,120
51,754
677,874 $
140,862
537,012
677,874 $
December 31, 2020
599,413
1,446
(2,780)
598,079
31,948
630,027
66,105
563,922
630,027
$
$
$
¹ Fixed rate mortgages are secured by investment properties, bear interest at a weighted average contractual interest rate of
2.71% (December 31, 2020 - 2.85%) and mature at various dates from 2022 through 2030 (December 31, 2020 - 2021 through
2030). The fixed rate mortgages include a $37,262 (December 31, 2020 - $38,234) variable interest mortgage fixed through an
interest rate swap.
2 The REIT has a committed revolving credit facility of $200,000 (December 31, 2020 - $200,000) that is secured by several
investment properties, matures on July 3, 2024 and is used to fund working capital requirements, acquisitions, letters of credit
and for general corporate purposes. At December 31, 2021, $52,196 (December 31, 2020 - $31,948) was utilized and the
remaining amount of $147,804 (December 31, 2020 - $168,052) of this facility was available in accordance with its terms and
conditions. The credit facility bears interest at one month bankers' acceptance plus 175 bps or prime plus 75 bps and as at
December 31, 2021, the weighted average variable interest rate was 2.19% (December 31, 2020 - 2.25%).
The secured debt balances at December 31, 2021, excluding unamortized mark-to-market adjustments and unamortized
deferred financing costs, are due as follows:
2022
2023
2024
2025
2026
2027 and thereafter
$
140,647
58,882
109,625
49,684
40,187
280,263
75|2021 Annual ReportMinto Apartment REIT Minto Apartment Real Estate Investment Trust
Notes to the Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
(in thousands of Canadian dollars, except Unit and per Unit amounts)
The following tables reconcile the changes in cash flows for secured debt:
Balance, December 31, 2019
$
487,876 $
1,741 $
(310) $
91,009 $
580,316
Unamortized
mark-to-market
adjustments
Unamortized
deferred
financing costs
Mortgages
Credit facility
Total
Cash flows
Issued
Repayments
Non-cash movement
Funds held in escrow1
Financing costs
Deferred financing amortization
Amortization of mark-to-market
adjustment
225,576
(122,597)
102,979
8,558
—
—
—
8,558
—
—
—
—
—
—
(295)
(295)
(1,757)
—
(1,757)
56,939
(116,000)
(59,061)
280,758
(238,597)
42,161
—
(968)
255
—
(713)
—
—
—
—
—
8,558
(968)
255
(295)
7,550
Balance, December 31, 2020
$
599,413 $
1,446 $
(2,780) $
31,948 $
630,027
Cash flows
Issued1
Repayments
Non-cash movement
Funds held in escrow1
Deferred financing amortization
Amortization of mark-to-market
adjustment
49,558
(12,879)
36,679
(8,558)
—
—
(8,558)
—
—
—
—
—
(294)
(294)
(138)
—
(138)
—
352
—
352
102,806
(83,000)
19,806
—
—
—
—
152,226
(95,879)
56,347
(8,558)
352
(294)
(8,500)
Balance, December 31, 2021
$
627,534 $
1,152 $
(2,566) $
51,754 $
677,874
As at December 31, 2021 and December 31, 2020, the REIT was in compliance with all financial covenants relating to its debt
obligations.
Fair value of fixed rate mortgages is calculated based on current market rates plus risk-adjusted spreads on discounted cash
flows. As at December 31, 2021, the current market rates plus risk-adjusted spreads ranged from 1.03% to 3.46% (December
31, 2020 - 0.95% to 2.81%) and the fair value of fixed rate mortgages was $634,412 (December 31, 2020 - $629,898) and is
considered level 2 within the fair value hierarchy. Given the variable nature of the credit facility, its carrying value approximates
its fair value.
1 Proceeds of $8,558 from a fixed rate mortgage that were held in escrow since July 2020 were released in September 2021.
