Amalfi Stonebriar Apartments - Frisco (Dallas), TX
2016 AnnuAl report
For The YeAr enDeD December 31, 2016
Table of conTenTs
Acquisition strAtegy | 1
sub-mArket selection | 2
finAnciAl highlights | 9
letter to unitholders | 10
md&A | 13
finAnciAl stAtements | 55
corporAte informAtion | 84
The Avenue on Fairmount - Dallas, TX
Table of conTenTs
AcquiSiTion STrATegY
Acquisition strAtegy | 1
sub-mArket selection | 2
finAnciAl highlights | 9
letter to unitholders | 10
md&A | 13
finAnciAl stAtements | 55
corporAte informAtion | 84
Pure multi-Family reiT lP owns and operates a high-quality
portfolio of multi-family apartments located across the
u.S. sunbelt.
Since our iPo in July 2012, we have carefully selected major
markets in Texas and Arizona that exhibit strong population
and job growth metrics which are key drivers of rental rate
growth. The Pure multi-Family acquisition strategy is also
based on the philosophy that high-quality properties will
attract high quality tenants. We believe that our focus on
select markets with good economic and demographic trends
will help deliver above average noi growth for our investors
over time.
one of the strongest growth markets in the u.S. sunbelt has
been Dallas-Fort Worth. We have been acquiring, upgrading
and renewing our portfolio in Dallas, with a focus on Plano and
Frisco, two of the fastest-growing employment districts in
north Dallas.
Part of our strategy also includes acquiring properties in
clusters. We have acquired a cluster of nine properties in the
Dallas-Fort Worth metroplex and a cluster of four properties
in the stable and growing San Antonio area. Acquiring clusters
of properties in the same market provides management
efficiencies, and a greater market presence in tune with the
unique characteristics of each market and sub-market.
To date, we have established small footprints in houston,
Austin and Phoenix – markets we know well and aim to build
out in the future.
our currenT AnD
TArgeT mArkeTS
Denver
lAS vegAS
PhoeniX
nAShville
chArloTTe
ATlAnTA
DAllAS
AuSTin
SAn AnTonio
houSTon
orlAnDo
TAmPA
TArgeT
currenT
5.3%2016 sAme property
groWTh
totAl rentAl revenue
valley ranch - irving (Dallas) , TX
brackenridge at midtown - San Antonio, TX
7.0%reported 2016
sAme property noi
groWTh
1
Park at West Avenue - San Antonio, TX
PorTFolio SummArY*
*As at December 31, 2016
ProPerTieS
15
284
builDingS
5,229
278
uniTS
AcreS
Sub-mArkeT SelecTion
Within our selected cities, we target high-growth sub-markets that feature strong
demand drivers such as employment hubs, restaurants, nightlife, and entertainment
districts; all key components to our acquisition strategy. in addition, these sub-markets
also feature lifestyle amenities such as outdoor recreational areas, dog parks, nature
preserves, and golf courses.
We believe the philosophy of acquiring high quality assets in high demand sub-
markets will enhance stability and contribute to achieving above-market occupancy
levels and strong rental revenues over the long term.
AcquiSiTionS AnD DiSPoSiTionS
our properties are well positioned in their particular sub-market. We look for newer
construction properties with high quality unit interiors and finishes; and luxury
common areas and amenities such as resort style pools, 24-hour fitness centres, dog
parks and resident club houses.
As part of our diligent and active management, we continue to re-position assets
through value-add initiatives. As we complete these value-add programs, we may
look to renew our portfolio by divesting select non-core holdings and re-investing the
proceeds into newer, higher-quality assets.
To this end, in keeping with our strategy of high-grading our portfolio, 4 out of our last
6 acquisitions have been brand new assets in stabilization mode. one challenge of
operating assets that are still stabilizing is that they can have a short-term impact on
occupancy levels. Despite this, we firmly believe our strategy of high-grading of the
portfolio is the right strategy to enhance long term portfolio value.
our portfolio of properties has an average age of 11 years, which is the newest vintage
of the entire canadian apartment reiT peers in canada.
beneFiTS To Acquiring high quAliTY clASS A ASSeTS
•
•
•
•
lower capital expenditures than older properties
Superior amenity packages
higher rents per square foot
long term stability with less lease turnover
Prairie creek villas - richardson (Dallas), TX
quAliTieS oF Pure mulTi-FAmilY’S ProPerTieS
•
•
•
•
2006
AverAge YeAr oF
conSTrucTion oF
our PorTFolio
*As at December 31, 2016
Proximity to Work: our properties are selected to be in high-growth sub-markets
often within walking distance to high quality employers.
in
NEVADA
CoreSpace
Property Amenities: our properties feature big, modern kitchens for
meal preparations and entertaining, lots of storage space and pet friendly
environments.
Entertainment: our properties are located where tenants are looking to socialize:
easy access to coffee houses, concert venues, sport arenas and restaurants.
Outdoor Recreation: our tenants are often interested in outdoor sports like
biking, hiking, running and other fitness activities, and seek outdoor recreation
locations such as parks, golf courses and nature preserves. We select properties
near these recreational areas.
1 0 8
D A LL A S EC ONOMIC DEVEL OPMENT G U ID E
WASHINGTON
Allied BioScience
Blucora
MINNESOTA
MoneyGram
Speed Commerce (Navarre)
NEBRASKA
Heartland
Automotive Services
COLORADO
Cagney Global Logistics
Harris Broadcast
OKLAHOMA
Global Power Equipment
Group Inc.
Hilti
LinkAmerica
CALIFORNIA
Acacia Research Group
AccentCare
ACTIVE Network
Amerifl ight LLC
C&S Propeller
Caliber Collision Centers
Channell Commercial Corp.
Ciao Telecom
Cinépolis
Copart
Daegis Inc.
Fluor*
Fonality
Farmers Brothers Coff ee
Glenmount Global Solutions
Ironclad Performance Wear Corp.
Jacobs Engineering Group
Jamba Inc.
Consolidated Electrical Distributors
Kubota Tractor Corp.
loanDepot
Mimi’s Cafe
Monkey Sports Inc.
Motorsport Aftermarket
Group and MAG Retail
MV Transportation
Omnitracs
Pacifi c Union Financial
Primoris
Raytheon Space and
AirborneSystems (SAS)
Rixi Recovery Services
Solera Holdings
Titan Laboratories
AUSTIN
Greenstream
slliH neveS
Commercial
Toyota North America
Toyota Industries
Commercial Finance
Trend Micro
United Scientifi c Group
(USG)
Vendor Resource
Management
W3global
ILLINOIS
Bar Louie Restaurant Group
Ferris Manufacturing
Neovia Logistics Services
TopGolf
MICHIGAN
Comerica*
NEW YORK
Greatbatch
HMS Holdings
Signature Systems Group
Six Flags Entertainment
MASSACHUSETTS
NTT Data Inc.
VCE
CONNECTICUT
Accudyne Industries
iCall Inc.
Revere Capital LLC
MISSOURI
GKN
Aerostructures*
ARKANSAS
Golden Living
NEW JERSEY
Comparex
CVE Technology Group
TENNESSEE
Dynamic Energy
Alliance
ALABAMA
Torchmark*
Zoes Kitchen
GEORGIA
NYLO Hotels
FLORIDA
CCS Medical
Fiesta Restaurant Group
NOTE: Companies
with an * moved to
Dallas-Fort Worth
prior to 2010
OTHER NEW HQ ESTABLISHMENTS
Blackberry North American HQ (Canada)*
Commemorative Air Force (Midland, TX)
GuestLogix U.S. HQ (Canada)
Hisun Motors North American HQ (China)
Howard Hughes Corporation
NGC Renewables North American HQ (China)
Nutribiotech (South Korea)
Triathlon Battery Solutions (Germany)
Taleris
HOUSTON
Inx Inc.
Magnum Hunter Resources
U.S. Concrete
SAN ANTONIO
AT&T*
Christus Health
2
dAllAs-fort worth
DAllAS-ForT WorTh meTroPleX -
A cASe STuDY
The Dallas-Fort Worth metroplex (DFW) is one of the fastest growing metroplexes in
the u.S. in terms of job growth.
We believe our multi-family apartment properties in DFW will continue to perform
well over the long term because of its strong population, employment and
disposable income growth characteristics.
PeoPle Are moving To DFW
comPAnieS Are moving To DFW
•
•
•
Affordable real estate costs
low cost of living
low unemployment rate
growing labour force
•
• Well-educated workforce
•
Absence of a state corporate income tax
in Texas
Pro-business environment
•
vistas at hackberry creek - Dallas, TX
dfw
sAmple of heAdquArter relocAtions to dAllAs-
fort worth, 2010-2016
DFW is regularly identified as one of the u.S.’ top markets for new and expanded corporate
facilities. DFW attracts an impressive list of companies that spans diverse industries. recent
relocations to DFW have included many headquarters for Fortune 500 and Forbes Top
Private companies.
ILLINOIS
Bar Louie Restaurant Group
Ferris Manufacturing
Neovia Logistics Services
TopGolf
MICHIGAN
Comerica*
NEW YORK
Greatbatch
HMS Holdings
Signature Systems Group
Six Flags Entertainment
MASSACHUSETTS
NTT Data Inc.
VCE
#1
in The uSA For
PercenT Job
groWTh
(3% growth)
december 2015- december 2016
WASHINGTON
Allied BioScience
Blucora
in
NEVADA
CoreSpace
MINNESOTA
MoneyGram
Speed Commerce (Navarre)
NEBRASKA
Heartland
Automotive Services
COLORADO
Cagney Global Logistics
Harris Broadcast
OKLAHOMA
Global Power Equipment
Group Inc.
Hilti
LinkAmerica
CALIFORNIA
Acacia Research Group
AccentCare
ACTIVE Network
Amerifl ight LLC
C&S Propeller
Caliber Collision Centers
Channell Commercial Corp.
Ciao Telecom
Cinépolis
Consolidated Electrical Distributors
Copart
Daegis Inc.
Farmers Brothers Coff ee
Fluor*
Fonality
Glenmount Global Solutions
Ironclad Performance Wear Corp.
Jacobs Engineering Group
Jamba Inc.
Kubota Tractor Corp.
loanDepot
Mimi’s Cafe
Monkey Sports Inc.
Motorsport Aftermarket
Group and MAG Retail
MV Transportation
Omnitracs
Pacifi c Union Financial
Primoris
Raytheon Space and
AirborneSystems (SAS)
Rixi Recovery Services
Solera Holdings
Titan Laboratories
AUSTIN
Greenstream
slliH neveS
Commercial
Toyota North America
Toyota Industries
Commercial Finance
Trend Micro
United Scientifi c Group
(USG)
Vendor Resource
Management
W3global
CONNECTICUT
Accudyne Industries
iCall Inc.
Revere Capital LLC
MISSOURI
GKN
Aerostructures*
ARKANSAS
Golden Living
NEW JERSEY
Comparex
CVE Technology Group
TENNESSEE
Dynamic Energy
Alliance
ALABAMA
Torchmark*
Zoes Kitchen
GEORGIA
NYLO Hotels
FLORIDA
CCS Medical
Fiesta Restaurant Group
NOTE: Companies
with an * moved to
Dallas-Fort Worth
prior to 2010
OTHER NEW HQ ESTABLISHMENTS
Blackberry North American HQ (Canada)*
Commemorative Air Force (Midland, TX)
GuestLogix U.S. HQ (Canada)
Hisun Motors North American HQ (China)
Howard Hughes Corporation
NGC Renewables North American HQ (China)
Nutribiotech (South Korea)
Triathlon Battery Solutions (Germany)
Taleris
HOUSTON
Inx Inc.
Magnum Hunter Resources
U.S. Concrete
SAN ANTONIO
AT&T*
Christus Health
1 0 8
D A LL A S EC ONOMIC DEVEL OPMENT G U ID E
Source: https://cdn.dallaschamber.org/wp-content/uploads/2016/03/The-Business-Community-Major-Expansions-and-Relocations.pdf
#2
in The uSA For
AbSoluTe Job
groWTh
(113,000 jobs)
december 2015- december 2016
Source: Dallas Chamber of Commerce: https://cdn.dallaschamber.
org/wp-content/uploads/2016/03/The-Economy-Accolades.pdf
is rated:3 dfwour DAllAS-ForT WorTh PorTFolio
As at December 31, 2016
property
valley ranch
prairie creek villas
bear creek
vistas at hackberry creek
fountainwood Apartments
the preserve at Arbor hills
Amalfi stonebriar Apartments
the Avenue on fairmount
current value
$ 29,886,453
$ 79,257,972
$ 60,573,816
$ 59,002,455
$ 28,900,000
$ 49,124,254
$ 65,600,000
$ 71,061,943
fmv cap
rate
year of
construction
leased
occupancy
units
Avg. rent
5.50%
5.65%
5.50%
6.00%
6.00%
5.50%
4.75%
5.25%
1999
1997
2004
1984
1986
1998
2014
2015
97.1%
98.3%
99.3%
97.0%
96.9%
95.5%
98.5%
90.5%
96.8%
210
464
436
560
288
330
395
368
$1,287
$1,361
$1,211
$1,005
$945
$1,214
$1,217
$1,546
3,051
$1,218
Avg. unit
size (sf)
991
1,000
962
777
795
940
811
829
882
summary
$ 443,406,893
5.47%
2003
in 2016, as part of
an overall strategy
in dallas, pure multi-
family sold 2 older
properties totaling
$57.1 million in sale
price...
...and acquired 2
newer “class A”
properties in dallas
totaling $111 million
in purchase price.
FAirWAYS AT PreSTonWooD $22.8 million
ProfitAbly DivesteD - November 2016
livingSTon APArTmenTS $34.3 million
ProfitAbly DivesteD - November 2016
Avenue on FAirmounT $71.0 million
PurchAseD - sePtember 2016
lAnSbrook AT TWin creekS $40.0 million
PurchAseD - JANuAry 2017
4
FuTure groWTh oF legAcY WeST
Pure multi-Family acquired Amalfi
Stonebriar Apartments in August of 2015.
The area surrounding this property is
known as legacy West and is home to
many regional and national Fortune 500
companies.
The legacy West urban village
development is a successful real estate
project in north Texas. legacy West
consists of high-end shops, restaurants
and boutique office space. Almost 20,000
people are anticipated to work in the
development by 2018.
Toyota is building a new north
American corporate headquarters with
a 2.1 million-square-foot corporate
campus scheduled to open in 2017.
The Toyota headquarters is expected to
create approximately 6,000 new white
collar jobs, within a 10 minute walk of
Amalfi Stonebriar Apartments.
Fedex office built its international
headquarters, a 19-acre 265,000-square-
foot office campus in 2016 directly
across the street from the Amalfi
Stonebriar Apartments and is expected
to bring 1,200 Fedex office workers into
the area.
AmAlFi AT legAcY WeST
J.P. morgan chase & co. completed
construction of a multi-building,
800,000-square-foot campus on 50 acres
at legacy West.
liberty mutual is also one of the major
head offices with a major campus in the
area.
Amalfi Stonebriar is located within
walking distance from all three of these
corporate headquarters, and will benefit
from the strong job and population
growth.
AMALFI stonebrIAr ApArtMents5
Pure estates at TPc - San Antonio, TX
sAn Antonio
SAn AnTonio mArkeT
commenTArY
San Antonio has a strong, steady and diversified economy, led by government, high tech,
transportation and utilities, leisure and hospitality, medical, and retail trade industries.
According to hFF, new apartment supply peaked in 2016 but is forecast to decrease from
2017 to 2020, while rental growth is anticipated to remain above its long term average of
2.38% during this period. hFF forecasts a steady increase in average household income
from $120,000 in 2015 to just over $135,000 in 2020.
brackenridge at midtown - San Antonio, TX
our SAn AnTonio PorTFolio
As at December 31, 2016
park at West Avenue
current value
$54,969,122
brackenridge at midtown
$51,000,000
pure view at tpc
pure estates at tpc
summary
$61,149,480
$56,771,662
$223,890,264
fmv
cap rate
5.00%
4.85%
5.35%
5.25%
5.12%
year of
construction
leased
occupancy
2014
2014
2014
2007
2012
94.7%
95.0%
83.2%
89.5%
90.1%
units
360
282
416
344
1,402
Avg. rent
1,217
1,404
1,305
1,443
1,336
Avg. unit
size (sf)
898
852
943
1,135
960
6 PhoeniX mArkeT commenTArY
in Phoenix, marcus and millichap reports that apartment demand is rising in key residential areas of the Phoenix metro. employers
are accelerating hiring, with one-third of recent job growth consisting of relatively higher-paying jobs. local tech sector companies
are also expanding. home ownership in some of these areas is out of reach for many of the startup households thereby driving rental
demand.
Apartment demand overshadows recent supply increases as Phoenix metrowide vacancy rates have dropped into the 4 percent range,
which is the lowest rate in a decade.
Phoenix is a market that Pure multi-Family knows extremely well, and we have been monitoring this market for three years looking for
an entry point to resume our acquisitions.
our PhoeniX PorTFolio
As at December 31, 2016
san brisas Apartment homes
current value
$33,349,800
fmv cap rate
year of
construction
5.25%
1996
leased
occupancy
97.1%
units
208
Avg. rent
$1,132
Avg. unit size
(sf)
1,006
phoenix
brackenridge at midtown - San Antonio, TX
brackenridge at midtown
$51,000,000
park at West Avenue
pure view at tpc
pure estates at tpc
summary
current value
$54,969,122
$61,149,480
$56,771,662
$223,890,264
fmv
cap rate
5.00%
4.85%
5.35%
5.25%
5.12%
year of
construction
leased
occupancy
2014
2014
2014
2007
2012
94.7%
95.0%
83.2%
89.5%
90.1%
units
360
282
416
344
1,402
Avg. rent
1,217
1,404
1,305
1,443
1,336
Avg. unit
size (sf)
898
852
943
1,135
960
San brisas Apartment homes - Phoenix, AZ
7 Walker commons - league city (houston), TX
houston
houSTon mArkeT
commenTArY
houston is the fourth most populous city in the nation (trailing only new York, los
Angeles and chicago), and is the largest in the southern u.S. and Texas. The metro area’s
population of 5.95 million in 2010 is 6th largest among u.S. metropolitan statistical
areas, and a 26% increase since 2000
houston’s economy has a broad industrial base in the energy, aeronautics, medical and
technology industries: only new York city is home to more Fortune 500 headquarters.
Although still heavily reliant on the energy sector, the greater houston economy is
more diverse than in previous cycles. our properties have preformed well and are
located in areas with lower levels of new supply and continued job growth.
The boulevard at Deer Park - Deer Park (houston), TX
our houSTon PorTFolio
As at December 31, 2016
the boulevard at deer park
Walker commons
summary
current value
$27,333,910
$50,566,315
$77,900,225
fmv
cap rate
5.75%
6.00%
5.91%
year of
construction
leased
occupancy
2000
2008
2005
96.3%
96.0%
96.1%
units
216
352
568
Avg. rent
$1,184
$1,201
$1,195
Avg. unit
size (sf)
934
928
930
8 FinAnciAl highlighTS
Rental Revenue
margin
gross book
value
total rental
revenue growth
5.3% 2016 same property
55.2% total debt to
54.6% 2016 noi
7.0% 2016 same
$76.4m 2016
$41.7m 2016 net
property noi
growth
total
revenues
rental
income
rental revenue (millions)
$16.5
$19.4
$19.9
$20.1
$17.1
$13.0
$13.9
$15.4
q1 2015
2015-q1
q2 2015
2015-q2
q3 2015
2015-q3
q4 2015
2015-q4
q1 2016
2016-q1
q2 2016
2016-q2
q3 2016
2016-q3
q4 2016
2016-q4
net rental income
net rental income (millions)
$9.7
$9.1
$7.8
$7.3
$8.4
$11.0
$10.7
$10.3
q1 2015
2015-q1
q2 2015
2015-q2
q3 2015
2015-q3
q4 2015
q1 2016
2015-q4
2016-q1
Total Assets
q2 2016
2016-q2
q3 2016
2016-q3
q4 2016
2016-q4
total Assets (millions)
$743
$752
$834
$779
$629
$614
$517
$453
ytd
ytd
YTD 15-q1 YTD 15-q2 YTD 15-q3 YTD 15-q4 YTD 16-q1 YTD 16-q2 YTD 16-q3 YTD 16-q4
q1 2015
q4 2016
ytd
q3 2016
ytd
q2 2016
ytd
q4 2015
ytd
q3 2015
ytd
q1 2016
ytd
q2 2015
the boulevard at deer park
Walker commons
summary
current value
$27,333,910
$50,566,315
$77,900,225
fmv
cap rate
5.75%
6.00%
5.91%
2000
2008
2005
year of
construction
leased
occupancy
96.3%
96.0%
96.1%
units
216
352
568
Avg. rent
$1,184
$1,201
$1,195
Avg. unit
size (sf)
934
928
930
$1.40
$1.20
$1.00
$0.80
$0.60
$0.40
$0.20
$-
rent and occupancy trends (december 2014 to december 2016)
Avg. rent per sf
Avg. physicAl occupAncy
Avg. leAsed occupAncy
d’14
J’15
f’15 m’15 A’15 m’15 J’15
J’15
A’15 s’15 o’15 n’15 d’15 J’16
f’16 m’16 A’16 m’16 J’16 J’16 A’16
s’16 o’16 n’16 d’16
100%
80%
60%
40%
20%
0%
9 leTTer To uniTholDerS
2016 highlighTS
2016 AchievemenTS
2016 marked our fourth consecutive year of solid growth for
Pure multi-Family reiT lP.
our portfolio at year-end consisted of 15 “class A” investment
properties valued at $779 m uSD and 5,229 apartment units
located in fast-growing u.S. markets.
We continue to focus our acquisitions on the major markets
of the u.S. sunbelt. We believe these markets have strong,
diverse and growing economies and thus dynamic rental rate
growth.
our same property noi grew 7.0% during 2016, well above
the canadian apartment reiT average long-term trend of
approximately 2.0%.
Same property total revenue growth was 5.3% year over year.
rental revenues increased from $58.9 million to $76.4 million,
an increase of 29.8% year over year.
Total Average rent Per occupied unit increased from $1,078
per unit in 2015 to $1,212 per unit in 2016, an increase of
12.4%
We believe Pure multi-Family will be well positioned to deliver
above average same-property noi growth and nAv per unit
growth over the coming years.
in July, Pure multi-Family announced the closing of a bought
deal public offering of 4.9 million class A units at a price
of cDn$7.64 per unit, for gross proceeds to Pure multi of
cDn$37.3 million.
in September, Pure multi-Family’ s Asset management was
internalized, at no cost to the reiT lP.
We believe that this is important to highlight as it further
demonstrates our alignment with unitholders. As a reminder,
since iPo, Pure multi-Family has not permitted external asset
management or transaction fees to be paid to management.
We established a structure, through the issuance of class b
units, that was success driven, and a structure that we believe
has been respectful of our unitholder’s capital. The Pure
multi-Family management team remains committed to fully
aligning our interests with those of our unitholders.
As we grow, we anticipate that Pure multi-Family
will continue to have among the lowest general and
administrative expense percentages versus total revenue of
our peer group.
2016 ToTAl reTurn on inveSTmenT
Series2
Series1
PuRe MulTI-faMIly
s&P/Tsx Index
s&P ReIT Index
Series3
43.2%
28.6%
83.1%
17.6%
21.1%
21.6%
54.8%
23.8%
Dec 31
Feb 28
JAn
Feb mAr
APr mAY
Jun Jul
Aug SeP ocT nov Dec
JAn
Feb
Jan-16
Feb-16 mar-16
Apr-16 may-16
Jun-16
Jul-16
Aug-16
Sep-16
oct-16
nov-16
Dec-16
Jan-17
Feb-17
Source: Bloomberg, Canadian Ticker
10 2016 revieW
2016 AcquiSiTionS
on march 1, 2016, Pure multi-Family acquired a portfolio of
two multi-family apartment communities, located in San
Antonio, Texas for uS$117.5 million.
Pure estates at TPc consisted of 344 luxury residential units
and Pure view at TPc consisted of 416 brand-new luxury
residential units
Pure multi-Family funded the purchase of the TPc Portfolio
with proceeds from its uS$39.2 million bought deal financing
which closed in December 2015, and net proceeds from the
sale of Windsong Apartments, which closed in December
2015, as well as two new first mortgage financings totaling
uS$78,000,000.
The two mortgage financings include a new first mortgage
financing on the Pure estates at TPc property in the amount
of uS$39 million, bearing a fixed interest rate of 3.96%
per annum for a term of 8 years; and a new first mortgage
financing on the Pure view at TPc property, in the amount
of uS$39 million, bearing a fixed interest rate of 3.92% per
annum for a term of 15 years.
in September 2016, Pure multi-Family acquired the 368-unit
class “AA” luxury apartment community “The Avenue on
Fairmount Apartments,” located in the oak lawn sub-market
of Dallas, Texas, for a purchase price of uS$71.0 million.
The Avenue was constructed in 2015 and consists of 368
luxury apartments averaging 829 square feet. The Avenue
offers residents easy access to downtown Dallas, the Dallas
medical District, uptown Dallas and love Field Airport, each
within a 10 minute drive. Additionally, numerous trendy
restaurants and entertainment venues are within walking
distance of this asset.
