2024 ANNUAL REPORT
Canada’s
Shopping Centre
SmartCentres
at a Glance
SmartCentres is one of Canada’s largest fully integrated REITs, with a best-in-class
and growing mixed-use portfolio featuring 195 strategically located properties in
communities across the country. SmartCentres has approximately $11.9 billion in
assets consisting of income producing value-oriented retail, purpose-built rental,
first-class office and self-storage properties. SmartCentres owns 35.3 million
square feet of leasable space with 98.7% in place and committed occupancy,
on 3,500 acres of owned land across Canada.
SmartCentres’ portfolio
includes an ownership interest
in properties comprising retail
shopping centres, mixed-use
properties, and development
lands. Properties within 10km
reach to over 90% of the
Canadian population.
In-place and
Commited
Occupancy
Properties at
Key Intersections
Across Canada
Total Assets
$11.9B
98.7%
Square Feet of
Income-Producing
Properties
35.3M
Square Feet of
Future Mixed-use
Pipeline1
85.1M
195
Revenue from
Walmart
23%
KEY OPERATIONAL
& FINANCIAL STATISTICS
1 At REIT share
Stable Tenants
and Cash Flow
Future Mixed-use
Development
Pipeline consists principally of
residential projects but also
includes additional retail, seniors
housing, self-storage and office
projects as part of the portfolio’s
expected future buildout.
Total Square Feet
85.1M
Under Construction | 1%
1.0 Million sq.ft.
Zoning Approved | 68%
58.1 Million sq.ft.
Rezoning Application Submitted | 11%
8.9 Million sq.ft.
In Planning | 20%
17.1 Million sq.ft.
SMARTCENTRES AT A GLANCE
2024
rental receipts
of tenants are national
or regional
of rental income from
top 10 tenants
of tenants are essential
services tenants
99+%
95+%
45+%
60+%
TOP 10 TENANTS
21,000+ storage units
1.4+ Million sq.ft. of Operating GFA
With 6 under construction (1 BC, 3 QC, 2 ON)
2 anticipated construction starts in 2025
ESG Highlights
Creating Value & Diversifying by
Partnering with Leading Players
ESG and sustainability considerations are
woven into the fabric of SmartCentres
of retail properties achieved BOMA Best
certification for excellence in energy
and environmental management
of retail tenant portfolio committed
to net zero by 2050
Electric vehicle charging stations
at properties
Volunteer hours donated to local
charities
Associates are women
76%
55%
237
1,325
51%
Penguin
SMARTCENTRES AT A GLANCE
2024
Management’s Discussion and Analysis
3
Section I — Introduction
5
Section II — Business Overview,
Strategic Direction and Outlook
17
Section III — Environmental, Social and
Governance (“ESG”)
18
Section IV — Development Activities
20
Section V — Business Operations
and Performance
28
Section VI — Leasing Activities
and Lease Expiries
41
Section VII — Asset Profile
48
Section VIII — Financing and
Capital Resources
58
Section IX — Related Party Transactions
67
Section X — Accounting Policies,
Risk Management and Compliance
71
Section XI — Glossary of Terms
80
Consolidated Financial Statements
81
$34.98
$23.89
Contents
MARKET STATISTICS1
7.7%
Dividend Yield
*SmartCentres has never cut a
distribution since its inception
Net Asset Value per Unit
Unit Price
Discount to
Net Asset Value
31.7%
1 Market data as of April 8, 2025
Message from the
Executive Chairman
& CEO
Everyone sees strong financial results once
they have happened. Few see when the seeds
of those results were first planted. The seeds
for our strong financial results in 2024 were
planted many years ago, as are seeds today being
planted for strong financial results tomorrow. At
SmartCentres, we take the long view.
Our core business – owning and operating
value-oriented, open-air retail shopping centres
- remains healthy. In 2024, some notable
achievements include:
•
98.7% occupancy; 99+% rent collection
•
Over 900,000 sq. ft. of vacany leased up
•
New large space leasing interest from core
Anchors (Walmart, Costco, food stores,
Canadian Tire Corp. etc.) was, and continues
to be strong
A reduction in retail square footage, growth in
population in Canada over the last 15 years and
visibility on role of e-commerce, has created
strong retail demand country-wide, particularly
for food, general merchandise and value-focused
retailers. SmartCentres is well positioned to
respond to this demand.
In our mixed-use portfolio, we secured 9.9
million sq. ft. of rezoning permissions in 2024,
with a development pipeline now exceeding a
substantial 85 million sq. ft. – 70% municipally
approved. The value of these permissions will be
realized at the appropriate time.
We are proud of our financial performance and
robust balance sheet:
•
Same Properties Net Operating Income
growth of 4.6% (excluding anchors)
•
Portfolio-wide rental growth of 6.1%, or 8.8%
excluding anchors
•
Unencumbered asset pool of approximately
$9.5 billion
Nothwithstanding this performance and
embedded value, the gap between our year-end
net asset value of approximately $35.00 per
unit and the trading price of our units remains
inexplicably large.
Environmental, Social, and Governance (ESG)
initiatives remain central to our strategy and
operations:
•
Environmental: Having completed a
framework for net zero 2050, the REIT has
commenced the development of a more
detailed plan, with milestones, to reach net
zero greenhouse gas emissions
•
Social: 38% female board representation and
36 community engagement events
•
Governance: Improved GRESB results and
strengthened cybersecurity and privacy
protocols
From the outset, SmartCentres was built for
Canadians by Canadians. As we together enter
a new era of trade and tariffs, we redouble our
commitment to bring value to all Canadians at a
time they need it most.
DEAR FELLOW UNITHOLDERS,
Mitchell Goldhar
Executive Chairman and CEO
SmartCentres REIT
Yours truly,
Management’s
Discussion
and Analysis
Section I —
Introduction
5
5
7
9
16
About this Management’s Discussion
and Analysis
Key Operational, Development
and Financial Information
Highlights for the Quarter
Presentation of Certain Terms
Including Non-GAAP Measures
Forward-Looking Statements
Section II — Business Overview,
Strategic Direction and Outlook
Business Overview
17
Strategic Direction
17
Outlook
17
Section III — Environmential,
Social and Goverance (“ESG”)
18
Section IV — Development Activities
Mixed-Use Development Initiatives
20
Residential Development Inventory
24
Properties Under Development
25
Completed and Future Earnouts and
Developments on Existing Properties
26
Section V — Business Operations
and Performance
Results of Operations - Income Statements,
NOI, SPNOI, Adjusted EBITDA
28
Other Measures of Performance -
FFO, AFFO, Weighted Average Units,
Distributions
33
General and Administrative Expense
38
Interest Income and Interest Expense
38
Quarterly Results and Trends
40
Section VI — Leasing Activities
and Lease Expiries
Retail, Office and Industrial
41
Self-Storage Rental Facilities
46
Residential Rentals
47
Section VII — Asset Profile
Proportionately Consolidated
Balance Sheets
48
Investment Properties
49
Maintenance Capital Requirements
52
Equity Accounted Investments
53
Amounts Receivable and Other,
and Prepaid Expenses, Deposits
and Deferred Financing Costs
55
Mortgage, Loans and Notes Receivable
56
Section VIII — Financing and
Capital Resources
Capital Resources and Liquidity
58
Debt
60
Financial Covenants
65
Unitholders’ Equity
66
Section IX — Related Party Transactions
67
Section X — Accounting Policies,
Risk Management and Compliance
Material Accounting Estimates
and Policies
71
Risks and Uncertainties
73
Income Taxes and the REIT Exception
78
Disclosure Controls and Procedures and
Internal Controls Over Financial Reporting
79
Section XI — Glossary of Terms
80
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED DECEMBER 31, 2024
Section I — Introduction
About this Management’s Discussion and Analysis
This Management’s Discussion and Analysis (“MD&A”) sets out SmartCentres Real Estate Investment Trust’s (“SmartCentres” or
the “Trust”) business overview and strategic direction, and provides an analysis of the financial performance and financial
condition as at December 31, 2024 and for the year ended December 31, 2024, management’s outlook and the risks facing the
business.
This MD&A should be read in conjunction with the Trust’s audited consolidated financial statements for the years ended
December 31, 2024 and December 31, 2023, and the notes contained therein, and the Trust’s annual information form (“AIF”).
Such consolidated financial statements have been prepared in accordance with International Financial Reporting Standards as
issued by the International Accounting Standards Board (“IFRS Accounting Standards”). The Canadian dollar is the functional
and reporting currency for purposes of preparing the consolidated financial statements for the years ended December 31, 2024
and December 31, 2023.
This MD&A is dated February 12, 2025, which is the date of the press release announcing the Trust’s results for the year ended
December 31, 2024. Disclosure contained in this MD&A is current to that date, unless otherwise noted. Certain terms defined in
this MD&A are defined in the Glossary of Terms.
Key Operational, Development and Financial Information
Portfolio Information (Number of properties)
Retail properties
155
155
155
Office properties
4
4
4
Self-storage properties
11
8
6
Residential properties
3
3
2
Industrial properties
1
1
—
Properties under development
21
20
19
Total number of properties with an ownership interest
195
191
186
Leasing and Operational Information(1)
Gross leasable retail, office and industrial area (in thousands of sq. ft.)
35,300
35,045
34,750
In-place and committed occupancy rate
98.7 %
98.5 %
98.0 %
Average lease term to maturity (in years)
4.2
4.3
4.2
In-place net retail rental rate excluding Anchors (per occupied sq. ft.)
$23.48
$22.59
$22.20
Financial Information
Total assets(2)
11,939,689
11,905,422
11,702,153
Investment properties(2)
10,659,783
10,564,269
10,286,891
Total unencumbered assets(3)
9,464,521
9,170,121
8,415,900
Debt(2)
5,046,279
4,999,522
4,983,265
Debt to Aggregate Assets(3)(4)(5)
43.7 %
43.1 %
43.6 %
Adjusted Debt to Adjusted EBITDA(3)(4)(5)
9.6X
9.6X
10.3X
Weighted average interest rate(3)(4)
3.92 %
4.15 %
3.86 %
Weighted average term of debt (in years)
3.1
3.6
4.0
Interest coverage ratio(3)(4)
2.5X
2.7X
3.1X
(in thousands of dollars, except per Unit and other non-financial data)
December 31, 2024
December 31, 2023
December 31, 2022
(1)
Excluding residential and self-storage area.
(2)
Represents a Generally Accepted Accounting Principles (“GAAP”) measure.
(3)
Represents a non-GAAP measure. The Trust’s method of calculating non-GAAP measures may differ from other reporting issuers’ methods and, accordingly, may not be comparable.
For definitions and basis of presentation of the Trust’s non-GAAP measures, refer to “Presentation of Certain Terms Including Non-GAAP Measures” and “Non-GAAP Measures” in this
MD&A.
(4)
Includes the Trust’s proportionate share of equity accounted investments.
(5)
As at December 31, 2024, cash-on-hand of $34.9 million was excluded for the purposes of calculating the applicable ratios (December 31, 2023 – $31.4 million, December 31, 2022 –
$33.4 million).
