Niagara West in
Toronto, Ontario
2022 Annual Report
TSX | MI.UN
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(5)
Suites(2)
2022
2021
8,291
7,538
Average Monthly Rent(3)
$1,732
$1,641
2%
8%
Occupancy - End of Period(3)
97.6%
95.5%
18%
Total Assets
$2.7 Billion
$2.4 Billion
Debt-to-Gross Book Value(3)
40.6%
36.5%
Weighted Average Fixed Interest Rate(3)
3.06%
2.82%
Weighted Average Variable Interest Rate(3)
6.87%
2.19%
34%
Suites Under Development(2,4)
2,302
1,678
2022
38%
Ottawa
Toronto
Montreal
Calgary
Edmonton
$0.490
$0.475
$0.455
$0.440
Ottawa
Toronto Montreal
Calgary
Edmonton
$24.00
$24.00
$22.26
$20.56
2019
2020
2021
2022
2019
2020
2021
2022
Annualized distributions per unit(6)
NAV per unit(3)
(1) All amounts are as at December 31, 2022 and December 31, 2021 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) Suites under development includes suites available to the REIT through execution of purchase options and suites being directly developed by the REIT.
(5) Geographic breakdown is based on the proportionate share of the fair value of the REIT's investment properties as at December 31, 2022.
(6) Distribution rates in effect as at December 31.
Letter from the
Chief Executive Officer
Dear Fellow Unitholders,
I look forward to writing this letter each year as it provides an opportunity to reflect and take stock of what we have
accomplished. However, this year it is a little bittersweet as it will be the last year that I will be writing to you as Chief
Executive Officer (“CEO”). As previously announced, Jonathan Li, the REIT’s President and Chief Operating Officer will
be succeeding me as the CEO effective April 3, 2023. Going forward, I will be focusing on my role as CEO of the Minto
Group and I will continue to serve as a trustee of the REIT and work with Jonathan as a strategic partner in the years
ahead.
This change is an important part of the REIT’s long-term plans to move to a fully internalized management structure.
Based on its scale at the time of the initial public offering (“IPO”), the REIT was established with a hybrid structure that
allowed it to benefit from management and administrative support from the Minto Group on advantageous terms. Since
its IPO, the REIT has grown substantially and delivered on its mission to generate strong operating performance while
building value through an urban portfolio of high-quality, multi-family residential communities in Canada’s largest housing
markets. It has acquired interests in ten properties and grown its suite count from 4,279 suites to 8,291 suites. Total assets
have grown from $1.1 billion to $2.7 billion at December 31, 2022. I believe, and the Board of Trustees concurred, that it is
time for the REIT to have a dedicated CEO.
Similarly in 2022, the REIT also announced the appointment of Edward (“Eddie”) Fu as Chief Financial Officer (“CFO”).
Eddie, formally Vice President, Finance of the REIT, succeeded Julie Morin as CFO on January 9, 2023. Julie was
instrumental in the successful IPO of the REIT and its continued growth since then, and we thank her for her exceptional
commitment and dedication to the REIT. Julie is now focusing on her role as CFO of the Minto Group. The Board of
Trustees and I have great confidence in Jonathan and Eddie’s leadership and look forward to working closely with them
as they take the REIT to the next level of its growth and evolution.
The REIT delivered strong economic performance in 2022 despite a backdrop of volatile equity markets, high inflation,
and rapidly rising interest rates. Notwithstanding valuation pressures caused by rising interest rates, the REIT maintained
its net asset value at $24.00 per unit and on November 8, 2022, announced a 3.2% increase to its annual cash
distribution. The REIT has increased its cash distribution in each full year of operation since its IPO and I am proud to say
that because of this performance, the REIT was added to the S&P/TSX Dividend Aristocrats Index, effective on February
1, 2023.
The REIT made substantial progress on its development pipeline during the year. Through a combination of direct
property investments and convertible development loans, the REIT now has a development pipeline of eight projects
comprising 2,302 suites. At year end, one of these projects was stabilized, five were under construction and two were in
the pre-development stage. Three of these development projects are in the Greater Vancouver/Victoria market which
provides the opportunity for the REIT to enter these markets with very high quality properties in excellent locations.
The REIT’s suite renovation and repositioning program also 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 11 of its 32 properties and repositioned 259 suites in 2022. Strong tenant demand for
repositioned suites resulted in annualized rent increases that generated a 9.0% return on invested capital. At the end
of the year the REIT had 1,983 suites (24% of its total suite count) remaining to reposition within its active repositioning
programs.
The REIT acquired two institutional quality properties in highly desirable downtown markets. Niagara West in downtown
Toronto was newly constructed and completed in 2020 and has 501 suites with grocery-anchored retail at its base.
The International in downtown Calgary has 247 suites and enjoys a rare connection to Calgary’s Plus 15 Skywalk which
enables pedestrian mobility throughout the central business district in an 18-kilometre, weather-protected, above-ground
walkway.
The REIT released its second annual Environmental, Social and Governance Report ("ESG Report") in 2022 including the
results from its 2022 Global Real Estate Sustainability Benchmark ("GRESB") assessment. The REIT earned a GRESB score
of 80, a 3-Star GRESB Rating, and Green Star Designation. This score is a ten-point improvement over 2021 and places
the REIT fourth out of 16 in our peer comparison group of North American residential firms. The REIT also earned a public
disclosure score of 93, ranking it first out of ten in its Canadian peer set.
Looking forward, the macro backdrop for housing remains strong in all the REIT’s markets. In 2022, Canada saw its
highest population growth rate in over 50 years, fuelled by high and rising levels of immigration. The REIT focuses
on primary urban markets and these are the first choice of new Canadians. This demand drove both occupancy
and average monthly rent higher. The REIT finished 2022 with an occupancy level for its unfurnished suites of 97.6%
(compared to 95.5% in 2021) and an average monthly rent per occupied unfurnished suite of $1,732 (compared to $1,641
in 2021). The Federal Government has increased its immigration targets for each of the next three years and we expect
overall rental demand to remain robust as a result.
On behalf of the Board of Trustees and Management, I want to thank you for your trust and confidence. We are excited
about the opportunities ahead for 2023. The REIT’s property portfolio is well positioned to capitalize on growing demand
for residential rentals and our development pipeline is second to none. I look forward to Jonathan sharing our progress
in the year ahead.
Michael Waters
Chief Executive Officer,
Minto Apartment REIT
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
Subsequent Events
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
2
3
3
9
14
14
15
25
26
27
27
29
29
29
30
30
31
31
33
35
38
38
38
39
45
46
49
49
50
50
51
51
52
52
55
55
60
61
62
63
64
94
Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2022
(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 32 (December 31, 2021 - 30) multi-residential rental
properties located in Ontario, Quebec and Alberta. The "Same Property Portfolio" consists of 29 multi-residential properties.
The ownership distribution of suites is shown in the table below and unless otherwise noted, all references to suite count,
including co-owned properties, are at 100% ownership rather than the REIT's proportionate effective ownership:
As at December 31,
Wholly-owned
50% co-owned
40% co-owned
28.35% co-owned
Total suites
Total suites at effective ownership
Same Property Portfolio Suites
Total Portfolio Suites
2022
5,114
1,413
750
—
7,277
6,121
2021
5,114
1,413
750
—
7,277
6,121
2022
5,627
1,413
750
501
8,291
6,776
2021
5,375
1,413
750
—
7,538
6,382
The REIT is currently developing two income-producing multi-residential projects on excess land available at Richgrove and
Leslie York Mills, both in Toronto, that will add 417 suites to the portfolio and is pursuing the development of a third multi-
residential project on excess land available at High Park Village in Toronto that would add a further 680 suites to the portfolio if
completed. The REIT has also provided convertible development loans for the development of five multi-residential properties,
which provide the REIT the option to acquire direct or indirect interests in these properties upon stabilization (the "CDL
Options"). Once completed, and subject to the exercise of the CDL Options, 1,205 suites would be added to the portfolio. The
aggregate of these growth opportunities would increase the portfolio suite count by approximately 28% by 2029, as depicted
below:
Suite Growth in the REIT's Portfolio
The REIT has a thoughtful and prudent approach to managing its capital by balancing the allocation among available
alternatives. These alternatives include its convertible development loan programs, increasing suite count through its current
developments, maintenance capital expenditures, distributions, repositioning programs, deleveraging and unit buy-backs. Key
criteria impacting our capital allocation decisions include project returns, liquidity, leverage levels, NAV per unit and cash flow
growth per unit over time. The REIT is also evaluating dispositions that meet its divestiture criteria as part of its capital
management. The potential changes in suite count through future acquisitions or dispositions are not depicted in the chart
above.
Minto Apartment REIT | 2022 Annual Report
8,2918,4548,6758,9029,91310,593Existing PortfolioGrowth Through Exercise of CDL OptionsGrowth Through DevelopmentQ4 2022202320242025202620291 Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2022
(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's 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, 2023, 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,
2022 and 2021, 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, 2023. 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.
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.
2022 Annual Report | Minto Apartment REIT
2 Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2022
(in thousands of Canadian dollars, except Unit and per Unit amounts, per suite amounts and other non-financial data)
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
Revenue and NOI growth driven by strengthening rental demand and occupancy increases
The REIT's performance in the quarter ended December 31, 2022 ("Q4 2022") rounded out a strong operating year. Over the
course of the year, rising interest rates and inflation have increased the cost of living, and further widened the affordability gap
between home ownership and renting. Combined with continued population growth, these economic factors have created an
increase in rental demand which has raised average rents and occupancy. In Q4 2022, average monthly rent for the Same
Property Portfolio increased by 4.6%, supplemented by strong average occupancy growth of 220 bps over the quarter ended
December 31, 2021 ("Q4 2021"). The Same Property Portfolio revenue grew by 7.6% as a result of these higher rents and
occupancy. Despite this revenue growth being somewhat moderated by inflationary cost pressure on expenses such as wages
and natural gas, which increased the REIT's property operating expenses by 8.4%, Same Property Portfolio NOI grew by 7.2%
over Q4 2021.
Total Portfolio closing occupancy rose sequentially, reaching 97.6% at the end of December 2022 and average monthly rent
rose to $1,732. Total Portfolio NOI for Q4 2022 grew by 15.1%, driven by revenue growth of 16.9% from the strong performance
of the Same Property Portfolio and the contributions of properties acquired since late 2021: Le Hill-Park in Montreal in early
December 2021, and Niagara West in Toronto and The International in Calgary both in Q2 2022.
For the year ended December 31, 2022 ("FY 2022"), the REIT experienced improved performance across many of its key
performance indicators due to the rebounding of the rental market after a few challenging years dealing with COVID-19
disruptions. Same Property Portfolio and Total Portfolio revenue increased by 8.3% and 16.4%, respectively over the year ended
December 31, 2021 ("FY 2021"). This was driven by rising average monthly rent throughout the year and improved average
occupancy, which for the Same Property Portfolio was up 320 bps over FY 2021. Strong revenue growth was partially offset by
increased operating costs across the portfolio, as the market conditions impacting Q4 2022 expenses have been a factor
throughout FY 2022. Despite higher operating costs, the REIT's NOI in FY 2022 increased by 7.5% and 15.1% for the Same
Property Portfolio and Total Portfolio, respectively.
FFO and AFFO growth constrained by rising interest rates
The REIT's strong operating performance for FY 2022, driven by improved occupancy and average monthly rents, contributed to
significant FFO and AFFO growth of 11.6% and 12.3%, respectively over FY 2021. In Q4 2022, Total Portfolio NOI growth was
offset by higher floating interest rate costs which unfavourably impacted the REIT's FFO and AFFO results. The REIT's FFO and
AFFO decreased by 2.9% and 4.3%, respectively, compared to Q4 2021, largely due to the increased interest rates on variable
rate mortgages and the credit facility. The REIT is actively in the process of refinancing its variable rate mortgages to fixed rate
instruments, and if the interest rates on refinancings are favourable compared to existing interest rates, it will significantly
reduce the REIT's borrowing costs and variable interest rate exposure. FFO and AFFO decreases would have been 5.2% and
6.9%, respectively, excluding the impact of a one-time insurance recovery of approximately $304 received in Q4 2022.
Minto Apartment REIT |
2022 Annual Report
3 Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2022
(in thousands of Canadian dollars, except Unit and per Unit amounts, per suite amounts and other non-financial data)
Increased Interest Costs1 Impact FFO and AFFO per unit
December 31, 2021
December 31, 2022
2.79%
3.97%
Weighted average interest rate - Total Debt2
Execution of organic growth strategy
The REIT continued to deliver on its strategy to create organic growth by realizing on the gain-to-lease potential in the portfolio
and by executing on its suite repositioning programs. For Q4 2022 and FY 2022, the REIT was able to realize significant gains of
16.6% and 13.9%, respectively, on the 423 and 2,065 new leases it signed during each period. These gains represent annualized
revenue growth of approximately $1,205 for Q4 2022 and $4,618 for FY 2022. In addition, the strong market conditions have
fuelled the estimated gain-to-lease potential of the portfolio which increased to 13.6% at December 31, 2022, up from 12.1% in
Q3 2022 and significantly stronger than 6.8% in Q4 2021. The REIT successfully repositioned 41 suites in Q4 2022, generating an
average annual unlevered return of 11.3%.
NAV per Unit decrease due to expansion of capitalization rates and capital expenditure reserves
NAV per unit as at December 31, 2022 decreased to $24.00 from $24.12 as at September 30, 2022, driven by a fair value loss on
investment properties of $12,209 due to the slight expansion of capitalization rates and increases in the capital expenditure
reserve for upcoming projects and sustainability initiatives at certain properties, partially offset by strong growth in forecast
NOI for the portfolio.
Distribution Increase
On November 8, 2022, the Board of Trustees approved a 3.2% increase to the REIT's annual distribution from $0.4750 per Unit
to $0.4900 per Unit. The monthly distribution increased to $0.04083 per Unit, up from $0.03958 per Unit, and was effective for
the REIT's November 2022 cash distribution paid on December 15, 2022. The distribution increase is the fifth consecutive
annual increase since the REIT's initial public offering, and reflects Management's confidence in its business model, execution of
its long-term strategy and the overall outlook for the REIT. The REIT expects to continue maintaining a low AFFO payout ratio,
fuelling the growth strategy by allowing the reinvestment of capital.
Announcing REIT Leadership Succession
On January 16, 2023, the REIT announced another major step in its long-term internalization process. Effective April 3, 2023,
Jonathan Li, who currently serves as the REIT's President and Chief Operating Officer, will assume the role of President and
Chief Executive Officer ("CEO") replacing Michael Waters, who is stepping down as CEO but who will continue to serve as a
Trustee of the REIT. Following Mr. Li's appointment, both the CEO and Chief Financial Officer ("CFO") functions will be fully
internalized. Mr. Li will join Edward Fu, the REIT's recently appointed CFO, as a full-time C-suite executive of the REIT and will
direct the REIT's overall strategy, operations development, capital allocation, asset management and balance sheet
management. Management believes as of April 3, 2023, the REIT will have a management structure similar to the large
sponsored retail and grocery real estate investment trusts at the time of their IPOs.
1 Interest costs is comprised of interest expenses, other financing charges and distributions on Class C LP Units.
2 Refer to "Section VI - Supplemental Information - Non-IFRS and Other Financial Measures"
2022 Annual Report Minto Apartment REIT
|
$6,133$7,912$24,874$27,615$2,150$5,033Same Property Portfolio interest costs¹Acquired propertiesSame Property Portfolio interest costs¹ $0.027 per unit higher in Q4 2022Same Property Portfolio interest costs¹ $0.042 per unit higher in FY 2022Q4 2021Q4 2022FY 2021FY 2022$—$15,000$30,0004 Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2022
(in thousands of Canadian dollars, except Unit and per Unit amounts, per suite amounts and other non-financial data)
The REIT Joins the S&P/TSX Canadian Dividend Aristocrats Index
On January 24, 2023, it was announced that the REIT would be added to the S&P/TSX Canadian Dividends Aristocrats Index,
effective February 1, 2023. The REIT, whose Units trade on the Toronto Stock Exchange under the symbol "MI.UN", was added
to the index as result of its record of consistent distribution increases.
Organic Growth — Gain-to-Lease1
The REIT realized on organic growth for Q4 2022 through effective leasing activities and revenue management strategies aided
by a strong rental market. As new tenants take occupancy, the REIT is able to move rental rates from older in-place rents to
current market rates. During the period, new leases resulted in annualized revenue growth of approximately $1,205. A
summary of leasing activities and the gains to be realized from new leases signed for Q4 2022 is set out in the table below:
Geographic Node
Toronto
Ottawa
Alberta
Montreal
New Leases
Signed2
103
148
96
76
Total/Average
423
Expiring AMR
New AMR
$2,476
1,648
1,361
1,645
$1,699
$2,896
1,920
1,615
1,855
$1,981
Realized
Gain-to-Lease
17.0%
16.5%
18.7%
12.8%
Annualized Gain-
to-Lease1,3
$256
563
260
126
16.6%
$1,205
The REIT realized gain-to-lease in all of its markets, with an average gain-to-lease of 16.6% on the 423 new leases it signed in Q4
2022. The Canadian rental market continued its strong performance, spurred by increased immigration, a large affordability gap
with home ownership due to sharp increases in home purchase mortgage rates, increasing general acceptance of renting versus
owning, the return to in-person learning and, for the REIT, a sharp return to downtown living. This has led to an escalation in
demand for rentals, resulting in higher rental rates in addition to greatly reducing the need for discounts and promotions.
Total Portfolio Annualized Turnover Rate1
Management expects turnover to slow in the coming quarters due to typically slower leasing through the winter months.
Separately, the trend of high average monthly rents and high occupancy is expected to increase the average length of stay for
tenants resulting in lower-than-average turnover.
For more details on revenue growth, see Section II - "Financial Highlights and Performance - Review of Financial Performance -
Revenue from Investment Properties".
Realized Gain-to-Lease and Average Monthly Rent1
1 Refer to "Section VI - Supplemental Information - Non-IFRS and Other Financial Measures"
2 New leases signed includes 100% of new leases from co-ownerships and excludes new leases of furnished suites.
3 For co-owned properties, reflects the REIT's co-ownership interest only.
Minto Apartment REIT | 2022 Annual Report
24.1%20.0%25.5%27.8%21.5%Q4 2021Q1 2022Q2 2022Q3 2022Q4 202210.0%20.0%30.0%40.0%7.6%5.9%4.4%7.2%10.8%12.1%14.5%16.6%$1,630$1,640$1,651$1,641$1,655$1,690$1,714$1,732Realized Gain-to-Lease (%)Average Monthly Rent ($)Q1 2021Q2 2021Q3 2021Q4 2021Q1 2022Q2 2022Q3 2022Q4 2022$1,050$1,200$1,350$1,500$1,650$1,800—%2.0%4.0%6.0%8.0%10.0%12.0%14.0%16.0%18.0%5 Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2022
(in thousands of Canadian dollars, except Unit and per Unit amounts, per suite amounts and other non-financial data)
The REIT continues to achieve growth in average monthly rent. Total Portfolio average monthly rent of $1,732 for Q4 2022 is
the highest achieved since the REIT's inception and an increase of 5.5% over Q4 2021. Same Property Portfolio average monthly
rent has sequentially increased in each quarter in 2022, reaching $1,738 in Q4 2022, which is an increase of 4.6% over Q4 2021.
For FY 2022, the REIT realized an average gain-to-lease of 13.9% on the 2,065 new leases it signed and realized gains in all
markets. The following table summarizes the leasing activities and the gains to be realized from new leases signed in FY 2022:
Geographic Node
Toronto
Ottawa
Alberta
Montreal
New Leases
Signed1
572
808
375
310
Total/Average
2,065
Expiring AMR
New AMR
$2,118
1,609
1,340
1,716
$1,652
$2,424
1,837
1,508
1,948
$1,881
Realized
Gain-to-Lease
14.5%
14.2%
12.5%
13.5%
Annualized Gain-
to-Lease2,3
$1,094
2,208
754
562
13.9%
$4,618
The annualized gains realized from new leases signed in the last four quarters are as follows:
Fiscal Quarter
Q1 2022
Q2 2022
Q3 2022
Q4 2022
New Leases
Signed1
401
667
574
423
Total/Average
2,065
Expiring AMR
New AMR
$1,620
1,645
1,675
1,699
$1,652
$1,794
1,844
1,918
1,981
$1,881
Realized
Gain-to-Lease
10.8%
12.1%
14.5%
16.6%
Annualized Gain-
to-Lease2,3
$726
1,285
1,402
1,205
13.9%
$4,618
The percentage growth in realized gain-to-lease has increased sequentially for each quarter of 2022. Management believes this
is an indicator of a return to urban living, demand from immigration-driven population growth and students, as well as the
effects of rising interest rates further increasing the cost of home ownership, all of which are driving rental demand and higher
rental rates.
Management continually reviews market conditions and updates its estimates of market rent for the properties in its portfolio.
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, 2022 is as follows:
Geographic Node
Total Suites4
Average Monthly In-
Place Rent per Suite
Toronto
Ottawa
Alberta
Montreal
Total/Average
2,351
2,950
901
1,700
7,902
$2,061
1,621
1,436
1,856
$1,732
Management's
Estimate of Monthly
Market Rent per Suite
$2,346
1,876
1,567
2,063
Percentage
Gain-to-Lease
Potential2,3
13.8%
15.8%
9.1%
11.1%
Annualized
Estimated Gain-to-
Lease Potential2,3
$4,643
9,056
1,413
3,027
$1,968
13.6%
$18,139
Management currently estimates that the portfolio has annualized gain-to-lease potential of approximately $18,139, compared
to $15,993 at September 30, 2022, and $7,913 at December 31, 2021. As market rents continue to increase, embedded gain-to-
lease potential will also increase.