762021 Annual Report|Minto Apartment REIT Minto Apartment Real Estate Investment Trust
Notes to the Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
(in thousands of Canadian dollars, except Unit and per Unit amounts)
11. Related-party transactions
In the normal course of operations, the REIT enters into various transactions with related parties. In addition to the related
party transactions disclosed elsewhere in these consolidated financial statements, related party transactions include:
(a) Administrative Support Agreement
On July 3, 2018, the REIT and Minto Properties Inc. ("MPI") entered into a five-year renewable Administrative Support
Agreement ("ASA"). The ASA provides the REIT with certain advisory, transaction and support services, including clerical and
administrative support, operational support for the administration of day-to-day activities of the REIT and office space. These
services are provided on a cost recovery basis, subject to a maximum for all general and administrative expenses, excluding
public company costs, of 32 bps of the gross book value of the REIT's assets.
For the year ended December 31, 2021, the REIT incurred $2,260 (December 31, 2020 - $1,695) for services rendered by MPI
and its affiliates under the ASA.
(b) Loans receivable from related parties
Project
99 Fifth Avenue,
Ottawa, ON
("Fifth and Bank")
Lonsdale Avenue,
North Vancouver, BC
("Lonsdale Square")
Beechwood Avenue,
Ottawa, ON
("Beechwood")
810 Kingsway,
Vancouver, BC
("810 Kingsway")
Related Parties
Commitment1
Affiliate of MPI
$
30,000
Interest Rate and
Maturity
6% per annum
March 31, 2022
Limited partnership
jointly owned by
MPI and a
subsidiary of
Darwin Properties
$
14,000
7% per annum
May 30, 2024
Affiliate of MPI
$
51,400
6% per annum
December 31, 2025
MPI
$
19,650
6% per annum
August 1, 2024
December 31, 2021 December 31, 2020
$
$
$
$
30,000 $
30,000
12,855 $
11,988
10,094 $
10,363 $
—
—
In connection with these financings, the REIT will have the exclusive option to purchase the property at Fifth and Bank, Lonsdale
Square and Beechwood, and MPI's ownership interest in 810 Kingsway upon project stabilization at 95% of its then-appraised
fair market value as determined by independent and qualified third-party appraisers.
1 All commitments include amounts to fund interest costs.
77|2021 Annual ReportMinto Apartment REIT Minto Apartment Real Estate Investment Trust
Notes to the Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
(in thousands of Canadian dollars, except Unit and per Unit amounts)
The following table shows the movement of loans receivable from related parties:
Opening balance
Cash flows
Advances
Interest received
Non-cash movement
Interest earned
Closing balance
December 31, 2021
$
41,988 $
December 31, 2020
19,922
20,024
(1,800)
3,100
21,324
63,312 $
22,188
(1,739)
1,617
22,066
41,988
$
The fair value of the loans receivable from related parties is determined by reference to current market rates that could be
obtained for similar instruments with similar terms and maturities. As at December 31, 2021 and December 31, 2020, the
carrying value of the loans approximates their fair value and is considered level 2 within the fair value hierarchy.
(c) Due to related parties
Included in due to related parties are the following:
•
Distribution payable of $901 and $561 (December 31, 2020 - $863 and $575) to limited partnerships wholly owned by MPI
on Class B LP Units and Class C LP Units, respectively.
• Working capital receivable of $110 (December 31, 2020 - payable of $211) from MPI and its affiliates.
•
•
Development and construction management fee payable of $535 (December 31, 2020 - payable of $nil) to an affiliate of
MPI.
Distribution payable of $35 (December 31, 2020 - $34) on Units to MPI.
At December 31, 2020, amounts due to related parties included $8,356 payable to MPI for the reconstructed Skyline
Maisonettes. The amount was repaid on April 22, 2021.
(d) Revenue and expenses
•
•
•
•
•
Included in rental revenue for the year ended December 31, 2021 is $716 (December 31, 2020 - $723) of revenue from MPI
and its affiliates as rent for office space, furnished suites, parking and other revenue at certain REIT properties.