MANAGEMENT’S DISCUSSION AND ANALYSIS
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SMARTCENTRES REAL ESTATE INVESTMENT TRUST | 2024 ANNUAL REPORT 15
5
(in thousands of dollars, except per Unit information)
December 31, 2024
December 31, 2023
December 31, 2024
December 31, 2023
Financial Information
Rentals from investment properties and
other(1)
229,743
211,021
918,359
834,581
Net income and comprehensive income(1)
141,850
14,165
292,070
510,103
Cash flows provided by operating activities(1)
122,118
93,745
374,208
330,853
Net rental income and other(1)
141,580
128,451
547,508
513,561
NOI(2)(3)
148,614
136,349
572,536
560,756
NOI from residential sales and other
adjustments(2)(3)
2,633
2,643
11,567
25,139
SPNOI(2)(3)
142,731
137,540
551,880
537,067
Change in SPNOI(2)(3)
3.8 %
1.7 %
2.8 %
2.2 %
Change in SPNOI excluding Anchors(2)(3)
6.0 %
2.1 %
4.6 %
3.3 %
FFO(2)(3)(4)(5)
96,645
106,893
402,556
400,965
FFO with adjustments(2)(3)(4)
101,361
91,362
383,043
376,592
AFFO(2)(3)(4)(5)
85,004
92,187
359,396
354,424
AFFO with adjustments(2)(3)(4)
89,720
76,656
339,883
330,051
Distributions declared
82,419
82,413
329,659
329,639
Units outstanding(6)
178,201,075
178,188,148
178,201,075
178,188,148
Units outstanding – diluted (7)
181,205,536
180,108,234
181,205,536
180,108,234
Weighted average – basic
178,201,075
178,188,148
178,191,737
178,178,090
Weighted average – diluted(8)
181,186,382
180,086,748
180,749,027
180,023,932
Per Unit Information (Basic/Diluted)
Net income and comprehensive income(1)
$0.80/$0.78
$0.08/$0.08
$1.64/$1.62
$2.86/$2.83
FFO(2)(3)(4)(5)
$0.54/$0.53
$0.60/$0.59
$2.26/$2.23
$2.25/$2.23
FFO with adjustments(2)(3)(4)
$0.57/$0.56
$0.51/$0.51
$2.15/$2.12
$2.11/$2.09
AFFO(2)(3)(4)(5)
$0.48/$0.47
$0.52/$0.51
$2.02/$1.99
$1.99/$1.97
AFFO with adjustments(2)(3)(4)
$0.50/$0.50
$0.43/$0.43
$1.91/$1.88
$1.85/$1.83
Distributions declared
$0.463
$0.463
$1.850
$1.850
Payout Ratio Information
Payout Ratio to AFFO(2)(3)(4)(5)
97.0 %
89.4 %
91.7 %
93.0 %
Payout Ratio to AFFO with adjustments(2)(3)(4)
91.9 %
107.5 %
97.0 %
99.9 %
Payout Ratio to cash flows provided by
operating activities
67.5 %
87.9 %
88.1 %
99.6 %
Three Months Ended
Year Ended
(1)
Represents a GAAP measure.
(2)
Represents a non-GAAP measure. The Trust’s method of calculating non-GAAP measures may differ from other reporting issuers’ methods and, accordingly, may not be comparable.
For definitions and basis of presentation of the Trust’s non-GAAP measures, refer to “Presentation of Certain Terms Including Non-GAAP Measures” and “Non-GAAP Measures” in this
MD&A.
(3)
Includes the Trust’s proportionate share of equity accounted investments.
(4)
See “Other Measures of Performance” in this MD&A for a reconciliation of these measures to the nearest consolidated financial statement measure.
(5)
The calculation of the Trust’s FFO and AFFO and related payout ratios, including comparative amounts, are financial metrics that were determined based on the REALPAC White
Paper on FFO and AFFO issued in January 2022 (“REALPAC White Paper”). Comparison with other reporting issuers may not be appropriate. The payout ratio to AFFO is calculated
as declared distributions divided by AFFO.
(6)
Total Units outstanding include Trust Units and LP Units (each as defined below), including Units classified as liabilities. LP Units classified as equity in the consolidated financial
statements are presented as non-controlling interests.
(7)
Total diluted Units outstanding include Trust Units and LP Units (each as defined below), including Units classified as liabilities. LP Units classified as equity in the consolidated
financial statements are presented as non-controlling interests, vested portion of the deferred issued pursuant to the deferred unit plan and vested EIPs granted pursuant to the
equity incentive plan.
(8)
The diluted weighted average includes the vested portion of the deferred issued pursuant to the deferred unit plan and vested EIPs granted pursuant to the equity incentive plan.
MANAGEMENT’S DISCUSSION AND ANALYSIS
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Highlights for the Quarter
Operational
•
With growing tenant demand for vacant space and strong retention, Same Properties NOI excluding Anchors(1) for the
three months ended December 31, 2024 increased by 6.0% (3.8% including Anchors) compared to the same period in
2023.
•
192,353 square feet of vacant space leased during the quarter, resulting in an in-place and committed occupancy rate of
98.7% as of December 31, 2024 (September 30, 2024 – 98.5%). In addition, growing demand for new-build retail
continues with approximately 253,000 square feet executed during the year.
•
Extended or finalized 91.7% of all leases matured in 2024, with a strong rent growth of 8.8% (excluding Anchors).
Development
•
Significant development pipeline is expected to provide long-term portfolio expansion and profitable growth from the
approximately 59.1 million square feet (at the Trust’s share) of zoned mixed-use development permissions, including 1.0
million square feet of sites currently under construction.
•
The Millway, a 458-unit purpose-built rental, was completed in Q4 2023. Leasing activity is approximately 95% of the
units leased and committed by end of 2024.
•
Self-storage facility in Stoney Creek opened in October 2024. Construction of self-storage facilities in Toronto (Gilbert
Ave.), Toronto (Jane St.), and Dorval (St-Regis Blvd.) is progressing, with all three facilities on schedule to open in
2025. Early site preparation and demolition works have commenced to facilitate the construction of three additional
self-storage facilities in Montreal (Notre Dame St. W), Laval E, Quebec, and Burnaby, British Columbia, which are
expected to be completed by 2026.
•
Construction of Phase I of the Vaughan NW townhomes is progressing well, with 11 units completed and closed in Q4
2024. As at December 31, 2024, approximately 83% of the 120 units in Phase I have been pre-sold.
•
Siteworks and excavation are now complete at ArtWalk condo Phase I and construction is advancing. Tower crane was
erected and footings are underway, with approximately 93% of the 340 units in Tower A pre-sold.
•
Siteworks for the 224,000 square foot project, encompassing Canadian Tire and ancillary retail units on Laird Drive in
Toronto have progressed and exterior services upgrades are almost complete. The below grade parking structure is
substantially constructed and work is proceeding on the ground floor slab, with possession expected in Q2 2026.
Financial
•
Rentals from investment properties and other(2) for the three months ended December 31, 2024, totalled $229.7 million
representing an increase of $18.7 million or 8.9% compared to the same period in 2023. The increase was primarily due
to lease-up activities for retail and mixed-use properties, and an increase in CAM recoveries.
•
Rentals from investment properties and other(2) for the year ended December 31, 2024, totalled $918.4 million
representing an increase of $83.8 million or 10.0% compared to the same period in 2023. The increase was primarily due
to lease-up activities for retail and mixed-use properties, an increase in CAM recoveries, and increase in residential
closing revenue from townhome closings.
•
Net rental income and other(2) for the three months and year ended December 31, 2024 was $141.6 million and $547.5
million, respectively, representing an increase of $13.1 million or 10.2% and $33.9 million or 6.6% compared to the same
periods in 2023. This increase was primarily due to lease-up activities for retail and mixed-use properties, an increase in
CAM recoveries, and increase in residential closing revenue from townhome closings.
•
Net income and comprehensive income(2) increased by $127.7 million for the three months ended December 31, 2024
compared to the same period in 2023. The increase was mainly driven by a $60.5 million increase in fair value
adjustments on revaluation of properties due to updated valuation parameters and leasing activities in prior year
period, and a $62.5 million increase in fair value adjustment on financial instruments due to mark-to-market adjustments
for interest rate swap agreements and fluctuation in the Trust’s unit price.
•
Net income and comprehensive income(2) decreased by $218.0 million for the year ended December 31, 2024 compared
to the same period in 2023. The decrease was mainly driven by a $184.9 million decrease in fair value adjustments on
revaluation of properties due to changes in market conditions for certain future development properties, partially offset
by improved leasing activities, and a $29.4 million increase in interest expense primarily due to higher interest rates and
lower capitalization due to completion of development projects.
•
Net income and comprehensive income per Unit(2) was $0.78 for the three months ended December 31, 2024 (three
months ended December 31, 2023 – $0.08). The change was mainly driven by an increase in fair value adjustments on
revaluation of properties due to updated valuation parameters and leasing activities, and an increase in fair value
MANAGEMENT’S DISCUSSION AND ANALYSIS
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7
adjustment on financial instruments due to mark-to-market adjustments for interest rate swap agreements and
fluctuation in the Trust’s Unit price.
•
Net income and comprehensive income per Unit(2) was $1.62 for the year ended December 31, 2024 (year ended
December 31, 2023 – $2.83). The decrease was mainly driven by fair value adjustments due to changes in market
conditions for certain future development properties, and an increase in interest expense primarily due to higher
interest rates and lower capitalization due to completion of development projects. These were partially offset by
improved leasing activities.
•
FFO per Unit(1) for the three months ended December 31, 2024, was $0.53 compared to $0.59 for the same period in
2023. This decrease was primarily due to changes in fair value adjustment on TRS resulting from fluctuations in the
Trust’s Unit price, partially offset by increase in NOI mainly due to lease-up activities for retail and mixed-use
properties, and an increase in CAM recoveries. FFO with adjustments per Unit(1) for the three months ended
December 31, 2024, was $0.56 compared to $0.51 in 2023. The increase was primarily attributable to an increase in NOI
due to lease-up activities for retail and mixed-use properties, and an increase in CAM recoveries, partially offset by an
increase in net interest expense compared to the prior year period.
•
FFO per Unit(1) for the for the year ended December 31, 2024, was $2.23, consistent with the same period in 2023. FFO
with adjustments per Unit(1) for the for the year ended December 31, 2024, was $2.12 compared to $2.09 in 2023. The
increase was attributable to an increase in NOI primarily due to lease-up activities for retail and mixed-use properties,
and an increase in CAM recoveries, partially offset by an increase in net interest expense compared to the prior year
period.
•
Payout Ratio to AFFO(1) for the three months and year ended December 31, 2024, was 97.0% and 91.7%, respectively, as
compared to 89.4% and 93.0% for the same periods in 2023. The Payout Ratio to AFFO(1) with adjustments for the
three months and year ended December 31, 2024 was 91.9% and 97.0%, respectively, as compared to 107.5% and 99.9%
for the same periods in 2023.
•
Payout Ratio to cash flows provided by operating activities for the three months and year ended December 31, 2024,
was 67.5% and 88.1%, respectively, as compared to 87.9% and 99.6% for the same periods in 2023. The decrease was
primarily attributed to higher net rental income and other, due to residential closing profits and increase in base rent
compared to the respective period in 2023.
•
As at December 31, 2024, the Trust’s fixed rate/variable rate debt ratio(1)(3) was 89%/11% (December 31, 2023 –
82%/18%).
•
As at December 31, 2024, this unencumbered portfolio of investment properties was valued at $9.5 billion
(December 31, 2023 – $9.2 billion).
•
In September 2024, the Trust entered into a secured non-revolving construction facility for the project on Laird Drive,
Toronto, totalling $61.3 million at the Trust’s share. The non-revolving facility bears interest at Adjusted CORRA plus
1.45%, with a maturity date of September 27, 2026. As at December 31, 2024, $5.5 million was drawn.
(1)
Represents a non-GAAP measure. The Trust’s method of calculating non-GAAP measures may differ from other reporting issuers’ methods and, accordingly, may not be comparable.
For definitions and basis of presentation of the Trust’s non-GAAP measures, refer to “Presentation of Certain Terms Including Non-GAAP Measures” and “Non-GAAP Measures” in this
MD&A.
(2)
Represents a GAAP measure.
(3)
Net of cash-on-hand of $34.9 million as at December 31, 2024 for the purposes of calculating the applicable ratios.
MANAGEMENT’S DISCUSSION AND ANALYSIS
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Presentation of Certain Terms Including Non-GAAP Measures
Readers are cautioned that certain terms used in this MD&A include non-GAAP measures and other terms. The following terms
are non-GAAP measures used in this MD&A: Adjusted Debt, Adjusted Funds From Operations (“AFFO”), AFFO with adjustments,
AFFO per Unit, AFFO with adjustments per Unit, Net Debt, Adjusted Debt to Adjusted EBITDA, Adjusted Earnings Before
Interest, Taxes, Depreciation and Amortization Expense (“Adjusted EBITDA”), Adjusted Interest Expense including Capitalized
Interest, Debt Service Expense, Aggregate Assets, Gross Book Value, Debt to Aggregate Assets, Debt to Aggregate Assets
excluding TRS debt and receivable, Debt to Gross Book Value, Fixed Charge Coverage Ratio, Fixed Rate to Variable Rate Debt
Ratio, Annualized NOI, Funds From Operations (“FFO”), FFO with adjustments, FFO per Unit, FFO with adjustments per Unit,
Interest Coverage Ratio, Net Operating Income (“NOI”), Investment Properties – non-GAAP, Payout Ratio to AFFO, Payout Ratio
to AFFO with adjustments, Proportionate Share Reconciliation, Recovery Ratio, Same Properties NOI (“SPNOI”), Same
Properties NOI excluding Anchors (“SPNOI excluding Anchors”), Total Proportionate Share, Transactional FFO, Unencumbered
Assets, Unencumbered Assets to Unsecured Debt, and Unsecured to Secured Debt Ratio. These non-GAAP measures are
defined in this MD&A and non-GAAP financial measures have been reconciled to the closest IFRS measure in the consolidated
financial statements of the Trust for the year ended December 31, 2024 in “Non-GAAP Measures”. Readers should refer to “Non-
GAAP Measures” in this MD&A for definitions and reconciliations of the Trust’s non-GAAP financial measures.