Pure multi-Family funded the Avenue with proceeds from its
cDn$37.3 million bought deal financing which closed on July
29, 2016, and a new first mortgage financing in the amount
of uS$43 million, which is interest-only for the first two years,
and bears a fixed interest rate of 3.40% per annum for a term
of 12 years.
2016 cAPiTAl recYcling
over the past few years, Pure multi-Family has significantly
improved the quality of its portfolio through strategic capital
recycling, profitably divesting older non-core assets and
acquiring newer properties with more attractive growth
prospects.
in 2016, we sold two communities with an average age of 22
years for uS$57.1 million, and we replaced them with two
new acquisitions in early 2017 with a weighted average age of
construction of seven years for uS$80 million.
investor demand for value add investment properties was a
trending investment theme throughout 2016. Pure multi-
Family took advantage of this high demand by selling several
of our older class b assets at historically low cap rates that were very
close to class A cap rates.
in november, we profitably sold livingston Apartments for
uS$34.3 million. livingston was a strong performing class
b asset located in Plano, Texas featuring 180 units and was
originally constructed in 1998. The livingston was acquired in
August 2013 for a price of uS$25.5 million.
Pure multi-Family also profitably divested Fairways at
Prestonwood located in Dallas, Texas in november, for gross
proceeds of uS$22.8 million. one of our few remaining class
b assets, Fairways was comprised of 156 residential units,
situated on 11.46 acres of land and was built in 1991. Pure
multi-Family originially acquired Fairways in march 2013 for
uS$17.5 million.
As part of Pure multi-Family’s commitment to create value for
our unitholders, Pure multi-Family used the net proceeds from
these older class b property sales (on a tax-deferred basis) to
improve the overall quality of our portfolio by acquiring two
well located high-quality class A properties in early 2017.
Park at West Avenue - San Antonio, TX
11 2017 looking ForWArD
2017 AcquiSiTionS
2017 looking AheAD
in January 2017, Pure multi-Family acquired the 276 unit class
“AA” luxury apartment community “Pure creekside at onion
creek” located in Austin, Texas, for a purchase price of uS$40.0
million.
Pure creekside was constructed in 2016 and consists of
276 luxury residential units averaging 828 square feet. Pure
creekside is ideally located less than 10 miles from the
largest employment hub in Austin (Downtown Austin), and is
conveniently located minutes from Southpark meadows, one
of the largest retail and entertainment centers in Austin. Pure
creekside is situated on over 13 acres of land with best-in-class
resort-style amenities.
Pure multi-Family funded the purchase of Pure creekside
with proceeds from the sale of livingston Apartments, and
new first mortgage financing in the amount of uS$20 million
bearing a fixed interest rate of 3.98% per annum for a term of 10
years.
Pure multi-Family also acquired the 288 unit multi-family
apartment community “lansbrook at Twin creeks” located in
the Allen sub-market of Dallas, Texas, for a purchase price of
uS$40.0 million.
lansbrook was constructed in 2002 and consists of 288
residential units averaging 961 square feet. it has value-add
potential and is located in the highly desirable residential area
of Allen, Texas, one of the fastest growing cities in Texas.
According to the Allen economic Development corporation,
Allen, Texas is the 16th fastest growing city in the u.S. and the
second fastest growing city in the Dallas Fort Worth metro
Area. The median household income in Allen is $105,679 well
above Dallas Fort Worth’s median income.
Pure multi-Family funded the purchase of lansbrook with
proceeds from the sale of Fairways at Prestonwood, and new
first mortgage financing in the amount of uS$16.5 million
bearing interest of 3.27% per annum for a term of 5 years.
As a result of these acquisitions, Pure multi-Family was able to
improve our portfolio’s average year of construction from 2003
in 2015, to 2006 today. We believe that our focus on newer
high quality properties will result in lower capital expenditures
permitting a greater focus on noi enhancing initiatives.
As we look ahead into 2017, acquisition pricing remains
extremely competitive for quality class A apartment assets,
with a large and robust pipeline of investment opportunities
and strong demand for real estate investment.
in 2016 we had opportunities to secure longer mortgage
terms at low fixed interest rate levels, and lock in these rates
over ten, twelve and fifteen years thereby mitigating risk from
the potential of rising interest rates in the short term. Pure
multi-Family has no property debt maturities scheduled prior
to 2019, a weighted average interest rate across our portfolio
of 3.74% (all of which is fixed rate debt) and a weighted
average mortgage term remaining of 9.4 years, which is
among the longest average mortgage terms of any reiT in
canada. Pure multi-Family’s leverage is currently 55.2%, a level
that is considered to be conservative in the multi-family space,
however it is our strategy to continue to reduce our debt to
gross book value even further.
looking ahead, our goal is to continue to decrease our
leverage over time into the low to mid 40% range, and
reducing our payout ratios into the mid-70 percent range.
once we have achieved these levels on what we believe to
be a sustainable basis, we will review increasing our monthly
distribution.
Fundamentals for our business remain strong, and 2017
should be another solid year for the u.S. multi-family
industry. The u.S. economy continues to expand, job growth
continues to increase, supply of new apartments are muted
and manageable in our targeted markets, and favourable
demographics are driving demand for u.S. multi-family
apartment communities in the u.S. sunbelt states.
in conclusion, i would like to thank our unitholders for
their support and our employees for their hard work and
dedication. We look forward to continuing our growth into
2017 and beyond.
Sincerely,
“steve evANs”
Steve evans, ceo
12 Pure creekside at onion creek - Austin, TX
mAnAgement’s discussion And AnAlysis
For The YeAr enDeD December 31, 2016
DATED: MARCh 8, 2017
13 Pure Multi-Family REIT LP
MD&A – December 31, 2016
SECTION I
FORWARD-LOOKING DISCLAIMER
The following management’s discussion and analysis (“MD&A”) of the results of operations and the financial
condition of Pure Multi-Family REIT LP (“Pure Multi-Family”) for the year ended December 31, 2016 should be read
in conjunction with Pure Multi-Family’s audited consolidated financial statements for the year ended December 31,
2016, available on SEDAR at www.sedar.com and on Pure Multi-Family’s website at www.puremultifamily.com.
Historical results, including trends which might appear, should not be taken as indicative of future operations or
results.
Certain information in this MD&A contains forward-looking information within the meaning of applicable securities
laws (also known as forward-looking statements) including, among others, statements made or implied under the
headings “Outlook”, “Results of Operations”, “Financial Condition”, “Liquidity and Capital Resources” and “Risks
and Uncertainties” relating to Pure Multi-Family’s objectives, strategies to achieve those objectives, beliefs, plans,
estimates, projections and intentions; and similar statements concerning anticipated future events, results,
circumstances, performance or expectations that are not historical facts. Forward-looking statements generally can be
identified by words such as “outlook”, “believe”, “expect”, “may”, “anticipate”, “should”, “intend”, “estimates” and
similar expressions.
In particular, certain statements in this MD&A discuss Pure Multi-Family’s anticipated future events. These
statements include, but are not limited to:
(i) Pure Multi-Family’s growth strategy, including the accretive acquisition of properties and the anticipated extent
of the accretion of any acquisitions, which could be impacted by demand for properties and the effect that demand
has on acquisition capitalization rates and changes in the cost of capital;
(ii) maintaining occupancy levels and rental revenue, which could be impacted by changes in demand for Pure Multi-
Family’s properties, financial circumstances of tenants, including tenant defaults, the effects of general economic
conditions and supply of competitors’ properties in proximity to Pure Multi-Family’s properties;
(iii) overall indebtedness levels, which could be impacted by the level of acquisition activity Pure Multi-Family is
able to achieve, fair value of its properties and future financing opportunities;
(iv) tax status of Pure US Apartments REIT Inc., which can be impacted by regulatory changes enacted by
governmental authorities;
(v) anticipated distributions and payout ratios, which could be impacted by capital expenditures, results of operations
and capital resource allocation decisions;
(vi) obtaining and maintaining adequate insurance for Pure Multi-Family’s properties; and
(vii) anticipated interest rates and exchange rates.
Forward-looking statements are provided for the purpose of presenting information about management’s current
expectations and plans relating to the future and readers are cautioned that such statements may not be appropriate for
other purposes. Forward-looking statements involve significant risks and uncertainties and should not be read as
guarantees of future performance or results. Those risks and uncertainties include, among other things, risks related
to: unit prices; liquidity; credit risk and tenant concentration; interest rate and other debt related risk; tax risk; ability
to access capital markets; lease rollover risk; competition for real property investments; environmental matters;
changes in legislation; and indebtedness of Pure Multi-Family.
Management believes that the expectations reflected in forward-looking statements are based upon reasonable
assumptions and information currently available, which include, management’s current expectations, estimates and
assumptions that: proposed acquisitions will be completed on the terms and basis agreed to by Pure Multi-Family,
property acquisition and disposition prospects and opportunities will be consistent with Pure Multi-Family’s
experience over the past 12 months, the multi-family residential real estate market in the “Sunbelt” region in the
United States will remain strong, the global economic environment will remain stable, interest rates will remain low
relative to historic norms, and Pure Multi-Family’s business strategy, plans, outlook, projections, targets and operating
costs will be consistent with Pure Multi-Family’s experience over the past 12 months, Pure Multi-Family will be able
14
Pure Multi-Family REIT LP
MD&A – December 31, 2016
to maintain occupancy at current levels, tenants will not default on lease terms, governmental regulations and taxation
will not change to adversely affect Pure Multi-Family’s business and financial results, and Pure Multi-Family will be
able to obtain adequate insurance and financing; however, management can give no assurance that actual results will
be consistent with these forward-looking statements.
Readers are cautioned that the foregoing list of factors that may affect future results is not exhaustive. When relying
on forward-looking statements to make decisions with respect to Pure Multi-Family, investors and others should
carefully consider the foregoing factors and other uncertainties and potential events.
These forward-looking statements are made as of March 8, 2017 and Pure Multi-Family assumes no obligation to
update or revise them to reflect new events or circumstances, except as required by law.
BASIS OF PRESENTATION
Unless otherwise noted, all financial information has been prepared in accordance with International Financial
Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”). The financial
information included in this MD&A for the year ended December 31, 2016 includes material information up to March
8, 2017. Except as otherwise stated in this MD&A, all dollar amounts in this MD&A, including per unit amounts, are
stated in U.S. dollars.
All references herein to “consolidated” refer to amounts as reported under IFRS. All references to “Pure Multi’s
interest” refer to a non-IFRS measure and assumes Pure Multi-Family prorates and accrues property tax liability and
expense based on the time period of ownership throughout a given reporting year. For a reconciliation of Pure Multi-
Family’s results of operations, see “Results of Operations Reconciliation”.
Certain figures in this MD&A are non-IFRS measures, including, Pure Multi’s interest, Funds from Operations or
FFO, Adjusted Funds from Operations or AFFO, Distributable Income or DI, same property net rental income,
adjusted same property net rental income, same property revenue, same property average monthly rent per occupied
unit, rental revenue - same property, rental revenue - properties acquired/sold, net rental income - same property, net
rental income - properties acquired/sold and net rental income – property tax expense adjustments. For an IFRS to
non-IFRS reconciliation, see “Results of Operations Reconciliation”, “Distributable Income” and “Liquidity and
Capital Resources – Funds from Operations and Adjusted Funds from Operations”.
OVERVIEW
About Pure Multi-Family
Pure Multi-Family is a Canadian-based publically traded vehicle which offers investors exclusive exposure to U.S.
multi-family real estate assets. It offers investors the ability to participate in monthly distributions, with potential for
capital appreciation, stemming from ownership of quality apartment assets located in core cities within the
Southwestern and Southeastern portions of the U.S., including states such as Texas, Arizona, Georgia and Nevada
(collectively, the “Sunbelt”).
Pure Multi-Family is a limited partnership formed under the Limited Partnership Act (Ontario) to indirectly invest in
multi-family real estate properties in the United States. Pure Multi-Family was established by Pure Multi-Family
Management Limited Partnership (the “Managing GP”), its managing general partner, and Pure Multi-Family REIT
(GP) Inc. (the “Governing GP”), its governing general partner, pursuant to the terms of a Limited Partnership
Agreement (the “LP Agreement”), dated May 8, 2012, as amended and restated May 28, 2015 and as amended August
21, 2015, as may be amended from time to time. Pure Multi-Family’s head office and address for service is located
at 910 – 925 West Georgia Street, Vancouver, British Columbia, V6C 3L2. A copy of the LP Agreement can be
obtained from the Chief Financial Officer of Pure Multi-Family and is available on SEDAR at www.sedar.com.
15
Pure Multi-Family REIT LP
MD&A – December 31, 2016
Pure Multi-Family, through Pure US Apartments REIT Inc. (the “US REIT”), was established for, among other things,
the purposes of acquiring, owning and operating multi-family real estate properties in the United States.
Operational and Financial Highlights (all metrics stated at Pure Multi’s interest (1))
Number of properties
Number of residential units
Portfolio average year of construction
Physical occupancy
Leased occupancy
Investment properties (000’s)
Mortgages payable (000’s)
Weighted average effective interest rate on mortgages payable
Loan to gross book value
December 31,
2016
15
5,229
2006
92.8%
94.9%
$ 778,547
$ 447,827
3.74%
55.2%
As at
December 31,
2015
14
4,437
2003
96.2%
97.3%
$ 613,682
$ 354,202
3.72%
54.6%
December 31,
2014
14
4,308
1996
97.6%
98.2%
$ 468,518
$ 256,735
3.86%
57.9%
Pure Multi’s interest
($000’s, except per unit basis)
(all per unit amounts based on basic weighted average
number of units outstanding)
Total rental revenue (2)
Total operating expense (2)
Total net rental income (2)
Net rental income margin
Basic weighted average number of units outstanding
Class A Units
Class B Units
Distributions
per Class A Unit
per Class B Unit
Funds from operations (2)
per Class A Unit
per Class B Unit
Payout ratio
Adjusted funds from operations (2)
per Class A Unit
per Class B Unit
Payout ratio
For the
year ended
December 31,
2016
76,414
34,722
41,692
54.6%
$
For the
year ended
December 31,
2015
58,876
26,180
32,696
55.5%
$
For the three
months ended
December 31,
2016
20,116
9,845
10,271
51.1%
$
For the three
months ended
December 31,
2015
16,547
7,437
9,110
55.1%
$
51,553,540
200,000
20,504
0.38
4.95
22,036
0.41
5.34
93.0%
20,810
0.38
5.04
98.5%
39,761,071
200,000
15,810
0.38
3.95
18,364
0.44
4.59
86.1%
17,363
0.42
4.34
91.1%
55,418,872
200,000
5,487
0.10
1.25
4,778
0.08
1.10
114.8%
4,456
0.08
1.02
123.1%
43,429,172
200,000
4,362
0.10
1.09
4,885
0.11
1.22
89.3%
4,607
0.10
1.15
94.7%
Notes:
(1) The adjustments from the IFRS measure to Pure Multi’s interest (non-IFRS measure) is limited to the prorating and accrual of the property
tax liability and expense on all portfolio investments, based on the time period of ownership throughout the given reporting year. As a result,
any unrelated balances presented correspond directly to the IFRS financial statements.
(2) For an IFRS to non-IFRS reconciliation, see “Results of Operations Reconciliation”, “Distributable Income”, and “Liquidity and Capital
Resources – Funds from Operations and Adjusted Funds from Operations”.
16
Pure Multi-Family REIT LP
MD&A – December 31, 2016
On August 12, 2016, a Determination Event (as defined in the LP Agreement) occurred as a result of Pure Multi-
Family’s market capitalization exceeding $300,000,000 for a period of ten consecutive trading days. Upon the
occurrence of the Determination Event, the number of Class A Units into which the Class B Units may be converted,
was fixed at 2,665,835 Class A Units. Subsequent to the Determination Event, on September 1, 2016, Pure Multi-
Family internalized its asset management and terminated the asset management agreement (the “Asset Management
Agreement”) between Pure Multi-Family and the Managing GP. No penalties were incurred upon termination of the
Asset Management Agreement.
During the year ended December 31, 2016, Pure Multi-Family acquired three investment properties, for a combined
purchase price of $188,500,000. These properties were acquired with proceeds received from the profitable sale of
Windsong Apartments sold on December 30, 2015, partial proceeds from the December 2015 Offering (as defined
herein) and July 2016 Offering (as defined herein), as described below, and new mortgage financing in the amount of
$121,000,000. During the year ended December 31, 2016, Pure Multi-Family completed the sale of two properties
for a combined sales price of $57,100,000. These acquisitions and sales resulted in Pure Multi-Family improving its
portfolio average year of construction to 2006 as at December 31, 2016, compared to 2003 as at December 31, 2015,
and 1996 as at December 31, 2014.
Pure Multi-Family continues to maintain a conservative debt profile with a current average interest rate on mortgages
payable of 3.74% per annum and an average mortgage term to maturity of 9.4 years.
For the year ended December 31, 2016, rental revenue was $76,414,359 and net rental income was $41,691,664,
representing increases of $17,538,560 and $8,995,880, respectively, compared to the prior year. For the three months
ended December 31, 2016, rental revenue was $20,115,884 and net rental income was $10,271,192, representing
increases of $3,568,515 and $1,161,262, respectively, compared to the same period in the prior year.
For the year ended December 31, 2016 the net rental income margin decreased to 54.6% from 55.5% compared to the
prior year, and for the three months ended December 31, 2016 the net rental income margin decreased to 51.1% from
55.1% compared to the three months ended December 31, 2015. The decrease in net rental income margin, for the
periods noted above, was primarily driven by an increase in property tax expense. The majority of this increase was
incurred during the three months ended December 31, 2016, thus causing the decrease in net rental income margin
compared to the prior year. As at December 31, 2016, there were a number of property tax appeals which remained
outstanding. After the appeals have been resolved, any savings will be recorded during the same period in which the
savings, if any, are realized.
Pure Multi-Family earned an average monthly rent per occupied unit of $1,244, or $1.356 per square foot, across its
entire portfolio for the three months ended December 31, 2016 (three months ended December 31, 2015 - $1,131 and
$1.257, respectively), representing an increase in the average monthly rent of an occupied unit of 10.1%, or 7.9% per
square foot, compared to the same period in the prior year. For the year ended December 31, 2016, Pure Multi-Family
earned an average monthly rent per occupied unit of $1,212, or $1.310 per square foot, across its entire portfolio (year
ended December 31, 2015 - $1,078 and $1.194, respectively), representing an increase in the average monthly rent of
an occupied unit of 12.4%, or 9.7% per square foot, over the prior year.
For the year ended December 31, 2016, the FFO payout ratio increased to 93.0% from 86.1% and the AFFO payout
ratio increased to 98.5% from 91.1% compared to the year ended December 31, 2015. For the three months ended
December 31, 2016, compared to the three months ended December 31, 2015, the FFO payout ratio increased to
114.8% from 89.3% and the AFFO payout ratio increased to 123.1% from 94.7%. The increases in the FFO and
AFFO payout ratios for the three months and year ended December 31, 2016 compared to the same periods in the
prior year were primarily due to:
i)
ii)
iii)
excess cash on the balance sheet, resulting from the disposal of investment properties and equity financings,
which was being held for the acquisition of investment properties,
delays in the resolution of outstanding property tax appeals at December 31, 2016, which have historically
resulted in the reduction of property tax expense on Pure Multi-Family’s investment properties, and
ongoing occupancy stabilization of Pure Multi-Family’s more recently acquired investment properties.
17
Pure Multi-Family REIT LP
MD&A – December 31, 2016
Same Property Analysis (all metrics stated at Pure Multi’s interest)
Pure Multi’s interest
Rental revenue – same property (3) (by location)
($000’s)
Dallas - Fort Worth, Texas
Houston, Texas
San Antonio, Texas
Phoenix, Arizona
$
December 31,
2016
33,288
8,375
-
2,855
$
For the year ended
December 31,
2015
31,438
8,167
-
2,673
$ Change % Change
5.9%
$
2.6%
-
6.8%
1,850
208
-
182
Total – same property (3)
Total – properties acquired/sold (4)
44,518
31,896
42,278
16,598
2,240
5.3%
15,298
92.2%
Total rental revenue
$ 76,414
$ 58,876
$ 17,538
29.8%
Pure Multi’s interest
Rental revenue – same property (3) (by location)
($000’s)
Dallas - Fort Worth, Texas
Houston, Texas
San Antonio, Texas
Phoenix, Arizona
Total – same property (3)
Total – properties acquired/sold (4)
Total rental revenue
Notes:
(3)
For the three months ended
December 31,
2016
$ 9,841
2,087
2,541
710
December 31,
2015
$ 9,426
2,082
2,357
675
$ Change % Change
4.4%
$
0.2%
7.8%
5.2%
415
5
184
35
15,179
4,937
14,540
2,007
639
4.4%
2,930
146.0%
$ 20,116
$ 16,547
$ 3,569
21.6%
Same property (non-IFRS measure) - represents properties owned throughout the comparative periods, which removes the impact of
acquisitions and dispositions.
(4) Properties acquired/sold (non-IFRS measure) - represents properties which were acquired or sold, therefore not owned during the entire
comparative periods.
Pure Multi’s interest
Net rental income – same property (3)
(by location)
($000’s)
Dallas - Fort Worth, Texas
Houston, Texas
San Antonio, Texas
Phoenix, Arizona
Total – same property (3)
Total – properties acquired/sold (4)
For the year ended
December 31,
2016
$ 19,014
4,982
-
1,690
25,686
16,006
$
December 31,
2015
17,818
4,589
-
1,590
$ Change % Change
6.7%
$
8.6%
-
6.3%
1,196
393
-
100
23,997
8,699
1,689
7,307
7.0%
84.0%
Total net rental income
$ 41,692
$ 32,696
$ 8,996
27.5%
18
Pure Multi-Family REIT LP
MD&A – December 31, 2016
Pure Multi’s interest
Net rental income – same property (3)
(by location)
($000’s)
Dallas - Fort Worth, Texas
Houston, Texas
San Antonio, Texas
Phoenix, Arizona
Total – same property (3)
Total – properties acquired/sold (4)
For the three months ended
December 31,
2016
$ 5,213
1,250
1,316
412
December 31,
2015
$ 5,417
1,089
1,203
410
$ Change % Change
(3.8%)
$
14.9%
9.4%
0.4%
(204)
161
113
2
8,191
2,080
8,119
991
72
0.9%
1,089
109.9%
Total net rental income
$ 10,271
$ 9,110
$ 1,161
12.7%
Notes:
(3)
Same property (non-IFRS measure) - represents properties owned throughout the comparative periods, which removes the impact of
acquisitions and dispositions.
(4) Properties acquired/sold (non-IFRS measure) - represents properties which were acquired or sold, therefore not owned during the entire
comparative periods.
Pure Multi’s interest
Average monthly rent per occupied unit -same
property (5) (by location)
Dallas - Fort Worth, Texas
Houston, Texas
San Antonio, Texas
Phoenix, Arizona
For the year ended
$
December 31,
2016
1,135
1,176
-
1,102
$
December 31,
2015
1,073
1,127
-
1,043
$ Change % Change
5.8%
$
4.4%
-
5.7%
62
49
-
59
Portfolio weighted average – same property (5)
1,140
1,081
59
5.5%
Pure Multi’s interest
Average monthly rent per occupied unit -same
property (5) (by location)
Dallas - Fort Worth, Texas
Houston, Texas
San Antonio, Texas
Phoenix, Arizona
For the three months ended
$
December 31,
2016
1,168
1,194
1,302
1,129
$
December 31,
2015
1,104
1,148
1,298
1,070
$ Change % Change
5.8%
$
4.0%
0.3%
5.5%
64
46
4
59
Portfolio weighted average – same property (5)
Notes:
(5) Average monthly rent per occupied unit – same property (non-IFRS measure) - represents average monthly rental income for occupied units,
1,139
1,191
4.6%
52
net of concessions and discounts, for properties owned during the entire comparative periods.
Average physical occupancy – same property (6)
(by location)
Dallas - Fort Worth, Texas
Houston, Texas
San Antonio, Texas
Phoenix, Arizona
For the year ended
December 31, 2016 December 31, 2015
97.7%
98.0%
-
96.0%
97.4%
96.7%
-
96.7%
% Change
(0.3%)
(1.3%)
-
0.7%
Portfolio weighted average – same property (6)
97.2%
97.6%
(0.4%)
19
Pure Multi-Family REIT LP
MD&A – December 31, 2016
Average physical occupancy – same property (6)
(by location)
Dallas - Fort Worth, Texas
Houston, Texas
San Antonio, Texas
Phoenix, Arizona
For the three months ended
December 31, 2016 December 31, 2015
97.1%
98.5%
89.8%
94.9%
95.8%
95.4%
95.1%
94.9%
% Change
(1.3%)
(3.1%)
5.3%
0.0%
Portfolio weighted average – same property (6)
95.6%
96.0%
(0.5%)
Notes:
(6) Average physical occupancy – same property (non-IFRS measure) - represents average physical occupancy, for properties owned during the
entire comparative periods.