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 turnover and overall market conditions.
Management expects that portfolio turnover will begin to moderate slightly given the anticipated continued strength of the
rental market. Notwithstanding a potential slow down in turnover, 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.
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 For co-owned properties, reflects the REIT's co-ownership interest only.
4 Excludes 188 furnished suites, 155 vacant suites and 46 suites offline for repositioning.
2022 Annual Report | Minto Apartment REIT
6 Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2022
(in thousands of Canadian dollars, except Unit and per Unit amounts, per suite amounts and other non-financial data)
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 occupied Toronto suites are 776 square feet
and $2.66 per square foot respectively, compared to 722 square feet and $3.81 per square foot for the average condo rental.1
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 which is
solely based on residents voluntarily choosing to vacate their suite for alternative housing arrangements. The REIT does not
engage in renovation-related evictions.
A summary of the repositioning activities for Q4 2022 and FY 2022 is set out below.
Property
Toronto
Minto Yorkville
Leslie York Mills
High Park Village
Roehampton
Martin Grove
Ottawa
Carlisle
Castle Hill
Montreal
Rockhill
Le 4300
Haddon Hall
Le Hill-Park
Total
Suites Repositioned and Leased
Ownership
Interest
Three months ended
December 31, 2022
Year ended
December 31, 2022
Remaining
Suites to
Reposition
Total Suites
in the
Program
Proportion
Complete
100%
50%
40%
100%
100%
100%
100%
50%
100%
100%
100%
2
6
7
2
1
4
1
3
3
8
4
4
47
28
42
4
19
11
51
15
26
12
31
198
264
50
22
75
68
755
216
136
168
99
409
407
148
32
191
176
934
261
191
261
41
259
1,983
3,109
69%
52%
35%
66%
31%
61%
61%
19%
17%
29%
36%
36%
Renovated suites at Le-Hill Park in Montreal
1 Source: Urbanation Q4 2022 UrbanRental Greater Toronto Area Rental Market Report
Minto Apartment REIT | 2022 Annual Report
7 Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2022
(in thousands of Canadian dollars, except Unit and per Unit amounts, per suite amounts and other non-financial data)
The following table summarizes costs and average annualized returns from repositioning activities for the past four quarters:
Fiscal Quarter
Suites Renovated
Q1 2022
Q2 2022
Q3 2022
Q4 2022
Total/Average
60
83
75
41
259
Average Cost
per Suite
$53,380
51,573
54,628
60,863
$54,347
Average Annual Rental
Increase per Suite
$4,468
4,434
5,150
6,050
$4,905
Average
Unlevered Return1
8.4%
8.6%
9.4%
11.3%
9.0%
Management targets an average unlevered return on investment in the range of 8% to 15% on suites renovated and leased.
The REIT's repositioning program represents an attractive capital investment opportunity, 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, strong relationships with trade partners, and transferable lessons learned from other projects. Due to the
continued strength in the rental market combined with decreasing vacancy and turnover, Management expects its repositioning
program to slow in 2023 relative to 2022.
Expansion of the REIT Portfolio from Relationship with The Minto Group
One of the benefits of the REIT's strategic relationship with The Minto Group is the opportunity to access its property pipeline.
During Q2 2022, the REIT acquired interests in two properties partially owned by a subsidiary of MPI. On April 22, 2022, the REIT
acquired a 28.35% managing interest in 39 Niagara Street, 29 and 33 Bathurst Street and 31 Bathurst Street ("Niagara West").
On May 6, 2022, the REIT acquired a 100% interest in 220 4th Avenue SW, Calgary, Alberta ("The International"). Both
properties are located in their respective downtown cores, are newly built or recently fully renovated, and decrease the average
age of the portfolio.
Niagara West is a newly constructed property (completed in 2020), comprising 501 suites and approximately 52,600 square feet
of grocery-anchored at-grade retail at the intersection of Bathurst Street and Front Street West in downtown Toronto. The
acquisition cost of $112,667 was satisfied by a cash payment of $4,990, the assumption of working capital liabilities of $545 and
an existing $46,158 mortgage and the issuance of 2,985,956 Class B LP Units to the vendor with a fair value of $60,974.
The International comprises 252 suites and 2,700 square feet of commercial space in downtown Calgary. It is directly connected
to Calgary's Plus 15 network, one of the world's most extensive pedestrian skywalk systems, connecting residents to office,
retail, restaurants and entertainment. The acquisition cost of $86,614 was satisfied by a cash payment of $23,771, and the
assumption of an existing mortgage of $62,220 and working capital liabilities of $623.
Environmental, Social and Governance Initiatives
The REIT continues to implement measures to improve environmental, social, and governance ("ESG") performance under the
three strategic pillars of environmental impact, community impact, and business resilience. Highlights from Q4 2022 are
provided below.
Environmental Impact
• Implementation of capital projects to reduce portfolio energy and water use continued with the completion of additional
boiler replacements, building automation system improvements, installation of shower heads with thermostatic shut-off
valves to eliminate water warm-up waste, and the application of aerosolized duct sealing to reduce energy loss and
maximize heating, ventilation, and air conditioning system efficiency.
• Real-time water monitoring device installation is in progress at Kaleidoscope and The Quarters in Calgary. All other
installations at properties higher than two-storeys and more than 20 suites are complete.
• Real-time energy and natural gas consumption monitoring is in place at Roehampton in Toronto through the installed
Artificial Intelligence system.
• A standalone real-time energy and natural gas consumption monitoring technology has been selected and a pilot project to
evaluate the technology is planned for 2023.
1 Refer to "Section VI - Supplemental Information - Non-IFRS and Other Financial Measures"
2022 Annual Report | Minto Apartment REIT
8 Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2022
(in thousands of Canadian dollars, except Unit and per Unit amounts, per suite amounts and other non-financial data)
• Technical feasibility studies for solar photovoltaic systems, which convert sunlight into electricity, were completed for
Huron, Seneca, and Aventura in Ottawa, and High Park Village in Toronto and additional assessments are in progress.
• The Richgrove development project in Toronto achieved an average construction waste diversion rate of 78.6% from
January to October 2022, slightly below the 80% target. A construction waste workshop will be conducted in 2023 to
support and optimize diversion for the project.
Community Impact and Business Resilience
• Roll-out of mandatory Diversity and Inclusion training for all employees started in December 2022, with additional courses
scheduled to launch in Q1 2023.
• New Business Continuity Plans have been developed for most critical services and assets, with the remainder to be
completed by the end of January 2023.
• A “lessons learned” exercise was completed to strengthen the REIT's Pandemic Plan.
• Strengthening the cybersecurity program continued including:
◦ Continually enhancing cyber security processes,
◦ Expanding multi-factor authentication,
◦ Completion of a fall 2022 cyber security training campaign,
◦ Deployment of the Microsoft 365 platform with enhanced security tools, and
◦ Penetration and vulnerability testing for the REIT's network and applications.
Governance Framework
The Board of Trustees receives quarterly updates on ESG and an ESG Steering Committee with senior executive representation
continues to meet quarterly. REIT employee incentive pay continues to be linked, in part, to ESG performance targets, with half
of the annual incentive targets being ESG-related. ESG-related needs and considerations are incorporated into capital and
operating budgets and ESG expectations are included in the business plan.
Reporting and Disclosure
The REIT participated in the 2022 Global Real Estate Sustainability Benchmark ("GRESB") assessment, earning a score of 80, a 3-
Star GRESB Rating, and Green Star Designation. This score is a ten-point improvement over 2021 and places the REIT fourth out
of 16 in our peer comparison group of North American, residential, listed constituents.
The REIT was included in the GRESB Public Disclosure evaluation for the first time in 2022. The REIT received a score of 93 out of
100, which placed first out of ten in our Canadian peer group and earned the GRESB Public Disclosure Level A rating.
The REIT’s 2021 ESG Report was released October 24, 2022. The report was prepared in accordance with the Global Reporting
Initiative (GRI) Standards: Core option and the Sustainability Accounting Standards Board (SASB) Real Estate Sustainability
Accounting Standard.
Outlook
Looking ahead, there are strong fundamental tailwinds supporting Management's positive outlook for revenue growth. The
primary tailwinds include the growing affordability gap of home ownership due to high interest rates, insufficient supply of new
housing and strong population growth driven by immigration. In addition, Management believes there are other tailwinds that
support revenue growth, including the return of in-person post-secondary learning, an increase of international students
coming to Canada, the increasing general acceptance of renting versus owning a home for all age groups1, a continuing return
to downtown living2, and a federal mandate for government employees to return to the office at least three days per week that
will mostly impact the REIT's Ottawa portfolio. Management believes these fundamentals will persist and support revenue
growth for the foreseeable future.
1 Ontario’s Need for 1.5 million more homes, Smart Prosperity Institute at the University of Ottawa, August 2022.
2 The Institute of Governmental Studies, UC Berkeley, Q2 2022, study of 62 North American cities.
Minto Apartment REIT | 2022 Annual Report
9 Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2022
(in thousands of Canadian dollars, except Unit and per Unit amounts, per suite amounts and other non-financial data)
Supported by these tailwinds, Management will continue to maximize organic growth including realizing on the embedded rent
in the REIT's high quality urban portfolio, value creation from the repositioning program and driving occupancy in all markets,
with particular focus on the REIT's Montreal portfolio which continues to steadily improve. Given the continued anticipated
strength in the rental market, Management believes that suite turnover will moderate slightly going forward as existing tenants
are more likely to stay in place since affordable housing alternatives will be less available. However, the REIT has exposure to
non-rent controlled markets like Calgary, as well as certain properties in Ontario that were built after November 2018.
Management estimates that 17.5% of its portfolio is unregulated, and the REIT has an additional 997 suites under development
and, if exercised, up to an additional 390 suites through CDL Options that will not be subject to rent control. In 2022, the REIT
repositioned 254 suites under the strategic repositioning program. Due to the anticipated lower turnover as well as carrying
lower overall vacancy, Management anticipates completing fewer repositionings under the program in 2023 than in 2022 and
currently forecasts to reposition 80 to 120 suites in 2023.
Management is keenly focused on delivering FFO per unit and AFFO per unit by managing operating expenses, employing
strategies to reduce interest costs and by making prudent capital allocation decisions, while at the same time, balancing long-
term value creation and growth objectives.
Management believes that revenue growth will outpace overall operating expense growth in 2023, generating solid NOI
growth. Management will adapt quickly to any changes in labour market dynamics and is evaluating efficiencies resulting from
the recent implementation of a new enterprise resource planning ("ERP") system as well as potential efficiencies from carrying
low overall vacancy. Natural gas unit costs saw major spikes in 2022 due to the war in Ukraine, however unit prices have
dropped significantly in early 2023. Currently, 95% of managed suites in the Total Portfolio are either submetered or directly
metered for electricity and approximately 86% of tenants pay the cost of electricity consumed in their suites. Management
continues to evaluate opportunities for operational efficiencies and cost reductions, which include property technology,
managing service contracts and supplier relationships, and labour efficiencies. Property technology is a burgeoning opportunity
to run properties more efficiently and conserve on utilities consumption and cost. With high utility costs, the value proposition
on some of the technology has become more attractive and has resulted in some being adopted, while others remain under
consideration for feasibility. Should cost inflation persist, Management believes the REIT is well positioned since historically, the
multi-family sector has performed well during times of high inflation relative to other real estate subsectors given the short
term nature of residential leases.
In 2022, high interest rates had a significant negative impact on corporate earnings, particularly for those entities who had
meaningful variable rate debt exposure. The REIT's FFO and AFFO per unit in Q4 2022 were materially impacted by high interest
rates as it temporarily carried a large amount outstanding on the revolving credit facility and the existing variable rate
mortgages on Niagara West and The International, both of which are variable rate debt instruments. Management is actively
working to refinance $108,378 of 7.45% variable rate debt with CMHC-insured fixed rate mortgages, secured by Niagara West
and The International. Management is also evaluating strategies to manage the amount outstanding on the revolving credit
facility, which had a weighted average interest rate of 6.47% at December 31, 2022, including early refinancings and
deleveraging using other sources of liquidity. Looking ahead, Management will continue to stagger its debt ladder and maturity
profile and believes there is upside to FFO and AFFO per unit if interest rates come down from current elevated levels.
Efficient capital allocation continues to be a key area of focus for the REIT. Management will evaluate capital allocation
decisions strategically, with consideration for leverage, liquidity, cash flow growth per unit and value creation, among other
including developments and convertible
things. Management anticipates funding near-term growth opportunities,
development loan programs including any related acquisitions, with internal sources including operating cash flow, credit
facility draws and capital recycling by disposing of certain non-core assets. At this time, Management does not anticipate
increasing leverage materially, nor anticipate raising equity at a large discount to NAV. Management will also consider unit
buybacks, reduction of variable rate debt and continued investment in properties with any excess capital.
Canada is facing the worst housing and affordability crisis in a generation. CMHC identified in a report that Canada needs over
22 million new housing units by 2030 to help achieve housing affordability. If the current rates of new construction continue,
CMHC projects that the housing stock will increase by 19 million units by 2030. Therefore, to restore affordability, CMHC
estimates that an additional 3.5 million housing units are required. Management believes that REITs and the private sector can
be part of the solution and in 2022, the five publicly-traded real estate investment trusts came together to form a group called
Canadian Rental Housing Providers for Affordable Housing (www.foraffordable.ca). The coalition is committed to being a part of
the solution and will continue to work collaboratively with all levels of government and civil society to build new housing
supply, create new jobs and help alleviate the housing supply and affordability pressures facing our country.
In summary, Management is confident that the industry fundamentals will support strong revenue growth in 2023. In addition,
it believes that the in-place strategies to contain controllable operating expenses will deliver solid NOI growth. In addition, FFO
and AFFO per unit will benefit from any future reduction of interest rates from current levels.
2022 Annual Report | Minto Apartment REIT
10 Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2022
(in thousands of Canadian dollars, except Unit and per Unit amounts, per suite amounts and other non-financial data)
Organic Growth Opportunities
The REIT 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 13.6% (as set out in the detailed
embedded gain-to-lease potential table in the previous section). The REIT aims to further enhance occupancy, which as of
December 31, 2022 was 97.6%, which provides another viable source of organic revenue growth.
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 nearly 2,000 suites eligible for repositioning. The REIT's ability to execute its repositioning program is highly dependent on
turnover of unrenovated suites and market conditions at the time suite renovations are completed. Management is anticipating
a slight moderation in turnover in 2023 due to overall rental market strength. Subject to unrenovated suites becoming
available, the REIT expects to reposition approximately 80 to 120 suites in 2023.
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 its affiliates by capitalizing on their extensive experience and track
record of successful developments and construction projects.
The REIT is in the process of developing additional rental suites on available excess land at the following properties:
Location and
Property Name
Toronto, ON
Richgrove
Leslie York Mills
High Park Village
Ownership
Estimated
Suites
Estimated
Project Costs1
Construction
Start Date
Estimated
Stabilization
Anticipated
Yield
100%
50%
40%
225
192
680
$
117,000
185,000
520,000 Q4 2024 (est.)
Q4 2021
Q4 2021
Q2 2026
Q2 2026
Q3 2029
4.25% - 4.75%
3.75% - 4.25%
4.25% - 4.75%
The existing Richgrove community comprises two mid-rise residential apartment buildings with a total of 258 suites and a high-
rise residential apartment building with 237 suites. The intensification involves the addition of a new tower with 225 suites,
including 100 affordable housing suites, and 213 parking stalls. The REIT has negotiated an agreement with the City of Toronto
under which the City has already exempted or waived development charges and other fees amounting to $3,794, has
committed to advance funding of $4,500, of which $1,350 has been received, and has agreed to provide exemption from
property tax and municipal and school taxes for a period of 25 years after first occupancy. On November 30, 2021, a
construction financing agreement was executed with CMHC for a maximum financing of $93,745. On March 1, 2022, the initial
draw was made on the construction financing which has a fixed interest rate of 2.39% for a 10-year term. Phase 1 below-grade
construction for the parking garage was completed and Phase 2 below-grade excavation for the tower began in January 2023.
Leslie York Mills comprises three existing 18-storey towers with a total of 409 suites. The intensification entails the
development of 192 new rental terrace homes in four blocks, creating an indoor pool, gym and recreational area and replacing
the existing parking structure with a new two-level underground parking garage. Enabling site servicing and construction of
temporary parking structures is underway. Underground garage construction is set to commence in late Q1 2023.
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 680 suites and 335 underground parking stalls. Rezoning was
completed in Q3 2022, however the development remains subject to municipal as well as investment partner approval through
the Site Plan Approval process. The garage rehabilitation that was required to enable construction was completed in December
2022.
Current economic conditions including high inflation, rising interest rates and municipal development policy changes have
created additional volatility in construction cost estimates. While these risks are largely offset by strong market conditions,
Management’s strategy for mitigating these risks include significant budget contingency, managing key vendor relationships,
exploration of value-engineering opportunities through each stage of the project, coupled with extensive use of sensitivity
analysis for construction costs, interests rates, capitalization rates and project duration to ensure project returns remain viable
under various changing economic conditions.
1 Estimated project costs are presented at 100% rather than the REIT's proportionate share.
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11 Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2022
(in thousands of Canadian dollars, except Unit and per Unit amounts, per suite amounts and other non-financial data)
The construction of the three development projects will add approximately 1,097 suites to the REIT's portfolio at an estimated
total cost of $822,0001, generating an expected average yield between 3.75% and 4.75%. Increases in rental rates are expected
to offset any cost inflation to preserve expected yields.
Access to Urban Pipeline in Target Markets Through MPI and Affiliates
The REIT has entered into agreements to extend convertible development loans to MPI and partnerships in which MPI is a
partner. Convertible development loan projects provide a host of benefits to the REIT including insulation from development
risk, an opportunity to earn interest income during the development period, the option to purchase newly constructed rental
housing at a discounted price, the potential to provide a more economic entry into markets compared to acquisitions of existing
properties, and the preservation of development capacity under the DOT for intensification projects. When the REIT's Unit price
is trading at a significant discount to NAV, as is currently the case, the REIT will be selective in the pursuit of any new convertible
development loan opportunities.
The REIT currently has the following convertible development loan projects:
Location and
Project Name
Ottawa, ON
Fifth + Bank
Beechwood
North Vancouver, BC
Lonsdale Square
Vancouver, BC
810 Kingsway
Victoria, BC
University Heights
Estimated
Suites
Estimated
Project
Costs1
Status
Construction
Start Date
Estimated
Stabilization
Maximum
Loan
Amount2
Advanced as
of December
31, 20222
163
227
113
108
93,000
137,000 Under construction
Stabilized
Q3 2020
Q4 2021
Q2 2022
Q1 2025
$30,000
51,400
$30,000
25,550
83,000
Under construction
Q2 2021
Q1 2024
14,000
13,784
78,000
Under construction
Q1 2022
Q3 2024
19,650
15,357
594
401,000
Pre-development Q4 2022 (est.)
Q2 2026
51,700
12,893
Fifth + Bank involves the redevelopment of a commercial property located at 99 Fifth Avenue in the Glebe neighbourhood of
Ottawa into a mixed-used multi-residential rental and retail property. Construction of 163 rental suites was completed in Q3
2021 and the property stabilized at the end of Q2 2022. MPI continues to work toward the record of site condition approval
from the provincial Ministry of Environment, Conservation and Parks. In Q4 2022, MPI extended the REIT's property purchase
option to June 30, 2023, and the REIT extended the maturity of the convertible development loan to July 31, 2023. The REIT has
not yet made a decision regarding the exercise of its purchase option and any decision will be based on market conditions and
other factors at that time.
Beechwood involves the development of a nine-storey property 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. Excavation and shoring has been
completed and formwork is currently underway. Stabilization is expected by Q1 2025.
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. Building superstructure was topped
off in October 2022 and the building achieved water-tightness in December 2022. Retail leasing is underway and construction
completion is expected by Q2 2023 and the property is expected to be stabilized in Q1 2024.
810 Kingsway involves the development of a six-storey mixed-used building in Vancouver comprising 108 rental suites and
approximately 11,500 square feet of at-grade retail space. Excavation and shoring was completed and slab on-grade work is
underway. Pre-leasing of the retail component has commenced. The property is expected to be stabilized in Q3 2024.
University Heights involves the development of five buildings containing 594 rental suites and 113,485 square feet of grocery-
anchored retail on an 11.5 acre parcel in Victoria currently containing the University Heights Shopping Centre. Additionally, the
site contains a Home Depot which will continue to operate throughout the development. The site is in proximity to two post-
secondary institutions: The University of Victoria and Camosun College’s Lansdowne Campus, with a combined 46,000+
students and 6,500+ faculty members. The first phase of parkade restoration is nearing completion and construction will be
executed in a phased approach, with construction of the first building expected to commence in Q2 2023. The project is
expected to be fully stabilized in Q2 2026.
1 Estimated project costs are presented at 100% rather than the REIT's proportionate share.
2 Maximum loan amounts and amounts advanced include amounts to fund interest costs.
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12 Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2022
(in thousands of Canadian dollars, except Unit and per Unit amounts, per suite amounts and other non-financial data)
In connection with these financings, the REIT has the exclusive option, upon project stabilization, to purchase the property at
Fifth + Bank, Lonsdale Square and Beechwood, MPI's 85% indirect ownership interest in 810 Kingsway and MPI's 45% indirect
ownership interest in University Heights, each at 95% of its then-appraised fair market value as determined by independent and
qualified third-party appraisers. If all of the CDL Options are exercised, these projects will add approximately 1,205 suites to the
REIT's portfolio. The exercise of each of the CDL Options would require approval by the independent members of the Board of
Trustees.