The following are other terms used in this MD&A: Net Asset Value (“NAV”), any related measure per Variable Voting Unit of the
Trust (a “Trust Unit”) and per unit of the Trust’s subsidiary limited partnerships (an “LP Unit”) (where management discloses the
combination of Trust Units and LP Units, combined units are referred to as a “Unit” or “Units”).
These non-GAAP measures and other terms are used by management to measure, compare and explain the operating results
and financial performance of the Trust and do not have any standardized meaning prescribed under IFRS and, therefore, should
not be construed as alternatives to net income or cash flow from operating activities calculated in accordance with IFRS where
applicable. Such terms do not have a standardized meaning prescribed by IFRS and may not be comparable to similar measures
disclosed by other issuers. For further details of these terms, see “Other Measures of Performance”, “Net Operating Income”,
“Debt”, “Financial Covenants”, and “Non-GAAP Measures” in this MD&A.
MANAGEMENT’S DISCUSSION AND ANALYSIS
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9
Non-GAAP Measures
The following table details the Trust’s non-GAAP measures. The Trust’s method of calculating non-GAAP measures may differ
from other reporting issuers’ methods and, accordingly, may not be comparable.
Measure
Definition and Intended Use
Reference to
Reconciliation and/
or Additional
Information
Adjusted Debt
and
Net Debt
Adjusted Debt is defined as Debt, inclusive of the Trust’s share of debt in equity
accounted investments, net of loans receivable and cash-on-hand. Net Debt is
defined as Debt, inclusive of the Trust’s share of debt in equity accounted
investments, net of cash-on-hand.
Adjusted Debt and Net Debt are intended to be used by investors as measures
of the level of indebtedness of the Trust and its ability to meet its obligations, as
liquid assets are used to reduce outstanding liabilities. Management uses
Adjusted Debt and Net Debt to calculate certain covenant ratios, and to assess
the Trust’s level of indebtedness.
Section VIII —
Financing and
Capital Resources,
“Debt”, “Financial
Covenants”
Adjusted Debt to
Adjusted EBITDA
Adjusted Debt to Adjusted EBITDA is defined as Adjusted Debt divided by
Adjusted EBITDA.
The ratio is intended to be used by investors as a measure of the level of the
Trust’s debt versus the Trust’s ability to service that debt. Management uses the
ratio to assess the Trust’s level of leverage and its capacity to borrow.
Section VIII —
Financing and
Capital Resources,
“Financial
Covenants”
Adjusted Earnings
Before Interest,
Taxes, Depreciation
and Amortization
Expense (“Adjusted
EBITDA”)
Adjusted EBITDA is defined as the Trust’s Total Proportionate Share of net
income and comprehensive income adjusted by income taxes, interest expense
net of interest income (“net interest expense”), amortization expense and
depreciation expense, as well as adjustments for gains and losses on disposal of
investment properties including transactional gains and losses on the sale of
investment properties to a joint venture that are expected to be recurring, and
the fair value changes associated with investment properties and financial
instruments, and excludes extraordinary items such as, but not limited to, yield
maintenance on redemption of unsecured debentures and Transactional FFO –
gain (loss) on sale of land to co-owners.
The measure is intended to be used by investors to help determine the Trust’s
ability to service its debt, finance capital expenditures and provide for
distributions to its unitholders (“Unitholders”). Management uses this measure to
assess the Trust’s profitability, as it removes the non-cash impact of the fair
value changes and gains and losses on investment property dispositions.
Section V —
Business
Operations and
Performance,
“Results of
Operations”
MANAGEMENT’S DISCUSSION AND ANALYSIS
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Non-GAAP Measures (Continued)
Measure
Definition and Intended Use
Reference to
Reconciliation and/
or Additional
Information
Adjusted
Interest Expense
including
Capitalized Interest
and
Debt Service
Expense
Adjusted Interest Expense including Capitalized Interest is defined as the Trust’s
Total Proportionate Share of interest expense, less distributions on vested
deferred units and Units classified as liabilities and interest income from
mortgages and loans receivable, plus capitalized interest. Debt Service Expense
is defined as the Trust’s Total Proportionate Share of interest expense, less
distributions on vested deferred units and Units classified as liabilities and
interest income from mortgages and loans receivable, plus capitalized interest
and mortgage principal amortization payments.
Adjusted Interest Expense including Capitalized Interest and Debt Service
Expense are intended to be used by investors as measures of the interest
expense on the Trust’s debt. Management uses these to calculate certain
covenant ratios, and to assess the Trust’s ability to service its debt.
Section VIII —
Financing and
Capital Resources,
“Financial
Covenants”
Adjusted Funds
From Operations
(“AFFO”)
and
AFFO with
adjustments
and
AFFO per Unit
and
AFFO with
adjustments per Unit
AFFO is a non-GAAP financial measure of operating performance widely used by
the real estate industry in Canada. AFFO is calculated as FFO less straight-line
rent, normalized capital expenditures and leasing costs. The Trust calculates
AFFO in accordance with the recommendations of the guidance set out in the
REALPAC White Paper. AFFO with adjustments is calculated as AFFO less non-
recurring items such as TRS gain (loss), FFO sourced from condo and townhome
closings, and gain (loss) on sale of land to co-owners.
AFFO per Unit and AFFO with adjustments per Unit, are defined as AFFO and
AFFO with adjustments divided by weighted average number of Units.
Management considers AFFO, AFFO with adjustments, AFFO per Unit, and
AFFO with adjustments per Unit as meaningful measures of recurring economic
earnings and relevant in understanding the Trust's ability to service its debt,
funding capital expenditures and determining an appropriate level of
distributions.
Management also considers these measures to be useful measures of operating
performance as they further adjust FFO for capital expenditures that sustain
income-producing properties and eliminates the impact of straight-line rent.
Section V —
Business
Operations and
Performance,
“Other Measures of
Performance”
Aggregate Assets
and
Gross Book Value
Aggregate Assets is defined as the Trust’s Total Proportionate Share of assets,
less cash-on-hand. Gross Book Value is defined as the total proportionate share
of assets, less cash-on-hand and fair value adjustments on investment properties
net of accumulated amortization.
Aggregate Assets and Gross Book Value, are intended to be used by investors as
measures of the total value of assets managed by the Trust. Management uses
Aggregate Assets, and Gross Book Value, to calculate certain covenant ratios,
and to assess the Trust’s ability to continue to grow.
Section VIII —
Financing and
Capital Resources,
“Financial
Covenants”
MANAGEMENT’S DISCUSSION AND ANALYSIS
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Non-GAAP Measures (Continued)
Measure
Definition and Intended Use
Reference to
Reconciliation and/
or Additional
Information
Annualized NOI
Annualized NOI is defined as estimated NOI for the next 12 months, based on the
current period’s NOI.
The measure is intended to be used by investors to project the next year’s
operating income of the Trust. Management uses this measure as a benchmark of
the Trust’s future profitability.
Section VIII —
Financing and
Capital Resources,
“Debt”
Debt to Aggregate
Assets
and
Debt to Aggregate
Assets (excluding
TRS debt and
receivable)
Debt to Aggregate Assets is defined as Net Debt divided by Aggregate Assets.
Debt to Aggregate Assets (excluding TRS debt and receivable) is defined as Net
Debt (excluding TRS debt) divided by Aggregate Assets (excluding TRS
receivable).
The ratios are intended to be used by investors to assess the leverage of the
Trust on a consolidated basis. Management uses the ratios to assess an
acceptable level of leverage for the Trust.
Section VIII —
Financing and
Capital Resources,
“Financial
Covenants”
Debt to Gross Book
Value
Debt to Gross Book Value is defined as Net Debt divided by Gross Book Value.
The ratio is intended to be used by investors to assess the leverage of the Trust
on a consolidated basis, while using the Trust’s cost basis for assets.
Management uses this ratio to assess an acceptable level of leverage for the
Trust.
Section VIII —
Financing and
Capital Resources,
“Financial
Covenants”
Fixed Charge
Coverage Ratio
Fixed Charge Coverage Ratio is defined as Adjusted EBITDA divided by Debt
Service Expense.
The ratio is intended to be used by investors to assess the Trust’s ability to
service its fixed charges. Management uses this ratio to manage the Trust’s cash
flows and fixed obligations.
Section VIII —
Financing and
Capital Resources,
“Financial
Covenants”
Fixed Rate to
Variable Rate Debt
Ratio
Fixed Rate to Variable Rate Debt Ratio is defined as the percentage of Fixed
Rate Debt out of total Debt compared with the percentage of Variable Rate Debt
(excluding interest rate swap agreements with fixed interest rates) out of total
Debt.
The ratio is intended to be used by investors to assess the Trust’s ability to
service its debt against the fluctuation of interest rates.
Section VIII —
Financing and
Capital Resources,
“Debt”
MANAGEMENT’S DISCUSSION AND ANALYSIS
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Non-GAAP Measures (Continued)
Measure
Definition and Intended Use
Reference to
Reconciliation and/
or Additional
Information
Funds From
Operations (“FFO”)
and
FFO with
adjustments
and
FFO per Unit
and
FFO with
adjustments per Unit
FFO is a measure of operating performance widely used by the Canadian real
estate industry based on the definition set forth by the REALPAC White Paper.
It is the Trust’s view that IFRS net income does not necessarily provide a complete
measure of the Trust’s economic earnings. This is primarily because IFRS net
income includes items such as fair value changes of investment property that are
subject to market conditions and capitalization rate fluctuations and gains and
losses on the disposal of investment properties, including associated transaction
costs and taxes, which are not representative of a company’s economic earnings.
For these reasons, the Trust has adopted the REALPAC White Paper’s definition of
FFO, which was created by the real estate industry as a supplemental measure of
economic earnings.
FFO is defined as net income and comprehensive income attributable to
Unitholders adjusted for items such as, but not limited to, unrealized changes in
the fair value of investment properties and financial instruments and transaction
gains and losses on the acquisition or disposal of investment properties. FFO with
adjustments is defined as FFO less TRS gain (loss), FFO sourced from condo and
townhome closings, and gain (loss) on sale of land.
FFO per Unit and FFO with adjustments per Unit, are defined as FFO, and FFO
with adjustments, divided by weighted average number of Units.
These measures are intended to be used by investors to assess the operating
performance of the Trust. Management uses these measures to assess profitability
and performance of the Trust.
Section V —
Business
Operations and
Performance,
“Other Measures of
Performance”
Interest Coverage
Ratio
Interest Coverage Ratio is defined as Adjusted EBITDA divided by Adjusted
Interest Expense including Capitalized Interest.
The ratio is intended to be used by investors to measure the Trust’s ability to make
interest payments on its existing debt. Management uses this ratio to measure an
acceptable level of interest expense relative to available earnings.
Section VIII —
Financing and
Capital Resources,
“Financial
Covenants”
Investment
Properties – non-
GAAP
Investment Properties – non-GAAP is defined as the Trust’s Total Proportionate
Share of investment properties, inclusive of the Trust’s share of investment
properties in equity accounted investments.
The measure is intended to be used by investors to measure the amount of the
Trust’s entire portfolio.
Section VII — Asset
Profile,
“Investment
Properties”
Net Operating
Income (“NOI”)
NOI from continuing operations is defined as: i) rentals from investment properties
and other less property operating costs and other, and ii) net profit from condo
sales. In the consolidated statements of income and comprehensive income, NOI is
presented as “net rental income and other”.
The measure is intended to be used by investors to assess the Trust’s profitability.
Management uses NOI as a meaningful measure of economic performance and
profitability from continuing operations, as it excludes changes in fair value of
investment properties and financial instruments.