For the year ended December 31, 2016, same property rental revenue increased by $2,239,017, or 5.3%, and same
property net rental income increased by $1,688,851, or 7.0%, compared to the prior year. The increase in same
property rental revenue was primarily driven by an increase in the same property average monthly rent per occupied
unit, while the increase in same property net rental income was a result of increased revenues combined with increased
efficiency managing the operating expenses and was partially offset by an increase in property tax expense.
For the three months ended December 31, 2016, same property rental revenue increased by $639,528, or 4.4%, and
same property net rental income increased by $71,791, or 0.9%, compared to the same time period in the prior year.
The increase in same property rental revenue was primarily driven by an increase in the same property average
monthly rent per occupied unit, while the increase in same property net rental income was mostly driven by the
increase in revenues and being partially offset by increased property tax expense incurred during the three months
ended December 31, 2016. The increase in property tax expense, incurred during the three months ended December
31, 2016, has been fully reflected in the same property net rental income during such period, thus resulting in growth
of only 0.9% compared to the same period in the prior year. By allocating this additional incurred property tax expense
over the year ended December 31, 2016, prorated based on the number of days of ownership of each investment
property (“adjusted same property net rental income”), the adjusted same property net rental income for the three
months ended December 31, 2016 would have increased by $432,837, or 5.4%, when compared to the adjusted same
store net rental income for the three months ended December 31, 2015. The table below provides a detailed description
of adjusted same property net rental income by location for the periods indicated:
Pure Multi’s interest
Adjusted net rental income – same property (7)
(by location)
($000’s)
Dallas - Fort Worth, Texas
Houston, Texas
San Antonio, Texas
Phoenix, Arizona
Total – same property (3)
Total – properties acquired/sold (4)
Total adjusted net rental income
Property tax expense adjustments (8)
For the three months ended
December 31,
2016
$ 5,501
1,241
1,255
414
December 31,
2015
$ 5,322
1,068
1,202
387
$ Change % Change
3.4%
$
16.2%
4.4%
6.9%
179
173
53
27
8,411
2,268
7,979
998
432
5.4%
1,270
127.3%
$ 10,679
$ 8,977
$ 1,702
19.0%
(408)
133
(541)
-
Total net rental income
$ 10,271
$ 9,110
$ 1,161
12.7%
Notes:
(3)
Same property (non-IFRS measure) - represents properties owned throughout the comparative periods, which removes the impact of
acquisitions and dispositions.
(4) Properties acquired/sold (non-IFRS measure) - represents properties which were acquired or sold, therefore not owned during the entire
comparative periods.
(7) Adjusted net rental income (non-IFRS measure) - represents net rental income after property tax expense adjustments made to reflect the
actual annual property tax expense prorated over the number of days of ownership for each property.
(8) Property tax expense adjustments (non-IFRS measure) - represents property tax expense adjustments to reflect the actual annual property tax
expense prorated over the number of days of ownership for each property.
20
Pure Multi-Family REIT LP
MD&A – December 31, 2016
Portfolio Summary
As at December 31, 2016, Pure Multi-Family’s portfolio consists of 15 investment properties, comprising an aggregate
of 5,229 residential units, with an average size of 913 square feet per residential unit, located within four metropolitan
areas: (i) Dallas - Fort Worth (“DFW”), Texas, (ii) Houston, Texas, (iii) San Antonio (“SA”), Texas and (iv) Phoenix,
Arizona.
The weighted average physical occupancy rate was 92.8% and weighted average leased occupancy rate was 94.9%
for all properties owned as at December 31, 2016 (December 31, 2015 – 96.2% and 97.3%, respectively). Typical
residential property leases have terms of between one to 12 months.
Property Name
Location
The Avenue on Fairmount
DFW, TX
Amalfi at Stonebriar
DFW, TX
Preserve at Arbor Hills
DFW, TX
Vistas at Hackberry Creek
DFW, TX
Fountainwood Apartments
DFW, TX
Stoneleigh at Valley Ranch DFW, TX
Prairie Creek Villas
DFW, TX
Stoneleigh at Bear Creek
DFW, TX
DFW, TX
Walker Commons
Houston, TX
The Boulevard at Deer Park Houston, TX
Year of
Acquisition
Year of
Construction Units
As at December 31, 2016
Fair
Market
Value
($000’s)
Debt to
Fair
Market
Value
Cap
Rate
Physical
Occupancy
Leased
Occupancy
Average
Rent per
Occupied
Unit (1)
2016
2015
2014
2013
2013
2012
2012
2012
2014
2013
2015
368
$ 71,062
60.5%
5.25%
87.0%
90.5%
$ 1,546
2014
395
65,600
68.6%
4.75%
91.4%
98.5%
1,217
1998
330
49,124
49.8%
5.50%
95.2%
95.5%
1984
560
59,002
50.0%
6.00%
95.4%
97.0%
1986
288
28,900
43.3%
6.00%
95.5%
96.9%
1999
210
29,887
45.8%
5.50%
94.8%
97.1%
1997
464
79,258
57.5%
5.65%
96.8%
98.3%
2004
436
60,574
53.0%
5.50%
98.9%
99.3%
1,214
1,005
945
1,287
1,361
1,211
2003 3,051
443,407
55.4%
5.47%
94.5%
96.8%
1,218
2008
352
50,566
56.3%
6.00%
94.0%
96.0%
2000
216
27,334
58.9%
5.75%
93.1%
96.3%
1,201
1,184
Houston, TX
2005
568
77,900
57.2%
5.91%
93.7%
96.1%
1,195
Pure View at TPC
Pure Estates at TPC
SA, TX
SA, TX
Brackenridge at Midtown
SA, TX
Park at West Avenue
SA, TX
SA, TX
San Brisas Apartments
Phoenix, AZ
2016
2016
2015
2015
2013
& 2014
2014
416
61,149
63.0%
5.35%
82.2%
83.2%
2007
344
56,772
67.8%
5.25%
87.5%
89.5%
2014
282
51,000
60.0%
4.85%
93.3%
95.0%
2014
360
54,969
66.4%
5.00%
93.1%
94.7%
1,305
1,443
1,404
1,217
2012 1,402
223,890
64.4%
5.12%
88.5%
90.1%
1,336
1996
208
33,350
50.7%
5.25%
95.2%
97.1%
1,132
Portfolio Total/Average
2006 5,229 $ 778,547
58.0%
5.41%
92.8%
94.9%
$ 1,244
Notes:
(1) Average rent per occupied unit (non-IFRS measure) - represents average in-place rent for all occupied units during the month of December 2016.
21
Pure Multi-Family REIT LP
MD&A – December 31, 2016
Acquisitions and Dispositions
Properties Acquired During 2016
On March 1, 2016, Pure Multi-Family, through the US REIT, acquired Pure Estates at TPC (“Pure Estates”), a multi-
family apartment community, located in San Antonio, Texas, for a purchase price of $56,500,000, plus standard
closing costs and adjustments. This acquisition was financed with cash on hand and a new 8-year mortgage in the
amount of $39,000,000.
On March 1, 2016, Pure Multi-Family, through the US REIT, acquired Pure View at TPC (“Pure View”), a multi-
family apartment community, located in San Antonio, Texas, for a purchase price of $61,000,000, plus standard
closing costs and adjustments. This acquisition was financed with cash on hand and a new 15-year mortgage in the
amount of $39,000,000.
On September 14, 2016, Pure Multi-Family, through the US REIT, acquired The Avenue on Fairmount Apartments
(“The Avenue”), a multi-family apartment community, located in Dallas, Texas, for a purchase price of $71,000,000,
plus standard closing costs and adjustments. This acquisition was financed with cash on hand and a new 12-year
mortgage in the amount of $43,000,000.
Properties Sold During 2016
On November 4, 2016, Pure Multi-Family, through the US REIT, sold Livingston Apartments (“Livingston”), located
in Plano, Texas, for gross proceeds of $34,300,000, less standard closing costs and adjustments. The mortgage
payable, secured by Livingston, was paid in full as of the same date.
On November 17, 2016, Pure Multi-Family, through the US REIT, sold Fairways at Prestonwood (“Prestonwood”),
located in Dallas, Texas, for gross proceeds of $22,800,000, less standard closing costs and adjustments.
Financings
May 2015 Class A Unit Offering
On May 8, 2015, Pure Multi-Family completed a public offering (the “May 2015 Offering”) of 6,900,000 Class A
Units, at a price of $5.10 per Class A Unit, for gross proceeds of $35,190,000, less offering costs.
The May 2015 Offering was completed on a “blind-pool” basis, meaning there were no properties identified for
acquisition at the time of the offering. On August 10, 2015, Pure Multi-Family acquired Amafli Stonebriar (“Amalfi”)
and on September 30, 2015, Pure Multi-Family acquired Brackenridge at Midtown (“Brackenridge”):
Use of Proceeds
($000s)
Amalfi
Brackenridge
Totals
Purchase Price
(Before Closing
Adjustments)
Mortgage
Proceeds
Gross proceeds
used from May
2015 Offering
Working
Capital
Total
$ 67,500
$ 45,000
$ 22,500
$
-
$ 67,500
51,000
118,500
30,600
75,600
11,871
34,371
8,529
8,529
51,000
118,500
December 2015 Class A Unit Offering
On December 11, 2015, Pure Multi-Family completed a public offering (the “December 2015 Offering”) of 7,250,000
Class A Units, at a price of $5.40 per Class A Unit, for gross proceeds of $39,150,000, less offering costs.
22
Pure Multi-Family REIT LP
MD&A – December 31, 2016
The December 2015 Offering was completed on a “blind-pool” basis, meaning there were no properties identified for
acquisition at the time of the offering. On March 1, 2016, Pure Multi-Family acquired Pure Estates at TPC (“Pure
Estates”) and Pure View at TPC (“Pure View”):
Use of Proceeds
($000s)
Pure Estates
Pure View
Totals
Purchase Price
(Before Closing
Adjustments)
Mortgage
Proceeds
Gross proceeds
used from
December 2015
Offering
Working
Capital
Total
$ 56,500
$ 39,000
$ 17,500
$
-
$ 56,500
61,000
117,500
39,000
78,000
294
21,706
61,000
17,794
21,706
117,500
July 2016 Class A Unit Offering
On July 29, 2016, Pure Multi-Family completed a public offering (the “July 2016 Offering”) of 4,884,000 Class A
Units, at a price of $5.857 (CDN$7.64) per Class A Unit, for gross proceeds of $28,603,483 (CDN$37,313,760), less
offering costs.
On September 14, 2016, Pure Multi-Family acquired The Avenue on Fairmount (“The Avenue”):
Use of
Proceeds
($000s)
Purchase Price
(Before Closing
Adjustments)
Gross proceeds
used from
December 2015
Offering
Mortgage
Proceeds
Gross proceeds
used from July
2016 Offering
Working
Capital
Total
The Avenue
$ 71,000
$ 43,000
$ 16,000
$ 12,000
$
-
$ 71,000
OUTLOOK
Pure Multi-Family’s strategy is to acquire a high-quality apartment portfolio located in the strongest growth markets
within the U.S. Sunbelt region. A conservative approach to balance sheet management has resulted in one of the
longest average mortgage terms in the sector at 9.4 years, with an average mortgage interest rate of 3.74% per annum,
at the end of 2016.
Job and population growth are fundamental drivers of apartment demand and our core and target markets continue to
project robust growth rates in both categories for the coming years. Pure Multi-Family has a particular focus on asset
selection that involves choosing assets that include unique features that inherently create a barrier-to-entry from
competition, either in their unique in-fill locations, or through other locational attributes such as golf course frontages,
large water features, or expansive views of neighbouring nature preserves. Such attention to detail on asset selection
pays dividends in terms of top-line revenue growth and reduced tenant turnover. Results for the year ended December
31, 2016 show an impressive same property revenue growth of 5.3% and same property net rental income growth of
7.0%, compared to the prior year, demonstrating the benefits of owning high quality and well-located assets, combined
with very solid demand drivers.
23
Pure Multi-Family REIT LP
MD&A – December 31, 2016
Our diligent and active management style includes re-positioning some assets through value-add initiatives and
ultimately renewing our portfolio over time to harvest the profits of such value-add programs through the profitable
divesting of non-core holdings in order to re-invest such capital into newer, higher-quality, assets thus affecting our
urban-renewal approach to our overall portfolio asset management.
As noted under “Operational and Financial Highlights”, on September 1, 2016, Pure Multi-Family internalized its
asset management function. Upon termination of the Asset Management Agreement and the internalization of asset
management, no fee was payable by Pure Multi-Family to the Managing GP. Going forward we intend to continue
our active management of Pure Multi-Family through executing more value-add initiatives and improving the quality
of our portfolio to enhance unitholder value. Our intention is to increase our portfolio holdings in our current existing
strong growth markets, as well as to expand our platform operations to include additional markets, such as Austin,
Denver, Atlanta and Tampa Bay, that offer similar compelling demand drivers. With the robust pipeline of high-
quality apartment properties available for sale in these markets, coupled with stable capitalization rates and continuing
favourable interest rates, we believe Pure Multi-Family is well positioned to continue its strong growth over the
coming years, thus enhancing unitholder value even further.
SECTION II
RESULTS OF OPERATIONS RECONCILIATION
“Pure Multi’s interest” is a non-IFRS measure representing the accrual of property tax liability and expense, on all
portfolio investments, based on time period of ownership throughout the given reporting year. Pure Multi’s interest
does not have any standardized meaning prescribed by IFRS.
The following tables provide reconciliations from Pure Multi-Family’s consolidated financial statements prepared in
accordance with IFRS to Pure Multi’s interest, as described above, for the affected current and comparative periods.
24
Pure Multi-Family REIT LP
MD&A – December 31, 2016
Reconciliation of Consolidated Statement of Income and Comprehensive Income to Statement of Income and
Comprehensive Income at Pure Multi’s Interest:
Year ended
December 31, 2016
($000’s)
REVENUES
Rental
OPERATING EXPENSES
Insurance
Property management
Property taxes
Property operating expenses
NET RENTAL INCOME
NET FINANCE INCOME (EXPENSES)
Interest income
Interest expense
Distributions to subsidiary’s preferred
unitholders
NET OTHER INCOME (EXPENSES)
Other income
General and administrative
Fair value adjustments to investment
properties
Loss on disposal of investment properties
Franchise taxes
Consolidated (1)
IFRIC 21 Property Tax
Adjustment (2)
Pure Multi’s Interest (3)
$ 76,414
$ -
$ 76,414
1,588
2,301
11,185
16,705
31,779
44,635
38
(19,799)
(16)
(19,777)
18
(1,438)
26,498
(1,485)
(287)
23,306
-
-
2,943
-
2,943
(2,943)
-
-
-
-
-
-
2,943
-
-
2,943
1,588
2,301
14,128
16,705
34,722
41,692
38
(19,799)
(16)
(19,777)
18
(1,438)
29,441
(1,485)
(287)
26,249
NET INCOME AND COMPREHENSIVE
INCOME
$ 48,164
$ -
$ 48,164
Notes:
(1) Represents Pure Multi-Family’s consolidated statement of income and comprehensive income prepared in accordance with IFRS.
(2) Represents Pure Multi-Family’s annual pro-rated portion of property tax expense, on its entire portfolio, that is accounted for under IFRIC
21.
(3) Represents Pure Multi’s interest, as described herein.
25
Pure Multi-Family REIT LP
MD&A – December 31, 2016
Reconciliation of Consolidated Statement of Income and Comprehensive Income to Statement of Income and
Comprehensive Income at Pure Multi’s Interest:
Three months ended
December 31, 2016
($000’s)
REVENUES
Rental
OPERATING EXPENSES
Insurance
Property management
Property taxes
Property operating expenses
NET RENTAL INCOME
NET FINANCE INCOME (EXPENSES)
Interest income
Interest expense
Distributions to subsidiary’s preferred
unitholders
NET OTHER INCOME (EXPENSES)
Other income
General and administrative
Fair value adjustments to investment
properties
IFRIC 21 fair value adjustment to
investment properties
Loss on disposal of investment properties
Franchise taxes
Consolidated (1)
IFRIC 21 Property Tax
Adjustment (2)
Pure Multi’s Interest (3)
$ 20,116
$ -
$ 20,116
417
622
220
4,602
5,861
14,255
11
(4,952)
(4)
(4,945)
(72)
(568)
(1,042)
(2,782)
(1,485)
(102)
(6,051)
-
-
3,984
-
3,984
(3,984)
-
-
-
-
-
1,202
2,782
-
-
3,984
417
622
4,204
4,602
9,845
10,271
11
(4,952)
(4)
(4,945)
(72)
(568)
160
-
(1,485)
(102)
(2,067)
NET INCOME AND COMPREHENSIVE
INCOME
$ 3,259
$ -
$ 3,259
Notes:
(1) Represents Pure Multi-Family’s consolidated statement of income and comprehensive income prepared in accordance with IFRS.
(2) Represents Pure Multi-Family’s annual pro-rated portion of property tax expense, on its entire portfolio, that is accounted for under IFRIC
21.
(3) Represents Pure Multi’s interest, as described herein.
26
Pure Multi-Family REIT LP
MD&A – December 31, 2016
Reconciliation of Consolidated Statement of Income and Comprehensive Income to Statement of Income and
Comprehensive Income at Pure Multi’s Interest:
Year ended
December 31, 2015
($000’s)
REVENUES
Rental
OPERATING EXPENSES
Insurance
Property management
Property taxes
Property operating expenses
NET RENTAL INCOME
NET FINANCE INCOME (EXPENSES)
Interest income
Interest expense
Distributions to subsidiary’s preferred
unitholders
NET OTHER INCOME (EXPENSES)
Other income
General and administrative
Fair value adjustments to investment
properties
Gain on disposal of investment properties
Franchise taxes
Consolidated (1)
IFRIC 21 Property Tax
Adjustment (2)
Pure Multi’s Interest (3)
$ 58,876
$ -
$ 58,876
1,543
1,764
8,500
13,655
25,462
33,414
14
(15,998)
(16)
(16,000)
13
(914)
34,519
525
(378)
33,765
-
-
718
-
718
(718)
-
-
-
-
-
-
718
-
-
718
1,543
1,764
9,218
13,655
26,180
32,696
14
(15,998)
(16)
(16,000)
13
(914)
35,237
525
(378)
34,483
NET INCOME AND COMPREHENSIVE
INCOME
$ 51,179
$ -
51,179
Notes:
(1) Represents Pure Multi-Family’s consolidated statement of income and comprehensive income prepared in accordance with IFRS.
(2) Represents Pure Multi-Family’s annual pro-rated portion of property tax expense, on its entire portfolio, that is accounted for under IFRIC
21.
(3) Represents Pure Multi’s interest, as described herein.
27
Pure Multi-Family REIT LP
MD&A – December 31, 2016
Reconciliation of Consolidated Statement of Income and Comprehensive Income to Statement of Income and
Comprehensive Income at Pure Multi’s Interest:
Three months ended
December 31, 2015
($000’s)
REVENUES
Rental
OPERATING EXPENSES (RECOVERIES)
Insurance
Property management
Property taxes
Property operating expenses
NET RENTAL INCOME
NET FINANCE INCOME (EXPENSES)
Interest income
Interest expense
Distributions to subsidiary’s preferred
unitholders
NET OTHER INCOME (EXPENSES)
Other income
General and administrative
Fair value adjustments to investment
properties
IFRIC 21 fair value adjustment to
investment properties
Gain on disposal of investment properties
Franchise taxes
Consolidated (1)
IFRIC 21 Property Tax
Adjustment (2)
Pure Multi’s Interest (3)
$ 16,547
$ -
$ 16,547
507
499
(66)
3,901
4,841
11,706
4
(3,981)
(4)
(3,981)
1
(278)
3,679
(1,912)
1,321
(121)
2,690
-
-
2,596
-
2,596
(2,596)
-
-
-
-
-
-
684
1,912
-
-
2,596
507
499
2,530
3,901
7,437
9,110
4
(3,981)
(4)
(3,981)
1
(278)
4,363
-
1,321
(121)
5,286
NET INCOME AND COMPREHENSIVE
INCOME
$ 10,415
$ -
$ 10,415
Notes:
(1) Represents Pure Multi-Family’s consolidated statement of income and comprehensive income prepared in accordance with IFRS.
(2) Represents Pure Multi-Family’s annual pro-rated portion of property tax expense, on its entire portfolio, that is accounted for under IFRIC
21.
(3) Represents Pure Multi’s interest, as described herein.
28
Pure Multi-Family REIT LP
MD&A – December 31, 2016
RESULTS OF OPERATIONS
($000’s, except per unit basis)
Revenues
Rental
Operating Expenses
Insurance
Property management
Property taxes (1)
Property operating expenses
Net Rental Income (1)
Net Finance Income (Expenses)
Interest income
Interest expense
Distributions to subsidiary’s
preferred unitholders
Other Income (Expenses) (1)
Other income
General and administrative
Fair value adjustments to
investment properties (1)
Gain (loss) on disposal of
investment properties
Franchise taxes
Net Income and Comprehensive
Income
For the
year ended
December 31,
2016
For the
year ended
December 31,
2015
For the three
months ended
December 31,
2016
For the three
months ended
December 31,
2015
$ 76,414
$ 58,876
$
20,116
$ 16,547
1,588
2,301
14,128
16,705
34,722
41,692
38
(19,799)
(16)
(19,777)
18
(1,438)
29,441
(1,485)
(287)
26,249
1,543
1,764
9,218
13,655
26,180
32,696
14
(15,998)
(16)
(16,000)
13
(914)
35,237
525
(378)
34,483
417
622
4,204
4,602
9,845
10,271
11
(4,952)
(4)
(4,945)
(72)
(568)
160
(1,485)
(102)
(2,067)
507
499
2,530
3,901
7,437
9,110
4
(3,981)
(4)
(3,981)
1
(278)
4,363
1,321
(121)
5,286
$ 48,164
$ 51,179
$ 3,259
$
10,415
Earnings per Class A Unit – basic
$
0.89
$
1.22
$
0.06
$
0.23
Weighted average number of
Class A Units – basic
51,553,540
39,761,071
55,418,872
43,429,172
Earnings per Class A Unit – diluted
$
0.86
$
1.15
$
0.06
$
0.22
Weighted average number of
Class A Units – diluted
Earnings per Class B Unit – basic
and diluted
Weighted average number of
Class B Units – basic and diluted
55,739,002
43,831,867
55,497,401
47,979,552
$
11.67
$
12.79
$
0.75
$
2.60
200,000
200,000
200,000
200,000
Notes:
(1) Represents Pure Multi’s interest, see “Results of Operations Reconciliation” for adjustments from IFRS to Pure Multi’s interest.
29
Pure Multi-Family REIT LP
MD&A – December 31, 2016
During the year ended December 31, 2016, based on Pure Multi’s interest, Pure Multi-Family recorded rental revenue
of $76,414,359, net rental income of $41,691,664, fair value adjustments to investment properties of $29,440,739 and
net income of $48,163,729 (year ended December 31, 2015 - $58,875,799, $32,695,784, $35,237,335 and
$51,179,380, respectively). During the year ended December 31, 2016, Pure Multi-Family incurred $1,438,416 of
general and administrative expenses (year ended December 31, 2015 - $913,588), recorded a loss on disposal of
investment properties of $1,484,345 (year ended December 31, 2015 – gain of $525,088), and incurred franchise tax
expense of $287,241 (year ended December 31, 2015 - $378,175). The increase in revenues and expenses are
primarily attributable to Pure Multi-Family operating additional investment properties, coupled with rental revenue
growth during the year ended December 31, 2016, compared to the prior year. The decrease in net income during the
year ended December 31, 2016, is primarily due to an increase in property tax expense, coupled with a smaller gain
on fair value adjustments to investments properties, compared to the prior year.
Rental Revenue
Rental revenue from investment properties includes recoveries of specified operating expenses, in accordance with
the terms of the lease agreements. The increase in rental revenue was primarily attributable to Pure Multi-Family
operating additional investment properties and residential units during the three months and year ended December 31,
2016, compared to the same periods in the prior year, in addition to organic rental revenue growth experienced from
the investment properties operated during such periods.
Operating Expenses
Operating expenses include costs relating to such items as cleaning, repairs and maintenance, turnover costs, HVAC,
property payroll, insurance, property taxes, utilities and property management fees among other items. In aggregate,
operating expenses totaled $34,722,695 for the year ended December 31, 2016 (year ended December 31, 2015 -
$26,180,015) and $9,844,692 for the three months ended December 31, 2016 (three months ended December 31, 2015
- $7,437,439). The increase in operating expenses was partially due to Pure Multi-Family operating additional
investment properties and residential units during the noted periods. In addition, increases in property tax assessments
for several properties increased the current period’s property tax expense amounts, with many of these under appeal
and remaining outstanding as at December 31, 2016. This increase to property tax expense impacted operating
margins whereby Pure Multi-Family’s operating margin during the year ended December 31, 2016 decreased to 54.6%
compared to 55.5% for the year ended December 31, 2015, and during the three months ended December 31, 2016
operating margins decreased to 51.1% from 55.1% for the three months ended December 31, 2015.