Included in property operating expenses for the year ended December 31, 2021 is $713 (December 31, 2020 - $713) paid
to MPI and its affiliates for repairs and maintenance and other expenses at certain REIT properties.
For the year ended December 31, 2021, compensation to key management personnel includes $635 (December 31, 2020 -
$642) paid to executives, Unit-based compensation expense of $1,304 (December 31, 2020 - $1,160) for executives and
Unit-based compensation expense for the grant of Deferred Units to Trustees in lieu of annual retainer and meeting fees of
$560 (December 31, 2020 - $513), respectively. Additional compensation to key management personnel for services
provided to the REIT was paid by MPI and its affiliate.
Included in finance costs for the year ended December 31, 2021 are distributions on Class B LP Units of $10,436 paid or
payable to a limited partnership wholly-owned by MPI. For the year ended December 31, 2020, distributions on Class B LP
Units of $10,162 were paid or payable to MPI and a limited partnership wholly-owned by MPI.
Included in finance costs for the year ended December 31, 2021 are distributions on Class C LP Units of $6,743 (December
31, 2020 - $6,907), paid or payable to a limited partnership wholly-owned by MPI.
782021 Annual Report|Minto Apartment REIT Minto Apartment Real Estate Investment Trust
Notes to the Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
(in thousands of Canadian dollars, except Unit and per Unit amounts)
•
Included in finance costs for the year ended December 31, 2021 is interest income of $3,100 (December 31, 2020 - $1,617)
earned from the loans advanced to related parties.
(e) Distributions
•
•
For the year ended December 31, 2021, distributions of $5,341 (December 31, 2020 - $5,177) were made to a limited
partnership wholly-owned by MPI in order to repay principal on Class C LP Units.
For the year ended December 31, 2021, distributions on Units to MPI of $411 (December 31, 2020 - $401) were declared
and recorded as a reduction to Unitholders' equity.
12. Accounts payable and accrued liabilities
Accounts payable
Accrued liabilities
Distributions payable
Unit-based compensation
Forgivable loan
Interest rate swap (Note 6)
Current
Non-current
December 31, 2021
9,154 $
8,884
1,550
4,915
3,794
—
28,297 $
23,776
4,521
28,297 $
December 31, 2020
8,348
6,295
1,342
3,035
—
1,318
20,338
18,410
1,928
20,338
$
$
$
During the year ended December 31, 2021, the REIT commenced construction of a new 225-suite residential rental property on
surplus land at its Richgrove property in Toronto, Ontario (the "Richgrove Development"). In connection with the Richgrove
Development, the REIT completed a contribution agreement with the City of Toronto whereby the City will contribute funds
towards the construction of 100 affordable rental suites as part of the new property and will also provide relief from
development charges and certain other fees. Funding and relief from development charges and certain other fees will be in the
form of a forgivable loan, with loan forgiveness commencing on the first anniversary of first occupancy of the affordable rental
suites, at 4% per year over a period of 25 years. As at December 31, 2021, $3,794 of development charges and other fees were
exempt or waived and have been recorded as forgivable loan payable in connection with the terms of the contribution
agreement.
13. Units
The following table presents the change in and outstanding amount of Units:
Authorized
Units issued and outstanding:
Balance, December 31, 2019 and 2020
Issued, October 29, 2021, net
Balance, December 31, 2021
Units
Unlimited
$
36,274,839 $
631,434
3,795,000 $
40,069,839 $
82,687
714,121
79|2021 Annual ReportMinto Apartment REIT Minto Apartment Real Estate Investment Trust
Notes to the Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
(in thousands of Canadian dollars, except Unit and per Unit amounts)
On October 29, 2021, the REIT completed the issuance of 3,795,000 Units from treasury at a price of $22.85 per Unit for net
proceeds of $82,687. The issuance included 495,000 Units sold pursuant to the full exercise of an over-allotment option granted
to the underwriters. Underwriters' fees and expenses relating to the issuance were $4,029.