Section V —
Business
Operations and
Performance,
“Results of
Operations”
MANAGEMENT’S DISCUSSION AND ANALYSIS
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Non-GAAP Measures (Continued)
Measure
Definition and Intended Use
Reference to
Reconciliation and/
or Additional
Information
Payout Ratio to
AFFO
and
Payout Ratio to
AFFO with
adjustments
Payout Ratio to AFFO and Payout Ratio to AFFO with adjustments, are defined
as distributions declared divided by AFFO, and AFFO with adjustments. It is the
proportion of earnings paid out as dividends to Unitholders.
The measures are intended to be used by investors to assess the distribution rate
of the Trust. Management determines the Trust’s Unit cash distribution rate by,
among other considerations, its assessment of cash flow as determined using
certain non-GAAP measures. As such, management believes the cash
distributions are not an economic return of capital, but a distribution of
sustainable cash flow from operations.
Section V —
Business
Operations and
Performance,
“Other Measures of
Performance”
Proportionate Share
Reconciliation
and
Total Proportionate
Share
References made to a “Total Proportionate Share” represent the Trust’s
proportionate interest in the financial position and operating activities of its
entire portfolio, which reflect the difference in accounting treatment between
joint ventures using proportionate consolidation and equity accounting.
“Proportionate Share Reconciliation” represents the adjustment to account for
the Trust’s proportionate share of equity accounted investments.
The presentation is intended to be used by investors to assess the Trust’s
financial position and performance on a consolidated basis because it represents
how the Trust and its partners manage the net assets and operating performance
for each of the Trust’s co-owned properties. The Trust accounts for its
investments in both associates and joint ventures using the equity method of
accounting.
Section V —
Business
Operations and
Performance,
“Results of
Operations”
Recovery Ratio
The Recovery Ratio is defined as property operating cost recoveries divided by
recoverable costs.
The measure is intended to be used by investors and management to assess the
Trust’s ability to manage recoverable operating expenses for its investment
properties.
Section V —
Business
Operations and
Performance,
“Results of
Operations”
MANAGEMENT’S DISCUSSION AND ANALYSIS
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Non-GAAP Measures (Continued)
Measure
Definition and Intended Use
Reference to
Reconciliation and/
or Additional
Information
Same Properties NOI
(“SPNOI”)
and
SPNOI excluding
Anchors
To facilitate a more meaningful comparison of NOI between periods, SPNOI
amounts are defined as the NOI attributable to those income properties that
were owned by the Trust during the current period and the same period in the
prior year. Any NOI from properties either acquired, Earnouts, developed or
disposed of, outside of the periods mentioned above, are excluded from SPNOI.
Certain non-cash items including straight-line rent and amortization of tenant
incentives are also excluded to present the SPNOI on a cash basis.
SPNOI is intended to be used by investors and management as profitability
growth indicators on the Trust’s existing investment property portfolio.
Section V —
Business
Operations and
Performance,
“Results of
Operations”
Transactional FFO
Transactional FFO represents the net financial/economic gain resulting from a
partial sale of an investment property. Transactional FFO is calculated as the
difference between the actual selling price and actual costs incurred for the
subject investment property.
Because the Trust intends to establish numerous joint ventures with partners in
which it plans to co-develop mixed-use development initiatives, the Trust
expects such gains to be recurring and therefore represent part of the Trust’s
overall distributable earnings.
The measure is intended to be used by investors to assist in assessing the
profitability of the Trust. Management uses this measure to calculate FFO with
adjustments and Transactional FFO, a profitability measure.
Section V —
Business
Operations and
Performance,
“Other Measures of
Performance”
Unencumbered
Assets
Unencumbered Assets is defined as the Trust’s assets that are free and clear of
any encumbrances.
The measure is intended to be used by investors and management to assess the
Trust’s ability to secure additional financing. Management uses this measure to
calculate Unencumbered Assets to Unsecured Debt Ratio.
Section VIII —
Financing and
Capital Resources,
“Debt”
Unencumbered
Assets to Unsecured
Debt Ratio
Unencumbered Assets to Unsecured Debt Ratio is defined as the Trust’s
unencumbered assets divided by the Trust’s unsecured debt.
The ratio is intended to be used by investors to assess the Trust’s ability to use
investment properties to satisfy unsecured debt obligations. This ratio is a
significant financial covenant pursuant to the terms of the Trust’s revolving
operating facilities and other credit facilities.
Section VIII —
Financing and
Capital Resources,
“Financial
Covenants”
Unsecured to
Secured Debt Ratio
Unsecured to Secured Debt Ratio is defined as the Trust’s unsecured debt
(including on equity accounted investments) divided by the Trust’s secured debt
(including on equity accounted investments).
The ratio is intended to be used by investors to assess the Trust’s composition of
debt. Management uses this ratio to determine the Trust’s ability to borrow
additional unsecured debt.
Section VIII —
Financing and
Capital Resources,
“Financial
Covenants”
MANAGEMENT’S DISCUSSION AND ANALYSIS
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15
Forward-Looking Statements
Certain statements in this MD&A are “forward-looking statements”, including forward-looking information within the meaning of
applicable Canadian securities laws, that reflect management’s expectations regarding the Trust’s future growth, results of
operations, performance, business prospects and opportunities, including those statements outlined under the headings,
“Highlights for the Quarter”, “Key Operational, Development and Financial Information”, “Business Overview”, “Strategic
Direction”, “Environmental, Social and Governance”, “Outlook”, “Mixed-Use Development Initiatives”, “Residential Development
Inventory”, “Properties Under Development”, “Completed and Future Earnouts and Developments on Existing Properties”,
“Results of Operations”, “Other Measures of Performance”, “Leasing Activities and Lease Expiries”, “Investment Properties”,
“Equity Accounted Investments”, “Amounts Receivable and Other, Prepaid Expenses, Deposits and Deferred Financing Costs”,
“Mortgages, Loans and Notes Receivable”, “Capital Resources and Liquidity”, “Maintenance Capital Requirements”,
“Debt” (which includes “Unencumbered Assets”), and “Risks and Uncertainties”.
More specifically, certain statements contained in this MD&A, including the Trust’s plans, expectations and intentions with
respect to the collection of rent from tenants, the operation, maintenance and development of its properties and its expectations
with respect to liquidity; the Trust’s future growth potential and the identification of development opportunities; future
occupancy levels; plans to extract additional sources of FFO and NAV; expected replacement income to be generated by
backfilling existing vacant space over time; the Trust’s maintenance capital requirements, estimated future development plans
and joint venture projects, including the described type, scope, costs and other financial metrics related thereto; the Trust’s
expectations regarding future potential mixed-use development opportunities, the timing of construction and costs thereof and
returns therefrom; the Trust’s ability to pay future distributions to Unitholders and expectations regarding monthly cash
distribution levels, view of term mortgage renewals, including rates and refinancing amounts, timing of future payments of
obligations, intentions to obtain additional secured and unsecured financing and potential financing sources; the Trust’s potential
future pipeline and uncommitted pipeline; Annualized NOI; vacancy and leasing assumptions; and statements that contain words
such as “could”, “should”, “can”, “anticipate”, “expect”, “believe”, “plan”, “potential”, “propose”, “schedule”, “estimate”, “intend”,
“project”, “will”, “may”, “continue”, “forecast”, “outlook”, “direction”, “come” and similar expressions or negative variations
thereof and statements relating to matters that are not historical facts, constitute “forward-looking statements”. These forward-
looking statements are presented for the purpose of assisting Unitholders to understand the Trust’s operating environment, and
may not be appropriate for other purposes. Such forward-looking statements reflect management’s current beliefs and are
based on information currently available to management.
However, such forward-looking statements involve significant risks and uncertainties. A number of factors could cause actu
results to differ materially from the results discussed in the forward-looking statements. These risks include, but are not
to, real property ownership and leasing/tenant risk; liquidity risk; capital requirements and access to capital; environmen
matters and climate change-related change risk; potential conflicts of interest; cyber security risk; debt financing; interest an
financing risk; inflation risk; joint venture risk; development and construction risk; credit risk; litigation and regulatory
potential volatility of Unit prices; cash distributions are not guaranteed and will fluctuate with the Trust’s performanc
availability of cash flow; significant Unitholder risk; tax-related risks; and public health crises risks. These risks and others
more fully discussed under the heading “Risks and Uncertainties” and elsewhere in this MD&A, as well as under the heading
Factors” in the Trust’s most recent AIF. The Trust has attempted to identify important factors that could cause actual resu
performance or achievements to be other than as expected or estimated and that could cause actual results, performance
achievements to differ materially from current expectations. These factors are not intended to represent a complete list of th
factors that could affect the Trust. Although the forward-looking statements contained in this MD&A are based on wh
management believes to be reasonable assumptions, including those discussed under the heading “Outlook” and elsewhere in
this MD&A, the Trust cannot assure investors that actual results will be consistent with these forward-looking statements.
Material factors or assumptions that were applied in drawing a conclusion or making an estimate set out in the forward-looking
information may include, but are not limited to: a rising interest rate environment; a continuing trend toward land use
intensification, including residential development in urban and suburban markets; access to equity and debt capital markets, and
to bank and mortgage financing, to fund, at acceptable costs, future capital requirements and to enable the refinancing of debts
as they mature on acceptable terms; the availability of investment opportunities for growth in Canada; the timing and ability of
the Trust to sell certain properties; the timing and ability of the Trust and its joint venture partners to pre-sell and close on the
sale of condo and townhome units as well as lease available residential rental units; and the valuations to be realized on property
sales relative to current IFRS values. Certain statements included in this MD&A may be considered “financial outlook” for
purposes of applicable Canadian securities laws and, as such, the financial outlook may not be appropriate for purposes other
than this MD&A. The forward-looking statements contained herein are expressly qualified in their entirety by this cautionary
statement and readers should not place undue reliance on such forward-looking statements. These forward-looking statements
are made as at the date of this MD&A and the Trust assumes no obligation to update or revise them to reflect new events or
circumstances unless otherwise required by applicable securities legislation.
All amounts in the MD&A are expressed in millions of Canadian dollars, except where otherwise stated. Per Unit amounts are
expressed on a diluted basis, except where otherwise stated. Additional information relating to the Trust, including the AIF, can
be found on the System for Electronic Document Analysis and Retrieval+ (“SEDAR+”) (www.sedarplus.ca).
MANAGEMENT’S DISCUSSION AND ANALYSIS
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16
Section II — Business Overview, Strategic Direction
and Outlook
Business Overview
The Trust is an unincorporated open-ended mutual fund trust governed by the laws of the Province of Alberta created under a
declaration of trust, dated December 4, 2001, subsequently amended and last restated on December 9, 2020 (“the Declaration
of Trust”).
The Trust develops, leases, constructs, owns and manages shopping centres, office buildings, high-rise and low-rise condos and
rental residences, seniors’ housing, townhome units, self-storage rental facilities, and industrial facilities in Canada.
As of December 31, 2024, the Trust owned a mixed-use portfolio featuring 195 strategically located properties in communities
across the country. The Trust has approximately $11.9 billion in assets and owns 35.3 million square feet of income producing
value-oriented retail and office properties at key intersections across Canada with a 98.7% in-place and committed occupancy
rate.
Strategic Direction
The Trust holds a unique portfolio of large open-format shopping centres with significant land holdings and, as a result, has
grown in recent years by expanding its business with recurring revenue from two major sources:
i)
core rental income from retail, self-storage, office, apartments, and industrial properties, and
ii)
income from condo and townhome sales.
As SmartCentres expands its major mixed-use real estate development, it has partnered with experienced industry experts in
many real estate categories, including: rental apartments, condos, self-storage centres, and office buildings. This mixed-use
development has provided the Trust with incremental growth of both NAV and FFO with a development pipeline of 85.1 million
square feet, all located in Canada’s major markets.
Together with its partner, Penguin, the Trust has designed and commenced the development of over 100 acres in its flagship
Vaughan Metropolitan Centre in Vaughan, Ontario (“SmartVMC”). SmartVMC is a master-planned community that, once
completed, is expected to have over 20 million square feet of mixed-use space. The Trust has a 50% interest in the
approximately 52 acres comprising the eastern portion of SmartVMC and, in December 2021, the Trust acquired a two-thirds
interest from unrelated parties in approximately 53 acres of development lands in the western part of SmartVMC. By virtue of
this transaction, the Trust has become the largest landowner in SmartVMC, Vaughan’s rapidly growing downtown.