The following table illustrates certain operating expenses as a percentage of total operating expenses:
Pure Multi’s interest
Insurance
Property management
Property taxes
Property operating expenses
Net rental income margin
Finance Income
For the
year ended
December 31, 2016
4.6%
6.6%
40.7%
48.1%
For the
year ended
December 31, 2015
5.9%
6.7%
35.2%
52.2%
For the three
months ended
December 31, 2016
4.2%
6.3%
42.7%
46.8%
For the three
months ended
December 31, 2015
6.8%
6.7%
34.0%
52.5%
100.0%
54.6%
100.0%
55.5%
100.0%
51.1%
100.0%
55.1%
Finance income consists of interest income which was earned from bank deposits at Pure Multi-Family and the
property level.
30
Pure Multi-Family REIT LP
MD&A – December 31, 2016
Finance Expenses
Finance expenses consist of interest expense and distributions to subsidiary’s preferred unitholders (see “Financial
Condition – Preferred Units of Subsidiary”). Pure Multi-Family declared distributions in the amount of $15,625 to
the subsidiary’s preferred unitholders during the year ended December 31, 2016 (year ended December 31, 2015 -
$15,625).
Interest Expense
Interest expense consists of mortgage interest, mortgage prepayment expense, convertible debenture interest, credit
facility interest, amortization of transaction costs, amortization of mark-to-market mortgage adjustment and accretion
of convertible debentures.
The weighted average interest rate on the mortgages is 3.74% per annum as at December 31, 2016 (December 31,
2015 - 3.72%) and the mortgages mature between 2019 and 2031 with a weighted average mortgage term of 9.4 years
remaining (December 31, 2015 - 9.4 years remaining). Pure Multi-Family intends to refinance any mortgages which
mature within six months of the maturity date.
General and Administrative Expenses
General and administrative expenses are primarily comprised of directors’ fees, directors’ and officers’ liability
insurance, professional fees, legal fees, filing fees, and administrative expenses. Professional fees include auditing
and tax fees. Administrative expenses include US REIT compliance expenditures, investor relations expenses, bank
charges, and beginning September 1, 2016, office overhead, rent and corporate salaries. Subsequent to the
Determination Event, on September 1, 2016, Pure Multi-Family internalized its asset management and terminated the
Asset Management Agreement with the Managing GP. No penalties were incurred upon termination of the agreement.
Prior to September 1, 2016, pursuant to the Asset Management Agreement, the Managing GP provided Pure Multi-
Family with support services consisting of office space and equipment and the necessary clerical and secretarial
personnel for the administration of its day-to-day activities, at no cost. Subsequent to September 1, 2016, Pure Multi-
Family recorded these additional administrative expenses, which were not present in the prior year comparatives,
resulting in the increases noted in the table below. It should also be noted the directors’ fees, of $83,771, for the three
months ended December 31, 2016, were significantly lower than the prior year comparative period, of $123,457, due
to a portion of the directors’ fees, in the comparative period, being related to an annual fee increase, which were
recorded during this period alone.
The following table illustrates corporate expenses as a percentage of overall general and administrative expenses:
For the
year ended
December 31, 2016
3.5%
25.4%
20.8%
21.0%
29.3%
For the
year ended
December 31, 2015
4.8%
32.6%
15.6%
23.0%
24.0%
For the three
months ended
December 31, 2016
2.2%
19.1%
12.4%
14.8%
51.5%
For the three
months ended
December 31, 2015
4.8%
22.2%
12.5%
44.5%
16.0%
100.0%
1.9%
100.0%
1.6%
100.0%
2.8%
100.0%
1.7%
Insurance
Professional fees
Legal and filing fees
Directors’ fees
Administrative expenses
G&A expense as a percentage
of rental revenue
Other Income (Expenses)
Other income (expenses) includes proceeds resulting from a land easement transaction, property investigation
expenses and foreign currency exchange gains and losses.
31
Pure Multi-Family REIT LP
MD&A – December 31, 2016
Fair Value Adjustments to Investment Properties
Pure Multi-Family revalues its investment properties at fair value on each reporting date and records the fair value
adjustments as an income or expense item. For the year ended December 31, 2016, based on Pure Multi’s interest,
Pure Multi-Family recorded an increase of $29,440,739 in the fair value of its investment properties (year ended
December 31, 2015 - $35,237,335). The weighted average capitalization rate of the investment properties at December
31, 2016, based on Pure Multi’s interest, was 5.41% (December 31, 2015 – 5.50%).
Gain (Loss) on Disposal of Investment Properties
During the year ended December 31, 2016, Pure Multi-Family sold Livingston Apartments and Fairways at
Prestonwood for a combined sale price of $57,100,000. Pure Multi-Family recorded a loss on disposal of the
investment properties in the amount of $1,484,345 (year ended December 31, 2015 – gain on disposal of $525,088).
The gain or loss on disposal is calculated by taking the difference between the fair value of each investment property
and its selling price, less any disposition costs associated with the sale of the properties.
Income Taxes
Pure Multi-Family is not subject to tax under Part I of the Income Tax Act (Canada) (the “Tax Act”). Each partner
(or “unitholder”) of Pure Multi-Family is required to include in computing the partner’s income for a particular
taxation year the partner’s share of the income or loss of Pure Multi-Family for its fiscal year ending in or on the
partner’s taxation year-end, whether or not any of that income or loss is distributed to the partner in the taxation year.
Accordingly, no provision has been made for Canadian income taxes under Part I of the Tax Act.
Franchise Taxes
Texas Franchise Tax applicable to Pure Multi-Family, for its investment properties operated in Texas during the year
ended December 31, 2016, is equal to 0.75% of the lesser of: (i) 70% of total revenue; (ii) 100% of total revenue less
cost of goods sold; (iii) 100% of total revenue less compensation expense; or (iv) 100% of total revenue less $1 million.
Pure Multi-Family recorded a provision for Texas Franchise Tax of $287,241 for the year ended December 31, 2016
(year ended December 31, 2015 - $378,175).
Offering Costs
Offering costs are the costs incurred by Pure Multi-Family that relate to the issuance of securities, which are included
in the statement of partners’ capital. Pure Multi-Family incurred $1,420,147 of offering costs, during the year ended
December 31, 2016 (year ended December 31, 2015 - $3,515,918).
DISTRIBUTABLE INCOME
Pure Multi-Family uses Distributable Income (“DI”) to measure its ability to earn and distribute cash to unitholders.
DI is a non-IFRS measurement, as described herein, and should not be construed as an alternative to net earnings
determined in accordance with IFRS as an indicator of Pure Multi-Family’s performance. DI, as computed by Pure
Multi-Family, may differ from similar computations as reported by other similar business entities and, accordingly,
may not be comparable to DI as reported by such business entities. DI does not have any standardized meaning
prescribed by IFRS. Management calculates DI by adding to or deducting the following items from net cash from
operating activities: non-cash working capital items, IFRIC 21 adjustments, interest income, interest expense,
mortgage prepayment expense and distributions to preferred unitholders.
32
Pure Multi-Family REIT LP
MD&A – December 31, 2016
($000’s, except per unit basis)
For the
year ended
December 31,
2016
For the
year ended
December 31,
2015
For the three
months ended
December 31,
2016
For the three
months ended
December 31,
2015
Net cash provided from operating activities
$ 40,238
$ 29,155
$ 1,218
$
6,159
Adjustment:
Changes in non-cash operating working
capital
IFRIC 21 property tax liability adjustment, net
Interest income
Interest expense
Mortgage prepayment expense
Distributions to subsidiary’s preferred
unitholders
Distributable Income
Class A Units
Class B Units
Distributions to Unitholders
Class A Units
Class B Units
Total distributions paid
Total distributions paid as a % of
Distributable Income
Weighted average number of units (000’s)
Class A Units
Class B Units
Diluted weighted average number of units (000’s)
Class A Units
Class B Units
Basic DI per unit
Class A Units
Class B Units
Diluted DI per unit
Class A Units
Class B Units
Distributions paid per weighted average unit
Class A Units
Class B Units
(253)
-
38
(18,831)
1,174
2,262
-
14
(17,952)
5,189
(16)
(16)
11,093
(2,782)
11
(4,677)
-
(4)
4,465
(1,912)
4
(3,753)
-
(4)
$ 22,350
$ 18,652
$
4,859
$
4,959
21,271
1,079
17,719
933
4,638
221
4,711
248
$ 19,515
$ 15,020
$
5,237
$
4,144
989
790
250
218
$ 20,504
$ 15,810
$
5,487
$
4,362
91.7%
84.8%
112.9%
88.0%
$
51,554
200
55,739
200
0.41
5.39
0.41
5.39
0.38
4.95
$
39,761
200
43,832
200
0.45
4.66
0.44
4.66
0.38
3.95
55,419
200
55,497
200
$
0.08
1.11
$
0.08
1.11
0.10
1.25
43,429
200
47,980
200
0.11
1.24
0.11
1.24
0.10
1.09
Pure Multi-Family may distribute to unitholders on each distribution date such percentage of the DI of Pure Multi-
Family for the month immediately preceding the month in which the distribution date falls, as the board of directors
of the Governing GP may determine at their discretion. At the rate of current monthly distributions, on an annualized
basis, unitholders receive $0.375 per Class A Unit. Monthly distributions will be paid on the distribution date to
unitholders of record on the last business day of such month. See “Financial Condition – Partners’ Capital”.
33
Pure Multi-Family REIT LP
MD&A – December 31, 2016
The board of directors of the Governing GP looks beyond quarter-to-quarter fluctuations in working capital when
making decisions regarding monthly distributions. As a result, management believes that the measure of DI, which
excludes the impact of changes in non-cash working capital, is a better measure for determining operating
performance. Management believes that the calculation of Net Cash from Operating Activities, defined as cash flow
from operations, distorts Pure Multi-Family’s quarter-to-quarter distributable cash and payout ratios, as non-cash
operating working capital fluctuates.
For the purpose of this MD&A, management defines “Diluted DI per unit” as Distributable Income divided by the
diluted weighted average number of units outstanding.
NET CASH FROM OPERATING ACTIVITIES
The following is a reconciliation of Pure Multi-Family’s DI to net cash from operating activities.
($000’s)
Distributable income
IFRIC 21 property tax liability adjustment, net
Interest income
Interest expense
Mortgage prepayment expense
Distributions to subsidiary’s preferred
unitholders
(Increase) decrease in amounts receivable
Increase in prepaid expenses
Increase (decrease) in rental deposits
Increase (decrease) in unearned revenue
Increase (decrease) in accounts payable and
accrued liabilities
$
For the
year ended
December 31,
2016
22,350
-
(38)
18,831
(1,174)
$
For the
year ended
December 31,
2015
18,652
-
(14)
17,952
(5,189)
$
For the three
months ended
December 31,
2016
4,859
2,782
(11)
4,677
-
$
For the three
months ended
December 31,
2015
4,959
1,912
(4)
3,753
-
16
(1,168)
(413)
163
168
16
(325)
(369)
202
(94)
1,503
(1,676)
4
(542)
(1,284)
(146)
(90)
(9,031)
4
315
(451)
(90)
233
(4,472)
Net Cash from Operating Activities
$
40,238
$
29,155
$
1,218
$
6,159
SEGMENTED INFORMATION
The primary format for segment reporting is based on geographical region and is consistent with the internal reporting
provided to the chief operating decision-maker, determined to be the general partners. Pure Multi-Family currently
operates in one business segment, indirectly owning and operating multifamily apartment properties in the Sunbelt
region in the United States.
FINANCIAL CONDITION
Assets
Investment Properties
Investment properties are stated at fair value. Fair value adjustments to investment properties arising from changes in
fair value are included in the consolidated statement of income and comprehensive income in the period which they
arise. As at December 31, 2016, investment properties were valued at $778,547,182 (December 31, 2015 -
$613,681,875). The increase in investment properties is primarily due to the acquisition of three investment properties
for a combined purchase price of $188,500,000 and a $26,498,121 increase to the fair values of the investment
properties, which were partially offset by the sale of two investment properties for a combined sales price of
$57,100,000. The increase in the fair value adjustment to investment properties was primarily driven by net rental
income increases.
34
Pure Multi-Family REIT LP
MD&A – December 31, 2016
The investment properties are pledged as security against the mortgages payable.
Prepaid Expenses
Prepaid expenses primarily consist of insurance and utility deposits.
Mortgage Reserve Fund
The mortgage reserve fund consists of cash on deposit requested by the lenders to be retained in escrow to pay for any
repairs to the properties and certain costs. These funds will be released to pay the respective obligations once certain
conditions are met, such as completion of repairs. As at December 31, 2016, the term for the current mortgage reserve
fund is less than 12 months. The mortgage reserve fund is $5,193,406, as at December 31, 2016 (December 31, 2015
- $6,570,597).
Liabilities
The LP Agreement limits the indebtedness of Pure Multi-Family to a maximum of 70% of the gross book value. The
gross book value is defined as the total book value of the assets plus accumulated depreciation and amortization in
respect of such assets. The indebtedness is 55.2% of the gross book value as at December 31, 2016 (December 31,
2015 – 54.6%).
Mortgages Payable
The mortgages bear interest at a weighted average effective rate of 3.74% per annum, as at December 31, 2016
(December 31, 2015 – 3.72%) and mature between 2019 and 2031. The scheduled principal payments, principal
maturities and weighted average effective rate are as follows:
December 31, 2016
($000’s, except percentage amounts)
Weighted Average
Effective Rate
(on expiry)
Scheduled
Principal
Repayments
Principal
Maturities
Total
Repayments
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
Thereafter
Unamortized mortgage transaction costs
-
-
3.29%
-
3.26%
3.51%
4.32%
3.96%
-
-
3.77%
3.74%
3,606
4,465
6,135
6,982
7,193
7,128
7,180
6,366
6,299
6,546
-
-
60,550
-
37,060
13,680
24,679
32,543
-
-
17,860
203,155
$
79,760
$ 371,667
3,606
4,465
66,685
6,982
44,253
20,808
31,859
38,909
6,299
6,546
221,015
451,427
(3,600)
$ 447,827
35
Pure Multi-Family REIT LP
MD&A – December 31, 2016
The following chart shows the remaining scheduled principal payments and principal maturities of the mortgages due
within the next 10 years and thereafter:
100.0%
80.0%
60.0%
40.0%
20.0%
0.0%
49.0%
14.8%
0.8%
1.0%
1.5%
9.8%
7.1%
8.6%
4.5%
1.4%
1.5%
2017
2019
Maturity
2021
2023
Scheduled Principal
2025
Thereafter
Preferred Units of Subsidiary
During the year ended December 31, 2013, the US REIT issued 125 preferred units at $1,000 per preferred unit for
gross proceeds of $125,000. On consolidation, the preferred units of the US REIT are reflected as a liability of Pure
Multi-Family.
The preferred units are non-voting preferred units. Unitholders holding preferred units are entitled to receive dividends
from the US REIT at a per annum rate equal to 12.5%, payable on June 30 and December 31 of each year. Unitholders
holding preferred units will be allocated such return in priority to any allocations or distributions to all other classes
and series of units of the US REIT. However, after payment of such return to unitholders holding preferred units,
preferred unitholders are not otherwise entitled to share in the income of the US REIT.
The US REIT may redeem the preferred units at any time, for a price equal to $1,000 per preferred unit, plus accrued
and unpaid distributions.
Due to the fixed distributions and preferred treatment for preferred units, they meet the definition of a liability. In
addition, the board of directors of the Governing GP does not expect to redeem any preferred units within the next
year. Thus, the preferred units are classified as non-current liabilities.
36
Pure Multi-Family REIT LP
MD&A – December 31, 2016
Convertible Debentures
On August 7, 2013, Pure Multi-Family issued 23,000 6.5% convertible unsecured subordinated debentures (each a
“6.5% convertible debenture”) at a price of $1,000 per 6.5% convertible debenture, for gross proceeds of $23,000,000.
The 6.5% convertible debentures mature on September 30, 2020 and are convertible at the holder’s option at any time
into Class A Units at a conversion price of $5.65 per Class A Unit, in accordance with the terms of the trust indenture
dated August 7, 2013. On or after September 30, 2016, but prior to September 30, 2018, the 6.5% convertible
debentures may be redeemed by Pure Multi-Family, in whole or in part, at a price equal to their principal amount plus
accrued and unpaid interest thereon, provided the weighted average trading price of the Class A Units for the 20
consecutive trading days, ending on the fifth trading day immediately preceding the date on which notice of
redemption is given, is at least 125% of the conversion price. After September 30, 2018, the 6.5% convertible
debentures may be redeemed by Pure Multi-Family at any time. During the year ended December 31, 2016, ten of
the originally issued 23,000 6.5% convertible debentures had been converted into Class A Units.
The following summarizes the face and carrying values of the 6.5% convertible debentures:
Balance as at December 31, 2014
Amortization of transaction costs
Accretion of liability component
Balance as at December 31, 2015
Conversion of convertible debenture
Amortization of transaction costs
Accretion of liability component
Convertible
Debentures
Face Value
$ 23,000,000
-
-
$ 23,000,000
(10,000)
-
-
Liability
Component
Carrying Value
Equity Component
Carrying Value
$ 1,985,429
$ 19,876,109
155,350
288,431
-
-
$ 20,319,890
(9,081)
168,316
313,777
$ 1,985,429
(919)
-
-
Balance as at December 31, 2016
$ 22,990,000
$ 20,792,902
$ 1,984,510
Partners’ Capital
The capital of Pure Multi-Family consists of an unlimited number of Class A Units and Class B Units and the interest
held by the Governing GP. The Governing GP has made a capital contribution of $20 to Pure Multi-Family and has
no further obligation to contribute capital.
On May 30, 2012, the Managing GP subscribed for 200,000 Class B Units of Pure Multi-Family, at a price of $5.00
per Class B Unit, for gross proceeds to Pure Multi-Family of $1,000,000, which initially entitled the Class B
Unitholders to a 5% interest in Pure Multi-Family. As of the date hereof, Pure Multi-Family has 200,000 Class B
Units outstanding.
From the date of formation on May 8, 2012, to December 31, 2015, Pure Multi-Family had issued 49,039,824 Class
A Units for gross proceeds of $245,366,767, less offering costs. During the year ended December 31, 2016, the
following transactions occurred:
iv)
v)
On July 29, 2016, Pure Multi-Family completed the July 2016 Offering consisting of 4,884,000 Class A
Units on a bought deal basis, at a price of $5.857 (or CDN$7.64) per Class A Unit for gross proceeds of
$28,603,483 (or CDN$37,313,760). Pure Multi-Family issued the Class A Units from treasury.
On August 12, 2016, a Determination Event occurred as a result of Pure Multi-Family’s market capitalization
exceeding $300,000,000 for a period of ten consecutive trading days. Upon the occurrence of the
Determination Event, the number of Class A Units into which the Class B Units may be converted to was
fixed at 2,665,835 Class A Units.
37
Pure Multi-Family REIT LP
MD&A – December 31, 2016
vi)
vii)
During the year ended December 31, 2016, Pure Multi-Family issued 2,142,913 Class A Units upon exercise
of 2,142,913 Class A Unit purchase warrants (each a “Warrant”), at an exercise price of $5.15 per Class A
Unit, for gross proceeds of $11,036,002 (year ended December 31, 2015 – $283,250). Pure Multi-Family
issued the Class A Units from treasury. At December 31, 2016, all outstanding Warrants had been exercised.
During the year ended December 31, 2016, Pure Multi-Family issued 1,769 Class A Units upon conversion
of ten 6.5% convertible debentures, at a conversion price of $5.65 per Class A Units (year ended December
31, 2015 - $nil)). Pure Multi-Family issued the Class A Units from treasury.
Class A Units outstanding, beginning of year
Class A Units issued, public offering
Class A Units issued, warrants exercised
2016
2015
49,039,824
34,834,824
4,884,000
14,150,000
2,142,913
55,000
Class A Units issued, debentures converted
1,769
-
Class A Units outstanding, end of year
56,068,506
49,039,824
As at December 31, 2016, Pure Multi-Family had 56,068,506 Class A Units and 200,000 Class B Units outstanding.
The capital of Pure Multi-Family is divided into Class A Units and Class B Units. The Class A Units are the subject
of the public offerings described in Pure Multi-Family’s prospectuses dated July 3, 2012, October 12, 2012, May 1,
2013, July 22, 2014, May 4, 2015, December 7, 2015 and July 22, 2016, which are available on SEDAR at
www.sedar.com. The Class B Units were subscribed for by the Managing GP on May 30, 2012. Except as set out in
the LP Agreement, no Class A Unit or Class B Unit has any preference or priority over another.
All distributions will be made to the holders of the Class A Units and the Class B Units in accordance with the Class
A Unit Percentage Interest and Class B Unit Percentage Interest, respectively. As described in the LP Agreement,
prior to the Determination Event, distributions from Pure Multi-Family were made 95% to the Class A Units and 5%
to the Class B Units. Commencing upon the occurrence of a Determination Event, the Class B Unitholders’ proportion
of the total distribution fluctuate depending on the number of Class A Units outstanding.
Subject to the terms of the LP Agreement, the Class B Unitholders as a class are entitled to convert some or all of their
Class B Units into Class A Units based on the Specified Ratio (as defined in the LP Agreement). Upon the Class B
Unitholders exercising their Conversion Rights, they will own that number of Class A Units which is equal to the
Class B Unit Percentage Interest (initially 5%) of all Class A Units outstanding after such conversion. Following the
occurrence of the Determination Event, the number of Class A Units to which the Class B Unitholder is entitled upon
exercising Conversion Rights becomes fixed, and future issuances of Class A Units will result in a decline in the Class
B Unit Percentage Interest. Upon the Determination Event, which occurred on August 12, 2016, the number of Class
A Units into which the Class B Units may be converted was fixed at 2,665,835 Class A Units.
The Conversion Rights may be exercised by the Managing GP at any time provided that:
(a) Pure Multi-Family is legally entitled to comply with its obligations in connection with the exercise of the
Conversion Rights; and
(b)
the Class B Unitholder who exercises the Conversion Rights complies with all applicable securities laws.
Upon the exercise of the Conversion Rights, the Class B Unitholders will receive 2,665,835 Class A Units. As such,
pursuant to the terms of the LP Agreement, the Class B Unitholders will receive such number of Class A Units
representing the same Class B Unit Percentage Interest in the net assets of Pure Multi-Family as was previously
designated in the form of Class B Units. Subject to applicable laws, Pure Multi-Family will redesignate all the interests
of Class B Unitholders into 2,665,835 Class A Units, effective as of the date that Pure Multi-Family receives a notice
of exercise of the Conversion Rights. Upon such occurrence and the exercise of the Conversion Rights (as defined in
38
Pure Multi-Family REIT LP
MD&A – December 31, 2016
the LP Agreement) by the Class B Unitholders, the interests of Class B Unitholders will be redesignated as Class A
Units. The Class B Units will not be required to be redeemed or cancelled.
Pursuant to the LP Agreement, the Managing GP or any affiliate or associate of the Managing GP, which is then the
Class B Unitholder, has agreed that it will not dispose of more than one-third of the Class A Units received by it
upon the conversion of the Class B Units in each consecutive twelve month period ending after the first anniversary
of the earlier of: (i) the date a Determination Event occurs; and (ii) the date upon which the conversion is completed.
This limitation will not apply where the Conversion Rights have been exercised in connection with a take-over bid
or a sale of substantially all of Pure Multi-Family’s assets.
LIQUIDITY AND CAPITAL RESOURCES
Funds from Operations and Adjusted Funds from Operations
Funds from operations (“FFO”) is a non-IFRS measure, as described herein, and should not be construed as an
alternative to net earnings or cash flows, as applicable, determined in accordance with IFRS. However, FFO is an
operating performance measure which is widely used by the real estate industry. Pure Multi-Family’s method of
calculating FFO may differ from other companies and accordingly may not be comparable to similar measures
presented by other companies.
The use of FFO, combined with the required IFRS presentations, has been presented for the purpose of improving the
understanding of operating results in the real estate industry by the investing public and in making comparisons of the
companies operating results more meaningful.
As FFO excludes fair value adjustments, amortization, IFRIC 21 adjustments, mortgage prepayment expenses, and
gains or losses from property dispositions, it provides a performance measure that, when compared period over period,
reflects the impact on operations of trends in occupancy levels, rental rates, operating costs and realty taxes; acquisition
activities; and interest costs, and provides a perspective of financial performance that is not immediately apparent
from net earnings determined in accordance with IFRS.
FFO is a widely accepted supplemental measure of financial performance for real estate entities; however, it does not
represent amounts available for capital programs, debt service obligations, commitments or uncertainties. FFO should
not be interpreted as an indicator of cash generated from operating activities and is not indicative of cash available to
fund operating expenditures, or for the payment of cash distributions. FFO is simply one of several measures of
operating performance.
Adjusted funds from operations (“AFFO”) is also a non-IFRS measure, as described herein, and should not be
construed as an alternative to net earnings or cash flows, as applicable, determined in accordance with IFRS. However,
AFFO is widely accepted as a performance measurement tool in the real estate industry. AFFO is calculated by
adjusting the FFO for non-cash compensation items, accretion of debentures, and maintenance capital expenditures.