Capital Recycling Program
The REIT's capital recycling program is an important element of the strategic plan as it represents an internal source of equity
capital. Management continuously evaluates its portfolio for relative NOI growth potential, NOI margin, repositioning programs,
geographic exposure and average age of the portfolio. This program will allow the REIT to reinvest any equity proceeds into
opportunities with enhanced returns that are aligned with the REIT's strategy, which may include investing in high growth
acquisitions, repayment of high cost debt and unit buybacks. The capital recycling program is an attractive alternative to raising
equity from the capital markets which is currently dilutive to existing unitholders.
On March 7, 2023, the REIT completed its disposition of Hi-Level Place in Edmonton for a sale price of $9,920, generating net
proceeds of $2,832.
Minto Apartment REIT | 2022 Annual Report
13 Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2022
(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 rising interest rates and inflation. As
a result, the operating performance and metrics in one quarter may not be indicative of future quarters. The following tables
highlight certain key IFRS and non-IFRS financial and operating measures used by the REIT.
Operating
Number of properties
Total suites1
Average monthly rent2
Occupancy - end of the period2
Occupancy - average for the period2
Average monthly rent2 - Same
Three months ended December 31,
Year ended December 31,
2022
2021
Change
2022
2021
Change
$
32
8,291
1,732
97.6 %
97.1 %
$
30
7,538
1,641
95.5 %
95.0 %
2
753
5.5 % $
210 bps
210 bps
32
8,291
1,732
97.6 %
95.6 %
$
30
7,538
1,641
95.5 %
92.5 %
2
753
5.5 %
210 bps
310 bps
Property Portfolio
$
1,738
$
1,662
4.6 % $
1,738
$
1,662
4.6 %
Occupancy - average for the period2 -
Same Property Portfolio
Financial
Revenue
NOI2
NOI margin2
Net (loss) income and comprehensive
(loss) income
Revenue - Same Property Portfolio
NOI2 - Same Property Portfolio
NOI margin2 - Same Property Portfolio
FFO2,3
FFO per unit2,3
AFFO2,3
AFFO per unit2,3
AFFO Payout Ratio2
Distribution per unit
Distribution yield2 based on Unit
closing price
97.3 %
95.1 %
220 bps
95.7 %
92.5 %
320 bps
$
$
$
$
$
$
$
$
$
37,916
22,947
$
$
32,429
19,940
16.9 % $ 143,790
15.1 % $
87,796
$ 123,547
76,247
$
60.5 %
61.5 %
(100) bps
61.1 %
61.7 %
(32,432) $
$
34,656
$
21,218
24,933
32,196
19,802
(230.1) % $ 225,400
7.6 % $ 133,547
7.2 % $
81,793
$
94,161
$ 123,314
76,109
$
61.2 %
61.5 %
(30) bps
61.2 %
61.7 %
12,864
0.1960
11,160
0.1700
$
$
$
$
13,245
0.2147
11,656
0.1890
(2.9) % $
(8.7) % $
(4.3) % $
(10.1) % $
54,177
0.8353
47,443
0.7315
$
$
$
$
48,530
0.8128
42,234
0.7073
71.3 %
63.1 %
(820) bps
65.4 %
65.1 %
$
0.1212
$
0.1171
3.5 % $
0.4775
$
0.4584
16.4 %
15.1 %
(60) bps
139.4 %
8.3 %
7.5 %
(50) bps
11.6 %
2.8 %
12.3 %
3.4 %
(30) bps
4.2 %
3.49 %
2.14 %
135 bps
3.40 %
2.09 %
131 bps
1 At December 31, 2022, includes 2,664 (December 31, 2021 - 2,163) suites co-owned with institutional partners.
2 Refer to "Section VI - Supplemental Information - Non-IFRS and Other Financial Measures"
3 In Q4 2022, the REIT received a one-time insurance recovery of approximately $304. Excluding this recovery, decreases in FFO and FFO per
unit were 5.2% and10.9%, respectively, and decreases in AFFO and AFFO per unit were 6.9% and 12.5% respectively, as compared to Q4 2021.
For FY 2022, after adjustments for one-time insurance recoveries of approximately $898 received in 2022, offset by a one-time property tax
refund of approximately $600 received in 2021, increases in FFO and FFO per unit were 11.2% and 2.3%, respectively, and increases in AFFO and
AFFO per unit were 11.8% and 2.9%, respectively.
2022 Annual Report | Minto Apartment REIT
14 Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2022
(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 ratio1,2
Weighted average term to maturity on fixed rate debt1
Weighted average interest rate on fixed rate debt1
Weighted average interest rate on variable rate debt1
Interest expense, other financing charges and distributions
on Class C LP Units
December 31, 2022
December 31, 2021
Change
40.6 %
1.66 x
12.43 x
4.27
3.06 %
6.87 %
36.5 %
1.76 x
11.75 x
4.69
2.82 %
2.19 %
(410) bps
(0.10)x
(0.68)x
(0.42) years
(24) bps
(468) bps
32,648
24,874
31.30 %
Valuation
NAV1
NAV per unit1
$
$
1,575,395
24.00
$
$
1,508,416
24.00
4.4 %
— %
Review of Financial Performance
The following tables highlight selected financial information for the REIT's Same Property Portfolio and Total Portfolio for the
three months and years ended December 31, 2022 and 2021.
Same Property Portfolio
Revenue from investment properties
$
Property operating costs
Property taxes
Utilities
Operating expenses
NOI1
NOI margin1
$
Three months ended December 31,
Year ended December 31,
2022
34,656
6,615
3,514
3,309
13,438
21,218
2021
32,196
6,118
3,486
2,790
12,394
19,802
$
$
% Change
2022
2021
7.6 % $ 133,547
(8.1) %
26,080
(0.8) %
14,056
(18.6) %
11,618
(8.4) %
51,754
7.2 % $
81,793
$ 123,314
23,909
13,300
9,996
47,205
76,109
$
61.2 %
61.5 %
(30) bps
61.2 %
61.7 %
% Change
8.3 %
(9.1) %
(5.7) %
(16.2) %
(9.6) %
7.5 %
(50) bps
1 Refer to "Section VI - Supplemental Information - Non-IFRS and Other Financial Measures"
2 For FY 2022 and FY 2021, the REIT added finance income to Adjusted EBITDA.
Minto Apartment REIT | 2022 Annual Report
15 Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2022
(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
Property taxes
Utilities
Operating expenses
NOI1
NOI margin1
General and administrative expenses
Finance costs - operations
Finance income
Fair value loss (gain) on:
Investment properties
Class B LP Units
Interest rate swap
Unit-based compensation
Fees and other income
Net (loss) income and comprehensive
(loss) income
Net Operating Income1
Three months ended December 31,
Year ended December 31,
2022
37,916
7,414
3,872
3,683
14,969
22,947
$
2021
32,429
6,161
3,508
2,820
12,489
19,940
60.5 %
61.5 %
2,554
13,184
(1,492)
12,209
29,617
(6)
354
(1,041)
1,849
8,798
(879)
(3,133)
(10,701)
(421)
(98)
(408)
% Change
2022
16.9 % $ 143,790
(20.3) %
28,387
2021
$ 123,547
23,952
% Change
16.4 %
(18.5) %
(10.4) %
(30.6) %
(19.9) %
15.1 %
(100) bps
(38.1) %
(49.9) %
69.7 %
(98.6) %
155.1 %
15,116
12,491
55,994
87,796
13,322
10,026
47,300
76,247
61.1 %
61.7 %
9,303
44,590
(4,818)
18,828
(197,531)
(2,391)
(2,246)
(3,339)
7,602
35,310
(3,129)
(89,188)
34,609
(1,625)
137
(1,630)
(13.5) %
(24.6) %
(18.4) %
15.1 %
(60) bps
(22.4) %
(26.3) %
54.0 %
47.1 %
104.8 %
$
(32,432) $
24,933
$ 225,400
$
94,161
139.4 %
Same Property Portfolio NOI for Q4 2022 increased by 7.2%, driven by rental revenue growth of 7.6%. Rental revenue growth
was spurred by unfurnished suite revenue growth of 9.2% over Q4 2021 driven by favourable occupancy and average monthly
rents. This was partially offset by an 8.4% increase in property operating expenses, particularly from higher gas rates, salaries
and repair and maintenance costs.
For FY 2022, Same Property Portfolio NOI increased by 7.5% and was driven by rental revenue growth of 8.3%. This was largely
due to an 8.5% increase in unfurnished suite revenue from strong occupancy and average monthly rents. This was augmented
by furnished suites revenue growing 11.9% driven by very strong rates and increased occupancy despite decreasing the overall
suite count. Revenue growth was partially offset by an increase in property operating expenses of 9.6% due largely to elevated
gas rates and increased property operating costs for salaries, repairs and maintenance, bad debt expense, and insurance
premiums. A one-time property tax refund received in Q2 2021 pertaining to select Ottawa properties of approximately $600
resulted in lower property tax for FY 2021. Excluding the impacts of this one-time property tax refund, the Same Property NOI
growth would have increased by 80 bps to 8.3% for FY 2022 as compared to FY 2021 and NOI margin would have been flat year
over year.
For Q4 2022 and FY 2022, the NOI variance between Same Property Portfolio results and Total Portfolio results is due to the
properties acquired: Le Hill-Park in Q4 2021, and Niagara West and The International in Q2 2022. As such, the discussion for
items associated with determining NOI will primarily be focused from the context of Same Property Portfolio results.
1 Refer to "Section VI - Supplemental Information - Non-IFRS and Other Financial Measures"
2022 Annual Report | Minto Apartment REIT
16 Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2022
(in thousands of Canadian dollars, except Unit and per Unit amounts, per suite amounts and other non-financial data)
Revenue from Investment Properties
Same Property Portfolio
Rental revenue
Unfurnished suites
Furnished suites
Commercial leases
Parking revenue
Other property income
Total Portfolio
Rental revenue
Unfurnished suites
Furnished suites
Commercial leases
Parking revenue
Other property income
Three months ended December 31,
Year ended December 31,
2022
2021
% Change
2022
2021
% Change
29,720
2,075
521
1,178
1,162
27,204
2,108
644
1,160
1,080
9.2 %
(1.6) %
(19.1) %
1.6 %
7.6 %
114,190
8,595
1,693
4,857
4,212
105,199
7,678
2,268
4,423
3,746
8.5 %
11.9 %
(25.4) %
9.8 %
12.4 %
$
34,656 $
32,196
7.6 % $
133,547 $
123,314
8.3 %
Three months ended December 31,
Year ended December 31,
2022
2021
% Change
2022
2021
% Change
$
32,467 $
2,075
705
1,367
1,302
27,420
2,108
644
1,168
1,089
18.4 % $
(1.6) %
9.5 %
17.0 %
19.6 %
123,043 $
8,595
2,182
5,374
4,596
105,415
7,678
2,268
4,431
3,755
16.7 %
11.9 %
(3.8) %
21.3 %
22.4 %
$
37,916 $
32,429
16.9 % $
143,790 $
123,547
16.4 %
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
For Q4 2022, rental revenue from unfurnished suites for the Same Property Portfolio increased 9.2% from Q4 2021, primarily
due to improved occupancy and higher average monthly rents, as well as reduced amortization of promotions. Same Property
Portfolio average occupancy for Q4 2022 was 97.3% compared to 95.1% for Q4 2021. As at December 31, 2022, average
monthly rent increased to $1,738, which was 4.6% per month higher than Q4 2021. Use of lease promotions has continued to
diminish as the rental market has strengthened.
For FY 2022, Same Property Portfolio rental revenue from unfurnished suites was 8.5% higher than FY 2021, primarily due to
higher occupancy and average monthly rents. Same Property Portfolio average occupancy of 95.7% for FY 2022 was 320 bps
higher than FY 2021. Average monthly rent for the year ended December 31, 2022 increased 5.5% to $1,732.
Minto Apartment REIT | 2022 Annual Report
17 Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2022
(in thousands of Canadian dollars, except Unit and per Unit amounts, per suite amounts and other non-financial data)
Same Property Portfolio Revenue and Occupancy - Average for the Period1
Same Property Portfolio
Occupancy - average for the period1
Toronto
Ottawa
Alberta
Montreal
Three months ended December 31,
Year ended December 31,
2022
2021
Change
2022
2021
Change
98.2 %
98.2 %
97.0 %
93.8 %
97.3 %
94.2 %
96.5 %
94.6 %
92.3 %
400 bps
170 bps
240 bps
150 bps
95.1 %
220 bps
96.8 %
96.4 %
95.3 %
92.5 %
95.7 %
91.2 %
93.5 %
92.3 %
91.1 %
560 bps
290 bps
300 bps
140 bps
92.5 %
320 bps
In 2021 Management offered promotions to residents to increase occupancy, which peaked in Q2 2021. The use of promotions
has since been reduced substantially as the REIT's occupancy has improved and the need for such incentives has declined. In
addition, the majority of the promotions offered during the peak period have been fully amortized.
For Q4 2022, revenue from unfurnished suites for the Total Portfolio was 18.4% higher as compared to Q4 2021, of which 9.2%
related to the acquisitions. Total Portfolio average monthly rent was $1,732 at December 31, 2022, an increase of 5.5% from
December 31, 2021. Total Portfolio average occupancy for Q4 2022 was 97.1%, an increase of 210 bps from Q4 2021.
For FY 2022, revenue from unfurnished suites for the Total Portfolio was 16.7% higher as compared to FY 2021, 7.8% of which
related to acquisitions. The balance of the revenue gain was driven by a 5.5% increase in average monthly rent over FY 2021
and growth in average occupancy of 310 bps to 95.6% for FY 2022.
Total Portfolio
Occupancy - average for the period1
Toronto
Ottawa
Alberta
Montreal
Three months ended December 31,
Year ended December 31,
2022
2021
Change
2022
2021
Change
98.1 %
98.2 %
96.9 %
93.8 %
97.1 %
94.2 %
96.5 %
94.6 %
92.4 %
390 bps
170 bps
230 bps
140 bps
95.0 %
210 bps
96.7 %
96.4 %
95.5 %
92.6 %
95.6 %
91.2 %
93.5 %
92.3 %
91.1 %
550 bps
290 bps
320 bps
150 bps
92.5 %
310 bps
In Q4 2022, there were 427 move-outs and 446 move-ins, compared to 420 move-outs and 514 move-ins for Q4 2021. The
graph below sets out the REIT's quarterly move-in/move-out metrics for the past five quarters (100% basis), and illustrates the
return to typical seasonal leasing patterns of higher leasing activity in Q2 and Q3 and reduced activity in the late fall and winter
months.
1 Refer to "Section VI - Supplemental Information - Non-IFRS and Other Financial Measures"
2022 Annual Report | Minto Apartment REIT
29,99929,88531,23432,42931,66532,91834,30834,65691.1%91.5%92.9%95.0%94.3%94.8%96.3%97.3%Revenue ($)Occupancy - average for the period (%)Q1 2021Q2 2021Q3 2021Q4 2021Q1 2022Q2 2022Q3 2022Q4 2022$15,000$20,000$25,000$30,000$35,00085%88%90%93%95%98%100%18 Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2022
(in thousands of Canadian dollars, except Unit and per Unit amounts, per suite amounts and other non-financial data)
Quarterly Move-ins/Move-outs
At December 31, 2022, the REIT's Total Portfolio had vacancy of 201 unfurnished suites (2.4% of total unfurnished suites), of
which 70 unfurnished suites (0.8% of total unfurnished suites) were leased for future occupancy, 46 unfurnished suites (0.6% of
total unfurnished suites) were held offline undergoing post move-out repairs and maintenance or under renovation for
repositioning programs, and 85 unfurnished suites (1% of total unfurnished suites) were rent ready.
Vacancy Composition of Unfurnished Suites at December 31, 2022
Rental Revenue from Furnished Suites
For Q4 2022, rental revenue from furnished suites for the Same Property Portfolio and Total Portfolio was 1.6% lower than Q4
2021. Increased average monthly rent for furnished suites of $4,848 for Q4 2022 represents a substantial increase over $4,078
for Q4 2021, but was offset by reduced occupancy of 77.35% compared to 80.50% and the average suite count decreased by 21
suites from Q4 2021.
For FY 2022, rental revenue from furnished suites for the Same Property Portfolio and Total Portfolio was 11.9% higher than FY
2021. Average monthly rent for furnished suites of $4,695 was significantly higher than $3,941 for FY 2021. Average occupancy
of 79.35% also increased over FY 2021, which had average occupancy of 76.20%. The positive revenue result was attained while
reducing the average suite count by 28 suites over the course of FY 2022 as compared to FY 2021. These metrics have improved
over the course of FY 2022 following a considerable recovery in demand from business travel, corporate relocations, easing
restrictions on non-essential travel and inflation.
Rental Revenue from Commercial Leases
For Q4 2022 and FY 2022, revenue from commercial leases for the Same Property Portfolio was 19.1% and 25.4% lower as
compared to the same periods in 2021. This decrease was due mainly to promotions offered in Ottawa.
As compared to the same periods in 2021, revenue from commercial leases for the Total Portfolio was 9.5% higher for Q4 2022
driven by the acquisition of Niagara West but 3.8% lower for FY 2022 with gains from Niagara West being more than offset by
promotions offered in Ottawa. The commercial space at Niagara West accounted for increases of 35.3% and 28.9% in Q4 2022
and FY 2022, respectively, over the Same Property Portfolio.
Parking Revenue
For Q4 2022 and FY 2022, parking revenue for the Same Property Portfolio increased by 1.6% and 9.8%, respectively over the
same periods in 2021, mainly due to improved occupancy and higher rates charged to tenants.
For Q4 2022 and FY 2022, parking revenue for the Total Portfolio was 17.0% and 21.3% higher as compared to the same periods
in 2021, of which 16.0% and 10.6%, respectively, related to the acquisitions.
Minto Apartment REIT | 2022 Annual Report
420324492562427514310585691446Move-outsMove-insQ4 2021Q1 2022Q2 2022Q3 2022Q4 20221503004506007502.4%97.6%OccupiedVacantFuture Lease SignedHeld OfflineRent Ready Total Portfolio2.4%0.8%0.6%1.0%VacancyVacancy Composition19 Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2022
(in thousands of Canadian dollars, except Unit and per Unit amounts, per suite amounts and other non-financial data)
Other Property Income
For Q4 2022 and FY 2022, other property income for the Same Property Portfolio increased by 7.6% and 12.4% as compared to
the same periods in 2021, primarily as a result of higher revenue from laundry, storage rentals and guest suites.
For Q4 2022 and FY 2022, other property income for the Total Portfolio was 19.6% and 22.4% higher as compared to the same
periods in 2021, of which 12.0% and 9.1%, respectively, related to the acquisitions.
Property Operating Costs
Same Property Portfolio
Three months ended December 31,
Year ended December 31,
2022
2021
% Change
2022
2021
% Change
Property operating costs
$
6,615 $
6,118
(8.1) % $
26,080 $
23,909
(9.1) %
Total Portfolio
Three months ended December 31,
Year ended December 31,
2022
2021
% Change
2022
2021
% Change
Property operating costs
$
7,414 $
6,161
(20.3) % $
28,387 $
23,952
(18.5) %
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, and waste removal.
For Q4 2022, Same Property Portfolio property operating costs were 8.1% higher compared to Q4 2021, mainly as a result of an
increase in salaries and wages, in addition to repairs and maintenance. The increase in salaries was mainly a result of filling
staffing vacancies and annual salary increases.
For FY 2022, property operating costs for the Same Property Portfolio were 9.1% higher than FY 2021, mainly due to increased
salaries and wages, repairs and maintenance, bad debt expense, insurance premiums, professional fees, and property
administrative expenses.
For Q4 2022 and FY 2022, property operating costs for the Total Portfolio were 20.3% and 18.5% higher as compared to the
same periods in 2021, of which 12.1% and 8.8%, respectively, related to the acquisitions.
Same Property Portfolio property operating costs were 19.1% of revenue for Q4 2022, compared to 19.0% for Q4 2021. For Q4
2022, Total Portfolio property operating costs were 19.6% of revenue, compared to 19.0% for Q4 2021. For FY 2022, Same
Property Portfolio property operating costs were 19.5% of revenue, compared to 19.4% for FY 2021. For FY 2022, Total Portfolio
property operating costs were 19.7% of revenue, compared to 19.4% for FY 2021.
Property Taxes
Same Property Portfolio
Three months ended December 31,
Year ended December 31,
2022
2021
% Change
2022
2021
% Change
Property taxes
$
3,514 $
3,486
(0.8) % $
14,056 $
13,300
(5.7) %
Total Portfolio
Three months ended December 31,
Year ended December 31,
2022
2021
% Change
2022
2021
% Change
Property taxes
$
3,872 $
3,508
(10.4) % $
15,116 $
13,322
(13.5) %
Property taxes for the Same Property Portfolio for Q4 2022 increased slightly as compared to Q4 2021, primarily due to changes
in assessed values and tax rates across the portfolio.