The Trust maintains sufficient liquidity and manages its balance sheet and capital structure conservatively. The Trust sets goals
to maintain leverage within target ranges and staggers its debt maturities with a mix of unsecured and secured debt to provide
continued financial flexibility and liquidity. This provides the Trust with the financial strength needed to thrive and continue its
growth.
Outlook
The Trust is focused on delivering stability with growing cash flows and net asset value appreciation, all with a long-term focus.
The Trust expects continued stability and strong occupancy across its retail portfolio and incremental growth through its mixed-
use initiatives. The Trust expects to continue to fortify its balance sheet and limit new financing initiatives primarily to refinance
upcoming maturities and those required to advance the Trust’s development initiatives, particularly those where construction is
expected to commence in the upcoming year.
Although the Trust cannot predict the impacts of the broader economic environment on its 2025 financial results, the Trust
remains confident that its business model, stable tenant base and strong balance sheet will continue to position it for long-term
success. The Trust’s retail portfolio continues to act as the anchor to cash flow. Approximately 89% of the Trust’s debt is fixed,
with a staggered ladder of manageable maturities. The Trust has strong relationships with Canada’s lending community that are
expected to continue to provide strong levels of liquidity for the future. In 2025, several projects, all with financing in place, will
continue under construction over the course of the year. New development initiatives will only commence when market
conditions permit and when appropriate financing has been arranged.
The Trust has an unparalleled development pipeline of retail and mixed-use development initiatives, and a significant
underutilized landbank, that present exceptional mixed-use intensification potential in major cities across Canada. By focusing
on the quality of our portfolio and the build out of our development pipeline, we will continue to generate resilient income and
grow FFO to support sustainable distributions and increase net asset value.
MANAGEMENT’S DISCUSSION AND ANALYSIS
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17
Section III — Environmental, Social and Governance
(“ESG”)
ESG at SmartCentres
The Trust was founded with the economic realities of the average Canadian household in mind: bringing value and convenience-
oriented retail to the Canadian market. That market is evolving as Canadians seek a more integrated lifestyle that seamlessly
combines work with home life. These changes are at the heart of the SmartLiving transformation plan, one that is driven by ESG
opportunities such as diverse housing forms, accessibility to urban amenities, transit connections, and green space.
The core values of the Trust have always been to build value-oriented affordable centres in the midst of communities to help
people live better lives. The principles of ESG, and sustainability, are aligned with its core values. In addition to being the right
thing to do, it creates value for the business. The Trust continues to think about the future and how it will operate and respond
to increased concern about our environment, like climate change, especially with an eye to the expectations of employees,
tenants, and investors.
The Trust embeds ESG considerations into its business strategy to manage risk and create value, today and well into the future.
That strategy underpins the Trust’s decision-making processes across all levels of the business.
The Trust incorporates ESG and sustainability considerations into its business by:
•
Maintaining an ongoing three-year ESG plan that aligns with the Trust’s business plan;
•
Embedding ESG-specific targets into its annual corporate targets and linking ESG achievements to the remuneration of
executives and all associates;
•
Regularly completing materiality assessments to identify and prioritize ESG factors that have the potential to drive
value in its business;
•
Investigating how new ESG initiatives could support the business;
•
Working with tenants to meet mutual climate and ESG-related goals by incorporating green lease provisions in its
leases;
•
Engaging with investors to identify material ESG topics and corresponding framework alignments and reporting
requirements;
•
Requiring ESG-related training for all Associates; and
•
Maintaining a Diversity, Equity, Inclusion and Belonging Policy.
In 2024, the Trust achieved its ESG Targets and objectives, including:
•
Updating the Trust’s ESG strategy and 3-year roll-forward plan;
•
Submitted to Global Real Estate Sustainability Benchmark (“GRESB”) and improved its score relative to previous
submission;
•
Increased support and alignment with internationally accepted sustainability disclosures frameworks and standards;
•
Developed a written “net zero” framework to evaluate requirements for an action plan;
•
Completed scenario analysis to identify and prioritize business-related climate risk and opportunities over the short,
medium, and long term;
•
Embedded climate and sustainability considerations into future development decision-making processes;
•
Improved data management processes through formalized controls and actioned review of ESG data collection
processes;
•
Enhanced employee training programs to improve orientation, engagement and retention, including offering Chartered
Professional Accountant (“CPA”) training and mandatory ESG training;
•
Increased stakeholder, including tenant, associates, and community, engagement; and
•
Maintained its diversity target of 30% female independent Trustees with 50% of its current independent Trustees and
37.5% of the Trust’s board of trustees (the “Board of Trustees”) members being female.
Environmental
SmartCentres is committed to ESG and sustainability, specifically as it relates to the impacts of climate change. The Trust uses
the scenario analysis’s results to identify, assess, prioritize, and monitor climate-related risk and opportunities, and incorporates
the results into the Trust's ESG future strategy and the entity’s overall risk management process.
In Q4 2024, utilizing industry-recognized external consultants, SmartCentres completed a comprehensive study to establish a
Framework that identifies investment requirements to meet potential corporate and tenant commitments to net zero emissions.
The study included the quantification of baseline emissions, forecasted future emissions, and identified multiple paths to achieve
net zero by 2050. Management reported the preliminary results to the Board and continues to analyze and evaluate the required
resources, capital investments, and best path forward to create Unitholder value and reduce GHG emissions by working with
tenants to meet mutual goals and targets.
The Trust issues an annual ESG report which reflects the considerable progress, actions, and performance taken on ESG topics
by the Trust, its subsidiaries and business units for the calendar year. The report released in 2024 (“2023 ESG Report”) increased
ESG disclosures and improved alignment with relevant industry-specific Sustainability Accounting Board Standards. In addition
to disclosing the Trust’s Scope 1 and Scope 2 emissions from landlord-controlled sources, the 2023 ESG Report included
increased disclosures for Scope 3 emissions from tenant-controlled energy consumption.
MANAGEMENT’S DISCUSSION AND ANALYSIS
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The Trust continues to use the GRESB, a global benchmark for sustainability for real estate companies, as a tool to measure its
ESG progress relative to its peers. In 2024, the Trust submitted its third submission to the GRESB and is pleased to report that it
has improved its score relative to the prior year. The Trust also scored above the Benchmark Group Average for Leadership,
Policies, Reporting, Risk Management, Risk Assessment, Tenants and Community, Stakeholder Engagement, and Building
Certifications.
Social
The Trust continued to create lasting value for the towns and cities in which it operates, as well as for its tenants, neighbours,
associates and for its Unitholders. The Trust is focused on community engagement through its developments and expanding the
SmartLiving brand.
Through the SmartCentres volunteer program called “Helping People, Changing Lives”, associates across Canada are
encouraged to donate volunteer hours to local charities. The Trust partnered with tenants and supported the York Region
School Board and the Ignite Durham Learning Foundation to provide school supplies to low-income communities. As well
associates were encouraged to participate in the Princess Margaret Road Hockey to Conquer Cancer, the CIBC Run For The
Cure, the Make - A- Wish - Trees of Joy, the City of Vaughan Food Drive, and the City of Vaughan with CP24 Christmas Wish Toy
Drive. To recognize and honour the National Day of Truth and Reconciliation and reflect on the legacy of the residential school
system in Canada, the Trust donated to the Indigo Love of Reading Foundation and arranged for an Associate to share their
personal Indigenous story.
The Trust continues to support its wellness and support programs for associates. Building on the success of the ESG education
session that the Trust hosted for all associates in 2023, the Trust hosted ESG education sessions to increase awareness and
understanding of ESG-related matters that are material to its business for all new associates as part of the onboarding process.
Additionally in 2024, the Trust launched its CPA Ontario-approved program to offer a 15-month rotation for accounting
professionals to receive their CPA designation.
The Trust continues to strengthen its partnerships with tenants, and associates, through engagement surveys and working to
create a formal tenant and associate engagement framework.
Governance
Risk management practices are ingrained in the Trust’s corporate culture, and the Trust works to maintain a high level of
competency through ongoing staff training and routine assessment. The Trust upgraded its enterprise resource planning (“ERP”)
system to support growth and increase processes productivity and completed an enterprise risk management update to
integrate sustainability-related risks and opportunities into its general risk management process. Enhanced governance through
improved ERP systems and updated segregation of duties and authority levels.
To demonstrate the importance of oversight of ESG-related matters to the Trust, the Board of Trustees is responsible for
governance and oversight of the ESG strategy, through the ESG Sub-committee. The ESG Sub-committee meets regularly with
senior management to provide oversight and direction on ESG-related matters. The EVP, Portfolio Management & Investments
holds senior executive responsibility for the management and implementation of the Trust’s ESG strategy and is supported by an
internal cross-functional ESG Taskforce of senior members of the organization.
In support of the International Sustainability Standards Board’s IFRS S1 and IFRS S2, the Trust assesses acute physical climate
risk exposure, has formal GHG assessment and management plans, and discloses board competencies related to the oversight of
sustainability and climate-related risk and opportunities. The Trust continues to formalize its internal controls and processes for
ESG data collection and disclosure.
The Trust monitors its progress relative to peers through benchmarks, including GRESB, and by its inclusion in the Globe and
Mail’s Board Games rankings.
The Trust published its most recent ESG report in August 2024, which provides additional details on its ESG commitments and
activities. It can be found on the Trust’s website (www.smartcentres.com/esg-report). The information on the Trust’s website
does not form part of this MD&A.
MANAGEMENT’S DISCUSSION AND ANALYSIS
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Section IV — Development Activities
Mixed-Use Development Initiatives
The following table summarizes the Trust’s projected future mixed-use development pipeline, which consists principally of
residential projects but also includes seniors’ housing, self-storage, office and industrial projects as part of the portfolio’s
expected future build-out. This pipeline will be implemented based on market conditions and upon securing appropriate
financing.
(in millions of square feet)
Area at 100%
Area at Trust’s Share
Under Construction
2.0
1.0
Zoning Approved
68.1
58.1
Rezoning Application Submitted
9.9
8.9
In Planning
20.5
17.1
Total Square Feet
100.5
85.1
The following graph presents the projected future mixed-use development pipeline area at Trust’s share:
1.2%
68.3%
10.4%
20.1%
Under Construction
Zoning Approved
Rezoning Application Submitted
In Planning
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Status of Current Development Initiatives
This section contains forward-looking statements related to expected milestones and completion dates of various development
initiatives. Completion, milestone or occupancy dates of each of the projects described below may be delayed or adversely
impacted. Please refer to the “Forward-Looking Statements” section in this MD&A for more information.
The Trust’s development initiatives have resulted in the Trust participating in various construction development projects. This
includes construction at: i) SmartVMC; ii) a retail project in Toronto (Laird), Ontario; iii) residential apartments in Ottawa,
Ontario; iv) self-storage locations throughout Ontario, Quebec, and British Columbia; and v) a townhome project in Vaughan,
Ontario. In addition, the Trust is currently working on development initiatives for many other properties that will primarily consist
of residential developments located in Ontario and Quebec.
The following table provides additional details on the Trust’s 10 development initiatives that are currently under construction or
where initial siteworks have begun (in order of estimated initial occupancy/closing date):
Projects under construction
(Location/Project Name)
Type
Trust’s share
Actual /
estimated initial
occupancy /
closing date
% of capital
spend
GFA(1)
(sq. ft.)
No. of
residential
units
Mixed-use Developments
Vaughan NW
Townhomes
50 %
Q1 2024
65 %
366,000
174
Gilbert Self-storage
Self-storage
50 %
Q1 2025
80 %
177,000
N/A
St-Regis Self-storage
Self-storage
50 %
Q2 2025
77 %
164,000
N/A
Jane Self-storage
Self-storage
50 %
Q2 2025
80 %
143,000
N/A
Notre-Dame Self-storage
Self-storage
50 %
Q2 2026
28 %
177,000
N/A
Laval East Self-storage
Self-storage
50 %
Q3 2026
17 %
178,000
N/A
Regent Self-storage
Self-storage
50 %
Q4 2026
26 %
133,000
N/A
Vaughan / ArtWalk
Condo
50 %
Q2 2027
37 %
295,000
340
Ottawa SW
Residential apartment
50 %
Q3 2027
30 %
361,000
425
Total Mixed-use Developments
1,994,000
939
Retail Development
Toronto (Laird)
Retail
50 %
Q2 2026
40 %
224,000
—
In millions of dollars
Total Capital Spend to Date at 100% (2)
$455.0
Estimated Cost to Complete at 100%
575.9
Total Expected Capital Spend by Completion at 100%(2)
$1,030.9
Total Capital Spend to Date at Trust’s Share(2)
$227.5
Estimated Cost to Complete at Trust’s Share
287.9
Total Expected Capital Spend by Completion at Trust’s Share(2)
$515.4
(1)
GFA represents Gross Floor Area.