Pure Multi-Family’s method of calculating AFFO may differ from other companies and accordingly may not be
comparable to similar measures presented by other companies.
39
Pure Multi-Family REIT LP
MD&A – December 31, 2016
The following table provides the analysis of Pure Multi-Family’s FFO and AFFO performance:
($000’s, except percent and per unit basis)
For the
year ended
December 31,
2016
For the
year ended
December 31,
2015
For the three
months ended
December 31,
2016
For the three
months ended
December 31,
2015
Net income and comprehensive income
$ 48,164
$ 51,179
$ 3,259
$ 10,415
Adjustment:
Amortization of transaction costs
Amortization of mark to market mortgage
adjustments
Fair value adjustment to investment properties
(Gain) loss on disposal of investment property
Property tax adjustments on acquisition or sale
Mortgage prepayment expense
IFRIC 21 fair value adjustment to investment
properties
IFRIC 21 property tax liability adjustment, net
654
-
(26,498)
1,485
(2,943)
1,174
-
-
967
(3,209)
(34,519)
(525)
(718)
5,189
-
-
194
-
1,042
1,485
(1,202)
-
2,782
(2,782)
154
-
(3,679)
(1,321)
(684)
-
1,912
(1,912)
Funds from operations
$ 22,036
$ 18,364
$ 4,778
$ 4,885
Maintenance capital provision (1)
Accretion of convertible debentures
(1,540)
314
(1,289)
288
(403)
81
(352)
74
Adjusted funds from operations
$ 20,810
$ 17,363
$ 4,456
$ 4,607
Weighted average number of units (000’s)
Class A Units
Class B Units
Diluted weighted average number of units (000’s)
Class A Units
Class B Units
FFO per unit - Basic
Class A Units
Class B Units
FFO per unit - Diluted
Class A Units
Class B Units
Payout Ratio on FFO
AFFO per unit - Basic
Class A Units
Class B Units
AFFO per unit – Diluted
Class A Units
Class B Units
Payout Ratio on AFFO
51,554
200
55,739
200
0.41
5.34
0.41
5.34
93.0%
$
39,761
200
43,832
200
55,419
200
55,497
200
43,429
200
47,980
200
$
0.44
4.59
$ 0.08
$ 0.11
1.10
1.22
0.44
4.59
86.1%
0.08
1.10
114.8%
0.11
1.22
89.3%
$
0.38
5.04
$
0.42
4.34
$ 0.08
$ 0.10
1.02
1.15
0.38
5.04
98.5%
0.41
4.34
91.1%
0.08
1.02
123.1%
0.10
1.15
94.7%
Notes:
(1) Based on an industry estimate of $300 per residential unit per year. This maintenance capital provision is estimated to be
incurred on the property portfolio as to sustain its current revenue rental income-generating potential into future periods.
40
Pure Multi-Family REIT LP
MD&A – December 31, 2016
The following is a reconciliation of the Pure Multi-Family’s AFFO and FFO to cash provided by operations:
($000’s)
Adjusted funds from operations
Maintenance capital provision
Accretion of convertible debentures
Funds from operations
(Increase) decrease in accounts receivable
Increase in prepaid expenses
Increase (decrease) in rental deposits
Increase (decrease) in accounts payable and
accrued liabilities
Increase (decrease) in unearned revenue
IFRIC 21 property tax liability adjustment, net
Accretion of convertible debentures
Interest income
Interest expense
Mortgage prepayment expense
Distributions to subsidiary’s preferred
unitholders
For the
year ended
December 31,
2016
$ 20,810
1,540
(314)
For the
year ended
December 31,
2015
$ 17,363
1,289
(288)
For the three
months ended
December 31,
2016
$ 4,456
403
(81)
For the three
months ended
December 31,
2015
$ 4,607
352
(74)
22,036
(1,168)
(413)
163
1,503
168
-
314
(38)
18,831
(1,174)
16
18,364
(325)
(369)
202
(1,676)
(94)
-
288
(14)
17,952
(5,189)
16
4,778
(542)
(1,284)
(146)
(9,031)
(90)
2,782
81
(11)
4,677
-
4
4,885
315
(451)
(90)
(4,472)
233
1,912
74
(4)
3,753
-
4
Net cash provided from operating activities
$ 40,238
$ 29,155
$ 1,218
$ 6,159
Capital Resources
Cash generated by investment properties represents the primary source of funds to fund total distributions to
unitholders of $20,504,317 for the year ended December 31, 2016 (year ended December 31, 2015 - $15,810,293).
There are no significant working capital requirements that currently exist and there are no pending items that may
affect liquidity. There are no legal or practical restrictions on the ability of Pure Multi-Family’s properties to transfer
funds to Pure Multi-Family.
Proceeds from the issuance of Class A Units, Warrants, Convertible Debentures and conventional mortgage financing
have been used mainly to fund property acquisitions. Pure Multi-Family intends to refinance any mortgages which
mature within six months of maturity.
Management expects to be able to meet all of Pure Multi-Family’s ongoing obligations and to finance future growth
through cash generated by operations, the issuance of securities and by using conventional mortgages. Pure Multi-
Family is not in default or arrears on any of its obligations including distribution payments, interest or principal
payments on debt.
41
Pure Multi-Family REIT LP
MD&A – December 31, 2016
Distributed Cash
In accordance with National Instrument 41-201, Pure Multi-Family is required to provide additional disclosure relating
to cash distributions.
For the year ended December 31, 2016, cash provided from operating activities, less interest paid (“adjusted cash
provided from (used by) operating activities”), was more than cash distributions declared and for the three months
ended December 31, 2016, adjusted cash provided from (used by) operating activities, was less than cash distributions
declared, which was primarily due to the decrease in non-cash working capital items. For the three months and year
ended December 31, 2015, adjusted cash provided from (used by) operating activities, was less than cash distributions
declared due to a non-recurring expense in the amount of $5,188,836, incurred by Pure Multi-Family on the mortgage
refinancing of Prairie Creek Villas. Management expects that adjusted cash provided from (used by) operating
activities, on an annual basis, will exceed cash distributions declared.
($000’s)
Cash provided from operating activities
Less interest paid
Adjusted cash provided from (used by) operating
activities
Actual cash distributions declared
Surplus (shortfall) of cash from operating activities
over cash distributions declared
For the
year ended
December 31,
2016
40,238
(18,651)
$
For the
year ended
December 31,
2015
29,155
(17,674)
$
For the three
months ended
December 31,
2016
1,218
(4,329)
$
For the three
months ended
December 31,
2015
6,159
(3,118)
$
21,587
20,504
11,481
15,810
(3,111)
5,487
3,041
4,362
$
1,083
$
(4,329)
$
(8,598)
$
(1,321)
For the years ended December 31, 2016 and 2015 and three months ended December 31, 2015, net income was greater
than cash distributions declared. For the three months ended December 31, 2016, net income was less than cash
distributions declared primarily due to the combination of the timing and use of excess cash on the balance sheet held
during the current period resulting from the disposal of investment properties and equity financings, the outstanding
property tax appeals at December 31, 2016 and the acquisition of investment properties which were going through
their stabilization period during the current period. Management expects annual net income to continue to exceed
cash distributions declared.
($000’s)
Net income
Actual cash distributions declared
Surplus (shortfall) of net income over cash
distributions declared
CAPITAL STRUCTURE
For the
year ended
December 31,
2016
48,164
20,504
$
For the
year ended
December 31,
2015
51,179
15,810
$
For the three
months ended
December 31,
2016
3,259
5,487
$
For the three
months ended
December 31,
2015
10,415
4,362
$
$
27,660
$
35,369
$
(2,228)
$
6,053
Pure Multi-Family defines capital as the aggregate of partners’ capital, preferred units of subsidiary and long term
debt. Pure Multi-Family’s objectives in managing capital are to maintain a level of capital that complies with
investment and debt restrictions pursuant to the initial offering prospectus; complies with existing debt covenants, if
any; funds its business strategies; and builds long-term unitholders’ value. Pure Multi-Family’s capital structure is
approved by the board of directors of the Governing GP through its periodic reviews.
42
Pure Multi-Family REIT LP
MD&A – December 31, 2016
The LP Agreement provides for a maximum indebtedness (or “loan”) level of up to 70% of the gross book value. The
term “indebtedness” means any obligation of Pure Multi-Family for borrowed money (including the face amount
outstanding under any convertible debentures and any outstanding liabilities of Pure Multi-Family arising from the
issuance of subordinated notes but excluding any premium in respect of indebtedness assumed by Pure Multi-Family
for which Pure Multi-Family has the benefit of an interest rate subsidy), but excludes trade accounts payable,
distributions payable to unitholders, preferred units of subsidiary, accrued liabilities arising in the ordinary course of
business and short-term acquisition credit facilities. The LP Agreement defines “gross book value” as the book value
of the assets of Pure Multi-Family plus the amount of accumulated depreciation and amortization in respect of such
assets (and related intangible assets), the amount of future income tax liability arising out of indirect acquisitions and
excluding the amount of any receivable reflecting interest rate subsidies on any debt assumed by Pure Multi-Family.
Pure Multi-Family’s indebtedness is 55.2% as at December 31, 2016 (December 31, 2015 – 54.6%).
Maintaining a relatively low indebtedness ratio is important in current economic conditions because it allows Pure
Multi-Family to access additional financing, if necessary.
The LP Agreement allows the board of directors of the Governing GP, at their discretion, to allocate to the unitholders
in each year all or a portion of Pure Multi-Family’s income for the year, as calculated in accordance with the Tax Act,
after all permitted deductions under the Tax Act have been taken. The board of directors of the Governing GP also
reviews the cash distributions paid to the unitholders on a regular basis. The total distributions declared to Class A
unitholders during the year ended December 31, 2016 was $19,514,630 (year ended December 31, 2015 –
$15,019,778). The total distributions declared to Class B unitholders during the year ended December 31, 2016 was
$989,687 (year ended December 31, 2015 – $790,515).
The capital structure consisted of the following components at December 31, 2016 and December 31, 2015:
($000’s)
Capital
Mortgages payable
Convertible debentures
Preferred units of subsidiary
Partners’ capital
Total Capital
December 31, 2016
December 31, 2015
Change
$ 447,827
20,793
125
370,162
$ 838,907
$ 354,202
20,320
125
304,274
$ 678,921
$ 93,625
473
-
65,888
$ 159,986
The total capital of Pure Multi-Family increased from December 31, 2015 to December 31, 2016 primarily due to the
new mortgages obtained on the three investment property acquisitions, the July 2016 Offering, the exercise of the
Warrants and net income earned from operations. This was partially offset by the repayment of mortgages payable
and distributions declared to the unitholders.
FINANCIAL INSTRUMENTS
For certain of Pure Multi-Family’s financial instruments, including cash and cash equivalents, amounts receivable,
mortgage reserve fund, and accounts payable and accrued liabilities, the carrying amounts approximate the fair values
due to the short-term nature of the instruments.
The fair values of the mortgages payable and preferred units of subsidiary have been calculated based on discounted
future cash flows using discount rates that reflect current market conditions for instruments having similar terms and
conditions. Discount rates are either provided by lenders or are observable in the open market. The fair value of the
convertible debentures has been calculated using quoted prices in active markets.
43
Pure Multi-Family REIT LP
MD&A – December 31, 2016
($000’s)
Mortgages payable
Preferred units of subsidiary
Convertible debentures
December 31, 2016
Carrying
Amount
$ 447,827
125
20,793
Fair Value
$ 440,116
125
25,151
December 31, 2015
Carrying
Amount
$ 354,202
125
20,320
Fair Value
$ 366,040
125
23,000
OFF-BALANCE SHEET ITEMS
Pure Multi-Family does not have any off-balance sheet items.
SECTION III
SUMMARY OF SELECTED ANNUAL INFORMATION
Pure Multi’s interest
($000’s, except per unit basis)
Rental revenue
Net rental income
Net income and comprehensive income
Total assets
Total non-current assets
Total liabilities
Total non-current liabilities
Distributions
Per Class A Unit
Per Class B Unit
Basic net income per Class A Unit
Basic net income per Class B Unit
For the
year ended
December 31, 2016
For the
year ended
December 31, 2015
For the
year ended
December 31, 2014
$ 76,414
$ 58,876
$ 48,475
41,692
48,164
853,372
778,547
483,210
465,138
32,696
51,179
691,153
613,682
386,879
372,776
20,504
$ 0.38
$ 4.95
15,810
$ 0.38
$ 3.95
$ 0.89
$ 11.67
$ 1.22
$ 12.79
26,112
41,949
492,791
468,518
294,993
275,128
11,919
$ 0.38
$ 2.98
$ 1.35
$ 10.49
Pure Multi-Family’s total assets and liabilities have increased significantly during the year ended December 31, 2016
due to investment property acquisitions and their related mortgages, the issuance of equity, and fair value increases of
its investment properties. As at December 31, 2016, Pure Multi held 15 investment properties comprising 5,229
residential units and 4,774,758 gross rentable square feet, compared to 14 investment properties with 4,437 residential
units and 4,052,934 gross rentable square feet as at December 31, 2015.
44
Pure Multi-Family REIT LP
MD&A – December 31, 2016
Total rental revenue from the investment properties totaled $76.4 million for the year ended December 31, 2016
compared to $58.9 million for the year ended December 31, 2015. This increase is reflective of the increase in the
number of days the investment properties were operating during 2016 compared to 2015, due to the timing of
acquisitions and dispositions, coupled with the organic growth in rental revenue achieved at the investment properties
operated during both periods.
SUMMARY OF QUARTERLY RESULTS
During the three months ended December 31, 2016, based on Pure Multi’s interest:
Total assets decreased to $853,371,629 from $868,683,074 as at September 30, 2016. This decrease was
primarily due to the sale of the investment properties during the current quarter, as proceeds from these sales
were used to fund the repayment of the Livingston mortgage obligation and other related selling costs of the
properties. As at December 31, 2016, Pure Multi-Family had cash and cash equivalents of $20,603,046 and
investment properties of $778,547,182, compared to $24,984,620 and $834,464,951, respectively, as at
September 30, 2016.
Total liabilities decreased to $483,209,572 from $505,917,300 as at September 30, 2016. This decrease was
primarily due to a decrease in mortgages payable, including the repayment of the Livingston mortgage, and
property taxes payable.
Partners’ capital increased to $370,162,057 from $362,765,774 as at September 30, 2016. This increase was
a result of receipts from the exercise of Warrants and net income earned by Pure Multi-Family during the
period, partially being offset by the distributions declared to unitholders.
Pure Multi-Family earned rental revenue of $20,115,884 from investment properties (three months ended
December 31, 2015 - $16,547,369). These properties incurred operating expenses of $9,844,692, resulting
in net rental income of $10,271,192 during the three months ended December 31, 2016 (three months ended
December 31, 2015 - $7,437,439 and $9,109,930, respectively). The increase in rental revenue, operating
expenses and net rental income, compared to the prior year, are primarily attributable to Pure Multi-Family
operating additional investment properties coupled with organic rental revenue growth, which was partially
offset by an increase in property tax expense.
Pure Multi-Family incurred interest expense of $4,952,174 and distributions to subsidiary’s preferred
unitholders of $3,906 (three months ended December 31, 2015 - $3,980,708 and $3,906, respectively). This
resulted in net finance expenses of $4,954,383 during the three months ended December 31, 2016 (three
months ended December 31, 2015 - $3,980,477). The increase in net finance expense was primarily due to
the additional mortgage interest costs during the period.
Pure Multi-Family incurred general and administrative expenses of $567,793, fair value adjustment gain to
investment properties of $159,519 and franchise tax expense of $101,969 (three months ended December 31,
2015 - $277,740, $4,362,671 and $121,654, respectively). General and administrative expenses increased
primarily due to the internalization of management on September 1, 2016.
Pure Multi had net income of $3,259,020 (three months ended December 31, 2015 - $10,414,868), as a result
of the above transactions.
45
Pure Multi-Family REIT LP
MD&A – December 31, 2016
Pure Multi’s interest
Quarter ended
($000’s, except per unit amounts)
Rental revenue
Operating expenses
Net rental income
Interest expense
General and administrative expenses
Fair value adjustments to investment
properties
Net income and comprehensive income
Basic net income per unit
Class A Units
Class B Units
Pure Multi’s interest
Quarter ended
($000’s, except per unit amounts)
Rental revenue
Operating expenses
Net rental income
Interest expense
General and administrative expenses
Fair value adjustments to investment
properties
Net income and comprehensive income
Basic net income per unit
Class A Units
Class B Units
As at
($000’s)
Total assets
Total liabilities
Partners’ capital
Investment properties
Mortgages payable
As at
($000’s)
Total assets
Total liabilities
Partners’ capital
Investment properties
Mortgages payable
December 31,
2016
$ 20,116
September 30,
2016
June 30,
2016
$ 19,864
$ 19,369
March 31,
2016
$ 17,066
9,845
10,271
(4,952)
(568)
160
3,259
0.06
0.75
9,158
10,706
(5,996)
(322)
9,754
14,163
0.26
3.42
8,400
10,969
(4,705)
(282)
8,264
14,248
0.28
3.56
7,320
9,746
(4,146)
(268)
11,262
16,494
0.32
4.12
December 31,
2015
September 30,
2015
June 30,
2015
$ 16,547
$ 15,378
$ 13,902
March 31,
2015
$ 13,049
7,437
9,110
(3,981)
(278)
4,363
10,415
0.23
2.60
6,950
8,428
(6,117)
(183)
10,340
11,583
0.26
2.90
6,087
7,815
(2,980)
(261)
9,401
13,896
0.34
3.47
December 31,
2016
$ 853,372
September 30,
2016
June 30,
2016
$ 868,683
$ 793,016
483,210
370,162
778,547
447,827
505,917
362,766
834,465
463,837
467,476
325,540
752,412
430,518
December 31,
2015
September 30,
2015
June 30,
2015
$ 691,153
$ 654,499
$ 565,553
386,879
304,274
613,682
354,202
393,863
260,636
629,035
354,455
312,382
253,171
517,148
276,338
5,706
7,343
(2,921)
(192)
11,134
15,285
0.42
3.82
March 31,
2016
$ 777,579
461,650
315,929
743,132
431,106
March 31,
2015
$ 482,813
273,168
209,645
452,568
240,577
46
Pure Multi-Family REIT LP
MD&A – December 31, 2016
SECTION IV
CRITICAL ACCOUNTING ESTIMATES
The preparation of financial statements in accordance with IFRS requires management to make estimates and
assumptions during the reporting period that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and
expenses during the reporting period. Pure Multi-Family’s significant accounting policies are described in note 3 to
the December 31, 2016 audited consolidated financial statements, available on SEDAR at www.sedar.com and on
Pure Multi-Family’s website at www.puremultifamily.com.
The policies that are most subject to estimation and judgment are outlined below.
Valuation of Investment Properties
The fair value of the investment properties is determined by management, using recognized valuation techniques
supported, in certain instances, by independent real estate valuation experts.
The determination of the fair value of investment properties requires the use of estimates such as future cash flows
from assets (based on factors such as tenant profiles, future revenue streams and overall repair and condition of the
property), capitalization rates and discount rates applicable to those assets. These estimates are based on market
conditions existing at the reporting date.
The following approaches, either individually or in combination, are used by management, together with the
appraisals, in their determination of the fair value of the investment properties:
The Income Approach derives market value by estimating the future cash flows that will be generated by the property
and then applying an appropriate capitalization rate or discount rate to those cash flows. This approach can utilize the
direct capitalization method and/or the discounted cash flow analysis.
The Direct Comparison Approach involves comparing or contrasting the recent sale, listing or optioned prices of
properties comparable to the subject and adjusting for any significant differences between them.
Management reviews each appraisal obtained and ensures the assumptions used by the appraisers are reasonable and
the final fair value amount reflects those assumptions used in the various approaches above. Where an appraisal is
not obtained at the reporting date, management uses the approaches described above to estimate the fair value of the
investment properties.
ACCOUNTING STANDARDS NOT YET ADOPTED
Pure Multi-Family’s significant accounting policies are described in note 3 to the December 31, 2016 audited
consolidated financial statements, available on SEDAR at www.sedar.com and on Pure Multi-Family’s website at
www.puremultifamily.com.
Standards issued but not yet effective
(a)
IFRS 9 - Financial instruments
On July 24, 2014 the IASB issued the complete IFRS 9, Financial Instruments (“IFRS 9 (2014)”).
The mandatory effective date of IFRS 9 (2014) is for annual periods beginning on or after January 1, 2018 and
must be applied retrospectively with some exemptions. Early adoption is permitted. The restatement of prior
periods is not required and is only permitted if information is available without the use of hindsight.
47
Pure Multi-Family REIT LP
MD&A – December 31, 2016
IFRS 9 (2014) introduces new requirements for the classification and measurement of financial assets. Under
IFRS 9 (2014), financial assets are classified and measured based on the business model in which they are held
and the characteristics of their contractual cash flows. The standard introduces additional changes relating to
financial liabilities. It also amends the impairment model by introducing a new ‘expected credit loss’ model for
calculating impairment.
IFRS 9 (2014) also includes a new general hedge accounting standard which aligns hedge accounting more
closely with risk management. This new standard does not fundamentally change the types of hedging
relationships or the requirement to measure and recognize ineffectiveness, however it will provide more hedging
strategies that are used for risk management to qualify for hedge accounting and introduce more judgment to
assess the effectiveness of a hedging relationship. Special transitional requirements have been set for the
application of the new general hedging model.
Pure Multi-Family intends to adopt IFRS 9 (2014) in its consolidated financial statements for the annual period
beginning on January 1, 2018. Pure Multi-Family does not expect the standard to have a material impact on the
consolidated financial statements.
(b)
IFRS 15 – Revenue from Contracts with Customers
On May 28, 2014 the IASB issued IFRS 15, Revenue from Contracts with Customers (“IFRS 15”). The new
standard is effective for annual periods beginning on or after January 1, 2018. Earlier application is permitted.
IFRS 15 will replace IAS 11, Construction Contracts, IAS 18, Revenue, IFRIC 13, Customer Loyalty
Programmes, IFRIC 15, Agreements for the Construction of Real Estate, IFRIC 18, Transfer of Assets from
Customers, and SIC 31, Revenue – Barter Transactions Involving Advertising Services.
The standard contains a single model that applies to contracts with customers and two approaches to recognizing
revenue: at a point in time or over time. The model features a contract-based five-step analysis of transactions
to determine whether, how much and when revenue is recognized. New estimates and judgmental thresholds
have been introduced, which may affect the amount and/or timing of revenue recognized.
The new standard applies to contracts with customers. It does not apply to insurance contracts, financial
instruments or lease contracts that fall in the scope of other IFRSs.
Pure Multi-Family intends to adopt IFRS 15 in its consolidated financial statements for the annual period
beginning on January 1, 2018. Pure Multi-Family does not expect the standard to have a material impact on the
consolidated financial statements.
(c)
IFRS 16 – Leases
On January 13, 2016 the IASB issued IFRS 16, Leases (“IFRS 16”). The new standard is effective for annual
periods beginning on or after January 1, 2019. Earlier application is permitted for entities that apply IFRS 15 at
or before the date of initial adoption of IFRS 16. IFRS 16 will replace IAS 17, Leases (“IAS 17”).
This standard introduces a single lessee accounting model and requires a lessee to recognize assets and liabilities
for all leases with a term of more than 12 months, unless the underlying asset is of low value. A lessee is required
to recognize a right-of-use asset representing its right to use the underlying asset and a lease liability representing
its obligation to make lease payments.
This standard substantially carries forward the lessor accounting requirements of IAS 17, while requiring
enhanced disclosures to be provided by lessors.
Other areas of the lease accounting model have been impacted, including the definition of a lease. Transitional
provisions have been provided.
Pure Multi-Family intends to adopt IFRS 16 in its consolidated financial statements for the annual period
beginning on January 1, 2019. Pure Multi-Family does not expect the standard to have a material impact on the
consolidated financial statements.
48
Pure Multi-Family REIT LP
MD&A – December 31, 2016
SECTION V
RISKS AND UNCERTAINTIES
All income producing property investments are subject to a degree of risk and uncertainty. They are affected by
various factors including general market conditions and local market circumstances. An example of general market
conditions would be the availability of long-term financing whereas local conditions would relate to factors affecting
specific properties in a particular geographic location, such as changes in market lease rates as a result of an over-
supply of space or a reduction in demand for real estate. Management attempts to manage these risks by acquiring
investment properties in various cities with strong economic and growth indicators, and engaging property
management groups with local knowledge and experience.
The board of directors of the Governing GP has the overall responsibility for the establishment and oversight of Pure
Multi-Family’s risk management framework. Pure Multi-Family’s risk management policies are established to
identify and analyze the risks faced by Pure Multi-Family, to set appropriate risk limits and controls, and to monitor
risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in
market conditions and in response to Pure Multi-Family’s activities.
In the normal course of business, Pure Multi-Family is exposed to a number of risks that can affect its operating
performance. These risks, and the actions taken to manage them, are as follows:
Interest Rate and Financial Risk
Interest rate risk arises from the possibility that the value of, or cash flows related to, a financial instrument will
fluctuate as a result of changes in market interest rates. Pure Multi-Family is exposed to financial risk from the interest
rate differentials between the market rate and the rates used on these financial instruments.