For the year ended December 31, 2021, distributions to Unitholders of $17,071 (December 31, 2020 - $16,189) were declared.
This represents monthly distributions of $0.03792 per Unit for the months of January to October 2021 and $0.03958 for the
months of November and December 2021 (2020 - monthly distributions of $0.03667 per Unit for the months of January to July
2020 and $0.03792 per Unit for the months of August to December 2020).
14. Segment reporting
The REIT owns, manages and operates 30 multi-residential rental properties located in Canada, including three mixed-use
residential apartment and commercial buildings. Management, when measuring the REIT's performance, does not distinguish or
group its operations on a geographical or any other basis. Accordingly, the REIT has a single reportable segment for disclosure
purposes in accordance with IFRS.
15. Revenue from investment properties
The components of revenue from investment properties are as follows:
Rental revenue
Revenue from services
16. Finance costs
Finance costs are comprised of the following:
Interest expense on mortgages
Interest expense & standby fees on credit facility
Amortization of financing charges
Amortization of mark-to-market adjustments
Interest income
Capitalized interest
Interest expense & other financing charges
Distributions on Class B LP Units (Note 8)
Distributions on Class C LP Units (Note 9)
Finance costs - operations
Fair value loss (gain) on Class B LP Units (Note 8)
Fair value loss (gain) on interest rate swap (Note 12)
Finance costs
December 31, 2021
100,150 $
23,397
123,547 $
December 31, 2020
102,268
22,661
124,929
December 31, 2021
16,605 $
1,750
640
(769)
(3,129)
(95)
15,002
10,436
6,743
32,181 $
34,609
(1,625)
65,165 $
December 31, 2020
16,735
1,838
548
(770)
(1,653)
—
16,698
10,162
6,907
33,767
(63,298)
2,429
(27,102)
$
$
$
$
$
802021 Annual Report|Minto Apartment REIT Minto Apartment Real Estate Investment Trust
Notes to the Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
(in thousands of Canadian dollars, except Unit and per Unit amounts)
17. Contingencies and commitments
The REIT is subject to claims and legal actions that arise in the ordinary course of business. It is the opinion of Management that
any ultimate liability that may arise from such matters would not have a significant adverse effect on the consolidated financial
statements of the REIT.
The REIT has an off-balance sheet arrangement at one of its properties in the Toronto area which was acquired in 2018
pursuant to which the City of Toronto provided a forgivable loan to support affordable housing at this property. Provided that
certain conditions are met, the REIT will not need to make repayments under this arrangement. As of December 31, 2021, the
remaining unforgiven balance of the loan is $14,688 (December 31, 2020 - $15,912). To date, the REIT has met all conditions
related to this forgivable loan and Management has assessed that throughout the remaining term of the loan the REIT is likely
to continue to meet the conditions for forgiveness and that the outflow of economic resources to settle the loan is not
probable. As such, no liability has been recorded by the REIT.
The REIT has an off-balance sheet arrangement at one of its properties in the Calgary area which was acquired in 2018 pursuant
to which the Province of Alberta provided a forgivable loan to support affordable housing at this property. Provided that certain
conditions are met, the REIT will not need to make repayments under the arrangement. As of December 31, 2021, the
remaining unforgiven balance of the loan is $3,696 (December 31, 2020 - $4,032). To date, the REIT has met all conditions
related to this forgivable loan and Management has assessed that throughout the remaining term of the loan the REIT is likely
to continue to meet the conditions for forgiveness and that the outflow of economic resources to settle the loan is not
probable. As such, no liability has been recorded by the REIT.
As at December 31, 2021, the REIT has committed to advance an additional $40,926 to related parties in order to support the
development of several projects and an additional $10,812 to fund interest costs.
The REIT is a guarantor on a joint and several basis for mortgage debt held through one of its joint operations. As at December
31, 2021, the maximum potential obligation resulting from this guarantee is $13,042 (December 31, 2020 - $13,382).