(2)
Total capital spend to date and total expected capital spend by completion including land value.
SmartVMC Development Initiatives
In December 2021, the Trust acquired a two-thirds interest in approximately 53 acres in SmartVMC valued at $513.0 million.
Existing permissions on the property include multi-residential, condo, seniors’ housing, office, retail, schools, recreational,
entertainment and other uses, although further entitlements or permissions may be required as specific developments are
planned.
The Trust now has an ownership interest in approximately 105 acres in the Vaughan Metropolitan Centre. When completed,
SmartVMC is planned to consist of approximately 20.0 million square feet (11.5 million square feet at the Trust’s share) of mixed-
use development, anchored by public transit infrastructure spending by the various levels of government of over $3.0 billion,
including the VMC subway station. SmartVMC currently includes:
i)
the 360,000 square foot KPMG tower, with 98% of the office space leased;
ii) the 225,000 square foot PwC-YMCA office and community-use complex, with fully occupied office space and
community-use space, including a new world-class YMCA facility and municipal library, both of which opened in 2022;
iii) the 140,000 square foot Walmart store which opened in 2020;
iv) the 458-unit purpose-built rental, The Millway;
v) 2.6 million square feet of condo units (Transit City 1, 2, 3, 4 & 5).
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The Trust is actively pursuing additional initiatives at SmartVMC, which include:
i)
the development of more than 4.0 million square feet (4,600 units) of residential density on the land at SmartVMC
previously occupied by a Walmart store, with zoning and site plan applications submitted in 2020 for approval of Phase
I of 550,000 square feet. Zoning was approved by the City of Vaughan in September 2021. The first phase condo,
ArtWalk, is underway, with 93% of the 340-unit Tower A pre-sold. Siteworks and excavation are completed and
construction has commenced;
ii) the development of 1.2 million square feet of mixed-use density – office, retail and residential – on the SmartVMC lands
immediately south of the Transit City 4 & 5 towers, with the rezoning and site plan applications submitted in September
2020; and
iii) Park Place condo pre-development is underway on the SmartVMC West lands strategically acquired in December 2021.
The Zoning By-law and Official Plan amendments were approved in June 2022. Pre-sales for this development have
commenced.
Residential and Other Mixed-Use Development Initiatives
In addition to the Trust’s 10 development initiatives that are currently under construction, the following table shows the mixed-
use development initiatives which have been completed during the last two years:
Project
Type
Estimated Total GFA
(sq. ft./units)
Year of Construction
Completion(1)
Trust’s
Share
Brampton (Kingspoint Plaza) SmartStop (ON)
Self-storage facility
138,000 sq. ft. (1,070 units)
2023
50 %
Laval Centre (QC)
Residential rental
211 units
2023
50 %
Transit City 4 & 5 (ON)
Condo
1,026 units
2023
25 %
The Millway (ON)
Residential rental
458 units
2023
50 %
Pickering (Seaton Lands) (ON)
Industrial
229,000 sq. ft.
2024
100 %
Whitby SmartStop (ON)
Self-storage facility
126,000 sq. ft. (870 units)
2024
50 %
Markham Boxgrove SmartStop (ON)
Self-storage facility
133,000 sq. ft. (930 units)
2024
50 %
Stoney Creek SmartStop (ON)
Self-storage facility
138,000 sq. ft. (970 units)
2024
50 %
(1) Economic stabilization is achieved at 92% to 98% occupancy which varies by asset class and unique project-based factors. Residential rental and seniors’ housing projects are generally
expected to achieve economic stabilization in 2-3 years after construction completion. Self-storage projects are generally expected to achieve economic stabilization in 4-5 years after
construction completion.
In addition, the Trust is currently working on initiatives for the development of many properties for which final municipal
approvals have been obtained or are being actively pursued. Completion, milestone or occupancy dates of each of the projects
described below may be delayed or adversely impacted. Please refer to the “Forward-Looking Statements” section in this MD&A
for more information.
Residential
i.
the development of a new residential block consisting of three phases totalling 500 units at Laval Centre in Quebec.
Phase I (163 units) and Phase 2 (178 units) are zoned and site plan approved;
ii.
the development of a 35-storey high-rise purpose-built residential rental tower containing 442 units, on Balliol Street
in midtown Toronto, Ontario, with zoning and site plan applications submitted in September 2020. A second
submission of these applications was made in July 2021. A third submission of these applications was made in March
2022. Zoning approval was received in July 2022 and site plan approval is expected in Q2 2025;
iii.
the development of up to 1,600 residential units, in various forms, in Mascouche, Quebec, with the first phase
consisting of 238 units in two 10-storey rental towers which opened in July 2022.
iv.
the development of up to 5.3 million square feet of predominately residential space, in various forms, at Highway 400
& Highway 7, in Vaughan, Ontario, with a rezoning application previously submitted and a site plan application for the
first four residential buildings totalling 1,742 units. Currently working with the City of Vaughan on advancement of
Weston & Highway 7 Secondary Plan, as a path to achieving these permissions;
v.
the development of up to 5.5 million square feet of predominately residential space, in various forms, at Oakville
North in Oakville, Ontario, with an initial two-tower 587-unit residential phase, with 6,000 square feet of retail, which
is now permitted following a decision by the Ontario Land Tribunal in settlement of our May 2023 zoning appeal;
vi.
the development of up to 1.5 million square feet of residential space in various forms on the Trust’s undeveloped lands
at the Vaughan NW property in Vaughan, Ontario. The municipal approval on draft plan was received for 174
townhomes to be developed in two phases, of which approximately 83% of the first phase comprising 120 townhomes
have been pre-sold. Construction is well underway with phased closings commenced in March 2024 and anticipated
to continue through to June 2025. Official Plan and Zoning Approval were obtained in June 2022 for five mid-rise
buildings, of which site plan approval was obtained for the Phase I development of two mid-rise buildings;
vii.
the development of up to 1.5 million square feet of residential space, in various forms, in Pointe-Claire, Quebec, with
the first phase, a two-tower rental project, being actively pursued, but subject to the urban planning revision process
by the city of Pointe-Claire;
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viii.
the development of residential density at the Trust’s shopping centre at 1900 Eglinton Avenue East in Scarborough,
Ontario, with Official Plan Approval obtained in August 2022 for 4.65 million square feet of density. Approval was also
obtained in August 2022 of a Phase I development to include two residential towers (46 and 48 storeys), permitting
975 residential units comprising up to 806,000 square feet. Site plan application and approvals for Phase I are
ongoing. In addition, applications for Phase 2, consisting of approximately 1.4 million square feet were submitted in
September 2022 and continue to be processed with the City;
ix.
the Q4 2020 acquisition of an additional 33.33% interest (new ownership structure of 66.66% held by the Trust and
33.33% held by Penguin) in 50 acres of adjacent land to the Trust’s Premium Outlets Montreal in Mirabel, Quebec, for
the ultimate development of residential density of up to 4,500 units. Master plan of development for the site is
subject to municipal approval;
x.
the development of up to 900,000 square feet of predominately residential space on Yonge St. in Aurora, Ontario,
with rezoning applications for the entire site and site plan submitted for Phase I in July 2021 and resubmitted in April
2022 and an appeal filed to the Ontario Land Tribunal in March 2023. Entire site zoning was approved in Q4 2024;
xi.
the development of 1.5 million square feet of residential density adjacent to the new South Keys light rail train station
at the Trust’s Ottawa South Keys Centre, consistent with current zoning permissions. Site plan application for the first
phase rental complex with 446 units was submitted and deemed complete in Q4 2021 and work is ongoing on a
second submission to respond to agency comments on the application;
xii.
the development of approximately 404,000 square feet of residential space in various forms on the Trust’s
undeveloped lands situated in Owen Sound, Ontario, with a Phase I application submitted in January 2023, that will
permit two four-storey apartment form buildings totalling 156 units, along with 87 traditional townhomes. Phase II is
proposed to accommodate three four-storey apartment form buildings totalling 234 units. The entire 404,000 square
foot project was approved by Owen Sound City Council in May 2023. Conditional site plan approval was granted in
August 2023;
xiii.
the redevelopment of the Trust’s property in downtown Markham, Ontario, with a rezoning application submitted in
December 2020. An appeal was filed in July 2022 for the initial Official Plan Amendment & Zoning By-law
Amendment submission. A settlement agreement was entered into with the City of Markham and formally approved
by the Ontario Land Tribunal in June 2023. The zoning by-law now approved by Ontario Land Tribunal permits the
development of a residential mixed-use project (apartment or condo) of approximately 260,000 square feet as-of-
right;
xiv.
the development of approximately 980,000 square feet of mixed-use density on the Trust’s Parkway Plaza Centre in
Stoney Creek, Ontario, with a Phase I development consisting of two towers (each 20 storeys), totalling
approximately 390,000 square feet and 462 residential units. The 980,000 square foot proposal was approved by
Hamilton City Council in August 2023. A Site Plan Application for Phase I was submitted in Q4 2024;
xv.
the development of four high-rise purpose-built residential rental buildings comprising approximately 1,700 units with
Greenwin, in Barrie, Ontario, for which a zoning application was approved by Barrie City Council in January 2021 with
the site plan approved for Phase I by Barrie City Council in June 2021. An application for a building permit was
submitted in July 2021. Environmental Risk Assessment was approved for the entire site in September 2021 and the
application of Certificate of Property Use was submitted in February 2022 and approved in September 2022;
xvi.
the development of the Phase I, a 46-unit rental building, which is part of a multi-phase master plan in Alliston,
Ontario, with a rezoning application approved by town council in December 2020, a site plan application approved in
July 2022, and the full building permit received in December 2022;
xvii.
the Trust is progressing with the development approvals for approximately 215,000 square feet of residential space at
the Bayview and Major Mackenzie shopping centre in Richmond Hill, Ontario. Work is underway on the development
approvals application, which is anticipated to be submitted in Q1 2025.
xviii.
the development of up to 2.6 million square feet of predominately residential space, in various forms, at the Westside
Mall in Toronto, Ontario, with a zoning application for the first 35-storey mixed-use tower submitted in 2021. A
complete Official Plan application and revised Zoning application were submitted to the City in October 2023. The
Official Plan and Zoning By-law were presented at City Council and subsequently approved in June 2024. A Site Plan
Application is underway with an anticipated submission by Q2 2025;
xix.
the Trust is planning the redevelopment of a portion of its 73-acre Cambridge, Ontario, retail property (includes 68
acres that are subject to a leasehold interest with Penguin) which now allows various forms of residential, retail, office,
institutional and commercial uses, providing for the creation of a vibrant urban community with the potential for over
12.0 million square feet of development on the overall property once completed. The site plan approval process for an
initial mid-rise apartment is underway with site plan application submitted in Q3 2024;
xx.
the development of up to 5.0 million square feet of predominately residential space, in various forms over the long
term, in Pickering, Ontario, with the initial zoning for five towers with a gross floor area of approximately 1,400,000
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square feet and site plan application for a three-tower mixed-use phase, approximating 700,000 square feet,
approved by the City Council in June 2022;
Office Buildings / Industrial
xxi.
during the second quarter of 2022, the Trust completed the purchase of approximately 38 acres of industrial lands in
Pickering, Ontario adjacent to Highway 407. The first phase construction of a 229,000 square feet industrial building
is now completed after a second tenant took occupancy of the remaining 103,000 square feet in March 2024;
xxii.
the intensification of the Toronto StudioCentre in Toronto, Ontario (zoning allows for up to 1.2 million square feet);
Self-storage
xxiii.
all of the eleven operating self-storage facilities (Toronto (Leaside), Vaughan NW, Brampton (Bramport), Oshawa
South, Toronto (Dupont), Scarborough East, Aurora, Brampton (Kingspoint Plaza), Whitby, Markham, and Stoney
Creek) have been very well received by their local communities, with current combined occupancy levels at these
facilities ahead of expectations, at over 90% for facilities which have been operating for more than one year; and
xxiv.
six self-storage facilities are currently under construction in Toronto (Gilbert Ave.), Toronto (Jane St.), Dorval (St-
Regis Blvd.), Montreal (Notre Dame St. W), Laval E, Quebec, and Burnaby, British Columbia. The Trust is in the
process of obtaining municipal approvals for one site in Toronto and two sites outside of Ontario in New Westminster,
and Victoria, British Columbia.