Pure Multi-Family manages its financial instruments and interest rate risks based on its cash flow needs. Pure Multi-
Family minimizes interest rate risk by obtaining long-term, fixed rate mortgages whenever possible. It targets a
conservative ratio of debt to gross book value within the range of 55% to 65% and is restricted under the LP Agreement
to a maximum of 70%. As Pure Multi-Family does not have any mortgages payable maturing prior to 2019 and all of
the mortgages payable bear interest at fixed rates, Pure Multi-Family does not face significant interest rate risk in the
context of its outstanding mortgages payable.
The profile of Pure Multi-Family’s interest-bearing financial instruments was:
Fixed rate instruments
Mortgages payable
Convertible debentures
Preferred units of subsidiary
Face Value
December 31, 2016 December 31, 2015
$ 451,426,743
22,990,000
125,000
$ 474,541,743
$ 357,075,437
23,000,000
125,000
$ 380,200,437
49
Pure Multi-Family REIT LP
MD&A – December 31, 2016
Credit Risk
Credit risk is the risk of financial loss to Pure Multi-Family if a tenant, customer or counterparty to a financial
instrument fails to meet its contractual obligations, and arises principally from Pure Multi-Family’s receivables from
tenants.
Pure Multi-Family’s exposure to credit risk is influenced mainly by the individual characteristics of each tenant. Pure
Multi-Family, through the US REIT, minimizes the risk by checking tenants’ credit histories, requesting security
deposits and initiating a prompt collection process. In addition, there is no concentration of credit risk due to the large
number of individual tenants.
Currency Risk
Pure Multi-Family is exposed to minimal currency risk as a relatively small portion of the expenses are in Canadian
dollars.
Lease Rollover Risk
Lease rollover risk arises from the possibility that Pure Multi-Family may experience difficulty renewing leases as
they expire or in re-leasing space vacated by tenants upon lease expiry. All leases of Pure Multi-Family’s investment
properties have lease terms of one year or less. Typically, Pure Multi-Family instructs its property managers to initiate
the renewal process before the existing leases expire. For any vacant spaces, Pure Multi-Family uses qualified leasing
agents to actively market the spaces.
Class A Unit Prices
It is not possible to predict the price at which Class A Units will trade and there can be no assurance that an active
trading market for the Class A Units will be sustained. The Class A Units will not necessarily trade at values
determined solely by reference to the value of the investment properties of Pure Multi-Family. Accordingly, the Class
A Units may trade at a premium or discount to the value implied by the value of Pure Multi-Family’s investment
properties. The market price for the Class A Units may be affected by changes in general market conditions,
fluctuations in the markets for equity securities and numerous other factors beyond Pure Multi-Family’s control.
Environmental Risk
As an owner of real property, Pure Multi-Family is subject to various federal, state and municipal laws relating to
environmental matters.
Management carries out environmental inspections, by qualified environmental consultants, before a property is
purchased. Management is not aware of any material non-compliance with environmental laws with respect to the
current portfolio and is not aware of any pending or threatened investigations or actions by environmental regulatory
authorities in connection with the current portfolio.
Liquidity Risk
Real property investments tend to be relatively illiquid, with the degree of liquidity generally fluctuating in relation to
demand for and the perceived desirability of such investments. Such illiquidity may tend to limit Pure Multi-Family’s
ability to vary its portfolio promptly in response to changing economic or investment conditions. If Pure Multi-Family
were required to liquidate a real property investment, the proceeds to Pure Multi-Family might be significantly less
than the aggregate carrying value of such property.
Liquidity risk is the risk that Pure Multi-Family will not be able to meet its financial obligations as they fall due. Pure
Multi-Family’s approach to managing liquidity is to ensure that it will have sufficient cash available to meet its
liabilities when due. In addition, Pure Multi-Family intends to refinance any mortgages which mature within six
months.
50
Pure Multi-Family REIT LP
MD&A – December 31, 2016
The following table provides the future non-discounted scheduled payments of financial liabilities, including estimated
interest payments:
2017
2018
2019
2021
and thereafter
2020
Mortgages payable (principal and interest)
$ 20,488,618
$ 21,197,592
$ 82,565,479
$ 21,235,763
$ 452,579,823
Convertible debentures payable
(principal and interest)
Preferred units of subsidiary (principal
and interest)
1,494,350
1,494,350
1,494,350
24,110,763
15,625
15,625
15,625
15,625
140,625
Accounts payable and accrued liabilities
12,287,387
-
-
-
-
Total
Tax Risk
$ 34,285,980
$ 22,707,567
$ 84,075,454
$ 45,362,151
$ 452,720,448
The US REIT currently qualifies as a real estate investment trust for U.S. federal income tax purposes. Thus, the US
REIT is not subject to U.S. federal income tax. If the US REIT does not qualify or ceases to qualify as a REIT under
the REIT exception, adverse consequences could arise including a material reduction of distributions to unitholders
and Pure Multi-Family.
There can be no assurance that Canadian or U.S. federal income tax laws regarding the treatment of REITs will not
be changed, or that administrative and assessment practices of the Canada Revenue Agency or IRS will not develop
in a manner which adversely affects Pure Multi-Family or its unitholders.
Regulatory Administration Risk
The new administration in the United States may bring about uncertainty in regulatory, tax and economic conditions
or in laws and policies governing foreign trade, development and investment that could potentially cause significant
volatility in global financial markets, including in global currency and debt markets. Such volatility could cause a
change in economic activities in the United States, Canada or globally, which could affect Pure Multi-Family’s
operating results and growth prospects, the extent of which may not be identifiable as of the date hereof.
RELATED PARTY TRANSACTIONS
Managing GP
Pure Multi-Family is related to the Managing GP, by virtue of having an officer and director in common (Stephen
Evans). Pure Multi-Family declared distributions to the Managing GP in the amount of $989,687 during the year
ended December 31, 2016 ($790,515 during the year ended December 31, 2015). Included in accounts payable and
accrued liabilities at December 31, 2016 was $nil (December 31, 2015 - $nil) payable to the Managing GP.
Tipton Asset Group, Inc.
Sunstone Multi-Family Management Inc. provides property management services to the US REIT pursuant to a
Property Management Agreement, dated May 9, 2012, as amended July 9, 2012. Sunstone Multi-Family Management
Inc. subcontracted Tipton Asset Group, Inc. (“Tipton”) as the property manager for Pure Multi-Family. Pure Multi-
Family is related to Tipton by virtue of having an officer and director in common with a subsidiary of Pure Multi-
Family (Bryan Kerns). Tipton charged property management fees in the amount of $2,301,288 during the year ended
December 31, 2016 ($1,764,027 during the year ended December 31, 2015). Included in accounts payable and accrued
liabilities at December 31, 2016 was $nil (December 31, 2015 - $nil) payable to Tipton.
51
Pure Multi-Family REIT LP
MD&A – December 31, 2016
Asset Management Agreement
Effective September 1, 2016, Pure Multi-Family terminated its Asset Management Agreement with the Managing GP,
as permitted upon the triggering of the Determination Event. No penalties were incurred upon termination of the
Asset Management Agreement. As part of the internalization of asset management, Pure Multi-Family is responsible
for rent, salary, office costs and other general management costs.
Prior to this time, the Managing GP, pursuant to the Asset Management Agreement, provided asset management,
administrative and reporting services to Pure Multi-Family as its managing general partner at no cost. The Asset
Management Agreement also required the Managing GP to provide Pure Multi-Family, at no cost, with support
services consisting of office space and equipment and the necessary clerical and secretarial personnel for the
administration of its day-to-day activities. In lieu of the fees typically associated with a third party asset management
agreement, the Managing GP was entitled to a reimbursement of any reasonable costs and expenses (including legal
and audit costs, but excluding personnel costs) that it incurred providing asset management services to Pure Multi-
Family.
Compensation
The directors of the Governing GP who are not affiliated with or employees of the Managing GP receive annual
compensation, in addition to fees for attending meetings of the directors or any committee, and acting as committee
chairs and members. As well, the Governing GP indirectly reimburses such directors for any out of pocket expenses,
including out of pocket expenses for attending meetings. Pure Multi-Family reimburses the Governing GP for such
amounts. In addition, Pure Multi-Family has obtained insurance coverage for such directors. Compensation is
reviewed on an annual basis, giving consideration to Pure Multi-Family’s growth and the extent of its portfolio. The
amount incurred during the year ended December 31, 2016 was $301,403 (year ended December 31, 2015 - $210,293).
As part of the internalization of asset management, as described under “Related Party Transactions - Asset
Management Agreement”, certain key personnel of the Managing GP became employees of a subsidiary of Pure Multi-
Family effective September 1, 2016. For the year ended December 31, 2016, corporate compensation, including
salaries, bonuses, and other short term employee benefits, incurred by Pure Multi-Family and recorded in general and
administrative expense was $251,810 (December 31, 2015 - $nil).
OUTSTANDING UNIT DATA
Except as set out in the LP Agreement, no Class A Unit or Class B Unit has any preference or priority over another.
The Class A Units and the Class B Units have voting rights as set out in the LP Agreement.
As at March 8, 2017, the following of Pure Multi-Family’s securities were outstanding:
(a) 200,000 Class B Units. Pursuant to the LP Agreement, the Class B Unitholders as a class are entitled to
convert some or all of their Class B Units into a maximum of 2,665,835 Class A Units;
(b) 56,068,506 Class A Units; and
(c) 22,990 Convertible Debentures. The Convertible Debentures are convertible at the option of the holder and
redeemable by Pure Multi-Family in accordance with the terms of the trust indenture dated August 7, 2013.
See “Financial Condition – Convertible Debentures”.
52
Pure Multi-Family REIT LP
MD&A – December 31, 2016
SECTION VI
SUBSEQUENT EVENTS
a) On January 25, 2017, Pure Multi-Family, through the US REIT, acquired a multi-family apartment
community, known as Pure Creekside at Onion Creek, located in Austin, Texas, for a purchase price of
$40,000,000, plus standard closing costs and adjustments. This acquisition was financed with cash on hand
from the sale of Livingston and proceeds from a new mortgage financing.
b) On January 27, 2017, Pure Multi-Family, through the US REIT, acquired a multi-family apartment
community, known as Lansbrook at Twin Creeks, located in Dallas, Texas, for a purchase price of
$40,000,000, plus standard closing costs and adjustments. This acquisition was financed with cash on hand
from the sale of Fairways at Prestonwood and proceeds from a new mortgage financing.
ADDITIONAL INFORMATION
Additional information relating to Pure Multi-Family is available on SEDAR at www.sedar.com and on Pure Multi-
Family’s website at www.puremultifamily.com.
TRADING SYMBOLS
TSX Venture Exchange: RUF.U, RUF.UN, RUF.DB.U
OTCQX: PMULF
53
ThiS PAge iS leFT inTenTionAllY blAnk
54 The Preserve at Arbor hills - Dallas, TX
consolidAted finAnciAl stAtements
For The YeAr enDeD December 31, 2016
ExpRESSED in uniTED STATES DollARS
55 KPMG LLP
PO Box 10426 777 Dunsmuir Street
Vancouver BC V7Y 1K3
Canada
Telephone (604) 691-3000
Fax (604) 691-3031
INDEPENDENT AUDITORS’ REPORT
To the Directors of Pure Multi-Family REIT (GP) Inc.
We have audited the accompanying consolidated financial statements of Pure Multi-
Family REIT LP, which comprise the consolidated statements of financial position as
at December 31, 2016 and 2015, the consolidated statements of partners’ capital,
income and comprehensive income and cash flows for the years then ended, and
notes, comprising a summary of significant accounting policies and other explanatory
information.
Management’s Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these
consolidated financial statements in accordance with International Financial Reporting
Standards, and for such internal control as management determines is necessary to
enable the preparation of consolidated financial statements that are free from material
misstatement, whether due to fraud or error.
Auditors’ Responsibility
Our responsibility is to express an opinion on these consolidated financial statements
based on our audits. We conducted our audits in accordance with Canadian generally
accepted auditing standards. Those standards require that we comply with ethical
requirements and plan and perform the audit to obtain reasonable assurance about
whether the consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts
and disclosures in the consolidated financial statements. The procedures selected
depend on our judgment, including the assessment of the risks of material
misstatement of the consolidated financial statements, whether due to fraud or error.
In making those risk assessments, we consider internal control relevant to the entity’s
preparation and fair presentation of the consolidated financial statements 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.
An audit also includes evaluating the appropriateness of accounting policies used and
the reasonableness of accounting estimates made by management, as well as
evaluating the overall presentation of the consolidated financial statements.
KPMG LLP is a Canadian limited liability partnership and a member firm of the KPMG network of
independent member firms affiliated with KPMG International Cooperative (“KPMG International”),
a Swiss entity. KPMG Canada provides services to KPMG LLP.
56
Pure Multi-Family REIT LP
Page 2
We believe that the audit evidence we have obtained in our audits is sufficient and
appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the consolidated financial statements present fairly, in all material
respects, the consolidated financial position of Pure Multi-Family REIT LP as at
December 31, 2016 and 2015, and its consolidated financial performance and its
consolidated cash flows for the years then ended in accordance with International
Financial Reporting Standards.
Chartered Professional Accountants
March 8, 2017
Vancouver, Canada
57
ASSETS
Non-current assets
Investment properties (note 4)
Current assets
Prepaid expenses
Mortgage reserve fund (note 5)
Amounts receivable
Cash held in trust (note 6)
Cash and cash equivalents
Pure Multi-Family REIT LP
Consolidated Statement of Financial Position
Expressed in United States dollars
December 31, 2016
December 31, 2015
$ 778,547,182
$ 613,681,875
1,869,048
5,193,406
1,979,517
45,179,430
20,603,046
74,824,447
1,456,482
6,570,597
811,420
22,705,731
45,926,661
77,470,891
TOTAL ASSETS
$ 853,371,629
$ 691,152,766
LIABILITIES
Non-current liabilities
Mortgages payable (note 7)
Convertible debentures (note 8)
Preferred units of subsidiary (note 9)
Current liabilities
Mortgages payable – current portion (note 7)
Rental deposits
Unearned revenue
Accounts payable and accrued liabilities
TOTAL LIABILITIES
PARTNERS’ CAPITAL (note 10)
$ 444,220,585
20,792,902
125,000
465,138,487
$ 352,331,209
20,319,890
125,000
372,776,099
3,605,966
1,167,897
984,835
12,312,387
18,071,085
1,870,858
1,004,731
816,880
10,409,972
14,102,441
483,209,572
386,878,540
370,162,057
304,274,226
TOTAL LIABILITIES AND PARTNERS’ CAPITAL
$ 853,371,629
$ 691,152,766
Nature of business and basis of presentation (notes 1 and 2)
Subsequent events (note 19)
The accompanying notes are an integral part of these consolidated financial statements
58
Pure Multi-Family REIT LP
Consolidated Statement of Partners’ Capital
Expressed in United States dollars
Balance,
December 31, 2015
Issuance of units
Conversion of warrants, net
of costs
Offering costs
Debenture conversion
Distributions to limited
partners
Net income for the period
Balance,
December 31, 2016
Balance,
December 31, 2014
Issuance of units
Conversion of warrants, net
of costs
Offering costs
Distributions to limited
partners
Net income for the period
Balance,
December 31, 2015
Limited
Partners
Class A
Limited
Partners
Class B
General
Partner
Other Equity Items
(note 10)
Accumulated
Earnings
Total
$ 230,277,915
$ 1,000,000
$ 20
$ 2,665,568
$ 70,330,723
$ 304,274,226
39,639,485
680,139
(1,420,147)
10,000
-
-
-
-
-
-
-
-
-
-
-
(680,139)
-
(919)
-
-
39,639,485
-
(1,420,147)
9,081
-
-
(20,504,317)
(20,504,317)
48,163,729
48,163,729
$ 269,187,392
$ 1,000,000
$ 20
$ 1,984,510
$ 97,990,135
$ 370,162,057
Limited
Partners
Class A
Limited
Partners
Class B
General
Partner
Other Equity Items
(note 10)
Accumulated
Earnings
Total
$ 159,153,127
$ 1,000,000
$ 20
$ 2,683,024
$ 34,961,636
$ 197,797,807
74,623,250
17,456
(3,515,918)
-
-
-
-
-
-
-
-
-
-
-
(17,456)
-
-
-
-
-
74,623,250
-
(3,515,918)
(15,810,293)
(15,810,293)
51,179,380
51,179,380
$ 230,277,915
$ 1,000,000
$ 20
$ 2,665,568
$ 70,330,723
$ 304,274,226
The accompanying notes are an integral part of these consolidated financial statements
59
Pure Multi-Family REIT LP
Consolidated Statement of Income and Comprehensive Income
Expressed in United States dollars
December 31, 2016
December 31, 2015
$ 76,414,359
$ 58,875,799
Year ended
REVENUES
Rental
OPERATING EXPENSES
Insurance
Property management
Property taxes
Property operating expenses
NET RENTAL INCOME
NET FINANCE INCOME (EXPENSES)
Interest income
Interest expense (note 11)
Distributions to subsidiary’s preferred unitholders
NET OTHER INCOME (EXPENSES)
Other income
General and administrative
Fair value adjustments to investment properties (note 4)
Gain (loss) on disposal of investment properties (note 4)
Franchise taxes
1,587,983
2,301,288
11,185,461
16,705,345
31,780,077
44,634,282
37,980
(19,799,027)
(15,625)
(19,776,672)
18,000
(1,438,416)
26,498,121
(1,484,345)
(287,241)
23,306,119
1,542,422
1,764,027
8,500,250
13,655,094
25,461,793
33,414,006
14,202
(15,998,065)
(15,625)
(15,999,488)
12,424
(913,588)
34,519,113
525,088
(378,175)
33,764,862
NET INCOME AND COMPREHENSIVE INCOME
$ 48,163,729
$ 51,179,380
Earnings per Class A unit
Basic
Diluted (note 18)
Weighted average number of Class A units
Basic
Diluted (note 18)
Earnings per Class B unit
Basic and diluted
Weighted average number of Class B units
Basic and diluted
$ 0.89
$ 0.86
51,553,540
55,739,002
$ 1.22
$ 1.15
39,761,071
43,831,867
$ 11.67
$ 12.79
200,000
200,000
The accompanying notes are an integral part of these consolidated financial statements
60
Year ended
Cash provided by (used in)
OPERATIONS
Net income
Items not involving cash:
Amortization of transaction costs and accretion of
convertible debentures
Amortization of mark to market mortgage adjustment
Fair value adjustments to investment properties (note 4)
Property tax adjustments on acquisitions
Property tax adjustments on sale
(Gain) loss on disposal of investment properties (note 4)
Interest income
Interest expense
Distributions to subsidiary’s preferred unitholders
Net change in non-cash working capital items (note 12)
INVESTING
Acquisitions of investment properties
Capital additions to investment properties
Proceeds received on disposal of investment properties
Cash held in trust (note 6)
Disposition costs on disposal of investment properties
Interest received
FINANCING
Distribution paid to subsidiary’s preferred unitholders
Distributions paid to limited partners
Interest paid
Mortgage proceeds received
Funds from mortgage reserve fund
Payment of finance transaction costs
Repayment of mortgages payable
Proceeds from the issuance of limited partner units
Unit offering costs
Repayment of bank credit facility
Net change in cash and cash equivalents
Cash and cash equivalents, beginning of year
Pure Multi-Family REIT LP
Consolidated Statement of Cash Flows
Expressed in United States dollars
December 31, 2016
December 31, 2015
$ 48,163,729
$ 51,179,380
968,404
-
(26,498,121)
(3,067,594)
124,976
1,484,345
(37,980)
18,830,623
15,625
253,441
40,237,448
(188,591,771)
(3,932,797)
57,100,000
(22,473,699)
(1,484,345)
37,980
(159,344,632)
(15,625)
(20,284,669)
(18,650,840)
121,000,000
1,377,191
(1,213,132)
(26,648,694)
39,639,485
(1,420,147)
-
93,783,569
(25,323,615)
45,926,661
1,255,192
(3,209,439)
(34,519,113)
(1,479,908)
761,686
(525,088)
(14,202)
17,952,312
15,625
(2,261,582)
29,154,863
(172,850,553)
(2,920,095)
51,901,950
(22,705,731)
(1,430,727)
14,202
(147,990,954)
(15,625)
(15,071,502)
(17,674,432)
158,600,000
(361,956)
(1,564,383)
(41,200,282)
74,623,250
(3,515,918)
(5,546,485)
148,272,667
29,436,576
16,490,085
CASH AND CASH EQUIVALENTS, END OF PERIOD
$ 20,603,046
$ 45,926,661
The accompanying notes are an integral part of these consolidated financial statements
61
Pure Multi-Family REIT LP
Consolidated Statement of Cash Flows (continued)
Expressed in United States dollars
Supplemental cash flow information:
Non-cash financing and investing activity:
Distributions to the limited partners included in accounts
payable and accrued liabilities
Mortgages assumed by purchaser
$ 1,752,143
-
$ 1,532,495
15,898,050
The accompanying notes are an integral part of these consolidated financial statements
62
Pure Multi-Family REIT LP
Notes to Consolidated Financial Statements
Expressed in United States dollars
1)
PURE MULTI-FAMILY REIT LP INFORMATION
Pure Multi-Family REIT LP (“Pure Multi-Family”) is a limited partnership formed under the Limited
Partnership Act (Ontario) to invest in multi-family real estate properties in the United States. Pure Multi-
Family was established by Pure Multifamily Management Limited Partnership (the “Managing GP”), its
managing general partner, and Pure Multi-Family REIT (GP) Inc. (the “Governing GP”), its governing general
partner, pursuant to the terms of the Limited Partnership Agreement (“LP Agreement”). Pure Multi-Family’s
head office and address for service is located at 910 – 925 West Georgia Street, Vancouver, British Columbia,
V6C 3L2. A copy of the Limited Partnership Agreement can be obtained from Pure Multi-Family or on
SEDAR at www.sedar.com.
Pure Multi-Family was established for, among other things, the purposes of:
a) acquiring Common Shares and a Series A Preferred Share of Pure US Apartments REIT Inc. (the “US
REIT”);
b)
c)
temporarily holding cash and investments for the purposes of paying the expenses and liabilities of Pure
Multi-Family and making distributions to Unitholders;
in connection with the undertaking set out above, reinvesting income and gains of Pure Multi-Family and
taking other actions besides the mere protection and preservation of Pure Multi-Family property.
The US REIT was established for, among other things, the purposes of acquiring, owning and operating multi-
family real estate properties in the United States.
These consolidated financial statements for the year ended December 31, 2016 were authorized for issue by
the Board of Directors of the Governing GP (the “Board”) on March 8, 2017.
2)
BASIS OF PRESENTATION AND STATEMENT OF COMPLIANCE
a. Statement of compliance and basis of presentation
These consolidated financial statements have been prepared in accordance with International Financial
Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”)
incorporating interpretations issued by the IFRS Interpretations Committee (“IFRICs”).
b. Basis of measurement
These consolidated financial statements have been prepared on a historical cost basis, except for investment
properties which have been measured at fair value.
The preparation of these consolidated financial statements requires the use of certain critical accounting
estimates. It also requires management to exercise judgment in the process of applying Pure Multi-Family’s
accounting policies. Areas involving a higher degree of judgment or complexity, or areas where
assumptions and estimates are significant to the financial statements are disclosed in note 3(R).
c. Functional and presentation currency
These consolidated financial statements are presented in United States dollars, which is Pure Multi-
Family’s functional currency.
63
Pure Multi-Family REIT LP
Notes to Consolidated Financial Statements
Expressed in United States dollars
d. Presentation of financial statements
Pure Multi-Family uses a classified statement of financial position. The consolidated statement of financial
position distinguishes between current and non-current assets and liabilities. Current assets and liabilities
are those expected to be recovered or settled within twelve months from the reporting date and non-current
assets and liabilities are those where the recovery or settlement is expected to occur more than twelve
months from the reporting date. Pure Multi-Family classifies the statements of income and comprehensive
income using the function of expense method, which classifies expenses according to their functions, such
as costs of operations or administrative activities.
3)
SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies applied in the preparation of these consolidated financial statements are
set out below. The accounting policies have been applied consistently by group entities unless otherwise
stated.
A. Basis of consolidation
The consolidated financial statements comprise the financial statements of Pure Multi-Family and its
subsidiaries, over which Pure Multi-Family has control. Control exists when Pure Multi-Family has the
power to govern the financial and operating policies of an entity so as to obtain benefit from its activities.
The financial statements of subsidiaries are consolidated from the date that control commences and continue
to be consolidated until the date that control ceases.
Intra-group transactions and balances are eliminated in preparing the consolidated financial statements.
The consolidated financial statements reflect the financial position, results of operations and cash flows of
Pure Multi-Family and its subsidiaries.
B. Translation of foreign currency
The functional and reporting currency of Pure Multi-Family is United States dollars. Pure Multi-Family
has certain transactions in Canadian dollars. Monetary items are translated at the exchange rate in effect at
the statement of financial position date and non-monetary items are translated at historical exchange rates.