18. Risk management
The REIT's activities expose it to a variety of financial risks, including market risk, credit risk and liquidity risk.
Market Risk
Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in
market prices. Market risk consists of interest rate risk, currency risk and other price risk.
(a)
Interest rate risk
As the REIT’s interest-bearing assets mainly comprise fixed rate instruments, changes in market interest rates do not have
any significant direct effect on the REIT’s income.
The REIT's financial liabilities comprise both fixed rate and variable rate instruments.
The REIT faces interest rate risk on its fixed rate debt due to the expected requirement to refinance such debt in the year
of maturity or shortly thereafter. The REIT manages interest rate risk by structuring its financings to stagger the maturities
of its debt, thereby mitigating its exposure to interest rate and other credit market fluctuations.
For the portion of the REIT’s financial liabilities that comprise variable rate instruments, from time to time the REIT may
enter into interest rate swap contracts or other financial instruments to modify the interest rate profile of its outstanding
debt without an exchange of the underlying principal amount.
As at December 31, 2021, the REIT has a committed variable rate credit facility of $200,000 (December 31, 2020 -
$200,000) with an outstanding balance of $51,754 (December 31, 2020 - $31,948). A 1% change in prevailing interest rates
would change annualized interest charges incurred by $518 (December 31, 2020 - $319).
81|2021 Annual ReportMinto Apartment REIT Minto Apartment Real Estate Investment Trust
Notes to the Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
(in thousands of Canadian dollars, except Unit and per Unit amounts)
(b) Currency risk
The REIT’s financial statement presentation currency is Canadian dollars. Operations are located in Canada and the REIT
has limited operational transactions in foreign-denominated currencies. As such, the REIT has no significant exposure to
currency risk.
(c) Other price risk
Other price risk is the risk of variability in fair value due to movements in equity prices or other market prices such as
commodity prices and credit spreads.
The REIT is exposed to other price risk on its Class B LP Units. A 1% change in the prevailing market price of the Units as at
December 31, 2021 would have a $4,984 (December 31, 2020 - $4,638) change in the fair value of the Class B LP Units.
Credit Risk
Credit risk is the risk that tenants and/or debtors may experience financial difficulty and be unable to fulfill their lease
commitments or loan repayments. An allowance for impairment is taken for all expected credit losses.
The REIT’s risk of credit loss from tenants experiencing financial difficulties is mitigated through diversification. The REIT’s
residential rental business is carried on in the Toronto, Montreal, Ottawa, Calgary and Edmonton regions. The nature of this
business involves a high volume of tenants with individually small monthly rent amounts. The REIT monitors the collection of
residential rent receivables on a regular basis with strictly followed procedures designed to minimize credit loss in cases of non-
payment.
The REIT is also exposed to credit risk in relation to the loans advanced, in the event that the borrowers default on the
repayment of amounts owing to the REIT. Management mitigates this risk by ensuring adequate security has been provided.
Liquidity risk
Liquidity risk is the risk that the REIT will encounter difficulty in meeting obligations associated with financial liabilities that are
settled by delivering cash or another financial asset. The REIT’s liquidity is subject to macroeconomic, financial, competitive and
other factors that are beyond the REIT’s control including the ongoing COVID-19 disruption.
Liquidity risk is managed through cash flow forecasting. Management monitors forecasts of the REIT’s liquidity requirements to
ensure it has sufficient cash to meet operational needs through maintaining sufficient cash and/or availability on the undrawn
credit facility and ensuring that it meets its financial covenants related to debt agreements. Such forecasting takes into
consideration the current and projected macroeconomic conditions, the REIT's cash collection efforts, debt financing plans and
covenant compliance required under the terms of debt agreements. There is a risk that such liquidity forecasts may not be
achieved and that currently available debt financing may no longer be available to the REIT at terms and conditions that are
favorable to the REIT, or at all.