2022 Annual Report | Minto Apartment REIT
20 Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2022
(in thousands of Canadian dollars, except Unit and per Unit amounts, per suite amounts and other non-financial data)
Property taxes for the Same Property Portfolio for FY 2022 were 5.7% higher than FY 2021, primarily due to changes in assessed
values and tax rates across the portfolio, as well as refunds received in Q2 2021 from successful property tax appeals of
approximately $600 relating to certain properties in Ottawa.
For Q4 2022 and FY 2022, property taxes for the Total Portfolio were 10.4% and 13.5% higher as compared to the same periods
in 2021, of which 10.2% and 7.5%, respectively, related to the acquisitions.
Same Property Portfolio property taxes were 10.1% of revenue for Q4 2022, compared to 10.8% for Q4 2021. Total Portfolio
property taxes were 10.2% of revenue for Q4 2022, compared to 10.8% for Q4 2021. For FY 2022, Same Property Portfolio
property taxes were 10.5% of revenue, compared to 10.8% for FY 2021. For FY 2022, Total Portfolio property taxes were 10.5%
of revenue, compared to 10.8% for FY 2021.
Utilities
Same Property Portfolio
Electricity
Natural gas
Water
Total Portfolio
Electricity
Natural gas
Water
Three months ended December 31,
Year ended December 31,
$
2022
935 $
1,598
776
2021
936
1,129
725
% Change
0.1 % $
(41.5) %
(7.0) %
2022
3,996 $
4,610
3,012
2021
3,938
3,081
2,977
% Change
(1.5) %
(49.6) %
(1.2) %
$
3,309 $
2,790
(18.6) % $
11,618 $
9,996
(16.2) %
Three months ended December 31,
Year ended December 31,
$
2022
1,120 $
1,767
796
2021
941
1,154
725
% Change
(19.0) % $
(53.1) %
(9.8) %
2022
4,403 $
5,005
3,083
2021
3,943
3,106
2,977
% Change
(11.7) %
(61.1) %
(3.6) %
$
3,683 $
2,820
(30.6) % $
12,491 $
10,026
(24.6) %
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.
Same Property Portfolio utilities for Q4 2022 were 18.6% higher compared to Q4 2021 primarily due to an increase in natural
gas expense. The natural gas expense increased by 41.5% as a result of significant increases in rates and federal carbon levies
across all geographic nodes. Heating degree days were 12.7% higher which drove a slight increase in consumption from Q4
2022 over Q4 2021.
Same Property Portfolio utilities for FY 2022 were 16.2% higher compared to FY 2021 primarily due to an increase in natural gas
expense. The increase in Same Property Portfolio natural gas expense of 49.6% is a combination of higher rates and federal
carbon levies. A colder winter and spring led to increased consumption as heating degree days were 11.2% higher for the first
two quarters of 2022 when compared to the same periods in 2021 in addition to colder Q4 2022 compared to Q4 2021 .
For Q4 2022 and FY 2022, utilities for the Total Portfolio were 30.6% and 24.6% higher as compared to the same periods in
2021, of which 11.3% and 7.5%, respectively, related to the acquisitions.
Natural gas supply rates are expected to continue to decrease into 2023 from peak Q3 2022 rates. Usage of natural gas is highly
seasonal and weather dependent with peaks in Q4 and Q1 of any given year.
Same Property Portfolio utilities represent 9.5% of revenue, compared to 8.7% for Q4 2021. Total Portfolio utilities for Q4 2022
represent 9.7% of revenue, compared to 8.7% for Q4 2021. For FY 2022, Same Property Portfolio utilities represent 8.7% of
revenue, compared to 8.1% for FY 2021. Total Portfolio utilities for FY 2022 represent 8.7% of revenue, compared to 8.1% for FY
2021.
Minto Apartment REIT | 2022 Annual Report
21 Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2022
(in thousands of Canadian dollars, except Unit and per Unit amounts, per suite amounts and other non-financial data)
Same Property Portfolio Utilities as a Proportion of Revenue1
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 for Q4 2022 and FY 2022 increased 38.1% and 22.4% respectively, primarily driven by
executive compensation and Unit-based compensation for the hiring of the new President and Chief Operating Officer, higher
professional fees, and travel costs.
Finance Costs - Operations
Interest expense on mortgages and
loans
Interest expense and standby fees on
credit facility
Amortization of financing charges
Amortization of mark-to-market
adjustments
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,
2022
2021
% Change
2022
2021
% Change
$
6,419 $
4,161
(54.3) % $
21,802 $
16,605
(31.3) %
2,344
328
(179)
(484)
8,428
3,122
1,634
410
145
(192)
(68)
4,456
2,665
1,677
(471.7) %
(126.2) %
(6.8) %
611.8 %
(89.1) %
(17.1) %
2.6 %
5,128
938
(743)
(1,051)
26,074
11,942
6,574
1,750
640
(193.0) %
(46.6) %
(769)
(95)
(3.4) %
1,006.3 %
18,131
10,436
6,743
(43.8) %
(14.4) %
2.5 %
$
13,184 $
8,798
(49.9) % $
44,590 $
35,310
(26.3) %
Finance costs comprise interest expense on fixed and variable rate mortgages and a construction loan, interest expense and
standby fees on the revolving credit facility, amortization of financing charges and mark-to-market adjustments on debt, and
distributions on Class B LP Units and Class C limited partnership units ("Class C LP Units") of the Partnership, offset by
capitalized interest expense.
Finance costs for Q4 2022 were higher by $4,386 compared to Q4 2021, primarily as a result of additional interest expense on
variable rate debt acquired in connection with the acquisitions of Niagara West and The International, higher interest expense
on the credit facility and an increase in distributions on Class B LP Units. Higher interest expense on the credit facility is a result
of increased usage and higher interest rates. For Q4 2022 the average outstanding balance was $144,856 with an average
borrowing rate of 6.03%, compared to $28,121 in Q4 2021 with an average borrowing rate of 2.19%. The increase in mortgage
interest expense is primarily driven by the mortgages associated with Niagara West and The International, which account for
$1,842 of the increase over Q4 2021; at December 31, 2022 their weighted average interest rate was 7.45%. Management is
actively working to secure CMHC-insured fixed rate mortgages for both of these properties. Class B LP Unit distributions for Q4
2022 were higher by $457 compared to Q4 2021 primarily due to the additional Class B LP Units issued in connection with the
Niagara West acquisition and the monthly distribution increase effective for November 2022 onward that increased the
monthly distributions from $0.03958 to $0.04083 per Class B LP Unit.
Finance costs for FY 2022 were $9,280 higher compared to FY 2021, primarily as a result of increased interest expense from the
credit facility due to higher interest rates and increased usage, an increase of $5,014 of interest expense on mortgages secured
by the three properties acquired since Q4 2021, and $1,506 from higher distributions on Class B LP Units.
1 Same Property Portfolio utilities as a percentage of revenue is representative of Total Portfolio utilities as a percentage of revenue.
2022 Annual Report | Minto Apartment REIT
9.0%7.4%6.9%8.7%11.0%7.7%6.7%9.5%Q1 2021Q2 2021Q3 2021Q4 2021Q1 2022Q2 2022Q3 2022Q4 20226.0%9.0%12.0%15.0%22 Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2022
(in thousands of Canadian dollars, except Unit and per Unit amounts, per suite amounts and other non-financial data)
Finance Income
Finance income comprises interest income on convertible development loans, a Unit purchase loan made to a member of
Management, and interest on bank deposits.
For Q4 2022 and FY 2022, finance income was 69.7% and 54.0% higher, respectively, when compared to the same periods in
2021, primarily as a result of higher interest income earned on convertible development loans. As at December 31, 2022, the
REIT had advanced $12,893 on one new convertible development loan commitment and an additional $21,379 on four existing
commitments, thus driving higher interest income throughout Q4 2022 and FY 2022.
Fair Value Gain (Loss) on Investment Properties
Fair value of residential investment properties is predominantly determined using the direct capitalization approach, by
applying an appropriate capitalization rate to the estimated 12-month stabilized forecasted NOI for each property, reduced by
an estimate of five-year future capital expenditures. 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.
The fair value gain (loss) on investment properties 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,
$
2022
68,134 $
(69,987)
(10,356)
—
2021
6,605 $
10,262
(13,734)
—
2022
151,368 $
(117,503)
(52,693)
—
2021
11,682
122,753
(47,928)
2,681
$
(12,209) $
3,133 $
(18,828) $
89,188
Increases in capitalization rates of 12.5 bps to 25.0 bps on various assets across all geographies were offset by forecast NOI
growth in Q4 2022 due to strong realized and forecasted leasing results continuing to outpace expense inflation. The weighted
average capitalization rate used for the Q4 2022 valuation of residential properties was 3.80%, compared to 3.68% in Q3 2022
and 3.60% in Q4 2021. The adjustment is derived from market data indicating mild capitalization rate expansion on multi-family
assets due to the rising interest rate environment. In addition, the capital expenditure reserve increased based on timing
changes of planned capital projects and sustainability initiatives. Collectively, adjustments to capitalization rates, forecast NOI,
and capital expenditure reserve resulted in a $12,209 fair value loss.
The fair value loss in FY 2022 was due to capitalization rate expansion of 12.5 bps to 25.0 bps across all geographies based on
their individual rental fundamentals and the changing debt market, as well as the progression of planned capital projects,
partially offset by increased forecast NOI as a result of stronger leasing across all geographies.
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, 2022
December 31, 2021
Low
3.88%
3.25%
4.38%
4.28%
3.75%
High
4.25%
3.50%
4.38%
4.63%
4.00%
3.80%
Low
3.63%
3.13%
4.25%
4.15%
3.50%
High
4.00%
3.25%
4.25%
4.50%
3.75%
3.60%
Minto Apartment REIT | 2022 Annual Report
23 Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2022
(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 economically equivalent to Units, in that they receive distributions equivalent 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.
The change in Unit price for the periods presented was as follows:
Unit price - opening
Unit price - closing
Three months ended December 31,
Year ended December 31,
$
2022
12.90
14.05
$
2021
22.36
21.89
$
2022
21.89
14.05
$
2021
20.37
21.89
The increase in Unit price for Q4 2022 resulted in a fair value loss on Class B LP Units of $29,617, compared to a decrease in Unit
price resulting in a fair value gain of $10,701 for Q4 2021. For FY 2022, the decrease in Unit price resulted in a fair value gain of
$197,531, whereas an increase in Unit price for FY 2021 resulted in a fair value loss of $34,609.
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 2022 and FY 2022, the REIT recognized fair value gains of $6 and $2,391, respectively, compared to fair value gains of
$421 and $1,625 for the same periods in 2021. The fair value gains were primarily a result of an increase 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 2022, the REIT recognized a fair value loss of $354 due to an increase in the Unit price, whereas for Q4 2021 the REIT
recognized a gain of $98 due to a decrease in the Unit price. For FY 2022, the REIT recognized a fair value gain of $2,246 due to
a decrease in the Unit price, whereas for FY 2021, an increase in Unit price resulted in a fair value loss of $137.
Fees and Other Income
Fees and other income represent revenue from asset, project and property management services provided by the REIT in
connection with four properties co-owned with institutional partners and other income, including insurance recoveries. For Q4
2022 and FY 2022, the REIT recognized $1,041 and $3,339, respectively, in fees and other income, with the increase over the
same periods in 2021 primarily driven by the addition of Niagara West to the portfolio on April 22, 2022 and approximately
$898 in one-time insurance recoveries received in 2022.
For Q4 2022, the REIT recognized a $304 insurance recovery relating to a property in Ottawa damaged by a storm. After
normalization of this one-time insurance recovery, FFO per unit and AFFO per unit decreased by 10.9% and 12.5%, respectively,
when compared to Q4 2021. For FY 2022, the REIT recognized $898 in one-time insurance recoveries. After normalization of
these one-time recoveries, FFO per unit and AFFO per unit grew 1.1% and 1.5%, respectively, as compared to the same period
in 2021.
2022 Annual Report | Minto Apartment REIT
24 Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2022
(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 (loss) income and
comprehensive (loss) income
FFO1
FFO per unit1
AFFO1
AFFO per unit1
Distributions declared2
AFFO Payout Ratio1
Distribution per unit
Q3 2022
Q2 2022
Q4 2022
Q1 2021
$ 2,734,812 $ 2,714,856 $ 2,706,092 $ 2,474,897 $ 2,440,714 $ 2,326,515 $ 2,286,697 $ 2,211,191
$ 2,611,094 $ 2,600,273 $ 2,599,891 $ 2,384,753 $ 2,360,565 $ 2,252,643 $ 2,206,078 $ 2,145,174
$ 1,521,275 $ 1,464,049 $ 1,487,430 $ 1,435,014 $ 1,430,713 $ 1,419,443 $ 1,456,426 $ 1,385,520
$ 1,189,744 $ 1,145,584 $ 1,244,872 $ 1,273,661 $ 1,248,071 $ 1,331,990 $ 1,394,275 $ 1,273,525
Q3 2021
Q1 2022
Q4 2021
Q2 2021
$
$
$
$
$
$
$
$
$
37,916 $
22,947 $
60.5%
37,838 $
24,224 $
64.0%
35,510 $
21,839 $
61.5%
32,526 $
18,786 $
57.8%
32,429 $
19,940 $
61.5%
31,234 $
19,405 $
62.1%
29,885 $
19,018 $
63.6%
29,999
17,884
59.6%
(32,432) $
12,864 $
0.1960 $
11,160 $
0.1700 $
7,960 $
71.3%
0.1212 $
39,655 $ 183,537 $
13,680 $
15,654 $
0.2100 $
0.2380 $
11,983 $
13,952 $
0.1840 $
0.2121 $
7,816 $
7,804 $
65.2%
55.9%
0.1187 $
0.1187 $
34,640 $
11,979 $
0.1906 $
10,348 $
0.1647 $
7,462 $
72.1%
0.1187 $
24,933 $
13,245 $
0.2147 $
11,656 $
0.1890 $
7,356 $
63.1%
0.1171 $
80,928 $
12,453 $
0.2109 $
10,883 $
0.1842 $
6,718 $
61.7%
0.1138 $
8,727 $
11,941 $
0.2022 $
10,373 $
0.1757 $
6,717 $
64.8%
0.1138 $
(20,427)
10,891
0.1845
9,322
0.1579
6,716
72.0%
0.1138
The REIT's operating results are affected by seasonal variations and other factors, including changing interest rates and
inflation. 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, as well as
lower suite turnover. The best performing quarters in any given year are typically the second and third quarters, where stronger
leasing demand and higher turnover provide an opportunity to realize more of the gain-to-lease potential.
Q4 2022 marks yet another strong quarter for the REIT's operations, driven by favourable long-term market demand conditions
for unfurnished suites which drive revenue and NOI. Average monthly rents and occupancy continued their upward trajectory.
While inflation increased the cost of utilities and property operating expenses, by the end of 2022 it showed signs of slowing.
FFO and AFFO were impacted by higher short term interest rates, which affected variable rate mortgages and the credit facility
in particular, and had a negative impact on financing costs. Overall, the REIT achieved strong results in the balance of these
challenges and opportunities, and was able to increase the monthly distributions by 3.2% while maintaining a conservative
payout ratio.
1 Refer to "Section VI - Supplemental Information - Non-IFRS and Other Financial Measures"
2 Includes distributions on Units and Class B LP Units.
Minto Apartment REIT | 2022 Annual Report
25 Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2022
(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
Interest expense and other financing charges
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
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
2022
2,734,812 $
2,611,094 $
1,521,275 $
1,189,744 $
143,790 $
87,796 $
61.1%
26,074 $
225,400 $
54,177 $
0.8353 $
47,443 $
0.7315 $
31,042 $
65.4%
0.4775 $
1,575,395 $
24.00 $
2021
2,440,714 $
2,360,565 $
1,430,713 $
1,248,071 $
123,547 $
76,247 $
61.7%
15,002 $
94,161 $
48,530 $
0.8128 $
42,234 $
0.7073 $
27,507 $
65.1%
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%
16,698
179,638
49,981
0.8465
43,733
0.7407
26,351
60.3%
0.4463
1,314,030
22.26
The REIT began FY 2022 with a portfolio of 30 multi-residential rental properties comprising 7,5383 suites across Ottawa,
Toronto, Montreal, Calgary and Edmonton with a value of $2,440,714. Two new properties were added to the portfolio during
the year: an ownership stake of 28.35% in Niagara West in Toronto, and The International, a wholly-owned property in Calgary,
bringing the total suite count to 8,291.3 The REIT also extended an additional convertible development loan to MPI to finance
the development of University Heights in Victoria, which provides the REIT the option to purchase MPI's 45% indirect ownership
share of an expected 594 suites. Despite the challenges presented throughout 2022, including numerous interest rate hikes,
soaring inflation, and volatile capital markets, the REIT continued to generate rental revenue and NOI growth through gains on
suite turnovers as new leases were set to market rates and increased average occupancy across the portfolio.
1 Refer to "Section VI - Supplemental Information - Non-IFRS and Other Financial Measures"
2 Includes distributions on Units and Class B LP Units.
3 Total suites includes suites co-owned with institutional partners: 2,163 at December 31, 2021 and 2,664 at December 31, 2022.
2022 Annual Report | Minto Apartment REIT
26 Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2022
(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, 2021
Additions
Acquisition
Capital expenditures
Development expenditures
Other
Fair value (loss) gain
Residential
properties
2,306,493 $
$
Commercial
properties
Land under
development
18,850 $
35,222 $
Total
2,360,565
186,579
52,348
—
(715)
(19,250)
12,702
48
—
—
(3,772)
—
—
18,395
—
4,194
199,281
52,396
18,395
(715)
(18,828)
Balance, December 31, 2022
$
2,525,455 $
27,828 $
57,811 $
2,611,094
Acquisition of Investment Properties
On April 22, 2022, the REIT completed the acquisition of a 28.35% managing ownership interest in Niagara West, a mixed-use
multi-residential property in Toronto, Ontario for a total acquisition cost of $112,667. The acquisition was financed by the
issuance of Class B LP Units, the assumption of an existing variable rate mortgage and working capital liabilities, and cash.
On May 6, 2022, the REIT completed the acquisition of The International, a multi-residential property in Calgary, Alberta for a
total acquisition cost of $86,614. The acquisition was financed by the assumption of an existing variable rate mortgage and
working capital liabilities, and cash.
Both acquisitions were accounted for as asset acquisitions and contributed to the operating results effective from their
respective acquisition dates. Through December 31, 2022, Niagara West and The International have achieved strong average
monthly rents of $2,639 and $1,620, respectively. This is supported by stable average occupancy since acquisition of 95.6% and
96.0%, respectively. Their strong performance in both rents and occupancy, along with those of Le Hill Park, have contributed to
Total Portfolio NOI growth of 15.1% for YTD 2022 over YTD 2021.
Capital 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 capital 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,
2022
2021
2022
$
18,433 $
10,350 $
52,396 $
11,273
5,921
17,194
1,239
6,039
2,523
8,562
1,788
30,280
15,945
46,225
6,171
2021
36,453
15,518
14,640
30,158
6,295
$
183 $
288 $
927 $
1,025
Minto Apartment REIT | 2022 Annual Report
27 Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2022
(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 Section I
- "Overview - Financial and Operating Highlights - Value Creation - Repositioning" and Section I - "Overview - Outlook".
Value-enhancing renovations are intended to generate NAV accretion, long term AFFO accretion and increase tenant
satisfaction, however they tend to be AFFO dilutive in the short term owing to vacancy during renovation.
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 2022 and FY 2022 were $1,239 and $6,171 or $183 and $927 per suite,
respectively, and primarily related to maintenance of plumbing, electrical and mechanical systems, parking garages, fire-life
safety systems and common areas at various buildings.
Management targets 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 constraints.
Development Expenditures
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. Development expenditures are
intended to generate NAV accretion and long term AFFO accretion. The REIT is currently developing two projects on excess land
available at Richgrove and Leslie York Mills and is pursuing the development of a third project at High Park Village, as discussed
under Section I - "Outlook - Development of Purpose-Built Rental Properties and Intensification on Existing Sites". The
breakdown of development expenditures incurred in connection with these projects is as follows:
Richgrove
Leslie York Mills
High Park Village
Three months ended December 31,
Year ended December 31,
$
$
2022
3,261 $
2,020
31
2021
11,274 $
430
131
2022
12,364 $
5,407
624
2021
13,079
792
348
5,312 $
11,835 $
18,395 $
14,219
The construction of the Richgrove project continues as planned, with development expenditures primarily related to the first
phase of below-grade construction which was completed in November 2022. Expenditures on the second phase of below-grade
construction will continue throughout 2023. As of December 31, 2022, the REIT has incurred costs of $26,368, and forecasts
$90,632 in remaining expenditures, an internal rate of return ("IRR") of 17.17% and stabilization in Q2 2026.
Development at Leslie York Mills also continues to progress, with the demolition of the existing parking structure and site
servicing complete. Preparation of the temporary parking structure is underway. As of December 31, 2022, the REIT has
incurred costs of $17,917, and forecasts $167,083 in remaining expenditures, an IRR of 12.46% and stabilization in Q2 2026.
The High Park Village development rezoning was completed in Q3 2022, however the final project specifications remain subject
to municipal as well as investment partner approval through the Site Place Approval process, with expenditures incurred as the
project progresses through the pre-development phase. As of December 31, 2022, the REIT has incurred costs of $7,549, and
forecasts $512,451 in remaining expenditures, an IRR of 14% to 17% and stabilization in Q3 2029.
Valuation
Refer to Section II, "Review of Financial Performance - Fair Value Loss (Gain) on Investment Properties" for details on the
valuation method used for the REIT's investment properties.