Revenue and expense items are translated at the exchange rate in effect on the dates they occur. Realized
and unrealized exchange gains and losses are included in earnings.
C. Property acquisitions and business combinations
Where property is acquired, management considers the substance of the agreement in determining whether
the acquisition represents the acquisition of a property or a business combination. The basis of the judgment
is set out in note 3(R).
Where such acquisitions are not judged to be a business combination, they are treated as asset acquisitions.
The cost to acquire the property, including transaction costs, is allocated between the identifiable assets
acquired and liabilities assumed based on their relative fair values at the acquisition date. Otherwise,
acquisitions are accounted for as a business combination.
D. Investment properties
Investment properties are comprised of properties held to earn rental revenue or for capital appreciation or
both. Investment properties are measured initially at cost including transaction costs. Transaction costs
include transfer taxes, professional fees for legal services and initial leasing commissions to bring the
property to the condition necessary for it to be capable of operating.
Subsequent to initial recognition, investment properties are measured at fair value and related gains or
losses on the disposal of an investment property are determined as the difference between net disposal
proceeds and the carrying value of the asset on the date the transaction occurred. Pure Multi-Family defines
fair value to be the price received to sell an asset or paid to transfer a liability in an orderly transaction
64
Pure Multi-Family REIT LP
Notes to Consolidated Financial Statements
Expressed in United States dollars
between market participants at the measurement date. Therefore, the fair value of recently acquired
investment property would be the purchase price. Any subsequent valuations performed on an investment
property, after the acquisition date, would be the new basis for the fair value recorded on the investment
property. Gains or losses arising from changes in fair values are included in the consolidated statement of
income and comprehensive income in the period in which they arise.
An investment property is derecognized when it has been disposed of and no future economic benefit is
expected from its disposal. Any gains or losses on the disposal of an investment property are recognized in
the consolidated statement of income and comprehensive income in the period of disposal.
E. Fair value
Pure Multi-Family measures investment properties at fair value at each balance sheet date. The 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. In certain
circumstances, the initial fair value may be based on other observable current market transactions, without
modification or on a valuation technique using market based inputs.
Fair value measurements recognized in the statement of financial position are categorized in accordance
with the following levels:
Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2: Quoted prices in active markets for similar assets or liabilities or valuation techniques where
significant inputs are based on observable market data.
Level 3: Valuation techniques for which any significant input is not based on observable market data.
F. Impairment of financial assets
At each reporting date, Pure Multi-Family assesses whether there is objective evidence that a financial asset
is impaired. If a financial asset carried at amortized cost is impaired, the amount of the loss is measured as
the difference between the amortized cost of the loan or receivable and the present value of the estimated
future cash flows, discounted using the instrument’s original effective interest rate. The loss is recognized
in impairment expense.
G. Financial instruments
Non-derivative financial assets and non-derivative financial liabilities are initially recognized at fair value,
and their subsequent measurement is dependent on their classification as described below. The
classification depends on the purpose for which the financial instruments were acquired or issued, their
characteristics and Pure Multi-Family’s designation of such instruments.
Pure Multi-Family classifies its financial instruments as follows:
Cash and cash equivalents
Amounts receivable
Mortgage reserve fund
Accounts payable and accrued liabilities
Convertible debentures
Preferred units of subsidiary
Mortgages payable
Loans and receivables
Loans and receivables
Loans and receivables
Other financial liabilities
Other financial liabilities
Other financial liabilities
Other financial liabilities
65
Pure Multi-Family REIT LP
Notes to Consolidated Financial Statements
Expressed in United States dollars
Loans and receivables are financial assets with fixed or determinable payments that are not quoted in an
active market. These assets are recognized initially at fair value plus any directly attributable transaction
costs. Subsequent to initial recognition, they are accounted for at amortized cost, using the effective interest
rate method, less any impairment losses.
Non-derivative financial liabilities are recognized initially at fair value plus any directly attributable
transaction costs. Subsequent to initial recognition, these financial liabilities are accounted for at amortized
cost using the effective interest rate method.
H. Cash and cash equivalents
Cash and cash equivalents consists of cash on hand and cash held at banks.
I. Cash held in trust
Cash held in trust consists of funds held in trust and refundable deposits, held pursuant to agreements of
purchase and sale, which are to be used for the acquisition of investment properties.
J. Convertible debentures
Convertible debentures issued by Pure Multi-Family are converted into Class A units (each a “Class A
Unit”) of Pure Multi-Family at the option of the holder, and the number of Class A units to be issued does
not vary with changes in their fair value.
Upon issuance, convertible debentures are separated into their debt and conversion feature components.
The debt component of the convertible debenture is recognized initially at fair value of a similar debt
instrument without a conversion feature. Subsequent to initial recognition, the debt component of a
compound financial instrument is measured at amortized cost using the effective interest method.
The conversion feature of the convertible debentures is initially recognized at fair value. The convertible
debentures are convertible into Class A Units at the holder’s option. As a result of this obligation, the
convertible debentures are exchangeable into equity (the Class A Units are equity by definition) and
accordingly the conversion feature component of the convertible debentures is also equity. The conversion
feature component of the convertible debentures is recorded in the consolidated statement of partners’
capital.
Any directly attributable transaction costs are allocated to the debt and conversion components of the
convertible debentures in proportion to their initial carrying amounts.
K. Operating segments
The primary format for segment reporting is based on geographical region and is consistent with the internal
reporting provided to the chief operating decision-maker, determined to be the general partners. Pure Multi-
Family currently operates in one business segment, the owning and operating of multifamily apartment
properties in the sun-belt area in the United States.
L. Revenue recognition
Rental revenue is recognized on a straight line basis over the term of the lease subject to ultimate collection
being reasonably assured. Revenue includes recoveries of specified operating expenses, in accordance with
the terms of the lease agreements. Recoveries are recognized in the period in which the related operating
expense was incurred and collectability is reasonably assured.
M. Leases
Leases are classified according to the substance of the transaction. Leases that transfer substantially all the
risks and benefits of ownership from Pure Multi-Family to the lessees are accounted for as finance leases.
All current leases of Pure Multi-Family are operating leases.
66
Pure Multi-Family REIT LP
Notes to Consolidated Financial Statements
Expressed in United States dollars
N. Finance income (expenses)
Finance income (expenses) consists of interest income, mortgage interest, credit facility interest, convertible
debenture interest, distributions to preferred unitholders and preferred unit offering costs. Finance income
is recognized in the period in which it is earned, while finance expenses are recognized in the period in
which they are incurred.
O. Taxes
a. Income Taxes
Pure Multi-Family is not subject to tax under Part I of the Income Tax Act (Canada) (the “Tax Act”).
Each partner of Pure Multi-Family is required to include in computing the partner’s income for a
particular taxation year the partner’s share of the income or loss of Pure Multi-Family for its fiscal year
ending in or on the partner’s taxation year-end, whether or not any of that income or loss is distributed
to the partner in the taxation year. Accordingly, no provision has been made for Canadian income taxes
under Part I of the Tax Act.
The Tax Act contains rules regarding the taxation of certain types of publicly listed or traded trusts and
partnerships and their investors (the “SIFT Measures”). A specified investment flow-through
partnership (a “SIFT partnership”, as defined in the Tax Act) will be subject to SIFT tax on its “taxable
non-portfolio earnings” (as defined in the Tax Act) at a rate that is substantially equivalent to the general
income tax rate applicable to Canadian corporations. The “taxable non-portfolio earnings” of a SIFT
partnership less SIFT tax payable by a SIFT partnership is deemed to be a taxable dividend received by
the SIFT partnership from a taxable Canadian corporation, subject to the detailed provisions of the Tax
Act. Any such deemed taxable dividend would be allocated to the partners of a SIFT partnership and
be taxable as taxable dividends in their hand. The SIFT Measures do not apply to a partnership that
does not hold any “non-portfolio property” throughout the taxation year of the partnership.
Management believes that the Pure Multi-Family does not hold any “non-portfolio property” and should
not be a SIFT partnership and therefore not subject to the SIFT Measures. Accordingly, no provision
has been made for tax under the SIFT Measures. Management intends to continue to operate Pure
Multi-Family in such a manner so as to remain exempt from the SIFT Measures on a continuous basis
in the future. If Pure Multi-Family becomes a SIFT partnership it will be generally subject to income
taxes at a rate that is substantially equivalent to the general tax rate applicable to Canadian corporations
on its taxable non-portfolio earnings, if any.
Pure Multi-Family made a protective election to be treated as a partnership for U.S. federal income tax
purposes. In addition, management believes at least 90% of Pure Multi-Family’s gross income for the
taxation year is qualifying income within the meaning of U.S. Internal Revenue Code (the “Code”)
section 7704 and Pure Multi-Family is not required to register as an investment company under the
Investment Company Act of 1940. As such, it is generally not subject to U.S. federal income tax under
the Code. Furthermore, Pure Multi-Family’s subsidiary, the US REIT, timely made and intends to
maintain an election to be taxed as a U.S. real estate investment trust (“REIT”) under the Code and to
take the necessary steps to qualify as a REIT pursuant to the Code. In order for the US REIT to qualify
as a REIT, the US REIT must meet a number of organizational and operational requirements, including
a requirement to make annual dividend distributions to its shareholders equal to a minimum of 90% of
its REIT taxable income, computed without regards to a dividends paid deduction and net capital gains.
As a REIT, the US REIT generally will not be subject to U.S. federal income tax on its taxable income
to the extent such income is distributed as a dividend to shareholders annually. Management believes
that all REIT conditions necessary to eliminate income taxes for the reporting period have been met,
and accordingly no provision for US federal and state income taxes has been made.
Management intends to operate the US REIT in such a manner so as to qualify as a REIT on a
continuous basis in the future. However, actual qualification as a REIT will depend upon meeting,
through actual annual and quarterly operating results, the various conditions imposed by the Code. If
the US REIT fails to qualify as a REIT in any taxable year, it will be subject to US federal and state
67
Pure Multi-Family REIT LP
Notes to Consolidated Financial Statements
Expressed in United States dollars
income taxes at regular US corporate rates, including any applicable alternative minimum tax. In
addition, the US REIT may not be able to requalify as a REIT for the four subsequent taxable years.
Even if the US REIT qualifies for taxation as a REIT, the US REIT may be subject to certain US state
and local taxes on its income and property, and to US federal income and excise taxes on its
undistributed taxable income and/or specified types of income in certain circumstances.
b. Texas Franchise Tax
Texas Franchise Tax applicable to Pure Multi-Family, for its investment properties operated in Texas
during the year ended December 31, 2016, is equal to 0.75% of the lesser of: (i) 70% of total revenue;
(ii) 100% of total revenue less cost of goods sold; (iii) 100% of total revenue less compensation
expense; or (iv) 100% of total revenue less $1 million. Pure Multi-Family has recorded a provision for
Texas Franchise Tax of $287,241 for the year ended December 31, 2016 (year ended December 31,
2015 - $378,175), which is included within other expenses in the consolidated statement of income and
comprehensive income.
P. Earnings per unit
Basic and diluted earnings per Class A and Class B unit have been calculated based on the proportion of
the earnings allocated to the respective class of units, and the respective weighted average number of Class
A units and Class B units outstanding.
Q. Provisions
Provisions are recognized by Pure Multi-Family when: (i) Pure Multi-Family has a present legal or
constructive obligation as a result of past events; (ii) it is probable that an outflow of resources will be
required to settle the obligation; and (iii) the amount can be reasonably estimated. If the time value of
money is material, provisions are discounted using a current rate that reflects the risk profile of the liability,
and the increase to the provision due to the passage of time will be recognized as interest expense.
R. Significant accounting judgments and estimates
Judgments, estimates and assumptions that affect the application of accounting policies and the reported
amounts of revenues, expenses, assets and liabilities are reviewed on an ongoing basis. Actual results may
differ from these estimates.
a. Judgments
In the process of applying Pure Multi-Family’s accounting policies, management has made the
following critical judgments, which have the most significant effects on the amounts recognized in the
consolidated financial statements:
(i) Asset acquisitions
Pure Multi-Family, through the US REIT, acquires individual real estate properties. At the time of
acquisition, Pure Multi-Family considers whether or not the acquisition represents the acquisition of
a business. Pure Multi-Family accounts for an acquisition as a business combination where an
integrated set of activities is acquired in addition to the property. More specifically, consideration is
made to the extent to which significant processes are acquired and, in particular, the extent of
ancillary services provided by the property (e.g., maintenance, cleaning, security, bookkeeping,
etc.).
When the acquisition of a property does not represent a business, it is accounted for as an acquisition
of a group of assets and liabilities. The cost of the acquisition, including transaction costs, is
allocated to the assets and liabilities acquired based upon their relative fair values, and no goodwill
or deferred tax is recognized.
All acquisitions to date by Pure Multi-Family have been determined to be asset acquisitions.
68
Pure Multi-Family REIT LP
Notes to Consolidated Financial Statements
Expressed in United States dollars
b. Estimates
The significant areas of estimation include the following:
(i) Valuation of investment properties
The fair value of the investment properties is determined by management, using recognized
valuation techniques supported, in certain instances, by independent real estate valuation experts.
The determination of the fair value of investment properties requires the use of estimates such as
future cash flows from assets (based on factors such as tenant profiles, future revenue streams and
overall repair and condition of the property), capitalization rates and discount rates applicable to
those assets. These estimates are based on market conditions existing at the reporting date.
The following approaches, either individually or in combination, are used by management, together
with the appraisals, in their determination of the fair value of the investment properties:
The Income Approach derives market value by estimating the future cash flows that will be
generated by the property and then applying an appropriate capitalization rate or discount rate to
those cash flows. This approach can utilize the direct capitalization method and/or the discounted
cash flow analysis.
The Direct Comparison Approach involves comparing or contrasting the recent sale, listing or
optioned prices of properties comparable to the subject and adjusting for any significant
differences between them.
Management reviews each appraisal obtained and ensures the assumptions used by the appraisers
are reasonable and the final fair value amount reflects those assumptions used in the various
approaches above. Where an appraisal is not obtained at the reporting date, management uses the
approaches described above, for each investment property, and estimates the fair value.
The significant assumptions used by management in estimating the fair value of investment
properties are set out in note 4.
S. Accounting standards not yet adopted
a. Financial instruments: classification and measurement
On July 24, 2014 the IASB issued the complete IFRS 9, Financial Instruments (“IFRS 9 (2014)”).
The mandatory effective date of IFRS 9 (2014) is for annual periods beginning on or after January 1,
2018 and must be applied retrospectively with some exemptions. Early adoption is permitted. The
restatement of prior periods is not required and is only permitted if information is available without the
use of hindsight.
IFRS 9 (2014) introduces new requirements for the classification and measurement of financial assets.
Under IFRS 9 (2014), financial assets are classified and measured based on the business model in which
they are held and the characteristics of their contractual cash flows. The standard introduces additional
changes relating to financial liabilities. It also amends the impairment model by introducing a new
‘expected credit loss’ model for calculating impairment.
IFRS 9 (2014) also includes a new general hedge accounting standard which aligns hedge accounting
more closely with risk management. This new standard does not fundamentally change the types of
hedging relationships or the requirement to measure and recognize ineffectiveness, however it will
provide more hedging strategies that are used for risk management to qualify for hedge accounting and
introduce more judgment to assess the effectiveness of a hedging relationship. Special transitional
requirements have been set for the application of the new general hedging model.
69
Pure Multi-Family REIT LP
Notes to Consolidated Financial Statements
Expressed in United States dollars
Pure Multi-Family intends to adopt IFRS 9 (2014) in its consolidated financial statements for the annual
period beginning on January 1, 2018. Pure Multi-Family does not expect the standard to have a material
impact on the consolidated financial statements.
b. Revenue recognition
On May 28, 2014 the IASB issued IFRS 15, Revenue from Contracts with Customers (“IFRS 15”). The
new standard is effective for annual periods beginning on or after January 1, 2018. Earlier application
is permitted. IFRS 15 will replace IAS 11, Construction Contracts, IAS 18, Revenue, IFRIC 13,
Customer Loyalty Programmes, IFRIC 15, Agreements for the Construction of Real Estate, IFRIC 18,
Transfer of Assets from Customers, and SIC 31, Revenue – Barter Transactions Involving Advertising
Services.
The standard contains a single model that applies to contracts with customers and two approaches to
recognizing revenue: at a point in time or over time. The model features a contract-based five-step
analysis of transactions to determine whether, how much and when revenue is recognized. New
estimates and judgmental thresholds have been introduced, which may affect the amount and/or timing
of revenue recognized.
The new standard applies to contracts with customers. It does not apply to insurance contracts, financial
instruments or lease contracts that fall in the scope of other IFRSs.
Pure Multi-Family intends to adopt IFRS 15 in its consolidated financial statements for the annual
period beginning on January 1, 2018. Pure Multi-Family does not expect the standard to have a material
impact on the consolidated financial statements.
c. Leases
On January 13, 2016 the IASB issued IFRS 16, Leases (“IFRS 16”). The new standard is effective for
annual periods beginning on or after January 1, 2019. Earlier application is permitted for entities that
apply IFRS 15 at or before the date of initial adoption of IFRS 16. IFRS 16 will replace IAS 17, Leases
(“IAS 17”).
This standard introduces a single lessee accounting model and requires a lessee to recognize assets and
liabilities for all leases with a term of more than 12 months, unless the underlying asset is of low value.
A lessee is required to recognize a right-of-use asset representing its right to use the underlying asset
and a lease liability representing its obligation to make lease payments.
This standard substantially carries forward the lessor accounting requirements of IAS 17, while
requiring enhanced disclosures to be provided by lessors.
Other areas of the lease accounting model have been impacted, including the definition of a lease.
Transitional provisions have been provided.
Pure Multi-Family intends to adopt IFRS 16 in its consolidated financial statements for the annual
period beginning on January 1, 2019. Pure Multi-Family does not expect the standard to have a material
impact on the consolidated financial statements.
70
Pure Multi-Family REIT LP
Notes to Consolidated Financial Statements
Expressed in United States dollars
4.
INVESTMENT PROPERTIES
Balance, at December 31, 2015
Acquisitions
Dispositions
Property tax adjustments on acquisitions and dispositions
Capital additions
Fair value adjustments to investment properties
Balance, December 31, 2016
Balance, at December 31, 2014
Acquisitions
Dispositions
Property tax adjustments on acquisitions and dispositions
Capital additions
Fair value adjustments to investment properties
Balance, December 31, 2015
2016
$ 613,681,875
188,591,771
(57,100,000)
2,942,618
3,932,797
26,498,121
$ 778,547,182
2015
$ 468,518,077
172,850,553
(65,844,185)
718,222
2,920,095
34,519,113
$ 613,681,875
On March 1, 2016, Pure Multi-Family, through the US REIT, acquired Pure View at TPC (“Pure View”), a
multi-family apartment community, located in San Antonio, Texas, for a purchase price of $61,000,000, plus
standard closing costs and adjustments. This acquisition was financed with cash and a new 15-year mortgage
in the amount of $39,000,000.
On March 1, 2016, Pure Multi-Family, through the US REIT, acquired Pure Estates at TPC (“Pure Estates”),
a multi-family apartment community, located in San Antonio, Texas, for a purchase price of $56,500,000, plus
standard closing costs and adjustments. This acquisition was financed with cash and a new 8-year mortgage
in the amount of $39,000,000.
On September 14, 2016, Pure Multi-Family, through the US REIT, acquired The Avenue on Fairmount
Apartments (“Avenue”), a multi-family apartment community, located in Dallas, Texas, for a purchase price
of $71,000,000, plus standard closing costs and adjustments. This acquisition was financed with cash and a
new 12-year mortgage in the amount of $43,000,000.
On November 4, 2016, Pure Multi-Family, through the US REIT, sold Livingston Apartments (“Livingston”),
a multi-family apartment community, located in Dallas, Texas, for a sale price of $34,300,000, less standard
closing costs and adjustments. The mortgage payable, that was secured by Livingston, was paid in full as of
the same date.
On November 17, 2016, Pure Multi-Family, through the US REIT, sold Fairways at Prestonwood
(“Prestonwood”), a multi-family apartment community, located in Dallas, Texas, for a sale price of 22,800,000,
less standard closing costs and adjustments.
71
Pure Multi-Family REIT LP
Notes to Consolidated Financial Statements
Expressed in United States dollars
The gain (loss on disposal of investment properties is calculated as follows:
For the year ended December 31,
Sales price
Disposition costs
Net proceeds
Fair value of investment properties
Gain / (loss) on disposal of
investment properties
2016
$ 57,100,000
(1,484,345)
55,615,655
(57,100,000)
2015
$ 67,800,000
(1,430,727)
66,369,273
(65,844,185)
$ (1,484,345)
$ 525,088
The investment properties are pledged as security against the mortgages payable.
Investment properties are carried at fair value. As set out in note 3(R), in arriving at their estimates of fair
value, management and the independent appraisers have used their market knowledge and professional
judgment and have not relied solely on historical transactional comparisons.
Independent appraisals were performed by accredited appraisers. Management reviews each appraisal and
ensures that the assumptions used are reasonable and the final fair value amount reflects those assumptions
used in the determination of the fair market values of the properties.
Pure Multi-Family does not obtain appraisals for each property at each reporting date. Where Pure Multi-
Family does not obtain an appraisal for a specific investment property at the reporting date, management uses
specific indicators (i.e. market conditions, discount rate changes, etc.) and determines whether a change in fair
value has occurred. During the years ended December 31, 2016 and 2015, Pure Multi-Family obtained
independent appraisals on all of the investment properties it held at December 31, 2016 and at December 31,
2015, respectively. As disclosed in note 3(R), where appropriate, management incorporated these appraisals
in its determination of fair value for each of the investment properties.
The significant assumptions made relating to the valuations of the investment properties are set out below:
December 31, 2016
December 31, 2015
Weighted
average
Range
Weighted
average
Range
Capitalization rate
5.41%
4.75% - 6.00%
5.50% 5.00% - 6.00%
5. MORTGAGE RESERVE FUND
The mortgage reserve fund consists of cash on deposit requested by the lenders to be retained in escrow to pay
for any repairs to the properties and certain costs. These funds will be released to pay the respective obligations
or once certain conditions are met, such as completion of repairs. The term of the mortgage reserve fund is less
than 12 months.
6.
CASH HELD IN TRUST
Included in cash held in trust at December 31, 2016 is $40,389,430, which represents the net proceeds received
from the sale of the Livingston and Prestonwood investment properties (year ended December 31, 2015 -
$21,705,731). This cash will be released in less than 12 months, therefore it is classified as a current asset.
72
7. MORTGAGES PAYABLE
Valley Ranch
Prairie Creek
Bear Creek
Hackberry Creek
Deer Park
Fountainwood
Walker Commons
Preserve
San Brisas
Park West
Amalfi
Brackenridge
Pure View
Pure Estates
The Avenue
Prestonwood
Livingston
Pure Multi-Family REIT LP
Notes to Consolidated Financial Statements
Expressed in United States dollars
Nominal
interest rate
Year of
maturity
December 31, 2016 December 31, 2015
Face value
Face value
3.51%
4.07%
3.45%
3.90%
4.21%
4.46%
3.11%
3.26%
3.26%
4.02%
3.83%
3.72%
3.92%
3.96%
3.40%
3.46%
3.51%
2022
2030
2019
2028
2023
2023
2019
2021
2021
2030
2027
2027
2031
2024
2028
-
-
$ 13,680,000
45,590,295
32,080,000
29,500,000
16,097,831
12,511,209
28,470,000
24,478,573
16,896,184
36,500,000
45,000,000
30,600,000
38,538,770
38,483,881
43,000,000
-
-
$ 13,680,000
46,372,718
32,080,000
29,500,000
16,370,676
12,734,504
28,470,000
24,600,000
16,980,000
36,500,000
45,000,000
30,600,000
-
-
-
8,670,000
15,517,539
Total mortgages principal payable
Unamortized mortgage transaction costs
451,426,743
357,075,437
(3,600,192)
(2,873,370)
Total carrying value of mortgages payable
$ 447,826,551
$ 354,202,067
The mortgages payable are recorded at amortized cost and bear a weighted average effective interest rate of
3.74% as at December 31, 2016 (December 31, 2015 – 3.72%).
The mortgages payable are secured by charges on Pure Multi-Family’s investment properties.
Principal repayments, as of December 31, 2016, based on scheduled repayments to be made on the mortgages
payable over the next five years and thereafter are as follows:
2017
2018
2019
2020
2021
Thereafter
$ 3,605,966
4,465,280
66,684,626
6,982,188
44,253,040
325,435,643
$ 451,426,743
73
Pure Multi-Family REIT LP
Notes to Consolidated Financial Statements
Expressed in United States dollars
8.