The REIT mitigates liquidity risk by staggering the maturity dates of its borrowing, maintaining borrowing relationships with
various lenders, proactively renegotiating expiring credit agreements well in advance of the maturity date and by maintaining
sufficient availability on its credit facility.
As of December 31, 2021, current liabilities of $182,642 (December 31, 2020 - $109,299) exceeded current assets of $38,909
(December 31, 2020 - $15,854), resulting in a net working capital deficit of $143,733 (December 31, 2020 - $93,445). The REIT's
immediate liquidity needs are met through cash-on-hand, cash flow from operations, refinancing of maturing mortgages and
availability on its credit facility. As of December 31, 2021, liquidity was $150,655 (December 31, 2020 - $170,659) consisting of
cash of $2,851 (December 31, 2020 - $2,607) and $147,804 (December 31, 2020 - $168,052) of available borrowing capacity
under the credit facility. Management believes that there is sufficient liquidity to meet the REIT’s financial obligations for the
foreseeable future.
822021 Annual Report|Minto Apartment REIT Minto Apartment Real Estate Investment Trust
Notes to the Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
(in thousands of Canadian dollars, except Unit and per Unit amounts)
The REIT has a committed credit facility for working capital requirements, acquisitions, letters of credit and for general
corporate purposes. The committed credit facility consists of the following:
December 31, 2021
200,000 $
December 31, 2020
200,000
Committed
Utilized
Amounts drawn
Letter of credit
Amount available
$
$
51,754
442
52,196
147,804 $
An analysis of the contractual cash flows associated with the REIT's material financial liabilities is set out below:
2022
140,647 $
$
—
140,647
5,510
23,304
10,100
1,922
2023
58,882 $
—
58,882
50,234
19,646
—
—
2024
57,871 $
51,754
109,625
50,499
14,808
26
—
2025
49,684 $
—
49,684
63,541
11,745
—
—
2026
40,187 $
—
40,187
1,283
9,126
10
—
2027 and
thereafter
280,263 $
—
280,263
41,116
26,179
—
—
Mortgages
Credit facility
Class C LP Units
Interest obligation
Tenant rental deposits
Due to related parties
Accounts payable and
accrued liabilities
23,776
501
172
54
—
3,794
28,297
$
205,259 $
129,263 $
175,130 $
125,024 $
50,606 $
351,352 $ 1,036,634
The contractual cash flows do not include any unamortized mark-to-market adjustments or unamortized deferred financing
costs.
19. Capital risk management
The REIT's capital consists of Class B LP Units, Class C LP Units, mortgages, a credit facility and Unitholders' equity. The REIT
invests its capital to achieve its business objectives and to generate an acceptable long-term return to the REIT’s Unitholders.
Primary uses of capital include property acquisitions, development activities, capital improvements, debt principal repayments
and development loans.
The REIT’s principal objective with respect to debt financing is to minimize its overall borrowing costs while maintaining balance
in its maturity schedule, diversity in its lender base and having sufficient liquidity and flexibility to meet current obligations and
to pursue new projects.
The actual level and type of future financings to fund the REIT’s capital obligations will be determined based on prevailing
interest rates, various costs of debt and/or equity capital, capital market conditions and Management’s general view of the
appropriate leverage in the business.
The REIT closely monitors its capital position. The REIT is also subject to certain financial covenants and is in compliance with
these covenants. Management has performed stress testing on the REIT’s covenants to ensure that the REIT continues to meet
its covenant obligations in the long term.