2022 Annual Report | Minto Apartment REIT
28 Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2022
(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.
On April 22, 2022, as partial consideration for the acquisition of Niagara West, 2,985,956 Class B LP Units were issued.
As at December 31, 2022, there were 25,755,029 (December 31, 2021 - 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, 2022 and December 31, 2021, there were 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, 2021 - 3.16%) and mature at various dates between 2023 and 2030.
Secured Debt
Secured debt includes mortgages, a construction loan 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 3.03% (December 31, 2021 - 2.71%) and mature
at various dates between 2023 and 2023. The REIT's fixed rate mortgages include a variable rate mortgage that is fixed at 3.38%
through an interest rate swap.
On February 10, 2022, the REIT obtained CMHC-insured mortgages for each of its three Edmonton properties for a total of
$32,975. Proceeds from the new mortgages were used to repay the existing mortgages of $16,300 and pay down the credit
facility. The new mortgages bear interest at 2.85% and mature on September 1, 2032.
In connection with the acquisitions of Niagara West and The International, the REIT assumed $108,378 in variable rate
mortgage financing. The Niagara West mortgage bears interest at bankers' acceptance plus 200 bps or prime plus 100 bps. The
International's mortgage bears interest at bankers' acceptance rate plus 250 bps or prime plus 100 bps. In Q1 2023, the
maturity dates of both mortgages were extended to April 30, 2023. At December 31, 2022, the weighted average variable
interest rate of these mortgages was 7.45%, an increase of 1.31% from September 30, 2022. The REIT is actively working on
refinancing both mortgages as CMHC-insured fixed rate mortgages.
The REIT has a fixed rate non-revolving construction loan to finance its Richgrove development. The $93,745 construction loan
bears interest at 2.39% and matures on March 1, 2032. As at December 31, 2022, $8,006 (December 31, 2021 - $nil) was drawn.
Payments are made monthly on an interest-only basis.
On June 30, 2022, the REIT increased the total commitment on its revolving credit facility from $200,000 to $300,000. As at
December 31, 2022, the REIT had available credit of $267,115 (December 31, 2021 - $200,000) which is the lesser of the total
commitment and the lending value. The increase enables the REIT to maintain financial flexibility and continue to capitalize on
opportunities to drive long term NAV growth. In addition to the commitment increase, the REIT extended the maturity date of
the credit facility by one year to July 3, 2025. The credit facility is secured by several investment properties 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, 2022, the weighted average variable
interest rate was 6.47% (December 31, 2021 - 2.19%).
Minto Apartment REIT | 2022 Annual Report
29 December 31, 2021
200,000
200,000
51,754
442
52,196
147,804
$
714,121
(3,248)
710,873
Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2022
(in thousands of Canadian dollars, except Unit and per Unit amounts, per suite amounts and other non-financial data)
Committed
Available
Utilized
Amounts drawn
Letter of credit
Undrawn amount available
Units
December 31, 2022
300,000 $
267,115
157,158
442
157,600
109,515 $
$
$
The following table presents the change in and outstanding amount of Units for the year ended December 31, 2022:
Opening balance, December 31, 2021
Cancellation of Units under NCIB
Closing balance, December 31, 2022
Normal Course Issuer Bid
Units
40,069,839 $
(182,227)
39,887,612 $
On July 15, 2022, the Toronto Stock Exchange ("TSX") accepted the REIT's notice to initiate a normal course issuer bid ("NCIB").
The NCIB period is from July 21, 2022 to July 20, 2023 and permits the REIT to acquire up to 3,847,284 Units, representing
approximately 10% of the REIT’s public float. Under the terms of the NCIB, the REIT may acquire up to 33,965 Units on any given
trading day, being approximately 25% of the REIT’s average daily trading volume for the six most recently completed calendar
months prior to initiating the NCIB. Purchases under the NCIB are made in the open market through the facilities of the TSX or
through Canadian Alternative Trading Systems.
The REIT’s Board of Trustees authorized the NCIB because it believes that, from time to time, the purchase of Units at prices
below the REIT's NAV may be an attractive and appropriate use of the REIT's funds, benefiting remaining Unitholders by
increasing the NAV per unit of the REIT. Decisions regarding the timing of purchases of Units will be based on market conditions,
Unit price and other factors such as liquidity and the need to prioritize capital.
For FY 2022, the REIT purchased and cancelled 182,227 Units under the NCIB, at a weighted average purchase price of $15.15
per Unit, for a total cost of $2,764, including commissions. The difference between the purchase price and the weighted
average historical Unit issuance price of $17.82 per Unit was recorded as an increase to retained earnings.
Distributions
On November 8, 2022, the Board of Trustees approved a 3.2% increase to the REIT's annual distribution from $0.4750 per Unit
to $0.4900 per Unit. The monthly distribution will be $0.04083 per Unit, up from $0.03958 per Unit, effective from the
November 2022 distribution paid on December 15, 2022. Management believes this distribution increase is aligned with its goal
of maintaining a conservative AFFO payout ratio, which was 65.4% for FY 2022, to facilitate the reinvestment of capital to fund
the REIT's growth initiatives.
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 FY 2022, distributions to Unitholders of $19,100 (December 31, 2021 - $17,071) were declared based on approved monthly
distributions of $0.03958 per Unit for the months of January to October and $0.04083 for the months of November and
December (2021 - $0.03792 per Unit for the months of January to October 2021 and $0.03958 per Unit for the months of
November and December 2021).
2022 Annual Report | Minto Apartment REIT
30 Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2022
(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 Class B LP Units, Class C LP Units, mortgages, a construction loan, a
credit facility and Unitholders' equity.
As at
Liabilities (principal amounts outstanding):
Class B LP Units
Class C LP Units
Mortgages
Construction loan
Credit facility
Unitholders' equity
December 31, 2022
December 31, 2021
$
361,858 $
206,673
740,334
8,006
157,158
1,474,029
1,213,537
$
2,687,566 $
498,415
212,183
627,534
—
51,754
1,389,886
1,010,001
2,399,887
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, 2022, 63% (December 31, 2021 - 72%) of the REIT's total debt is CMHC insured and
approximately 76% (December 31, 2021 - 94%) 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
Construction loan
Credit facility
Total debt
Total assets
Debt-to-Gross Book Value ratio1
Total liquidity
Liquidity as a percentage of total debt
$
December 31, 2022
208,086 $
738,314
8,006
157,158
1,111,564
2,734,812
40.6%
114,838
10.3%
December 31, 2021
214,069
626,120
—
51,754
891,943
2,440,714
36.5%
150,655
16.9%
The REIT continues to maintain a conservative overall leverage position with a Debt-to-Gross Book Value ratio of 40.6% at
December 31, 2022.
While the REIT has sufficient liquidity, Management manages its liquidity prudently given the current capital market conditions.
The REIT's liquidity ratio (total liquidity as a percentage of total debt) was 10.3% at December 31, 2022, compared to 16.9% at
December 31, 2021.
1 Refer to "Section VI - Supplemental Information - Non-IFRS and Other Financial Measures"
Minto Apartment REIT | 2022 Annual Report
31 Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2022
(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:
NOI1
General and administrative expenses
Finance income
Fees and other income
Impact on NOI of stabilized earnings from acquisitions
Adjusted EBITDA1
Total debt
Cash
Total debt, net of cash
Debt-to-Adjusted EBITDA ratio1
$
December 31, 2022
87,796 $
(9,303)
4,818
3,339
86,650
2,351
89,001
1,111,564
5,323
1,106,241
12.43x
December 31, 2021
76,247
(7,602)
3,129
1,630
73,404
2,286
75,690
891,943
2,851
889,092
11.75x
For FY 2022 and FY 2021, the REIT added finance income to Adjusted EBITDA as the amounts earned have become material to
the operations of the REIT, making EBITDA more comparable to net income prior to adjustments.
The REIT's Debt-to-Adjusted EBITDA ratio increased by 0.68x compared to December 31, 2021. The primary reasons for the
increase is the assumption of the mortgages for Niagara West and The International, additional draws on the credit facility, and
the refinancing on the Edmonton properties. In addition, the REIT uses a combination of equity and debt to finance the
intensification of existing sites and the issuance of convertible development loans (refer to Section I - "Overview - Outlook").
Any increased debt arising from these latter transactions is not immediately matched by increased NOI until the development
projects stabilize or the REIT decides to exercise its CDL Options, 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, 2022, the weighted average term to maturity on fixed
rate debt was 4.27 years (December 31, 2021 - 4.69 years) and the weighted average interest rate on fixed rate debt was 3.06%
(December 31, 2021 - 2.82%). The contractual payments under the REIT’s debt financing are summarized in the table below.
Principal Repayments
Principal at Maturity
Year
2023
2024
2025
2026
2027
2028
Thereafter
Mortgages
$
Class C LP
Units
Mortgages
Credit
facility
Construction
loan
Class C LP
Units
12,933 $
11,053
10,077
8,598
8,155
8,362
14,387
5,271 $
4,321
3,067
1,283
1,327
598
998
226,262 $
48,182
41,016
72,524
—
—
278,785
— $
— $
—
157,158
—
—
—
—
—
—
—
—
—
8,006
44,963 $
46,178
60,474
—
21,425
—
16,768
Total % of Total
26.0 %
9.9 %
24.4 %
7.4 %
2.8 %
0.8 %
28.7 %
289,429
109,734
271,792
82,405
30,907
8,960
318,944
Interest
Rate2
5.40 %
3.04 %
5.08 %
3.00 %
3.31 %
— %
2.67 %
$
73,565 $
16,865 $
666,769 $
157,158 $
8,006 $
189,808 $ 1,112,171
100 %
Of the REIT's debt financings at December 31, 2022, $265,536 incurs interest at variable interest rates and the weighted
average interest rate was 6.87%. Two of the variable rate financings, making up $108,378 of the total variable debt, mature in
Q2 2023 and Management is actively working to secure new fixed rate CMHC-insured financing for both.
As of December 31, 2022, current liabilities of $331,531 (December 31, 2021 - $182,642) exceeded current assets of $42,422
(December 31, 2021 - $38,909), resulting in a net working capital deficit of $289,109 (December 31, 2021 - $143,733). Current
liabilities as of December 31, 2022 include $271,225 (December 31, 2021 - $127,833) of mortgage financing which the REIT is
actively in the process of refinancing. 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, 2022, liquidity was
$114,838 (December 31, 2021 - $150,655), consisting of cash of $5,323 (December 31, 2021 - $2,851) and $109,515 (December
31, 2021 - $147,804) 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.
1 Refer to "Section VI - Supplemental Information - Non-IFRS and Other Financial Measures"
2 Weighted average interest rates for maturing mortgages, construction loan, credit facility and Class C LP Units.
2022 Annual Report | Minto Apartment REIT
32 Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2022
(in thousands of Canadian dollars, except Unit and per Unit amounts, per suite amounts and other non-financial data)
The REIT had a short form base shelf prospectus that allowed 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 was effective for
a 25-month period from the date of issuance on December 8, 2020. 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, 2022, the amount available
to be raised pursuant to the short form base shelf prospectus was $713,284. Due to the volatility in the capital markets, the
REIT did not renew the short form base shelf prospectus on its expiry in January 2023.
Cash Flows
The REIT held a cash balance of $5,323 as at December 31, 2022 (December 31, 2021 - $2,851). The sources and use of cash
flow for the three months and years ended December 31, 2022 and 2021 are as follows:
Operating activities
Financing activities
Investing activities
Three months ended December 31,
Year ended December 31,
$
2022
18,389 $
10,787
(29,424)
2021
27,295 $
80,401
(107,932)
2022
82,499 $
45,659
(125,686)
2021
72,119
81,238
(153,113)
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:
Three months ended December 31,
Year ended December 31,
2022
2021
2022
2021
Net (loss) income and comprehensive (loss)
income
$
Add: distributions on Class B LP Units
Less: distributions paid1
(Shortfall) excess of net (loss) income and
comprehensive (loss) income over total
distributions paid
Cash provided by operating activities
$
$
Add: interest received
Less: interest paid
Less: distributions paid1
Excess of cash provided by operating
activities over total distributions and
interest paid
(32,432) $
24,933 $
225,400 $
3,122
(29,310)
(7,875)
(37,185) $
18,389 $
522
(10,087)
8,824
(7,875)
2,665
27,598
(7,109)
20,489 $
27,295 $
603
(6,153)
21,745
(7,109)
11,942
237,342
(30,849)
206,493 $
82,499 $
1,868
(32,981)
51,386
(30,849)
949
14,636
20,537
Distributions declared2
$
7,960 $
7,356 $
31,042 $
94,161
10,436
104,597
(27,260)
77,337
72,119
1,829
(25,150)
48,798
(27,260)
21,538
27,507
For Q4 2022, total distributions exceeded net income and comprehensive income, whereas for FY 2022 net income and
comprehensive income was in excess total distributions paid. Distributions are better evaluated in the context of operating cash
flows rather than net income as net income 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 2022 and FY 2022, cash provided by operating activities was in excess of total distributions and interest paid.
1 Distributions paid on REIT Units and Class B LP Units.
2 Refer to "Section VI - Supplemental Information - Non-IFRS and Other Financial Measures"
Minto Apartment REIT | 2022 Annual Report
33 Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2022
(in thousands of Canadian dollars, except Unit and per Unit amounts, per suite amounts and other non-financial data)
Cash provided by financing activities
Proceeds from issuance of Units, net of
issue costs
Proceeds from mortgage financing
Net proceeds (repayments) on credit
facility
Proceeds from construction loan
CMHC premiums and financing costs
Principal repayments on mortgages
Forgivable loan transferred from restricted
cash
Distributions paid on various classes of
units
Interest paid
Purchase and cancellation of Units
Three months ended December 31,
Year ended December 31,
2022
2021
2022
$
— $
—
82,726 $
41,000 $
— $
34,623 $
28,567
5,183
(84)
(3,522)
(25,246)
—
(199)
(3,265)
105,404
8,006
(1,419)
(30,201)
2021
82,726
49,558
19,806
—
(222)
(12,879)
—
—
1,350
—
(9,270)
(10,087)
—
(8,462)
(6,153)
—
(36,359)
(32,981)
(2,764)
(32,601)
(25,150)
—
$
10,787 $
80,401 $
45,659 $
81,238
For Q4 2022, cash flows used in financing activities included principal and interest on mortgages, distributions on various
classes of units, payments of financing costs, and interest on the credit facility. These were entirely offset by net proceeds on
the credit facility and draws on the construction loan in connection with the Richgrove development.
For FY 2022, cash flows from financing activities included net proceeds on the credit facility, new mortgage financing for the
Edmonton properties, upward refinancing for Le Hill-Park, draws on the construction loan and a forgivable loan received in
relation to the Richgrove intensification. These activities were partially offset by principal and interest payments on mortgages,
distributions on various classes of units, purchases made under the NCIB, payments of CMHC premiums and financing costs,
and interest on the credit facility.
Cash used in investing activities
Acquisition of investment property
Capital additions to investment properties
Development expenditures
Loans advanced to related parties
Interest received
$
Three months ended December 31,
Year ended December 31,
2022
— $
(10,261)
(4,108)
(15,577)
522
2021
(80,007) $
(10,842) $
(6,742)
(10,944)
603
2022
(28,761) $
(49,203) $
(17,550)
(32,040)
1,868
2021
(80,007)
(37,429)
(17,482)
(20,024)
1,829
$
(29,424) $
(107,932) $
(125,686) $
(153,113)
Cash flows used in investing activities for Q4 2022 included capital expenditures on investment properties, development
expenditures on the active Richgrove and Leslie York Mills projects and the pursuit of the High Park Village development, and
loan advances on the Beechwood, 810 Kingsway and University Heights convertible development loans, offset by interest
received from related parties.
Cash flows used in investing activities for FY 2022 include the acquisitions of Niagara West and The International, capital
expenditures on investment properties, development expenditures on the three development projects described above,
advances on the Beechwood, 810 Kingsway and University Heights convertible development loans and a loan advance to
Management, partially offset by interest received from related parties.
2022 Annual Report | Minto Apartment REIT
34 Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2022
(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 substantially 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
Issuance costs on Class B LP Units
Fair value loss (gain) on:
Investment properties
Class B LP Units
Interest rate swap
Unit-based compensation
Q4 2022
Q3 2022
Q2 2022
Q1 2022
Q4 2021
Q3 2021
Q2 2021
Q1 2021
$ (32,432) $ 39,655 $ 183,537 $ 34,640 $ 24,933 $ 80,928 $
3,122
—
3,058
—
3,058
175
2,704
—
2,665
—
2,591
—
8,727 $ (20,427)
2,590
2,590
—
—
12,209
29,617
(6)
354
18,689
(44,813)
(302)
(633)
2,325
(172,772)
(776)
(1,867)
(14,395)
(9,563)
(1,307)
(100)
(3,133)
(10,701)
(421)
(34,663)
(35,976)
(145)
(98)
(282)
(50,478)
50,775
3
324
(914)
30,511
(1,062)
193
Funds from operations (FFO)
$ 12,864 $ 15,654 $ 13,680 $ 11,979 $ 13,245 $ 12,453 $ 11,941 $ 10,891
Maintenance capital expenditure reserve
Amortization of mark-to-market
(1,525)
(1,524)
(1,506)
(1,436)
(1,397)
(1,377)
(1,377)
(1,376)
adjustments
(179)
(178)
(191)
(195)
(192)
(193)
(191)
(193)
Adjusted funds from operations (AFFO)
$ 11,160 $ 13,952 $ 11,983 $ 10,348 $ 11,656 $ 10,883 $ 10,373 $
9,322
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
3,122
4,838
7,960
3,058
4,746
7,804
3,058
4,758
7,816
2,704
4,758
7,462
2,665
4,691
7,356
2,591
4,127
6,718
2,590
4,127
6,717
2,590
4,126
6,716
71.3%
55.9%
65.2%
72.1%
63.1%
61.7%
64.8%
72.0%
65,642,641 65,769,904 65,135,801 62,838,912 61,683,912 59,043,912 59,043,912 59,043,912
$ 0.1960 $ 0.2380 $ 0.2100 $ 0.1906 $ 0.2147 $ 0.2109 $ 0.2022 $ 0.1845
$ 0.1700 $ 0.2121 $ 0.1840 $ 0.1647 $ 0.1890 $ 0.1843 $ 0.1757 $ 0.1579
For Q4 2022, FFO was lower as compared to Q4 2021 driven mainly by a 49.9% increase in operating finance costs spurred by
the variable rate mortgages and increased draws and interest rates on the credit facility. This was partially offset by a 15.1%
increase in NOI driven mainly by an improvement in occupancy and average monthly rent and the additional revenues from the
acquisitions of Le Hill-Park, Niagara West, and The International. AFFO was lower as compared to Q4 2021, primarily as a result
of lower FFO as well as the increase in maintenance capital expenditure reserve applied to the acquisitions. The operations
from acquisitions completed since Q4 2021 added $1,782 to the FFO and $1,635 to the AFFO for Q4 2022. The decline of Q4
2022 FFO per unit and AFFO per unit over Q4 2021 would have been 10.9% and 12.5%, respectively, with the exclusion of the
impacts of a one-time insurance recovery of approximately $304 received in Q4 2022.
Minto Apartment REIT | 2022 Annual Report
35 December 31, 2020
179,638
10,162
(78,701)
(63,298)
2,429
(249)
49,981
(5,478)
(770)
43,733
10,162
16,189
26,351
60.3%
(5,527)
(769)
42,234 $
10,436
17,071
27,507
65.1%
Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2022
(in thousands of Canadian dollars, except Unit and per Unit amounts, per suite amounts and other non-financial data)
December 31, 2022
December 31, 2021
$
Net income and comprehensive income
Distributions on Class B LP Units
Issuance costs on Class B LP Units
Fair value loss (gain) on:
Investment properties
Class B LP Units
Interest rate swap
Unit-based compensation
225,400 $
11,942
175
18,828
(197,531)
(2,391)
(2,246)
94,161 $
10,436
—
(89,188)
34,609
(1,625)
137
Funds from operations (FFO)
$
54,177 $
48,530 $
Maintenance capital expenditure reserve
Amortization of mark-to-market adjustments
(5,991)
(743)
Adjusted funds from operations (AFFO)
$
47,443 $
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
$
$
11,942
19,100
31,042
65.4%
64,858,981
59,709,337
0.8353 $
0.7315 $
0.8128 $
0.7073 $
59,043,912
0.8465
0.7407
For FY 2022, FFO was higher as compared to FY 2021, reflecting a 15.1% increase in NOI due to an improvement in occupancy
and average monthly rent and the additional revenues from the acquisitions made since Q4 2021. AFFO for FY 2022 was higher
as compared to FY 2021, primarily as a result of higher FFO, offset by an increase in the maintenance capital expenditure
reserve. The operations from acquisitions made since Q4 2021 added $3,981 to FFO and $3,687 to AFFO for FY 2022.
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 approximately $900 per suite on an annual basis, which is slightly lower than the
three-year historical average of actual maintenance capital expenditures of $935. The pandemic restrictions caused a
temporary slow down in activity and the subsequent recovery led to an increase in costs as deferred maintenance was
completed. Management believes as these deferred expenditures are completed and maintenance activity normalizes, annual
maintenance capital expenditure per suite will be approximately $900 per suite, subject to costing pressures from inflation, and
further disruptions due to the trades availability and supply chain constraints. Refer to Section III - "Assessment of Financial
Position - Investment Properties - Capital Expenditures" for a more detailed discussion of maintenance capital expenditures.