CONVERTIBLE DEBENTURES
On August 7, 2013, Pure Multi-Family issued 23,000 6.5% convertible unsecured subordinated debentures
(each a “6.5% convertible debenture”) at a price of $1,000 per 6.5% convertible debenture, for gross proceeds
of $23,000,000. The 6.5% convertible debentures mature on September 30, 2020 and are convertible at the
holder’s option at any time into Class A Units at a conversion price of $5.65 per Class A Unit, in accordance
with the terms of the trust indenture dated August 7, 2013. On or after September 30, 2016, but prior to
September 30, 2018, the 6.5% convertible debentures may be redeemed by Pure Multi-Family, in whole or in
part, at a price equal to their principal amount plus accrued and unpaid interest thereon, provided the weighted
average trading price of the Class A Units for the 20 consecutive trading days, ending on the fifth trading day
immediately preceding the date on which notice of redemption is given, is at least 125% of the conversion
price. After September 30, 2018, the 6.5% convertible debentures may be redeemed by Pure Multi-Family at
any time. During the year ended December 31, 2016, ten of the originally issued 23,000 6.5% convertible
debentures had been converted into Class A Units.
The following summarizes the face and carrying values of the 6.5% convertible debentures:
Balance as at December 31, 2014
Amortization of transaction costs
Accretion of liability component
Balance as at December 31, 2015
Conversion of convertible debenture
Amortization of transaction costs
Accretion of liability component
Convertible
Debentures
Face Value
$ 23,000,000
-
-
$ 23,000,000
(10,000)
-
-
Liability
Component
Carrying Value
$ 19,876,109
Equity
Component
Carrying Value
$ 1,985,429
155,350
288,431
-
-
$ 20,319,890
(9,081)
168,316
313,777
$ 1,985,429
(919)
-
-
Balance as at December 31, 2016
$ 22,990,000
$ 20,792,902
$ 1,984,510
9.
PREFERRED UNITS OF SUBSIDIARY
During the year ended December 31, 2013, the US REIT issued 125 preferred units at $1,000 per preferred unit
for gross proceeds of $125,000. On consolidation, the preferred units of the US REIT are reflected as a liability
of Pure Multi-Family.
The preferred units are non-voting preferred units. Unitholders holding preferred units are entitled to receive
dividends from the US REIT at a per annum rate equal to 12.5%, payable on June 30 and December 31 of each
year. Unitholders holding preferred units will be allocated such return in priority to any allocations or
distributions to all other classes and series of units of the US REIT. However, after payment of such return to
unitholders holding preferred units, preferred unitholders are not otherwise entitled to share in the income of
the US REIT.
The US REIT may redeem the preferred units at any time, for a price equal to $1,000 per preferred unit, plus
accrued and unpaid distributions.
Due to the fixed distributions and preferred treatment for preferred units, they meet the definition of a liability.
In addition, the Board does not expect to redeem any preferred units within the next year. Thus, the preferred
units are classified as non-current liabilities.
Pure Multi-Family declared distributions of $15,625 during the year ended December 31, 2016 to the preferred
unitholders (year ended December 31, 2015 - $15,625).
74
10.
PARTNERS’ CAPITAL
a. Limited Partners and General Partner
Pure Multi-Family REIT LP
Notes to Consolidated Financial Statements
Expressed in United States dollars
The capital of Pure Multi-Family consists of an unlimited number of units of Pure Multi-Family and the interest
held by the Governing GP. The Governing GP has made a capital contribution of $20 to Pure Multi-Family
and has no further obligation to contribute capital.
On May 30, 2012, the Managing GP subscribed for 200,000 Class B units (each a “Class B Unit”) of Pure
Multi-Family, at a price of $5.00 per Class B Unit, for gross proceeds to Pure Multi-Family of $1,000,000,
which initially entitled the Class B Unitholders to a 5% interest in Pure Multi-Family. Pure Multi-Family did
not issue any additional Class B Units subsequent to this.
From the date of formation on May 8, 2012, to December 31, 2015, Pure Multi-Family had issued 49,039,824
Class A Units for gross proceeds of $245,366,767, less offering costs. During the years ended December 31,
2016 and 2015, the following transactions occurred:
(i) On July 29, 2016, Pure Multi-Family completed the closing of a public offering of 4,884,000 Class A
Units on a bought deal basis, at a price of $5.857 (or CDN$7.64) per Class A Unit for gross proceeds of
$28,603,483 (or CDN$37,313,760). Pure Multi-Family issued the Class A Units from treasury.
(ii) On August 12, 2016, a Determination Event, as defined in the LP Agreement, occurred as a result of
Pure Multi-Family’s market capitalization exceeding $300,000,000 for a period of 10 consecutive
trading days. Upon the occurrence of the Determination Event, the number of Class A Units, into which
the Class B Units may be converted to, was fixed at 2,665,835.
(iii) During the year ended December 31, 2016, the remaining 2,142,913 Class A Unit purchase warrants
(each a “Warrant”) were exercised for 2,142,913 Class A Units at an exercise price of $5.15 for gross
proceeds of $11,036,002 (year ended December 31, 2015 – $283,250). Pure Multi-Family issued the
Class A Units from treasury.
(iv) During the year ended December 31, 2016, ten 6.5% convertible debentures were converted at a
conversion price of $5.65 into 1,769 Class A Units (year ended December 31, 2015 – $nil). Pure Multi-
Family issued the Class A Units from treasury.
(v) On May 8, 2015, Pure Multi completed a public offering of 6,900,000 Class A Units, on a bought deal
basis, at a price of $5.10 per Class A Unit for gross proceeds of $35,190,000, less offering costs. Pure
Multi-Family issued the Class A Units from treasury.
(vi) On October 27, 2015, 55,000 Class A Unit purchase warrants (each a “Warrant”) were exercised for
55,000 Class A Units, at an exercise price of $5.15, for gross proceeds of $283,250. Pure Multi issued
the 55,000 Class A Units from treasury.
(vii) On December 11, 2015, Pure Multi completed a public offering of 7,250,000 Class A Units, on a bought
deal basis, at a price of $5.40 per Class A Unit for gross proceeds of $39,150,000, less offering costs.
Pure Multi-Family issued the Class A Units from treasury.
Class A Units outstanding, beginning of year
49,039,824
34,834,824
Class A Units issued, public offering
4,884,000
14,150,000
Class A Units issued, warrants exercised
2,142,913
55,000
Class A Units issued, debentures converted
1,769
-
Class A Units outstanding, end of year
56,068,506
49,039,824
2016
2015
75
b. Other Equity Items
Pure Multi-Family REIT LP
Notes to Consolidated Financial Statements
Expressed in United States dollars
Convertible
Debentures
Equity Component
(note 8)
Warrants
Total
Balance as at December 31, 2014
Warrants exercised, net of offering costs
Balance as at December 31, 2015
Warrants exercised, net of offering costs
Convertible Debentures converted, equity
portion
$ 1,985,429
-
$ 1,985,429
-
$ 697,595
$ 2,683,024
(17,456)
(17,456)
$ 680,139
$ 2,665,568
(680,139)
(680,139)
(919)
-
(919)
Balance as at December 31, 2016
$ 1,984,510
$ -
$ 1,984,510
During the year ended December 31, 2014, Pure Multi-Family issued 2,197,913 Warrants. Each Warrant
entitled the holder to acquire one additional Class A Unit from Pure Multi-Family at a price of $5.15 per Class
A Unit until November 20, 2016. All outstanding Warrants were exercised before November 20, 2016. As at
December 31, 2015, there were 2,142,913 Warrants outstanding.
11.
INTEREST EXPENSE
Interest expense consists of the following:
Mortgage interest
Convertible debenture interest
Amortization of transaction costs and accretion of
convertible debentures
Mortgage prepayment expense (1) (2)
Amortization of mark to market mortgage adjustment (2)
Credit facility interest
Year ended
December 31, 2016 December 31, 2015
$ 16,158,464
1,498,203
$ 11,156,074
1,495,000
968,404
1,173,956
-
-
1,255,192
5,188,836
(3,209,439)
112,402
$ 19,799,027
$ 15,998,065
Notes:
(1) On September 12, 2016, Pure Multi-Family incurred a prepayment expense of $1,173,956 related to the early pay off
of the mortgage secured by Prestonwood.
(2) On September 9, 2015, Pure Multi-Family obtained new mortgage financing on Prairie Creek Villas and incurred a
mortgage prepayment expense of $5,188,836 related to paying off its prior mortgage. This prepayment expense was
partially offset by the write-off of the unamortized portion of the market to market mortgage adjustment in the amount
of $2,737,202 on the same date.
76
12. NET CHANGE IN NON-CASH WORKING CAPITAL ITEMS
Pure Multi-Family REIT LP
Notes to Consolidated Financial Statements
Expressed in United States dollars
Cash provided by (used in)
Amounts receivable
Prepaid expenses
Accounts payable and accrued liabilities
Unearned revenue
Rental deposits
13. CAPITAL MANAGEMENT
Year ended
December 31, 2016
$ (1,168,097)
(412,566)
1,502,983
167,955
163,166
December 31, 2015
$ (325,302)
(368,851)
(1,676,070)
(93,794)
202,435
$ 253,441
$ (2,261,582)
Pure Multi-Family defines capital as the aggregate of partners’ capital, preferred units of subsidiary and long
term debt. Pure Multi-Family’s objectives in managing capital are to maintain a level of capital that complies
with investment and debt restrictions pursuant to the initial offering prospectus; complies with existing debt
covenants, if any; funds its business strategies; and builds long-term partners’ value. Pure Multi-Family’s
capital structure is approved by the board of directors of the Governing GP through its periodic reviews.
The LP Agreement provides for a maximum indebtedness level of up to 70% of the gross book value. The
term "indebtedness" means any obligation of Pure Multi-Family for borrowed money (including the face
amount outstanding under any convertible debentures and any outstanding liabilities of Pure Multi-Family
arising from the issuance of subordinated notes, but excluding any premium in respect of indebtedness assumed
by Pure Multi-Family for which Pure Multi-Family has the benefit of an interest rate subsidy), but excludes
trade accounts payable, distributions payable to unitholders, preferred units of subsidiary, accrued liabilities
arising in the ordinary course of business and short-term acquisition credit facilities. The LP Agreement defines
“gross book value” as the book value of the assets of Pure Multi-Family plus the amount of accumulated
depreciation and amortization in respect of such assets (and related intangible assets), the amount of future
income tax liability arising out of indirect acquisitions and excluding the amount of any receivable reflecting
interest rate subsidies on any debt assumed by Pure Multi-Family. Pure Multi-Family’s indebtedness is 55.2%
as at December 31, 2016 (December 31, 2015 – 54.6%). Pure Multi-Family was in compliance with all of its
investment and debt restrictions during the years ended December 31, 2016 and 2015.
There were no changes in Pure Multi-Family’s approach to capital management during the year ended
December 31, 2016.
The capital structure consisted of the following components at December 31, 2016 and December 31, 2015:
Capital
Mortgages payable
Convertible debentures
Preferred units of subsidiary
Partners’ capital
December 31, 2016
December 31, 2015
$ 447,826,551
20,792,902
125,000
370,162,057
$ 354,202,067
20,319,890
125,000
304,274,226
Total capital
$ 838,906,510
$ 678,921,183
77
14.
FINANCIAL INSTRUMENTS
Fair value of financial instruments
Pure Multi-Family REIT LP
Notes to Consolidated Financial Statements
Expressed in United States dollars
For certain of Pure Multi-Family’s financial instruments, including cash and cash equivalents, amounts
receivable, mortgage reserve fund, and accounts payable and accrued liabilities, the carrying amounts
approximate the fair value due to the short-term nature of the instruments.
The fair value of the mortgages payable and preferred units have been calculated based on discounted future
cash flows using discount rates that reflect current market conditions for instruments having similar terms and
conditions. Discount rates are either provided by lenders or are observable in the open market. The fair value
of the convertible debentures has been calculated using quoted prices in active markets.
The following table presents the carrying amount and fair value of Pure Multi-Family’s non-current financial
instruments:
December 31, 2016
Carrying
Amount
$ 447,826,551
125,000
20,792,902
Fair Value
$ 440,115,993
125,000
25,151,060
December 31, 2015
Carrying
Amount
$ 354,202,067
125,000
20,319,890
Fair Value
$ 366,039,986
125,000
23,000,000
Mortgages payable
Preferred units of subsidiary
Convertible debentures
Financial risk management
The board of directors of the Governing GP has the overall responsibility for the establishment and oversight
of Pure Multi-Family’s risk management framework. Pure Multi-Family’s risk management policies are
established to identify and analyze the risks faced by Pure Multi-Family, to set appropriate risk limits and
controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed
regularly to reflect changes in market conditions and in response to Pure Multi-Family’s activities.
In the normal course of business, Pure Multi-Family, through the US REIT, is exposed to a number of risks
that can affect its operating performance. These risks include, but are not limited to, credit risk, interest rate
risk, liquidity risk, currency risk and environmental risk. These risks, and the actions taken to manage them,
are as follows:
a. Credit risk
Credit risk is the risk of financial loss to Pure Multi-Family if a tenant, customer or counterparty to a
financial instrument fails to meet its contractual obligations, and arises principally from Pure Multi-
Family’s receivables from tenants.
Pure Multi-Family’s exposure to credit risk is influenced mainly by the individual characteristics of each
tenant. Pure Multi-Family minimizes the risk by checking tenants’ credit histories, requesting security
deposits and initiating a prompt collection process. All trade receivables are current.
b. Interest rate risk
Interest rate risk arises from the possibility that the value of, or cash flows related to, a financial instrument
will fluctuate as a result of changes in market interest rates. Pure Multi-Family is exposed to interest rate
risk from the interest rate differentials between the market rate and the rates used on these financial
instruments.
Pure Multi-Family manages its financial instruments and interest rate risks based on its cash flow needs
and with a view to minimizing interest expense. Whenever possible, Pure Multi-Family, through the US
REIT, tries to secure fixed interest rate mortgages. As Pure Multi-Family does not have any mortgages
78
Pure Multi-Family REIT LP
Notes to Consolidated Financial Statements
Expressed in United States dollars
maturing prior to 2019 and all of the mortgages payable bear interest at fixed rates, Pure Multi-Family does
not face significant interest rate risk in the context of its outstanding mortgages payable.
c. Liquidity risk
Liquidity risk is the risk that Pure Multi-Family will not be able to meet its financial obligations as they fall
due. Real estate property investments tend to be relatively illiquid, with the degree of liquidity generally
fluctuating in relation to demand for and the perceived desirability of such investments. Such illiquidity
may tend to limit Pure Multi-Family’s ability to vary its portfolio promptly in response to changing
economic or investment conditions. If Pure Multi-Family were required to liquidate the investment
properties, the proceeds to Pure Multi-Family might be significantly less than the aggregate carrying value
of such property.
Pure Multi-Family’s approach to managing liquidity is to ensure that it will have sufficient cash available
to meet its liabilities when due. In addition, Pure Multi-Family intends to refinance any mortgages which
mature within six months.
The following table provides the future non-discounted scheduled payments of financial liabilities, including
estimated interest payments:
Year ended December 31,
2017
2018
2019
2020
2021 and
thereafter
Mortgages payable (principal
and interest)
Convertible debentures payable
(principal and interest)
Preferred units of subsidiary
(principal and interest)
Accounts payable and accrued
liabilities
$ 20,488,618
$ 21,197,592
$ 82,565,479
$ 21,235,763
$ 452,579,823
1,494,350
1,494,350
1,494,350
24,110,763
-
15,625
15,625
15,625
15,625
140,625
12,287,387
-
-
-
-
Total
$ 34,285,980
$ 22,707,567
$ 84,075,454
$ 45,362,151
$ 452,720,448
d. Currency risk
Pure Multi-Family is exposed to minimal currency risk since only a small portion of the expenses is in
Canadian dollars.
e. Environmental risk
Pure Multi-Family, through the US REIT, is subject to various federal, state and municipal laws relating to
the environment. On acquisition, Pure Multi-Family conducts environmental inspections of its properties
and appropriate testing by qualified environmental consultants when required to ensure compliance with
all applicable environmental laws.
15. RELATED PARTY TRANSACTIONS AND COMMITMENTS
Managing GP
Pure Multi-Family is related to the Managing GP, by virtue of having an officer and director in common
(Stephen Evans).
79
Pure Multi-Family REIT LP
Notes to Consolidated Financial Statements
Expressed in United States dollars
Pure Multi-Family declared distributions to the Managing GP in the amount of $989,687 during the year ended
December 31, 2016 (year ended December 31, 2015 - $790,515). Included in accounts payable and accrued
liabilities at December 31, 2016 was $nil (December 31, 2015 - $nil) payable to the Managing GP.
Asset Management Agreement
Effective September 1, 2016, Pure Multi-Family terminated its Asset Management Agreement with the
Managing GP, as permitted upon the triggering of the Determination Event. No penalties were incurred upon
termination of the Asset Management Agreement. As part of the internalization of asset management, Pure
Multi-Family is responsible for rent, salary, office costs and other general management costs.
Prior to this time, the Managing GP, pursuant to the Asset Management Agreement, provided asset
management, administrative and reporting services to Pure Multi-Family as its managing general partner at no
cost. The Asset Management Agreement also required the Managing GP to provide Pure Multi-Family, at no
cost, with support services consisting of office space and equipment and the necessary clerical and secretarial
personnel for the administration of its day-to-day activities. In lieu of the fees typically associated with a third
party asset management agreement, the Managing GP was entitled to a reimbursement of any reasonable costs
and expenses (including legal and audit costs, but excluding personnel costs) that it incurred providing asset
management services to Pure Multi-Family.
Tipton Asset Group, Inc. (“Tipton”) is the property manager for Pure Multi-Family. Pure Multi-Family is
related to Tipton by virtue of having an officer and director in common (Bryan Kerns) with a subsidiary of
Pure Multi-Family. Tipton charged property management fees in the amount of $2,301,288 during the year
ended December 31, 2016 (year ended December 31, 2015 $1,764,027). Included in accounts payable and
accrued liabilities at December 31, 2016 was $nil (December 31, 2015 - $nil) payable to Tipton.
Compensation
The directors of the Governing GP who are not affiliated with or employees of the Managing GP receive annual
compensation, in addition to fees for attending meetings of the directors or any committee, and acting as
committee chairs and members. As well, the Governing GP indirectly reimburses such directors for any out
of pocket expenses, including out of pocket expenses for attending meetings. Pure Multi-Family reimburses
the Governing GP for such amounts. In addition, Pure Multi-Family has obtained insurance coverage for such
directors. Compensation is reviewed on an annual basis, giving consideration to Pure Multi-Family’s growth
and the extent of its portfolio. The amount incurred during the year ended December 31, 2016 was $301,403
(year ended December 31, 2015 - $210,293).
As part of the internalization of asset management, as described in Asset Management Agreement, certain key
personnel of the Managing GP became corporate employees of a subsidiary of Pure Multi-Family effective
September 1, 2016. For the year ended December 31, 2016, corporate compensation, including salaries,
bonuses, and other short term employee benefits, incurred by Pure Multi-Family and recorded in general and
administrative expense was $251,810 (December 31, 2015 - $nil).
16. LEASES
Pure Multi-Family, through the US REIT, has entered into lease agreements on its investment properties. The
residential property leases typically have lease terms of 1 to 12 months. Future minimum rental revenue to be
earned under non–cancellable operating leases is $33,231,374 as at December 31, 2016 (December 31, 2015 -
$27,215,236).
17.
FAIR VALUE MEASUREMENT
Pure Multi-Family measures investment properties at fair value at each balance sheet date, the 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, acting at arms-length, at the measurement date under current market conditions. In certain
80
Pure Multi-Family REIT LP
Notes to Consolidated Financial Statements
Expressed in United States dollars
circumstances, the initial fair value may be based on other observable current market transactions, without
modification or on a valuation technique using market based inputs.
Fair value measurements recognized in the statement of financial position are categorized in accordance with
the following levels:
Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2: Quoted prices in active markets for similar assets or liabilities or valuation techniques where
significant inputs are based on observable market data.
Level 3: Valuation techniques for which any significant input is not based on observable market data.
The fair value hierarchy of assets and liabilities measured at fair value on the consolidated statement of financial
position or disclosed in the notes to the financial statements is as follows:
(000’s)
Investment properties
Mortgages payable
Preferred units of subsidiary
Convertible debentures
25,151
December 31, 2016
December 31, 2015
Level 1
Level 2
Level 3
Level 1
Level 2
Level 3
$ -
$ - $ 778,547
$ -
$ - $ 613,682
-
-
440,116
125
-
-
-
-
-
-
23,000
366,040
125
-
-
-
-
There have been no transfers between the levels during the year.
As disclosed above, the fair value methodology for Pure Multi-Family’s investment properties is considered
Level 3, as significant unobservable inputs are required to determine fair value. Refer to note 4 for a description
of how management determines fair value and for further details of the average capitalization rates and ranges
for investment properties.
Investment properties as at December 31, 2016 and December 31, 2015 have been valued using the overall
capitalization rate (“OCR”) method, an income based approach, whereby the stabilized net operating income
is capitalized at the requisite OCR.
Valuations determined by the OCR method are most sensitive to changes in capitalization rates. The table
below summarizes the sensitivity of the fair value of investment properties to changes in the capitalization rate
at December 31, 2016:
Rate sensitivity
+ 75 basis points
+ 50 basis points
+ 25 basis points
Base rate (5.41%)
- 25 basis points
- 50 basis points
- 75 basis points
OCR Sensitivity
Fair value
Change in fair value
$ 683,357,663
$ (95,189,519)
712,379,678
743,988,254
778,547,182
816,492,235
858,350,023
904,763,131
(66,167,504)
(34,558,928)
-
37,945,053
79,802,841
126,215,949
81
Pure Multi-Family REIT LP
Notes to Consolidated Financial Statements
Expressed in United States dollars
18. DILUTED EARNINGS PER CLASS A UNIT
The components of diluted earnings per share are summarized in the following tables:
Year ended
Basic net income and comprehensive income
Dilutive interest expense (1)
Diluted net income and comprehensive income
Diluted net income and comprehensive income
allocated to Class A unitholders
Notes:
(3) Dilutive interest expense includes the removal of the interest expense related to the dilutive 6.5% convertible
$ 47,714,257
$ 50,462,252
December 31, 2016
$ 48,163,729
1,980,297
50,144,026
December 31, 2015
$ 51,179,380
1,938,780
53,118,160
debentures.
Weighted average number of Class A units - basic
Dilutive effect of the conversion of convertible
debentures using the treasury stock method (1)
Dilutive effect of the conversion of warrants (2)
Year ended
December 31, 2016
51,553,540
December 31, 2015
39,761,071
4,069,027
116,435
4,070,796
-
43,831,867
Weighted average number of Class A units - dilutive
Notes:
(1) Conversion of 6.5% convertible debentures based on exercise price of $5.65 per Class A Unit.
(2) Conversion of warrants based on exercise price of $5.15 per Class A Unit.
55,739,002
19.
SUBSEQUENT EVENTS
a. On January 25, 2017, Pure Multi-Family, through the US REIT, acquired a multi-family apartment
community, known as the Pure Creekside at Onion Creek, located in Austin, Texas, for a purchase price
of $40,000,000, plus standard closing costs and adjustments. This acquisition was financed with cash and
proceeds from a new mortgage financing.
b. On January 27, 2017, Pure Multi-Family, through the US REIT, acquired a multi-family apartment
community, known as Lansbrook at Twin Creeks, located in Dallas, Texas, for a purchase price of
$40,000,000, plus standard closing costs and adjustments. This acquisition was financed with cash and
proceeds from a new mortgage financing.
82
ThiS PAge iS leFT inTenTionAllY blAnk
83 corPorATe inFormATion
mAnAgemenT
DirecTorS
STePhen evAnS
Director and
chief executive officer
SAmAnThA ADAmS
vice President
ScoTT ShillingTon, cPA, cA
chief Financial officer
AnDreW greig
Director of
investor relations
roberT king
lead independent Director
DouglAS ScoTT, cPA, cA
independent Director
FrASer berrill
independent Director
John o’neill
independent Director
JAmeS reDekoP
independent Director
JAmeS SPeAkmAn
Director
corporate legal counsel
SherrY TrYSSenAAr
independent Director
84 corPorATe inFormATion
brackenridge at midtown - San Antonio, TX
HEAd OffiCE
910-925 West georgia Street
vancouver, bc canada v6c 3l2
604-681-5959
T:
info@puremultifamily.com
e:
www.puremultifamily.com
W:
tRAnsfER AgEnt
computershare Trust company
of canada
100 university Avenue, 9th Floor
Toronto, on m5J 2Y1
T:
TF:
F:
TFF:
514-982-7555
1-800-564-6253
1-866-249-7775
1-888-453-0330
AuditORs
kPmg llP chartered Accountants
Po box 10426, 777 Dunsmuir Street
vancouver, bc v7Y 1k3
604-691-3000
T:
F:
604-691-3031
www.kpmg.ca
CORPORAtE COunsEl
clark Wilson llP
800-885 West georgia Street
vancouver, bc v6c 3h1
604-891-7767
T:
F:
604-687-6314
invEstOR RElAtiOns
Andrew greig, Director of investor relations
T:
TF:
e:
604-681-5959
1-888-681-5959
agreig@puremultifamily.com
stOCk ExCHAngE listing
TSX venture
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listing symbOl
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AnnuAl And sPECiAl
mEEting Of sHAREHOldERs
11:00 Am Pacific Standard Time
Thursday may 25, 2017
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86