Residential Development Inventory
Vaughan NW Residential Development
Residential development inventory consists of development lands, co-owned with Fieldgate and another partner, located at
Vaughan NW, Ontario, for the purpose of developing and selling residential townhome units. The municipally approved draft
plan consists of 174 townhomes to be developed in two phases. A phased sales program for the Vaughan NW Townhomes was
launched in December 2021, with Phase I comprising 120 townhomes. As of December 31, 2024, approximately 83% of the Phase
I townhomes have been pre-sold. Construction of Phase I is underway with 11 townhome closings completed in the quarter
contributing $11.8 million to FFO (the Trust’s share). Closing of the remaining townhomes in Phase I is anticipated to be
completed by the end of Q1 2025.
The following table summarizes the status of the Vaughan NW townhome closing Phase I:
Total
Total units in development - Phase I
120
Townhomes closed in Q1 2024
2
Townhomes closed in Q2 2024
25
Townhomes closed in Q3 2024
47
Townhomes closed in Q4 2024
11
Total units closed
85
Total units remaining
35
% of townhomes closed
70.8 %
The following table summarizes the net profits from the Vaughan NW townhome closing:
(in thousands of dollars)
For the Three Months Ended
December 31, 2024
For the Year Ended December
31, 2024
Total
Trust’s Share
Total
Trust’s Share
Townhome sales closings revenue
$15,558
$7,779
$116,536
$58,268
Cost of sales
(10,423)
(5,211)
(85,689)
(42,845)
Net Profit from Co-Tenancy
5,135
2,568
30,847
15,423
Interest and other
—
(567)
—
(3,576)
Net profit
$5,135
$2,001
$30,847
$11,847
MANAGEMENT’S DISCUSSION AND ANALYSIS
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Properties Under Development
As at December 31, 2024, the fair value of properties under development, including properties under development recorded in
equity accounted investments, totalled $2.2 billion, resulting in a net decrease of $81.5 million as compared to December 31,
2023, as presented in the following table. The net decrease was mainly driven by $143.1 million transfers to income properties,
which is offset by $187.8 million increase in fair value adjustment loss, primarily as a result of changes in market conditions for
certain future development properties, and a decrease in development costs of $27.6 million during the year ended
December 31, 2024, due to completion of projects. See “Investment Properties” in this MD&A for further discussion.
(in thousands of dollars)
December 31, 2024
December 31, 2023
Variance
Developments
$1,694,728
$1,758,774
$(64,046)
Earnouts subject to option agreements(1)
22,766
61,687
(38,921)
Total
$1,717,494
$1,820,461
$(102,967)
Equity accounted investments
469,870
448,446
21,424
Total including equity accounted investments(2)
$2,187,364
$2,268,907
$(81,543)
(1)
Earnout development costs during the development period are paid by the Trust and funded through interest-bearing secured debt provided by the vendors to the Trust. On
completion of the development and the commencement of lease payments by a tenant, the Earnouts will be acquired from the vendors based on predetermined or formula-based
capitalization rates, net of land and development costs incurred. Penguin has contractual options to acquire Trust Units and LP Units on completion of Earnouts as shown in Note 11(b)
of the consolidated financial statements for the year ended December 31, 2024. Effective December 9, 2020, pursuant to the Omnibus Agreement (defined below) between the Trust
and Penguin (see also “Related Party Transactions”), Penguin has the option to extend all Earnouts by two years from the previous expiry date, and the Trust has been given a right of
first offer in connection with the sale of the economic and financial benefits and rights of any such development parcel during any extended period. For further details, see the Trust’s
management information circular dated November 6, 2020, filed on SEDAR+.
(2)
Represents a non-GAAP measure. The Trust’s method of calculating non-GAAP measures may differ from other reporting issuers’ methods and, accordingly, may not be comparable.
For definitions and basis of presentation of the Trust’s non-GAAP measures, refer to “Presentation of Certain Terms Including Non-GAAP Measures” and “Non-GAAP Measures” in this
MD&A.
Future Retail Developments, Earnouts and Mezzanine Financing
Total future Retail Developments, Earnouts and Mezzanine Financing could increase the existing Trust’s portfolio by an
additional 2.0 million square feet. With respect to the future pipeline, commitments have been negotiated on 0.3 million square
feet. The Trust continues to revise its estimates and adjust its plans towards mixed-use developments.
The following table summarizes the expected potential future retail pipeline in properties under development as at December 31,
2024:
(in thousands of square feet)
Committed
Years 0–2
Years 3–5
Beyond Year 5
Total(1)
Developments
257
514
672
65
1,508
Earnouts
38
28
73
—
139
295
542
745
65
1,647
Mezzanine Financing
—
—
—
387
387
295
542
745
452
2,034
(1)
The estimated timing of development is based on management’s best estimates and can be adjusted based on changes in business conditions.
During the year ended December 31, 2024, the future retail properties under development pipeline increased by 5,000 square
feet to a total of 1.6 million square feet. The change is summarized in the following table:
(in thousands of square feet)
Total Area
Future retail properties under development pipeline – January 1, 2024
1,642
Add:
Transferred from income properties to properties under development
102
Net adjustment to project densities
222
Less:
Completion of Earnouts and Developments
(319)
Net change
5
Future retail properties under development pipeline – December 31, 2024
1,647
MANAGEMENT’S DISCUSSION AND ANALYSIS
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25
Uncommitted Retail Pipeline
The following table summarizes the estimated future investment by the Trust in retail properties under development. It is
expected the future development costs will be spent over the next five years and beyond:
(in thousands of dollars)
Years 0–2
Years 3–5
Beyond Year 5
Total Estimated
Costs
Costs
Incurred
Future
Development
Costs
Developments
$173,319
$258,771
$28,721
$460,811
$149,075
$311,736
Earnouts
11,751
21,322
—
33,073
2,748
30,325
$185,070
$280,093
$28,721
$493,884
$151,823
$342,061
Approximately 7.3% of the retail properties under development, representing a proportion of gross investment cost (committed
and uncommitted) relating to Earnouts ($47.3 million, divided by total estimated costs of $643.2 million), representing 139,000
square feet are lands that are under contract by vendors to develop and lease for additional proceeds when developed. In
certain events, the developer may sell the portion of undeveloped land to accommodate the construction plan that provides the
best use of the property. It is management’s intention to finance the costs of construction through interim financing or operating
facilities and, once rental revenue is stabilized, long-term financing will be arranged. With respect to the remaining gross
leasable area, it is expected that 1.5 million square feet of future space will be developed as the Trust leases space and finances
the related construction costs.
Completed and Future Earnouts and Developments on Existing Properties
For the three months ended December 31, 2024, $39.4 million of Earnouts and Developments (including Developments relating
to equity accounted investments, and of which $26.3 million at the Trust’s share) were completed and transferred to income
properties, as compared to $307.0 million ($154.8 million at the Trust’s share) in the same period in 2023.
Three Months Ended December 31, 2024
Three Months Ended December 31, 2023
Area
(sq. ft.)
Investment
(in millions)
Area
(sq. ft.)
Investment
(in millions)
Development – transfers from properties under
development to income properties
39,443
$14.1
11,452
$2.5
Self-storage facilities – equity accounted
investments
99,000
23.1
—
—
Developments – equity accounted investments
3,283
2.2
604,102
304.5
Total Earnouts and Developments
141,726
$39.4
615,554
$307.0
Total Trust’s share of Earnouts and
Developments
89,928
$26.3
313,503
$154.8
For the year ended December 31, 2024, $173.8 million of Earnouts and Developments (including developments recorded in
equity accounted investments, and of which $133.8 million at the Trust’s share) were completed and transferred to income
properties, as compared to $467.9 million ($275.0 million at the Trust’s share) in 2023.
Year Ended December 31, 2024
Year Ended December 31, 2023
Area
(sq. ft.)
Investment
(in millions)
Area
(sq. ft.)
Investment
(in millions)
Earnouts(1)
2,232
$1.0
12,610
$5.8
Development – transfers from properties under
development to income properties
317,008
95.0
321,531
76.2
Self-storage facilities – equity accounted
investments
278,500
72.2
98,956
23.8
Developments – equity accounted investments
8,593
5.6
769,076
362.1
Total Earnouts and Developments
606,333
$173.8
1,202,173
$467.9
Total Trust’s share of Earnouts and Developments
461,068
$133.8
768,157
$275.0
(1) The Earnouts for the year ended December 31, 2023 excluded one land parcel sale totalling $2.4 million of investment and the area for this parcel sale is not reflected in the table above.
MANAGEMENT’S DISCUSSION AND ANALYSIS
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14 SMARTCENTRES REAL ESTATE INVESTMENT TRUST | 2024 ANNUAL REPORT
26
The following table summarizes future retail developments, Earnouts and Mezzanine Financing as at December 31, 2024:
(in thousands of dollars)
Area
(sq. ft.)
Total
Area
Income
Gross
Commitment
Invested To
Date
Net
Commitment
Yield /
Cap Rate
Developments
Committed Developments
2025
64,184
3.9 %
$1,835
$29,275
(2)
$11,804
(2)
$17,471
6.3 %
(3)
2026 and beyond
192,869
11.7 %
6,144
105,860
(2)
29,853
(2)
76,007
5.8 %
(3)
Total Committed Developments
257,053
15.6 %
$7,979
$135,135
$41,657
$93,478
5.9 %
Uncommitted Developments
2025
133,027
8.1 %
1,735
36,069
(2)
25,903
(2)
10,166
4.8 %
(3)
2026 and beyond
1,117,645
67.9 % 26,495
424,741
(2)
123,171
(2)
301,570
6.2 %
(3)
Total Uncommitted Developments
1,250,672
76.0 %
$28,230
$460,810
$149,074
$311,736
6.1 %
Total Developments
1,507,725
91.6 % $36,209
$595,945
$190,731
(1)
$405,214
6.1 %
Earnouts
Committed Earnouts
2025
33,211
2.0 %
742
11,409
2,577
8,832
6.5 %
2026 and beyond
4,500
0.3 %
212
2,778
18
2,760
7.6 %
Total Committed Earnouts
37,711
2.3 %
$954
$14,187
$2,595
$11,592
6.7 %
Uncommitted Earnouts
2025
10,979
0.7 %
248
3,591
922
2,669
6.9 %
2026 and beyond
90,439
5.5 %
2,059
29,482
1,826
27,656
7.0 %
Total Uncommitted Earnouts
101,418
6.2 %
$2,307
$33,073
$2,748
$30,325
7.0 %
Total Earnouts
139,129
8.5 %
$3,261
$47,260
$5,343
(1)
$41,917
6.9 %
Total Before Non-cash Development
Cost
1,646,854
100.1 % $39,470
$643,205
$196,074
$447,131
6.1 %
Non-cash development cost (4)
58,272
(1)
Land / Intensification projects
1,463,148
(1)
Equity accounted investments
469,870
(1)
Total
1,646,854
100.1 % $39,470
$643,205
$2,187,364
(1)
$447,131
6.1 %
Options through Mezzanine Financing
386,575
Total Potential Pipeline
2,033,429
(1)
Under “Completed and Future Earnouts and Developments on Existing Properties” in this MD&A, Earnouts of $22.8 million, developments of $1,694.7 million and equity accounted
investments of $469.9 million comprise the total amount of $2,187.4 million. The amounts in the table above have been adjusted for Earnouts that are expected to be completed
after the expiry of the Earnout options being reclassified as developments.
(2)
Includes fair value adjustment for land.
(3)
On a cost basis, the yield would be 5.5%, 5.6%, 3.6%, and 5.3%, respectively.
(4)
Represents net liability currently recorded.