NOI and NOI Margin
Same Property Portfolio
Three months ended December 31,
Year ended December 31,
2022
2021
2022
Revenue from investment properties
$
34,656 $
32,196
$
133,547 $
Property operating expenses
NOI
NOI margin
13,438
21,218
61.2%
12,394
51,754
19,802
$
81,793 $
61.5%
61.2%
2021
123,314
47,205
76,109
61.7%
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36 Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2022
(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,
2022
37,916 $
14,969
22,947
60.5%
2021
32,429
12,489
19,940
61.5%
$
$
2022
143,790 $
55,994
87,796 $
61.1%
2021
123,547
47,300
76,247
61.7%
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 and construction loan:
Principal repayments
Finance costs
Total debt service
Debt Service Coverage ratio
December 31, 2022
$
87,796 $
December 31, 2021
76,247
5,128
5,510
6,574
13,901
21,802
52,915 $
1.66x
1,750
5,341
6,743
12,879
16,605
43,318
1.76x
$
The decline in Debt Service Coverage ratio for FY 2022 from FY 2021 was primarily a result of higher interest on variable rate
debt specifically relating to increased borrowings on the credit facility and new mortgages from the acquisitions of Niagara
West and The International. This was further attributable to higher fixed interest on the refinanced mortgages at the Edmonton
properties, from the acquisition of Le-Hill Park, and from the construction loan for the Richgrove development project. The
foregoing was partially offset by an increase in NOI driven by higher rents and occupancy.
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.
For FY 2022 and FY 2021, the REIT added finance income to Adjusted EBITDA as the amounts earned have become material to
the operations of the REIT, making EBITDA more comparable to net income prior to adjustments.
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, 2022
December 31, 2021
1,213,537 $
361,858
1,575,395 $
65,642,641
1,010,001 $
498,415
1,508,416 $
62,838,912
December 31, 2020
850,224
463,806
1,314,030
59,043,912
24.00 $
24.00 $
22.26
$
$
$
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37 Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2022
(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, 2022, in determining the potential impact of economic
factors and COVID-19 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, 2022 and 2021. The estimates that could be most
significantly impacted by economic factors and 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.
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38 Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2022
(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:
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 revenues, thereby reducing its operating income and earnings and 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 financing costs on variable rate debt as well
as 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.
Changes in Legislation
interest), zoning, building standards,
The REIT is subject to laws and regulations governing the ownership and leasing of real property (including laws restricting the
acquisition of certain categories of residential real property by entities like the REIT in which non-residents have at least a three
landlord/tenant relationships, construction, employment standards,
percent
environmental matters, taxes and other matters, including laws and regulations imposing restrictions relating to or arising from
contagious disease, 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. 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.
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 equity 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.
Tax-Related Risk
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.
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39 Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2022
(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 2022 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) 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.
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.
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.
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40 Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2022
(in thousands of Canadian dollars, except Unit and per Unit amounts, per suite amounts and other non-financial data)
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, and Minto as a service provider under the Administrative Support Agreement, have 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.
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.
Risks Associated with the Administrative Support Agreement
The REIT relies upon Minto with respect to the provision of certain services as described in the REIT's Annual Information Form
dated March 8, 2023, under the section "Arrangements with Minto - Administrative Support Agreement", available on SEDAR at
www.sedar.com. 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 commodity 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 and by investing in technology and property improvements that are aimed at reducing
consumption. Currently, approximately 95% of the suites in the Portfolio are submetered or directly metered for electricity and
approximately 86% 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.
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41 Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2022
(in thousands of Canadian dollars, except Unit and per Unit amounts, per suite amounts and other non-financial data)
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.
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.
2022 Annual Report | Minto Apartment REIT
42 Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2022
(in thousands of Canadian dollars, except Unit and per Unit amounts, per suite amounts and other non-financial data)
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.
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.
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, cyber-risks 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.
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43 Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2022
(in thousands of Canadian dollars, except Unit and per Unit amounts, per suite amounts and other non-financial data)
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.
Other Tax Matters
i) 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. The REIT mitigates this
risk by regularly monitoring the residency of Unitholders.
ii) 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.
iii) 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.
iv) 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
2022 Annual Report | Minto Apartment REIT
44 Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2022
(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, 2022, the REIT has a committed variable rate credit facility of $267,115 (December 31, 2021 - $200,000)
with an outstanding balance of $157,600 (December 31, 2021 - $51,754). A 100 bps change in prevailing variable interest rates
would change annualized interest charges incurred by $1,572 (December 31, 2021 - $518).
As at December 31, 2022, the REIT also has two variable rate mortgages with outstanding balance of $108,378 (December 31,
2021 - $nil). A 1% change in prevailing interest rates would change annualized interest charges incurred by $1,084 (December
31, 2021 - $nil). The REIT intends to refinance these mortgages as CMHC-insured fixed rate mortgages.
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, 2022 would have a $3,619 (December 31, 2021 - $4,984) 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 ("ECL"s).
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 the concentration of credit risk in relation to the loans advanced, in the event that the borrowers
default on the contractual terms of repayment of amounts owing to the REIT. The REIT provides financing to MPI for strategic
developments and, in turn, receives an option to purchase or acquire an ownership interest in those developments.
Management mitigates this risk by the ensuring there is sufficient security provided by the development assets in addition to
guarantees provided by MPI.
Minto Apartment REIT | 2022 Annual Report
45 Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2022
(in thousands of Canadian dollars, except Unit and per Unit amounts, per suite amounts and other non-financial data)
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.
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, 2022, liquidity was $114,838 (December 31, 2021 - $150,655), consisting of cash of $5,323 (December 31,
2021 - $2,851) and $109,515 (December 31, 2021 - $147,804) of available borrowing capacity under the credit facility.
An analysis of the contractual cash flows associated with the REIT's financial liabilities is set out below:
Mortgages
Construction loan
Credit facility
Class C LP Units
Interest obligation1
Tenant rental deposits
Due to related parties
Accounts payable and
accrued liabilities
2023
239,195 $
$
—
239,195
—
50,234
33,816
10,464
2,936
2024
59,235 $
—
59,235
—
50,499
26,591
—
—
2025
51,093 $
—
51,093
157,158
63,541
18,990
—
—
2026
81,122 $
—
81,122
—
1,283
10,607
—
—
2027
8,155 $
—
8,155
—
22,752
9,539
10
—
2028 and
thereafter
301,534 $
8,006
309,540
—
18,364
24,733
—
—
Total
740,334
8,006
748,340
157,158
206,673
124,276
10,474
2,936
28,689
412
147
51
—
5,144
34,443
$
365,334 $
136,737 $
290,929 $
93,063 $
40,456 $
357,781 $ 1,284,300
The contractual cash flows do not include any unamortized mark-to-market adjustments or unamortized deferred financing
costs.
Related Party Transactions
Administrative Support Agreement
On July 3, 2018, the REIT and MPI, an entity with significant influence over the REIT, entered into a five-year renewable 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 during the initial term of the ASA only for all general and administrative expenses,
excluding public company costs, of 32 bps of the gross book value of the REIT's assets.
On December 15, 2022, the REIT exercised its option to renew the ASA for an additional term of five years commencing on July
3, 2023. The limitation of all general and administrative expenses, excluding public company costs, of 32 bps of the gross book
value of the REIT's assets was removed from the renewed ASA.
For the year ended December 31, 2022, the REIT incurred $2,260 (December 31, 2021 - $2,260) for services rendered by MPI
and its affiliates under the ASA.
1 Interest obligation on mortgages, construction loan, credit facility and Class C LP Units.
2022 Annual Report | Minto Apartment REIT
46 Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2022
(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
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")
3958 Shelbourne
Street, Victoria, BC
("University Heights")
Related Parties
Commitment
Interest Rate and
Maturity
December 31, 2022 December 31, 2021
Affiliate of MPI
$
30,000
6% per annum
July 31, 2023
$
30,000 $
30,000
Limited partnership
jointly owned by
MPI and a subsidiary
of Darwin Properties
14,000
7% per annum
May 30, 2024
13,784
12,855
Affiliate of MPI
51,400
6% per annum
December 31, 2025
25,550
10,094
MPI
MPI
19,650
6% per annum
August 1, 2024
51,700
7% per annum
December 31, 2026
166,750
700
Variable per annum1
April 27, 2032
$
167,450
1
$
$
15,357
10,363
12,893
97,584
718
98,302 $
30,000
68,302
98,302 $
—
63,312
—
63,312
30,000
33,312
63,312
Loan receivable
Management
Current
Non-current
All commitments pertaining to projects include a reserve to fund interest costs. In connection with these financings, the REIT
has the exclusive option to purchase the property at Fifth and Bank, Lonsdale Square and Beechwood, MPI's 85% indirect
ownership interest in 810 Kingsway and MPI's 45% indirect ownership interest in University Heights, upon project stabilization
at 95% of its then-appraised fair market value as determined by independent and qualified third-party appraisers. As at
December 31, 2022, the ECL based on 12 month expected losses for the loans receivable is $nil (December 31, 2021 - $nil)
The following table shows the movement of loans receivable from related parties:
Year ended
Opening balance
Cash flows
Advances
Interest received
Non-cash movement
Interest earned
Closing balance
December 31, 2022
$
63,312 $
December 31, 2021
41,988
32,040
(1,800)
30,240
4,750
34,990
$
98,302 $
20,024
(1,800)
18,224
3,100
21,324
63,312
Fair value of loans receivable relating to projects is calculated based on current market rates plus risk-adjusted spreads on
discounted cash flows. As at December 31, 2022, the current market rates plus risk-adjusted spreads ranged from 8.50% to
9.50% and the fair value of the loans receivable relating to projects was $93,441 (December 31, 2021 - carrying value of the
loans receivable approximated their fair value) and is considered level 2 within the fair value hierarchy.
1 The interest rate is set quarterly at the greater of prime and the prescribed interest rate as determined by the Regulations of the Income Tax
Act (Canada), subject to a maximum of 5%. Interest is payable annually in arrears.
Minto Apartment REIT | 2022 Annual Report
47 Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2022
(in thousands of Canadian dollars, except Unit and per Unit amounts, per suite amounts and other non-financial data)
Related Parties
December 31, 2022
December 31, 2021
Due to related parties
Item
Current
Class B LP Units distributions
Class C LP Units distributions
Property operating costs payable
Development costs and fees
Unit distribution
Limited partnership wholly-
owned by MPI and MPI affiliates $
Limited partnership wholly-
owned by MPI
MPI and its affiliates
Affiliate of MPI
MPI
Rental and service revenue receivable
MPI and its affiliates
Revenue, expenses, capital expenditures and distributions
Related Parties / Item
Revenue from MPI, its affiliates and jointly-owned limited partnerships
Rental and service revenue
Interest income on loans advanced
1,052 $
546 $
493 $
1,357 $
37 $
3,485 $
(549) $
2,936 $
901
561
411
535
35
2,443
(521)
1,922
December 31, 2022
December 31, 2021
863 $
4,750 $
$
$
$
$
$
$
$
$
$
Expenses and distributions to MPI, its affiliates, its wholly-owned and jointly-owned limited partnerships
Property operating expenses
Development costs and fees
Distribution on Class B LP Units (finance costs)
Distribution on Class C LP Units (finance costs)
Distribution on Class C LP Units (principal)
Distributions on Units
Compensation of key management personnel
Paid to executives
Unit-based compensation
Executives
Trustees in lieu of annual retainer and meeting fees
1,315
1,231
11,942
6,574
5,510
427
770
1,502
579
716
3,100
713
—
10,436
6,743
5,341
411
635
1,304
560
Additional compensation to key management personnel for services provided to the REIT was paid by MPI and its affiliate.
Property acquisitions
On April 22, 2022, the REIT acquired a 28.35% ownership interest in a 501-suite multi-residential rental property located in
Toronto, Ontario from a limited partnership in which an associate of MPI and certain current and former executives of MPI
owned a minority interest. The acquisition cost of $112,667, including transaction costs of $2,896, was settled by the REIT
assuming a $46,158 mortgage, the issuance of 2,985,956 Class B LP Units with a fair value of $60,974, paying $4,990 in cash,
and assuming working capital liabilities of $545.
On May 6, 2022, the REIT acquired a 252-suite multi-residential rental property located in Calgary, Alberta from a limited
partnership in which a subsidiary of MPI owned a minority interest. The acquisition cost of $86,614, including transaction costs
of $99, was settled with the REIT assuming a mortgage of $62,220, paying $23,771 in cash, and assuming working capital
liabilities of $623.
2022 Annual Report | Minto Apartment REIT
48 Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2022
(in thousands of Canadian dollars, except Unit and per Unit amounts, per suite amounts and other non-financial data)
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, 2022, the
remaining unforgiven balance of the loan is $13,464 (December 31, 2021 - $14,688). 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, 2022, the
remaining unforgiven balance of the loan is $3,360 (December 31, 2021 - $3,696). 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, 2022, the REIT has committed to advance an additional $50,087 (December 31, 2021 - $40,926) to related
parties in order to support the development of several projects and an additional $19,079 (December 31, 2021 - $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, 2022, the maximum potential obligation resulting from this guarantee is $12,690 (December 31, 2021 - $13,042).
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:
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 has assessed the impact of the amendments and expects to shorten its disclosure on
accounting policies in the REIT's consolidated financial statements based on the guidance in the amendments.
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.
Minto Apartment REIT | 2022 Annual Report
49 Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2022
(in thousands of Canadian dollars, except Unit and per Unit amounts, per suite amounts and other non-financial data)
Classification of Liabilities as Current or Non-Current (Amendments to IAS 1)
On January 23, 2020, the IASB issued amendments to IAS 1, 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, 2024. 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, 2024, when the
amendments become effective. The REIT has assessed the potential impact of the amendments and they will have no material
impact on the REIT's consolidated financial statements.
Lease Liability in a Sale and Leaseback (Amendments to IFRS 16)
On September 22, 2022, the IASB issued amendments to IFRS 16 – Leases confirming that the measurement of a right-of-use
asset and lease liability is unlikely to be $nil if variable lease payments arise in a sale-and-leaseback transaction. On initial
recognition, the seller-lessee includes variable lease payments when it measures a lease liability arising from a sale-and-
leaseback transaction. After initial recognition, the seller-lessee applies the general requirements for subsequent accounting of
the lease liability such that it recognizes no gain or loss relating to the right-of-use it retains.
The REIT intends to adopt the amendments in its annual financial statements beginning on January 1, 2024, when the standard
becomes 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 and operating effectiveness of DC&P and ICFR (as defined in National Instrument 52-109, Certification
of Disclosure in Issuers’ Annual and Interim Filings) as at December 31, 2022.
As a result of this evaluation, Management has concluded that as of December 31, 2022, 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. Management has also concluded that as of December 31, 2022, the REIT's
ICFR were appropriately designed and operating effectively in accordance with the 2013 Guidance on Internal Control published
by the Committee of Sponsoring Organizations of the Treadway Commission.
During the year ended December 31, 2022, the REIT completed the conversion to a new ERP system. The ERP system
conversion has not resulted in any significant changes in internal controls during the year ended December 31, 2022, and the
REIT's Management employed appropriate procedures to ensure internal controls over financial reporting were in place during
and after the conversion.
Subsequent Events
On March 7, 2023, the REIT completed its disposition of Hi-Level Place in Edmonton for a sale price of $9,920, generating net
proceeds of $2,832.
2022 Annual Report | Minto Apartment REIT
50 Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2022
(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
6
Roehampton
7 Niagara West
Ottawa
Parkwood Hills Garden Homes & Townhomes
8 Minto one80five1
9
10 Aventura
11 Huron
12 Seneca
13 Castleview
14 Skyline Garden Homes, Maisonettes & Walkups
15 The Carlisle
16 Castle Hill
17 Grenadier
18 Tanglewood
19 Eleanor
20 Frontenac
21 Stratford
Montreal
22 Rockhill
23 Le 4300
24 Haddon Hall
25 Le Hill-Park
Edmonton
26 The Lancaster House
27 York House
28 Hi-Level Place
Calgary
29 The Quarters
30 The Laurier
31 Kaleidoscope
32 The International
Portfolio Total
Total Suites
REIT Ownership
Interest
Effective Ownership
Interest (Suites)
750
409
258
237
181
148
501
2,484
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
252
665
8,291
40%
50%
100%
100%
100%
100%
28.35%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
50%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
300
205
258
237
181
148
142
1,471
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
252
665
6,776
1 Suite counts for Minto Yorkville and Minto one80five include furnished suites, representing approximately 31% of the total suites at these
properties.
Minto Apartment REIT | 2022 Annual Report
51 Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2022
(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 occupied suite
$2,061
1,621
1,436
1,856
Average sq. ft.
per occupied suite
776
836
672
975
Average rent per sq.
ft per suite
$2.66
1.94
2.14
1.90
$1,732
827
$2.09
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 non-IFRS and other financial 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 substantially 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 substantially 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”.
• "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”.
2022 Annual Report | Minto Apartment REIT
52 Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2022
(in thousands of Canadian dollars, except Unit and per Unit amounts, per suite amounts and other non-financial data)
• "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 including finance income, 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 contractual interest rate" is calculated as the weighted average contractual interest rate on mortgages.
• "Weighted average interest rate on fixed rate debt" is 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 term to maturity on fixed rate debt" is 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 variable rate debt" is calculated as the weighted average interest rate on the revolving
credit facility and the variable rate mortgages for the period, excluding the variable rate mortgage fixed through an interest
rate swap.
Supplementary Financial Measures
• "Average annual unlevered return" refers to the return on repositioning activities, and is calculated by dividing the average
annual rental increase per suite after repositioning by the average repositioning cost per suite, excluding the impact of
financing costs.
• "Debt Service Coverage ratio" is the ratio of NOI to total debt service.
• "Debt-to-Gross Book Value ratio" is calculated by dividing total interest-bearing debt consisting of fixed and variable rate
mortgages, credit facilities, construction loans and Class C LP Units of the Partnership by Gross Book Value and is used as
the REIT's primary measure of its leverage.
• "Distribution yield per unit" is calculated as the annualized distribution per Unit and Class B LP Unit, divided by the Unit
closing price as of the balance sheet date.
• "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.
• "Gross Book Value" is defined as the total assets of the REIT as at the balance sheet date.
• "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.
• "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 from investment properties.
• "Total debt" is calculated as the sum of value of interest-bearing debt consisting of fixed and variable rate mortgages, credit
facilities, construction loans and Class C LP Units of the Partnership.
• "Total debt, net of cash" is calculated as Total debt, reduced by cash balance.
• "Total debt service" is calculated as the sum of interest expense recorded as finance costs and principal payments on
mortgages, construction loan, credit facility and distributions on Class C LP Units.
Minto Apartment REIT | 2022 Annual Report
53 Minto Apartment Real Estate Investment Trust | Management's Discussion and Analysis - 2022
(in thousands of Canadian dollars, except Unit and per Unit amounts, per suite amounts and other non-financial data)
• "Total liquidity" is calculated as the sum of the undrawn balance under the revolving credit facility and cash.
• "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.
Operating Performance Measures
• "Annualized turnover rate" is calculated as the trailing twelve-month new leases signed for the period divided by total
number of suites in the portfolio, excluding furnished suites and suites held offline for repositioning.
• "Average monthly rent" or "AMR" represents the average monthly rent per suite for occupied unfurnished suites at the end
of the period.
• "Average monthly rent for furnished suites" represents the average daily rent per suite for furnished suites for the period
multiplied by 30.
• "Occupancy for furnished suites" is the ratio of occupied furnished suites to the total furnished suites in the portfolio for the
period.
• "Occupancy - average of the period" is defined as the ratio of occupied unfurnished suites to the total unfurnished suites in
the portfolio for the period. Occupancy as an average for the period is a useful indicator to evaluate the unfurnished rental
performance.
• "Occupancy - end of the period" is defined as the ratio of occupied unfurnished suites to the total unfurnished suites in the
portfolio at the end of the period. Occupancy at end of the period is a useful indicator to evaluate the unfurnished rental
performance.
2022 Annual Report | Minto Apartment REIT
54 KPMG LLP
Bay Adelaide Centre
333 Bay Street, Suite 4600
Toronto, ON M5H 2S5
Canada
Tel 416-777-8500
Fax 416-777-8818
INDEPENDENT AUDITOR’S 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, 2022 and December 31, 2021
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, 2022 and December 31,
2021, and its consolidated financial performance and its consolidated cash flows for the years
then ended in accordance with International Financial Reporting Standards (IFRS) as issued
by the International Accounting Standards Board (IASB).
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 “Auditor’s
Responsibilities for the Audit of the Financial Statements” section of our auditor’s 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.
© 2023 KPMG LLP, an Ontario limited liability partnership and a member firm of the KPMG global organization of independent member firms
affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.
Minto Apartment Real Estate Investment Trust
March 8, 2023
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, 2022.
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 matter described below to be the key audit matter to be
communicated in our auditor’s report.
Evaluation of the fair value of residential investment properties
Description of the matter
We draw attention to Note 2(f), Note 2(s) 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 $2,525,455 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.
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.
Minto Apartment Real Estate Investment Trust
March 8, 2023
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 reports of real estate industry
commentators and considering the various characteristics of the portfolio.
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 auditor’s report thereon,
included in a document entitled “2022 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 2022 Annual Report as of the date
of the auditor’s report. If, based on the work we have performed on this other information,
we conclude that there is a material misstatement of this other information, we are required
to report that fact in the auditor’s report.
We have nothing to report in this regard.