31,948
—
31,948
168,052
Total
627,534
51,754
679,288
212,183
104,808
10,136
1,922
83|2021 Annual ReportMinto Apartment REIT Minto Apartment Real Estate Investment Trust
Notes to the Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
(in thousands of Canadian dollars, except Unit and per Unit amounts)
The components of the REIT's capital are set out in the table below:
Liabilities (principal amounts outstanding):
Class B LP Units
Class C LP Units
Mortgages
Credit facility
Unitholders' equity
20. Supplemental cash flow disclosures
Change in non-cash working capital comprises the following:
Year ended
Prepaid expenses and other assets
Resident and other receivables
Tenant rental deposits
Due to related parties
Accounts payable and accrued liabilities
21. Unit-based compensation
Executives
December 31, 2021
December 31, 2020
498,415 $
212,183
627,534
51,754
1,389,886
1,010,001
2,399,887 $
463,806
217,524
599,413
31,948
1,312,691
850,224
2,162,915
December 31, 2021
(1,795) $
(9)
1,146
769
1,733
1,844 $
December 31, 2020
811
(223)
252
(170)
(4,399)
(3,729)
$
$
$
$
Deferred Units granted to executives generally vest on the second, third or fourth anniversaries of the grant date and are
settled by Units issued from treasury equivalent to the number of Deferred Units credited, including any distributions paid by
the REIT on the Units that have accrued in the form of Deferred Units or, if so elected by the participant and subject to the
approval of the Plan Administrator, cash payable upon the participant’s separation from service with the REIT. The Board of
Trustees has the discretion to vary the manner in which the Deferred Units vest for any participant.
A summary of the Deferred Unit plan activity and the value of Unit-based compensation expense for the executives is presented
below:
Opening balance
Unit-based compensation expense
Settlement
Fair value loss (gain)
Closing balance
December 31, 2021
December 31, 2020
$
$
1,660 $
1,304
(121)
47
2,890 $
655
1,160
—
(155)
1,660
842021 Annual Report|Minto Apartment REIT Minto Apartment Real Estate Investment Trust
Notes to the Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
(in thousands of Canadian dollars, except Unit and per Unit amounts)
The details of movement in Deferred Units for the executives is as follows:
Opening balance
Granted
Redeemed
Forfeited
Distribution equivalents
Closing balance
Trustees
December 31, 2021
December 31, 2020
161,091
56,000
(5,499)
(5,499)
4,059
210,152
108,421
49,500
—
—
3,170
161,091
Trustees have the option to elect to receive up to 100% of all fees that are otherwise payable in cash (i.e. annual board retainer
fee, meeting fees and additional retainers) in the form of Deferred Units. The REIT matches 45% of the total value of annual
board retainer fees and board and committee meeting fees that a trustee elected to receive in the form of Deferred Units.
Deferred Units granted in respect of a participant’s election to receive Deferred Units in lieu of cash compensation vest
immediately upon grant. Deferred Units granted further to any match by the REIT also vest immediately. The Board of Trustees
has the discretion to vary the manner in which the Deferred Units vest for any participant. The Deferred Units are settled by
Units issued from treasury equivalent to the number of Deferred Units credited, including any distributions paid by the REIT on
the Units that have accrued in the form of Deferred Units or, if so elected by the participant and subject to the approval of the
Plan Administrator, cash payable upon the participant’s separation from service with the REIT.
A summary of the Deferred Units granted and the value of Unit-based compensation expense recorded for the Trustees is
presented below.