Responsibilities of Management and Those Charged with Governance for the
Financial Statements
Management is responsible for the preparation and fair presentation of the financial
statements in accordance with International Financial Reporting Standards (IFRS) as issued
by the International Accounting Standards Board (IASB), and for such internal control as
management determines is necessary to enable the preparation of financial statements that
are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, management is responsible for assessing the 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.
Minto Apartment Real Estate Investment Trust
March 8, 2023
Auditor’s Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements
as a whole are free from material misstatement, whether due to fraud or error, and to issue
an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance but is not a guarantee that an audit
conducted in accordance with Canadian 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 Canadian 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.
• 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 auditor’s report to the related disclosures in the financial
statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions
are based on the audit evidence obtained up to the date of our auditor’s report. However,
future events or conditions may cause the 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.
Minto Apartment Real Estate Investment Trust
March 8, 2023
• 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
auditor’s report unless law or regulation precludes public disclosure about the matter or
when, in extremely rare circumstances, we determine that a matter should not be
communicated in our auditor’s 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 auditor’s report is Thomas Rothfischer.
Toronto, Canada
March 8, 2023
Minto Apartment Real Estate Investment Trust
Consolidated Balance Sheets
(in thousands of Canadian dollars, except Unit and per Unit amounts)
Note
December 31, 2022
December 31, 2021
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 and loans
Credit facility
Tenant rental deposits
Due to related parties
Accounts payable and accrued liabilities
Unitholders' equity
Contingencies and commitments
Subsequent event
3
12
6
7
8
9
10
11
12
13
18
24
$
$
$
$
$
2,611,094 $
98,302
16,806
3,287
5,323
2,734,812 $
361,858 $
208,086
746,320
157,158
10,474
2,936
34,443
1,521,275 $
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
1,213,537
1,010,001
2,734,812 $
2,440,714
See accompanying notes to the consolidated financial statements.
2022 Annual Report | Minto Apartment REIT
60 Minto Apartment Real Estate Investment Trust
Consolidated Statements of Net Income and Comprehensive Income
For the years ended December 31, 2022 and 2021
(in thousands of Canadian dollars, except Unit and per Unit amounts)
Revenue from investment properties
16
$
143,790 $
123,547
Note
December 31, 2022
December 31, 2021
Property operating expenses
Property operating costs
Property taxes
Utilities
Property operating income
Other expenses (income)
General and administrative
Finance costs - operations
Finance income
Fair value loss (gain) on:
Investment properties
Class B LP Units
Interest rate swap
Unit-based compensation
Fees and other income
28,387
15,116
12,491
55,994
87,796
9,303
44,590
(4,818)
18,828
(197,531)
(2,391)
(2,246)
(3,339)
(137,604)
17
3
8, 17
6, 17
22
Net income and comprehensive income
$
225,400 $
See accompanying notes to the consolidated financial statements.
23,952
13,322
10,026
47,300
76,247
7,602
35,310
(3,129)
(89,188)
34,609
(1,625)
137
(1,630)
(17,914)
94,161
Minto Apartment REIT | 2022 Annual Report
61 Minto Apartment Real Estate Investment Trust
Consolidated Statements of Changes in Unitholders' Equity
For the years ended December 31, 2022 and 2021
(in thousands of Canadian dollars, except Unit and per Unit amounts)
Note
Units
Distributions
Retained
earnings
Total
Balance, December 31, 2020
$
631,434 $
(30,204) $
248,994 $
850,224
Net income and comprehensive income
Units issued, net of issue costs
Distributions
Balance, December 31, 2021
Net income and comprehensive income
Cancellation of Units under normal course
issuer bid
Distributions
14
14
14
14
—
82,687
—
—
—
(17,071)
94,161
—
—
94,161
82,687
(17,071)
$
714,121 $
(47,275) $
343,155 $
1,010,001
—
(3,248)
—
—
—
(19,100)
225,400
225,400
484
—
(2,764)
(19,100)
Balance, December 31, 2022
$
710,873 $
(66,375) $
569,039 $
1,213,537
See accompanying notes to the consolidated financial statements.
2022 Annual Report | Minto Apartment REIT
62 Minto Apartment Real Estate Investment Trust
Consolidated Statements of Cash Flows
For the years ended December 31, 2022 and 2021
(in thousands of Canadian dollars, except Unit and per Unit amounts)
Note
December 31, 2022
December 31, 2021
Cash provided by (used in):
Operating activities
Net income
Adjustments for:
Finance costs - operations
Finance income
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 from credit facility
Proceeds from construction loan
Forgivable loan
Distributions on Class B LP Units
Distributions on Class C LP Units, used to repay principal
Distribution on Units
Interest paid
Purchase and cancellation of Units
Cash provided by financing activities
Investing activities
Acquisition of investment properties
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
17
3
8, 17
6, 17
22
21
10
10
11
10
9
14
4
12
See accompanying notes to the consolidated financial statements.
Minto Apartment REIT | 2022 Annual Report
$
225,400 $
44,590
(4,818)
18,828
(197,531)
(2,391)
(2,246)
667
82,499
—
34,623
(882)
(537)
(30,201)
105,404
8,006
1,350
(11,791)
(5,510)
(19,058)
(32,981)
(2,764)
45,659
(28,761)
(49,203)
(17,550)
(32,040)
1,868
(125,686)
2,472
2,851
$
5,323 $
94,161
35,310
(3,129)
(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
63 Minto Apartment Real Estate Investment Trust
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(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, 2022, the REIT's portfolio consists of interests in 32 multi-residential rental properties, including four 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 units of the Partnership ("Class B LP Units"), 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 REIT's business faces risk from economic factors that have grown in prominence, specifically, rising interest rates and
inflation. The REIT has used all information available as at December 31, 2022 that it considers relevant in determining the
potential impact of these economic factors and COVID-19 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, 2022 and 2021. The
estimates and judgements that could be most significantly impacted by economic factors and COVID-19 include those
underlying the valuation of investment properties. Actual results could differ from those estimates. Investment properties
(Note 3) and risk management (Note 19) include disclosures of the potential impacts of economic factors and COVID-19 on
the fair value of investment properties and liquidity risk. The REIT continues to monitor and assess the impact that
economic factors and COVID-19 will have on its business activities and financial results.
(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, 2023.
(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.
2022 Annual Report | Minto Apartment REIT
64 Minto Apartment Real Estate Investment Trust
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(in thousands of Canadian dollars, except Unit and per Unit amounts)
(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.
(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.
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65 Minto Apartment Real Estate Investment Trust
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(in thousands of Canadian dollars, except Unit and per Unit amounts)
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.
(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.
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66 Minto Apartment Real Estate Investment Trust
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(in thousands of Canadian dollars, except Unit and per Unit amounts)
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 and loans
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.
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.
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67 Minto Apartment Real Estate Investment Trust
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(in thousands of Canadian dollars, except Unit and per Unit amounts)
Class B LP Units
The 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). The determination of a
significant increase in credit risk takes into account different factors and varies by nature of investment. The REIT assumes
that the credit risk on a financial asset has increased significantly if it is more than 30 days past due or certain criteria are
met which are specific to the individual borrower based on judgment. The REIT considers a financial asset to be credit
impaired when the borrower is more than 90 days past due and when there is objective evidence that there has been a
deterioration of credit quality to the extent the REIT no longer has reasonable assurance as to the timely collection of the
full amount of principal and interest or when the REIT has commenced enforcement remedies available to it under its
contractual agreements.
Measurement of ECL's
Loss allowances for ECLs are probability-weighted estimates of credit losses. Credit losses are measured as the present
value of all cash shortfalls (i.e. the difference between the cash flows due to the REIT in accordance with the contract and
the cash flows that the REIT expects to receive) and incorporate significant assumptions including the probability of default
as well as the estimated loss given default. ECLs are discounted at the effective interest rate of the financial asset.
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68 Minto Apartment Real Estate Investment Trust
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(in thousands of Canadian dollars, except Unit and per Unit amounts)
Lifetime ECLs are the ECLs that result from all possible default events over the expected life of a financial instrument. 12-
month ECLs are the portion of ECLs that result from default events that are possible within the 12 months after the
reporting date (or a shorter period if the expected life of the instrument is less than 12 months). The maximum period
considering when estimating ECLs is the maximum contractual period over which the Company is exposed to credit risk.
The determination of ECLs of a collateralized impaired loan reflects the expected realization of the underlying security, net
of expected costs and any amounts legally required to be paid to the borrower.
When determining the allowance for ECLs, the REIT considers reasonable and supportable information that is relevant and
available without undue cost or effort. Management considers past events, current market conditions and reasonable
forward-looking supportable information about future economic conditions. In assessing information about possible future
economic conditions, management utilized multiple economic scenarios including a base case, which represents the most
probable outcome and is consistent with management's view of the financial asset. In considering the lifetime of a loan,
the contractual period of the loan, including prepayment, extension and other options is generally used.
The estimation of ECLs also includes assumptions about local real estate market conditions, availability and terms of
financing, underlying value of the security and various other factors. These assumptions are limited by the availability of
reliable comparable market data, economic uncertainty and the uncertainty of future events. Accordingly, by their nature,
estimates of impairment are subjective and may not necessarily be comparable to the actual outcome. Should the
underlying assumptions change, the estimated future cash flows could vary.
(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
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69 Minto Apartment Real Estate Investment Trust
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(in thousands of Canadian dollars, except Unit and per Unit amounts)
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 reassessing 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 periods presented herein.
(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.
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70 Minto Apartment Real Estate Investment Trust
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(in thousands of Canadian dollars, except Unit and per Unit amounts)
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.
(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.
(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. The grant date value 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 for
Deferred Units and using a pricing model for Performance Units. 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
grant date value estimate for Performance Units requires determination of relevant inputs to the pricing model. The
liability is remeasured at each reporting date and settlement date using the closing market price of the Units as defined in
the Plan or the updated pricing model 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.
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71 Minto Apartment Real Estate Investment Trust
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(in thousands of Canadian dollars, except Unit and per Unit amounts)
(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.
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.
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72 Minto Apartment Real Estate Investment Trust
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(in thousands of Canadian dollars, except Unit and per Unit amounts)
(t) Future changes in accounting standards
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 has assessed the impact of the amendments and expects to shorten its
disclosure on accounting policies in the REIT's consolidated financial statements based on the guidance in the
amendments.
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.
Classification of Liabilities as Current or Non-Current (Amendments to IAS 1)
On January 23, 2020, the IASB issued amendments to IAS 1, 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, 2024. 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, 2024, when
the amendments become effective. The REIT has assessed the potential impact of the amendments and they will have no
material impact on the REIT's consolidated financial statements.
Lease Liability in a Sale and Leaseback (Amendments to IFRS 16)
On September 22, 2022, the IASB issued amendments to IFRS 16 – Leases confirming that the measurement of a right-of-
use asset and lease liability is unlikely to be nil if variable lease payments arise in a sale-and-leaseback transaction. On
initial recognition, the seller-lessee includes variable lease payments when it measures a lease liability arising from a sale-
and-leaseback transaction. After initial recognition, the seller-lessee applies the general requirements for subsequent
accounting of the lease liability such that it recognizes no gain or loss relating to the right-of-use it retains.
The REIT intends to adopt the amendments in its annual financial statements beginning on January 1, 2024, when the
standard becomes 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.
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73 Minto Apartment Real Estate Investment Trust
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(in thousands of Canadian dollars, except Unit and per Unit amounts)
3. Investment properties
The following table presents the change in investment properties by type:
Balance, December 31, 2020
$
Residential
properties
2,098,052 $
Commercial
properties
Land under
development
22,490 $
17,559 $
Total
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
Additions
Acquisitions (Note 4)
Capital expenditures
Development expenditures
Other
Fair value (loss) gain
186,579
52,348
—
(715)
(19,250)
12,702
48
—
—
(3,772)
—
—
18,395
—
4,194
199,281
52,396
18,395
(715)
(18,828)
Balance, December 31, 2022
$
2,525,455 $
27,828 $
57,811 $
2,611,094
For the year ended December 31, 2022, the REIT capitalized $1,051 (December 31, 2021 - $95) in interest costs associated with
the REIT's general borrowings and the construction loan to the respective developments. The REIT's weighted average
borrowing rate on general borrowings was 4.52% (December 31, 2021 - 2.21%). Interest costs associated with the construction
loan were capitalized to the related development using the actual borrowing rate associated with the loan.
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,
2022, 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, 2022, the
REIT obtained external property appraisals representing approximately 53% (December 31, 2021 - 52%) 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 economic factors and COVID-19 (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, 2022. It is not possible to forecast with certainty the duration or full scope of the financial impact
that economic factors and 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 and of a sustained increase in interest rates would
ultimately impact the underlying valuation of investment properties and such impact may be material.
2022 Annual Report | Minto Apartment REIT
74 Minto Apartment Real Estate Investment Trust
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(in thousands of Canadian dollars, except Unit and per Unit amounts)
Fair value for residential properties is predominantly determined using the direct capitalization approach and includes a
deduction for estimated aggregate future capital expenditures. For the year ended December 31, 2022, the aggregate five-year
estimated future capital expenditures deducted was $89,329 (December 31, 2021 - $83,852) 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, 2022
December 31, 2021
Min
3.25%
Max
4.63%
Weighted
average
3.80%
Min
3.13%
Max
4.50%
Weighted
average
3.60%
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, 2022:
December 31, 2022
Capitalization rate
-50 basis points
-25 basis points
Base rate
+25 basis points
+50 basis points
-3 %
-1 %
NOI
+1 %
+3 %
$
2,831,592 $
2,625,751
2,447,012
2,290,353
2,151,920
2,891,817 $
2,681,732
2,499,308
2,339,419
2,198,132
2,921,929 $
2,709,722
2,525,455
2,363,951
2,221,237
2,952,042 $
2,737,713
2,551,603
2,388,484
2,244,343
3,012,267
2,793,694
2,603,899
2,437,550
2,290,554
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
Minto Apartment REIT | 2022 Annual Report
75 Minto Apartment Real Estate Investment Trust
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(in thousands of Canadian dollars, except Unit and per Unit amounts)
4. Acquisition of investment properties
The REIT completed the acquisition of two investment properties for the year ended December 31, 2022:
Property
39 Niagara Street, 29–33 Bathurst
Street, Toronto, ON ("Niagara
West")
220 4 Avenue SW, Calgary, AB
("The International")
Date of
acquisition
Total
acquisition cost
Variable rate
mortgage
financing
April 22, 2022 $
112,667 $
46,158
May 6, 2022
86,614
62,220
$
199,281 $
108,378
Interest rate and
maturity at date of
acquisition
Bankers' acceptance
+ 2% or Prime + 1%
November 30, 2022
Bankers' acceptance
+ 2.5% or Prime + 1%
September 30, 2022
Ownership
interest
28.35%
100%
The REIT completed the following investment property acquisition during the year ended December 31, 2021:
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 properties was as follows:
Total acquisition cost
Mortgage financing assumed
Issuance of Class B LP Units (Note 8)
Transaction costs payable
Working capital assumed
Cash consideration paid on close
5. Joint operations
December 31, 2022
(199,281) $
108,378
60,974
—
1,168
(28,761) $
December 31, 2021
(82,604)
—
—
2,431
166
(80,007)
$
$
The REIT jointly owns and operates four 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
Niagara West
Date of acquisition
May 1, 2019
May 7, 2019
August 1, 2019
April 22, 2022
Location
Toronto, ON
Montreal, QC
Toronto, ON
Toronto, ON
Ownership interest
50%
50%
40%
28.35%
2022 Annual Report | Minto Apartment REIT
76 Minto Apartment Real Estate Investment Trust
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(in thousands of Canadian dollars, except Unit and per Unit amounts)
6. Prepaid expenses and other assets
Prepaid expenses
Prepaid CMHC premiums
Restricted cash
Deposits and other prepayments
Interest rate swap
Current
Non-current
December 31, 2022
2,729 $
8,825
1,434
1,120
2,698
16,806 $
3,812
12,994
16,806 $
December 31, 2021
2,305
6,940
1,218
1,128
307
11,898
3,970
7,928
11,898
$
$
$
The following table is a summary of the REIT's interest rate swap and the respective fair value of the asset:
Instrument
Maturity
Fixed
rate
Original notional
amount
Notional
amount
December 31, 2022 December 31, 2021
Interest rate swap1
1 The REIT has a 40% ownership interest in this contract through the ownership of a joint operation.
April 2026
$42,360
$36,257
3.38%
$
2,698 $
307
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:
Year ended
Opening balance
Non-cash movement
Fair value gain
Closing balance
December 31, 2022
307 $
2,391
2,698 $
December 31, 2021
(1,318)
1,625
307
$
$
Minto Apartment REIT | 2022 Annual Report
77 Minto Apartment Real Estate Investment Trust
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(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, 2022
December 31, 2021
$
$
1,844 $
2,375
(932)
3,287 $
1,388
1,294
(594)
2,088
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, 2020
Non-cash movement
Fair value loss
Balance, December 31, 2021
Non-cash movement
Issued, April 22, 2022 (Note 4)
Fair value gain
Balance, December 31, 2022
Class B LP Units
22,769,073 $
—
22,769,073 $
2,985,956
—
2,985,956
25,755,029 $
$
463,806
34,609
498,415
60,974
(197,531)
(136,557)
361,858
For the year ended December 31, 2022, distributions of $11,942 (December 31, 2021 - $10,436) 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, 2022
December 31, 2021
206,673 $
1,413
208,086 $
50,642
157,444
208,086 $
212,183
1,886
214,069
5,982
208,087
214,069
$
$
$
2022 Annual Report | Minto Apartment REIT
78 Minto Apartment Real Estate Investment Trust
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(in thousands of Canadian dollars, except Unit and per Unit amounts)
As at December 31, 2022 there were 22,978,700 (December 31, 2021 - 22,978,700) Class C LP Units of the Partnership
outstanding. The following table reconciles the changes in cash flows for the Class C LP Units:
Year ended
Opening balance
Cash flows
Distributions used to repay principal
Non-cash movement
Amortization of mark-to-market adjustments
December 31, 2022
$
214,069 $
December 31, 2021
219,885
(5,510)
(473)
(5,983)
(5,341)
(475)
(5,816)
214,069
Closing balance
$
208,086 $
For the year ended December 31, 2022, the REIT also made distributions of $6,574 (December 31, 2021 - $6,743) 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, 2021 - 3.16%) and mature at various dates between 2023 and 2030
(December 31, 2021 - 2023 and 2030).
Distributions on Class C LP Units as at December 31, 2022, excluding unamortized mark-to-market adjustments, are due as
follows:
2023
2024
2025
2026
2027
2028 and thereafter
$
$
50,234
50,499
63,541
1,283
22,752
18,364
206,673
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, 2022, the current market rates plus risk-adjusted spreads ranged from 4.29% to 5.91% (December
31, 2021 - 1.65% to 3.26%) and the fair value of the Class C LP Units was $199,200 (December 31, 2021 - $218,599) and is
considered level 2 within the fair value hierarchy.
Minto Apartment REIT | 2022 Annual Report
79 Minto Apartment Real Estate Investment Trust
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(in thousands of Canadian dollars, except Unit and per Unit amounts)
10. Mortgages and loans
December 31, 2022
December 31, 2021
Weighted Average
Interest Rate
3.03%
7.45%
2.39%
Mortgages - fixed rate
Mortgages - variable rate
Construction loan
Unamortized mark-to-market adjustments
Unamortized deferred financing costs
Current
Non-current
Mortgages
Balance
Outstanding
631,956
108,378
8,006
748,340
882
(2,902)
746,320
238,800
507,520
746,320
$
$
$
Weighted Average
Interest Rate
2.71%
—
—
Balance
Outstanding
627,534
—
—
627,534
1,152
(2,566)
626,120
140,862
485,258
626,120
$
$
$
The fixed and variable rate mortgages are secured by investment properties and mature at various dates between 2023 and
2030 (December 31, 2021 - 2022 and 2030). The fixed rate mortgages include a $36,257 (December 31, 2021 - $37,262) variable
interest mortgage fixed through an interest rate swap.
Construction loan
The REIT has a fixed rate non-revolving construction loan commitment of $93,745 and as at December 31, 2022, $8,006
(December 31, 2021 - $nil) was drawn. The construction loan is used to finance the construction of a new 225-suite residential
rental property on surplus land at the REIT's Richgrove property in Toronto, Ontario (the "Richgrove Development") and is
secured by a first priority mortgage on the project. The loan bears fixed interest at 2.39% and matures on March 1, 2032.
Payments are made monthly on an interest-only basis.
The mortgages and construction loan, excluding unamortized mark-to-market adjustments and deferred financing costs, are
due as follows:
2023
2024
2025
2026
2027
2028 and thereafter
239,195
59,235
51,093
81,122
8,155
309,540
748,340
$
2022 Annual Report | Minto Apartment REIT
80 Minto Apartment Real Estate Investment Trust
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(in thousands of Canadian dollars, except Unit and per Unit amounts)
The following tables reconcile the changes in cash flows for the mortgages and loan payable:
Balance, December 31, 2020
$
598,079 $
— $
Fixed and variable
rate mortgages
Construction loan
Cash flows
Issued1
Deferred financing costs incurred
Repayments
Non-cash movement
Funds held in escrow1
Amortization of mark-to-market adjustment
Deferred financing amortization
Balance, December 31, 2021
Balance, December 31, 2021
Cash flows
Issued
Deferred financing costs incurred
Deferred financing CMHC premiums
Repayments
$
$
Non-cash movement
Assumed on acquisition
Amortization of mark-to-market adjustment
Deferred financing charges transferred from
prepaid CMHC premiums
Deferred financing amortization
49,558
(138)
(12,879)
36,541
(8,558)
(294)
352
(8,500)
626,120 $
626,120 $
34,623
(537)
(319)
(30,201)
3,566
108,378
(270)
(75)
595
108,628
—
—
—
—
—
—
—
—
— $
— $
8,006
—
—
—
8,006
—
—
—
—
—
Balance, December 31, 2022
8,006 $
$
1 Proceeds of $8,558 from a fixed rate mortgage that were held in escrow July 2020 were released in September 2021.
738,314 $
Total
598,079
49,558
(138)
(12,879)
36,541
(8,558)
(294)
352
(8,500)
626,120
626,120
42,629
(537)
(319)
(30,201)
11,572
108,378
(270)
(75)
595
108,628
746,320
As at December 31, 2022 and December 31, 2021, the REIT was in compliance with all financial covenants relating to its debt
obligations.