Balance, December 31, 2019
Granted and vested
Distribution equivalents
Fair value gain
Balance, December 31, 2020
Granted and vested
Distribution equivalents
Fair value loss
Balance, December 31, 2021
Deferred Units
41,322 $
25,048
1,139
—
67,509 $
23,438
1,591
—
92,538 $
$
956
490
23
(94)
1,375
525
35
90
2,025
85|2021 Annual ReportMinto Apartment REIT Minto Apartment Real Estate Investment Trust
Notes to the Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
(in thousands of Canadian dollars, except Unit and per Unit amounts)
22. Operating leases
The REIT has entered into lease agreements on its investment properties. The residential leases typically have lease terms of 1
to 12 months. The commercial leases have lease terms between 1 to 15 years. There were no tenants that accounted for more
than 10% of the REIT's total rental revenue for the year ended December 31, 2021 and 2020. The total future contractual
minimum rent lease payments expected to be received under residential and commercial leases are as follows:
Less than 1 year
Between 1 to 5 years
5 years and thereafter
December 31, 2021
31,654 $
2,930
574
35,158 $
December 31, 2020
25,913
4,623
637
31,173
$
$
Minto Apartment REIT
|
2021 Annual Report
86 Unitholder Information
Board of Trustees
Officers
Michael Waters
CEO and President
Julie Morin
Chief Financial Officer
Glen MacMullin
Chief Investment Officer
John Moss
General Counsel and
Corporate Secretary
Paul Baron
Senior Vice President, Operations
Ben Mullen
Senior Vice President, Asset
Management
Martin Tovey
Senior Vice President, Investments
Edward Fu
Vice President, Finance
Roger Greenberg
Chairman of Minto Apartment REIT, the
Minto Group and Ottawa Sports and
Entertainment Group
Allan Kimberley( 1,3)
Lead Trustee, Director of Orlando
Corporation, former Vice Chairman
of Investment Banking, Real Estate at
CIBC World Markets
Heather Kirk(1,2,3)
Jacqueline Moss(2,3)
Chair of the Compensation,
Governance and Nominating
Committee, Chair of the Human
Resources Committee of Investment
Management Corporation Ontario
Simon Nyilassy(1,2,3)
Chair of the Audit Committee, Founder
and CEO of Marigold & Associates Inc.
Philip Orsino
President and CEO of Brightwaters
Strategic Solutions Inc., Director of the
Minto Group and former CEO of Jeld-
Wen Inc. and Masonite International
Corp.
Michael Waters
CEO and President of Minto Apartment
REIT and CEO of The Minto Group
(1) Member of the Audit Committee
(2) Member of the Compensation, Governance and Nominating Committee
(3) Independent
87
2021 Annual Report |
Minto Apartment REIT
Head Office
Minto Apartment REIT
180 Kent Street, Suite 200
Ottawa, Ontario K1P 0B6
T: 613-230-7051
Investor Information
www.mintoapartments.com
info@mintoapartmentreit.com
T: 613-230-7051
Auditor
KPMG LLP
Legal Counsel
Goodmans LLP
Transfer Agent
TSX Trust Company
PO Box 700, Postal Station B
Montreal, QC H3B 3K3
Unit Listing
TSX: MI.UN
Unit Distributions
January 2021 – October 2021
$0.03792 per Unit per month
November 2021 – December 2021
$0.03958 per Unit per month
Annual Meeting
The Annual General Meeting of
Unitholders will be held virtually on
Thursday, May 26, 2022 at 11:00am.
87 Expansion Through Convertible
Development Loans
Investment in development projects through convertible
development loans (“CDLs”) provide the REIT with an option
to purchase new, high-quality properties in attractive urban
locations at a discount to their then-appraised fair market
value. CDLs also generate an attractive return during the
development period without taking any construction or
lease-up risk. In addition to the two existing CDLs advanced
by the REIT in 2019 and 2020, two further investments were
made in 2021 (Beechwood in Ottawa and 810 Kingsway in
Vancouver).
B C
8
1
0
Kin
gs
way Rendering • Van c o u v e r,
a, O N
w
g • O tt a
Beechwood R e n d e r i n
Repositioning Program
The REIT continually monitors local market demand and
competing product offerings to determine an appropriate
strategy for each of our properties. In certain locations
there are opportunities to renovate and strategically
reposition suites. Improvements to suites and common
areas improve the quality and desirability of our properties.
Strong demand for repositioned suites creates growth in
rental revenues and produces accretive financial returns on
invested capital. Given the predictable costs and revenue
associated with suite repositioning and the ability to meter
out capital in small increments, our repositioning program
offers superior risk-adjusted returns.
O n t a r i o
t a w a ,
O t
•
( R e n d e r i n g )
B e e c h w o o d
1.613.230.7051
info@mintoapartmentreit.com
Minto Apartment REIT
200-180 Kent Street
Ottawa, ON K1P 0B6
www.mintoapartments.com