Fair value of fixed rate mortgages and the construction loan is calculated based on current market rates plus risk-adjusted
spreads on discounted cash flows. As at December 31, 2022, the current market rates plus risk-adjusted spreads ranged from
4.25% to 5.87% (December 31, 2021 - 1.03% to 3.46%) and the fair value of fixed rate mortgages and construction loan was
$595,760 (December 31, 2021 - $634,412) and is considered level 2 within the fair value hierarchy. Given the variable nature of
the variable rate mortgages, their carrying value approximates their fair value.
Minto Apartment REIT | 2022 Annual Report
81 Minto Apartment Real Estate Investment Trust
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(in thousands of Canadian dollars, except Unit and per Unit amounts)
11. Credit facility
Committed
Available
Utilized
Amounts drawn
Letter of credit
Undrawn amount available
December 31, 2022
300,000 $
267,115
157,158
442
157,600
109,515 $
December 31, 2021
200,000
200,000
51,754
442
52,196
147,804
$
$
The following tables reconcile the changes in cash flows for the credit facility:
Year ended
Opening balance
Cash flows
Issued
Repayments
December 31, 2022
51,754 $
December 31, 2021
31,948
115,404
(10,000)
105,404
157,158 $
102,806
(83,000)
19,806
51,754
$
$
The REIT has a revolving credit facility that is secured by several investment properties, matures on July 3, 2025 and is used to
fund working capital requirements, acquisitions, letters of credit and for general corporate purposes. The credit facility bears
interest at one month bankers' acceptance plus 175 bps or prime plus 75 bps. At December 31, 2022, the weighted average
variable interest rate was 6.47% (December 31, 2021 - 2.19%). Given the variable nature of the credit facility, its carrying value
approximates its fair value.
As at December 31, 2022 and December 31, 2021, the REIT was in compliance with all financial covenants relating to its credit
facility.
12. 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"), an entity with significant influence over the REIT, 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 during the
initial term of the ASA only for all general and administrative expenses, excluding public company costs, of 32 bps of the gross
book value of the REIT's assets.
On December 15, 2022, the REIT exercised its option to renew the ASA for an additional term of five years commencing on July
3, 2023. The limitation of all general and administrative expenses, excluding public company costs, of 32 bps of the gross book
value of the REIT's assets was removed from the renewed ASA.
For the year ended December 31, 2022, the REIT incurred $2,260 (December 31, 2021 - $2,260) for services rendered by MPI
and its affiliates under the Administrative Support Agreement.
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82 Minto Apartment Real Estate Investment Trust
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(in thousands of Canadian dollars, except Unit and per Unit amounts)
(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")
3958 Shelbourne
Street, Victoria, BC
("University Heights")
Related Parties
Commitment
Interest Rate and
Maturity
December 31, 2022 December 31, 2021
Affiliate of MPI
$
30,000
6% per annum
July 31, 2023
$
30,000 $
30,000
Limited partnership
jointly owned by
MPI and a subsidiary
of Darwin Properties
14,000
7% per annum
May 30, 2024
13,784
12,855
Affiliate of MPI
51,400
6% per annum
December 31, 2025
25,550
10,094
MPI
MPI
19,650
6% per annum
August 1, 2024
51,700
7% per annum
December 31, 2026
166,750
700 Variable per annum1
April 27, 2032
$
167,450
15,357
10,363
12,893
97,584
718
98,302 $
30,000
68,302
98,302 $
—
63,312
—
63,312
30,000
33,312
63,312
$
$
Loan receivable
Management
Current
Non-current
1 The interest rate per annum is set quarterly at the greater of prime and the prescribed interest rate as determined by the Regulations of the
Income Tax Act (Canada) to a maximum of 5%. Interest is payable annually in arrears.
All commitments pertaining to projects include a reserve to fund interest costs. If the interest reserve is fully utilized, the
interest is paid to the REIT on a monthly basis. In connection with these financings, the REIT will have the exclusive option to
purchase the property at Fifth and Bank, Lonsdale Square and Beechwood, MPI's 85% indirect ownership interest in 810
Kingsway and MPI's 45% indirect ownership interest in University Heights, upon project stabilization at 95% of then-appraised
fair market value as determined by independent and qualified third-party appraisers. As at December 31, 2022, the expected
credit loss ("ECL") based on 12 month expected losses for the loans receivable is $nil (December 31, 2021 - $nil)
Minto Apartment REIT | 2022 Annual Report
83 Minto Apartment Real Estate Investment Trust
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(in thousands of Canadian dollars, except Unit and per Unit amounts)
The following table shows the movement of loans receivable from related parties:
Year ended
Opening balance
Cash flows
Advances
Interest received
Non-cash movement
Interest earned
Closing balance
December 31, 2022
$
63,312 $
December 31, 2021
41,988
32,040
(1,800)
30,240
4,750
34,990
$
98,302 $
20,024
(1,800)
18,224
3,100
21,324
63,312
Fair value of loans receivable relating to projects is calculated based on current market rates plus risk-adjusted spreads on
discounted cash flows. As at December 31, 2022, the current market rates plus risk-adjusted spreads ranged from 8.50% to
9.50% and the fair value of the loans receivable relating to projects was $93,441 (December 31, 2021 - carrying value of the
loans receivable approximated their fair value) and is considered level 2 within the fair value hierarchy.
(c) Due to related parties
Item
Current
Related Parties
December 31, 2022
December 31, 2021
Class B LP Units distributions
Class C LP Units distributions
Property operating costs payable
Development costs and fees
Unit distribution
Limited partnership wholly-
owned by MPI and MPI affiliates
Limited partnership wholly-
owned by MPI
MPI and its affiliates
Affiliate of MPI
MPI
Rental and service revenue receivable
MPI and its affiliates
1,052 $
546
493
1,357
37
3,485
(549)
$
2,936 $
901
561
411
535
35
2,443
(521)
1,922
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84 Minto Apartment Real Estate Investment Trust
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(in thousands of Canadian dollars, except Unit and per Unit amounts)
(d) Revenue, expenses, capital expenditures and distributions
Related Parties / Item
December 31, 2022
December 31, 2021
Revenue from MPI, its affiliates and jointly-owned limited partnerships
Rental and service revenue
Interest income on loans advanced
$
863 $
4,750
Expenses and distributions to MPI, its affiliates, its wholly-owned and jointly-owned limited partnerships
Property operating expenses
Development costs and fees
Distributions on Class B LP Units (finance costs)
Distributions on Class C LP Units (finance costs)
Distributions on Class C LP Units (principal)
Distributions on Units
Compensation of key management personnel
Paid to executives
Unit-based compensation
Executives
Trustees in lieu of annual retainer and meeting fees
1,315
1,231
11,942
6,574
5,510
427
770
1,502
579
716
3,100
713
—
10,436
6,743
5,341
411
635
1,304
560
Additional compensation to key management personnel for services provided to the REIT was paid by MPI and its affiliate.
(e) Property acquisitions
On April 22, 2022, the REIT acquired a 28.35% ownership interest in a 501-suite multi-residential rental property located in
Toronto, Ontario from a limited partnership in which a subsidiary of MPI and certain current and former executives of MPI
owned a minority interest. The acquisition cost of $112,667, including transaction costs of $2,896, was settled by the REIT
assuming a $46,158 mortgage, the issuance of 2,985,956 Class B LP Units with a fair value of $60,974, paying $4,990 in cash,
and assuming working capital liabilities of $545.
On May 6, 2022, the REIT acquired a 252-suite multi-residential rental property located in Calgary, Alberta from a limited
partnership in which a subsidiary of MPI owned a minority interest. The acquisition cost of $86,614, including transaction costs
of $99, was settled with the REIT assuming a mortgage of $62,220, paying $23,771 in cash, and assuming working capital
liabilities of $623.
13. Accounts payable and accrued liabilities
December 31, 2022
4,711 $
18,457
1,592
4,539
5,144
34,443 $
28,689
5,754
34,443 $
December 31, 2021
9,154
8,884
1,550
4,915
3,794
28,297
23,776
4,521
28,297
$
$
$
Accounts payable
Accrued liabilities
Distributions payable
Unit-based compensation
Forgivable loan
Current
Non-current
Minto Apartment REIT | 2022 Annual Report
85 Minto Apartment Real Estate Investment Trust
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(in thousands of Canadian dollars, except Unit and per Unit amounts)
During the year ended December 31, 2021, the REIT commenced construction of 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.
For the year ended December 31, 2022, $1,350 of funding was received in connection with the Richgrove Development and has
been recorded as forgivable loan payable in connection with the terms of the contribution agreement (December 31, 2021 -
$3,794 of development charges and other fees were exempt or waived).
14. Units
Authorized
Units issued and outstanding:
Balance, December 31, 2020
Issued, October 29, 2021, net
Balance, December 31, 2021
Cancellation of Units under Normal Course Issuer Bid
Balance, December 31, 2022
Units
Unlimited
36,274,839 $
3,795,000
40,069,839
(182,227)
39,887,612 $
$
631,434
82,687
714,121
(3,248)
710,873
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, 2022, distributions to Unitholders of $19,100 (December 31, 2021 - $17,071) were declared,
representing monthly distributions of $0.03958 per Unit for the months of January to October and $0.04083 for the months of
November and December (2021 - $0.03792 per Unit for the months of January to October 2021 and $0.03958 per Unit for the
months of November and December 2021).
Normal Course Issuer Bid ("NCIB")
On July 15, 2022, the Toronto Stock Exchange accepted the REIT's notice to initiate a NCIB for a portion of its Units. The NCIB is
authorized from July 21, 2022 through to July 20, 2023 and permits the REIT to acquire up to 3,847,284 Units including up to
33,965 Units on any given trading day.
For the year ended December 31, 2022, the REIT purchased and cancelled 182,227 Units under the NCIB, at a weighted average
purchase price of $15.15 per Unit, for a total cost including commissions of $2,764. The difference between the purchase price
and the weighted average historical unit issuance price was recorded as an increase to retained earnings.
15. Segment reporting
The REIT owns, manages and operates 32 multi-residential rental properties located in Canada, including four 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.
2022 Annual Report | Minto Apartment REIT
86 Minto Apartment Real Estate Investment Trust
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(in thousands of Canadian dollars, except Unit and per Unit amounts)
16. Revenue from investment properties
Rental revenue
Revenue from services
17. Finance costs
Interest expense on mortgages & loans
Interest expense & standby fees on credit facility
Amortization of financing charges
Amortization of mark-to-market adjustments
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)
Interest rate swap (Note 6)
Finance costs
December 31, 2022
121,554 $
22,236
143,790 $
December 31, 2021
100,150
23,397
123,547
December 31, 2022
21,802 $
5,128
938
(743)
(1,051)
26,074
11,942
6,574
44,590 $
(197,531)
(2,391)
(155,332) $
December 31, 2021
16,605
1,750
640
(769)
(95)
18,131
10,436
6,743
35,310
34,609
(1,625)
68,294
$
$
$
$
$
18. 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, 2022, the
remaining unforgiven balance of the loan is $13,464 (December 31, 2021 - $14,688). 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, 2022, the
remaining unforgiven balance of the loan is $3,360 (December 31, 2021 - $3,696). 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.
Minto Apartment REIT | 2022 Annual Report
87 Minto Apartment Real Estate Investment Trust
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(in thousands of Canadian dollars, except Unit and per Unit amounts)
As at December 31, 2022, the REIT has committed to advance an additional $50,087 (December 31, 2021 - $40,926) to related
parties in order to support the development of several projects and an additional $19,079 (December 31, 2021 - $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, 2022, the maximum potential obligation resulting from this guarantee is $12,690 (December 31, 2021 - $13,042).
19. 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, 2022, the REIT has a committed variable rate credit facility of $300,000 (December 31, 2021 -
$200,000) with an availability of $267,115 (December 31, 2021 - $200,000) and outstanding balance of $157,158
(December 31, 2021 - $51,754). A 1% change in prevailing interest rates would change annualized interest charges incurred
by $1,572 (December 31, 2021 - $518).
As at December 31, 2022, the REIT also has two variable rate mortgages with outstanding balance of $108,378 (December
31, 2021 - $nil). A 1% change in prevailing interest rates would change annualized interest charges incurred by $1,084
(December 31, 2021 - $nil). The REIT intends to refinance these mortgages as CMHC-insured fixed rate mortgages.
(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, 2022 would have a $3,619 (December 31, 2021 - $4,984) 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 ECLs.
2022 Annual Report | Minto Apartment REIT
88 Minto Apartment Real Estate Investment Trust
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(in thousands of Canadian dollars, except Unit and per Unit amounts)
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 the concentration of credit risk in relation to the loans advanced, in the event that the borrowers
default on the contractual terms of repayment of amounts owing to the REIT. The REIT provides financing to MPI for strategic
developments and, in turn, receives an option to purchase or acquire an ownership interest in those developments.
Management mitigates this risk by the ensuring there is sufficient security provided by the development assets in addition to
guarantees provided by MPI.
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.
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, 2022, current liabilities of $331,531 (December 31, 2021 - $182,642) exceeded current assets of $42,422
(December 31, 2021 - $38,909), resulting in a net working capital deficit of $289,109 (December 31, 2021 - $143,733). Current
liabilities as of December 31, 2022 include $271,225 (December 31, 2021 - $127,833) of mortgage financing which the REIT is
actively in the process of refinancing. 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, 2022, liquidity was
$114,838 (December 31, 2021 - $150,655) consisting of cash of $5,323 (December 31, 2021 - $2,851) and $109,515 (December
31, 2021 - $147,804) 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.
Minto Apartment REIT | 2022 Annual Report
89 Minto Apartment Real Estate Investment Trust
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(in thousands of Canadian dollars, except Unit and per Unit amounts)
An analysis of the contractual cash flows associated with the REIT's financial liabilities is set out below:
Mortgages
Construction loan
Credit facility
Class C LP Units
Interest obligation1
Tenant rental deposits
Due to related parties
Accounts payable and
accrued liabilities
2023
239,195 $
$
—
239,195
—
50,234
33,816
10,464
2,936
2024
59,235 $
—
59,235
—
50,499
26,591
—
—
2025
51,093 $
—
51,093
157,158
63,541
18,990
—
—
2026
81,122 $
—
81,122
—
1,283
10,607
—
—
2027
8,155 $
—
8,155
—
22,752
9,539
10
—
2028 and
thereafter
301,534 $
8,006
309,540
—
18,364
24,733
—
—
Total
740,334
8,006
748,340
157,158
206,673
124,276
10,474
2,936
28,689
412
147
51
—
5,144
34,443
$
365,334 $
136,737 $
290,929 $
93,063 $
40,456 $
357,781 $ 1,284,300
1 Interest obligation on mortgages, construction loan, credit facility and Class C LP Units.
The contractual cash flows do not include any unamortized mark-to-market adjustments or unamortized deferred financing
costs.
20. Capital risk management
The REIT's capital consists of Class B LP Units, Class C LP Units, mortgages, a construction loan, 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 construction 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.
2022 Annual Report | Minto Apartment REIT
90 Minto Apartment Real Estate Investment Trust
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(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
Construction loan
Credit facility
Unitholders' equity
21. 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
22. Unit-based compensation
Executives
Deferred Units
December 31, 2022
December 31, 2021
361,858 $
206,673
740,334
8,006
157,158
1,474,029
1,213,537
2,687,566 $
498,415
212,183
627,534
—
51,754
1,389,886
1,010,001
2,399,887
December 31, 2022
(3,597) $
(1,199)
(174)
878
4,759
667 $
December 31, 2021
(1,795)
(9)
1,146
769
1,733
1,844
$
$
$
$
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.
The details of movement in Deferred Units for the executives are as follows:
December 31, 2022
December 31, 2021
210,152
85,660
(14,495)
(17,982)
7,841
271,176
161,091
56,000
(5,499)
(5,499)
4,059
210,152
Opening balance
Granted
Redeemed
Forfeited
Distribution equivalents
Closing balance
Minto Apartment REIT | 2022 Annual Report
91 Minto Apartment Real Estate Investment Trust
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(in thousands of Canadian dollars, except Unit and per Unit amounts)
The Deferred Unit plan activity and the value of Unit-based compensation expense for the executives are as follows:
Opening balance
Unit-based compensation expense
Settlement
Fair value (gain) loss
Closing balance
Performance Units
December 31, 2022
December 31, 2021
$
$
2,890 $
1,502
(211)
(1,461)
2,720 $
1,660
1,304
(121)
47
2,890
Performance Units granted to executives generally vest on the third anniversary of the grant date based on the achievement of
performance goals. Performance Units are settled by Units issued from treasury equivalent to the number of Performance Units
credited, including any distributions paid by the REIT on the Units that have accrued in the form of Performance Units or, if so
elected by the participant and subject to the approval of the Plan Administrator, cash. The Board of Trustees has the discretion
to vary the manner in which the Performance Units vest for any participant.
The Performance Unit plan activity for the executives is as follows:
Opening balance
Granted
Closing balance
Trustees
December 31, 2022
December 31, 2021
—
31,750
31,750
—
—
—
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 following the participant’s separation from service with the REIT.
2022 Annual Report | Minto Apartment REIT
92 Minto Apartment Real Estate Investment Trust
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(in thousands of Canadian dollars, except Unit and per Unit amounts)
The Deferred Units granted and the value of Unit-based compensation expense recorded for the Trustees are as follows:
Balance, December 31, 2020
Granted and vested
Distribution equivalents
Fair value loss
Balance, December 31, 2021
Granted and vested
Distribution equivalents
Fair value gain
Balance, December 31, 2022
23. Operating leases
Deferred Units
67,509 $
23,438
1,591
—
92,538 $
33,858
3,099
—
129,495 $
$
1,375
525
35
90
2,025
528
51
(785)
1,819
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, 2022 and 2021. 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
24. Subsequent event
December 31, 2022
32,128 $
1,909
2,972
37,009 $
December 31, 2021
31,654
2,930
574
35,158
$
$
On March 7, 2023, the REIT completed its disposition of Hi-Level Place in Edmonton for a sale price of $9,920, generating net
proceeds of $2,832.
Minto Apartment REIT | 2022 Annual Report
93 Unitholder Information
Board of Trustees
Officers
Michael Waters
Chief Executive Officer
Jonathan Li
President and Chief Operating
Officer
Edward Fu
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
Stephen Marshall
Vice President, Operations
Roger Greenberg
Chair 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)
Chief Investment Officer of Revera Inc.
Jacqueline Moss(2,3)
Chair of the Compensation,
Governance and Nominating
Committee, Director and Chair of
the Human Resources Committee of
Investment Management Corporation
Ontario and Ontario Health
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
Chief Executive Officer of Minto
Apartment REIT and Chief Executive
Officer of The Minto Group, Trustee
and Member of Governance &
Nominating Committee and Investment
Committee of Crombie 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 2022 – October 2022
$0.03958 per Unit per month
November 2022 – December 2023
$0.04083 per Unit per month
Annual Meeting
The Annual General Meeting of
Unitholders will be held virtually on
Thursday, May 9, 2023 at 1:00pm.
(1) Member of the Audit Committee
(2) Member of the Compensation, Governance and Nominating Committee
(3) Independent
2022 Annual Report | Minto Apartment REIT
94
Fifth + Bank • O t t a w a , O
N
L
o
n
s
d
ale Square Rend e r i n g
c
n
a
V
•
C
o uver, B
U
niv
e
rsity Heights Rendering • V i c t o r i a , B C
B
e
e
c
h
wood Rende r i n g
w a, O N
O t t a
•
8
1
0
Kin
gsway Renderi n g
o
c
n
V a
•
u v er, BC
Further Expansion in British Columbia
Investment in development projects through convertible development
loans (“CDLs”) provides 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 without taking any construction
or lease-up risk. The REIT made a fifth CDL investment during 2022
by way of the University Heights CDL to support the development of a
594 suite mixed-use multi-residential property in Victoria, BC.
CDL Geographic Distribution(1)
Vancouver
Victoria
Ottawa
594
1,205
Suites
390
Ottawa
Toronto
Calgary
Edmonton
Montreal
Vancouver
Victoria
221
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 disburse capital in small increments, our repositioning
program offers superior risk-adjusted returns.
(1) Suite counts are presented at 100% ownership share rather than the REIT's proportionate share upon execution of its purchase options. See “Outlook - Access to Urban Pipeline in Target Market Through
MPI and Affiliates” in the Management’s Discussion and Analysis included in this annual report.
University Heights (Rendering) • Victoria, British Columbia
1.613.230.7051
info@mintoapartmentreit.com
Minto Apartment REIT
200-180 Kent Street
Ottawa, ON K1P 0B6
www.mintoapartments.com