MANAGEMENT’S DISCUSSION AND ANALYSIS
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27
Section V — Business Operations and Performance
Results of Operations
Below is a summary of selected financial information concerning the Trust’s operations for the year ended December 31, 2024.
This information should be read in conjunction with the Trust’s consolidated financial statements for the year ended
December 31, 2024.
Proportionately Consolidated Statements of Income and Comprehensive Income (including the Trust’s Interests in Equity
Accounted Investments)
The following tables present the proportionately consolidated statements of income and comprehensive income, which include a
reconciliation of the Trust’s proportionate share of equity accounted investments:
Quarterly Comparison to Prior Year
(in thousands of dollars)
Three Months Ended December 31, 2024
Three Months Ended December 31, 2023
GAAP Basis
Proportionate
Share
Reconciliation
Total
Proportionate
Share(1)
GAAP Basis
Proportionate
Share
Reconciliation
Total
Proportionate
Share(1)
Variance of
Total
Proportionate
Share(1)
Net rental income and other
Rentals from investment properties and
other
$221,841
$12,528
$234,369
$211,021
$10,439
$221,460
$12,909
Property operating costs and other
(82,885)
(5,503)
(88,388)
(82,073)
(5,681)
(87,754)
(634)
$138,956
$7,025
$145,981
$128,948
$4,758
$133,706
$12,275
Residential sales revenue and other(2)
7,902
10
7,912
—
13,789
13,789
(5,877)
Residential cost of sales and other
(5,278)
(1)
(5,279)
(497)
(10,649)
(11,146)
5,867
$2,624
$9
$2,633
$(497)
$3,140
$2,643
$(10)
NOI
$141,580
$7,034
$148,614
$128,451
$7,898
$136,349
$12,265
Other income and expenses
General and administrative expense, net
(10,794)
—
(10,794)
(10,542)
—
(10,542)
(252)
Earnings (losses) from equity accounted
investments
9,576
(9,576)
—
(10,107)
10,107
—
—
Fair value adjustment on investment
properties
22,632
9,992
32,624
(14,887)
(12,953)
(27,840)
60,464
Gain (loss) on sale of investment
properties
(3)
—
(3)
67
—
67
(70)
Interest expense
(45,345)
(5,850)
(51,195)
(41,886)
(4,560)
(46,446)
(4,749)
Interest income
3,016
391
3,407
4,379
743
5,122
(1,715)
Supplemental costs
—
(1,991)
(1,991)
—
(1,235)
(1,235)
(756)
Fair value adjustment on financial
instruments
21,188
—
21,188
(41,310)
—
(41,310)
62,498
Net income and comprehensive income
$141,850
$—
$141,850
$14,165
$—
$14,165
$127,685
(1)
This column contains non-GAAP measures because it includes figures that are recorded in equity accounted investments. The Trust’s method of calculating non-GAAP measures may
differ from other reporting issuers’ methods and, accordingly, may not be comparable. For definitions and basis of presentation of the Trust’s non-GAAP measures, refer to
“Presentation of Certain Terms Including Non-GAAP Measures” and “Non-GAAP Measures”.
(2)
Includes additional partnership profit and other revenues.
For the three months ended December 31, 2024, net income and comprehensive income increased by $127.7 million as compared
to the same period in 2023. This increase was primarily attributable to the following:
•
$32.6 million fair value gain on investment properties for the period was higher by $60.5 million, primarily due to lease-
ups and renewals at higher rents for the three months ended December 31, 2024, and updated valuation parameters
and leasing activities in prior year period;
•
$21.2 million fair value gain on financial instruments for the period was higher by $62.5 million, primarily due to mark-to-
market adjustments for interest rate swaps and fluctuation in the Trust’s Unit price; and
•
$12.3 million increase in NOI primarily due to lease-up activities for retail and mixed-use properties, and an increase in
CAM recoveries compared to the prior year period.
MANAGEMENT’S DISCUSSION AND ANALYSIS
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14 SMARTCENTRES REAL ESTATE INVESTMENT TRUST | 2024 ANNUAL REPORT
28
Year-to-Date Comparison to Prior Year
(in thousands of dollars)
Year Ended December 31, 2024
Year Ended December 31, 2023
GAAP Basis
Proportionate
Share
Reconciliation
Total
Proportionate
Share(1)
GAAP Basis
Proportionate
Share
Reconciliation
Total
Proportionate
Share(1)
Variance of
Total
Proportionate
Share(1)
Net rental income and other
Rentals from investment properties and
other
$860,091
$46,723
$906,814
$834,581
$36,544
$871,125
$35,689
Property operating costs and other
(324,269)
(21,576)
(345,845)
(317,147)
(18,361)
(335,508)
(10,337)
$535,822
$25,147
$560,969
$517,434
$18,183
$535,617
$25,352
Residential sales revenue and other(2)
58,268
92
58,360
—
139,190
139,190
(80,830)
Residential cost of sales and other
(46,582)
(211)
(46,793)
(3,873)
(110,178)
(114,051)
67,258
$11,686
$(119)
$11,567
$(3,873)
$29,012
$25,139
$(13,572)
NOI
$547,508
$25,028
$572,536
$513,561
$47,195
$560,756
$11,780
Other income and expenses
General and administrative expense, net
(37,672)
—
(37,672)
(36,370)
(260)
(36,630)
(1,042)
Earnings from equity accounted
investments
20,589
(20,589)
—
75,170
(75,170)
—
—
Fair value adjustment on investment
properties
(69,671)
22,157
(47,514)
91,448
45,896
137,344
(184,858)
Gain (loss) on sale of investment
properties
(123)
—
(123)
44
—
44
(167)
Interest expense
(183,099)
(24,282)
(207,381)
(163,741)
(14,191)
(177,932)
(29,449)
Interest income
14,101
2,212
16,313
19,647
2,239
21,886
(5,573)
Supplemental costs
—
(4,526)
(4,526)
—
(5,709)
(5,709)
1,183
Fair value adjustment on financial
instruments
437
—
437
10,344
—
10,344
(9,907)
Net income and comprehensive income
$292,070
$—
$292,070
$510,103
$—
$510,103
$(218,033)
(1)
This column contains non-GAAP measures because it includes figures that are recorded in equity accounted investments. The Trust’s method of calculating non-GAAP measures may
differ from other reporting issuers’ methods and, accordingly, may not be comparable. For definitions and basis of presentation of the Trust’s non-GAAP measures, refer to
“Presentation of Certain Terms Including Non-GAAP Measures” and “Non-GAAP Measures” in this MD&A.
(2)
Includes additional partnership profit and other revenues.
For the year ended December 31, 2024, net income and comprehensive income decreased by $218.0 million as compared to
2023. This decrease was primarily attributed to the following:
•
$47.5 million fair value loss on investment properties, compared to a gain of $137.3 million in prior year, primarily as a
result of changes in market conditions for certain future development properties, partially offset by improved leasing
activities during the year ended December 31, 2024;
•
$29.4 million increase in interest expense primarily due to higher interest rates and lower capitalization due to
completion of development projects compared to the prior year (see “Interest Income and Interest Expense” section in
this MD&A for further discussion);
•
$0.4 million fair value gain on financial instruments for the year was lower by $9.9 million, primarily due to fluctuation in
the Trust’s Unit price, and mark-to-market adjustments for interest rate swaps; and
•
$13.6 million decrease in net profit from residential sales due to higher profits from condo closings at Transit City 4 & 5
in 2023.
Partially offset by the following:
•
$25.4 million increase in net rental income primarily due to lease-up activities for retail and mixed-use properties and an
increase in CAM recoveries compared to the prior year.
MANAGEMENT’S DISCUSSION AND ANALYSIS
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29
Net Operating Income
The following tables summarize NOI, related ratios and recovery ratios, provide additional information, and reflect the Trust’s
proportionate share of equity accounted investments, the sum of which represent a non-GAAP measure:
Quarterly Comparison to Prior Year
(in thousands of dollars)
Three Months Ended December 31, 2024
Three Months Ended December 31, 2023
Trust portion
excluding
EAI
Equity
Accounted
Investments
Total
Proportionate
Share(1)
Trust portion
excluding
EAI
Equity
Accounted
Investments
Total
Proportionate
Share(1)
Variance of
Total
Proportionate
Share(1)
Net base rent
$139,531
$8,751
$148,282
$133,183
$7,259
$140,442
$7,840
Property tax and insurance recoveries
45,547
618
46,165
42,824
707
43,531
2,634
Property operating cost recoveries
28,231
1,218
29,449
24,065
1,255
25,320
4,129
Miscellaneous revenue
5,544
1,853
7,397
5,654
1,569
7,223
174
Rentals from investment properties
$218,853
$12,440
$231,293
$205,726
$10,790
$216,516
$14,777
Service and other revenues
3,076
—
3,076
4,944
—
4,944
(1,868)
Earnings from other
(88)
88
—
351
(351)
—
—
Rentals from investment properties and
other(2)
$221,841
$12,528
$234,369
$211,021
$10,439
$221,460
$12,909
Recoverable tax and insurance costs
(45,358)
(767)
(46,125)
(43,609)
(735)
(44,344)
(1,781)
Recoverable CAM costs
(31,144)
(1,192)
(32,336)
(29,533)
(1,149)
(30,682)
(1,654)
Property management fees and costs
(1,501)
(474)
(1,975)
(1,324)
(406)
(1,730)
(245)
Non-recoverable operating costs
(1,312)
(3,024)
(4,336)
(1,651)
(3,202)
(4,853)
517
ECL
(494)
(46)
(540)
(1,011)
(189)
(1,200)
660
Property operating costs
$(79,809)
$(5,503)
$(85,312)
$(77,128)
$(5,681)
$(82,809)
$(2,503)
Other expenses
(3,076)
—
(3,076)
(4,945)
—
(4,945)
1,869
Property operating costs and other(2)
$(82,885)
$(5,503)
$(88,388)
$(82,073)
$(5,681)
$(87,754)
$(634)
Net rental income and other
$138,956
$7,025
$145,981
$128,948
$4,758
$133,706
$12,275
Residential sales closings revenue
7,902
10
7,912
—
13,789
13,789
(5,877)
Residential cost of sales and marketing
costs
(5,278)
(1)
(5,279)
(497)
(10,649)
(11,146)
5,867
Net profit (loss) on residential sales
$2,624
$9
$2,633
$(497)
$3,140
$2,643
$(10)
NOI(3)
$141,580
$7,034
$148,614
$128,451
$7,898
$136,349
$12,265
Net rental income and other as a
percentage of rentals from investment
properties and other
62.6 %
56.1 %
62.3 %
61.1 %
45.6 %
60.4 %
1.9 %
Recovery Ratio
96.4 %
93.7 %
96.4 %
91.5 %
104.1 %
91.8 %
4.6 %
(1)
This column contains non-GAAP measures because it includes figures that are recorded in equity accounted investments. The Trust’s method of calculating non-GAAP measures may
differ from other reporting issuers’ methods and, accordingly, may not be comparable. For definitions and basis of presentation of the Trust’s non-GAAP measures, refer to
“Presentation of Certain Terms Including Non-GAAP Measures” and “Non-GAAP Measures” in this MD&A.
(2)
As reflected under the column 'Trust portion excluding EAI' in the table above, this amount represents a GAAP measure.
(3)
Represents a non-GAAP measure. The Trust’s method of calculating non-GAAP measures may differ from other reporting issuers’ methods and, accordingly, may not be comparable.
For definitions and basis of presentation of the Trust’s non-GAAP measures, refer to “Presentation of Certain Terms Including Non-GAAP Measures” and “Non-GAAP Measures” in this
MD&A.
NOI for the three months ended December 31, 2024, increased by $12.3 million or 9.0% as compared to the same period in 2023.
This increase was primarily attributable to the following:
•
$7.8 million increase in base rent, of which $6.1 million relates to retail properties, and $1.7 million relates to self-storage
facilities and apartment rentals.
•
$4.0 million increase in CAM recoveries due to CAM recovery true-up in the prior year.
MANAGEMENT’S DISCUSSION AND ANALYSIS
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30
Year-to-Date Comparison to Prior Year
(in thousands of dollars)
Year Ended December 31, 2024
Year Ended December 31, 2023
Trust portion
excluding
EAI
Equity
Accounted
Investments
Total
Proportionate
Share(1)
Trust portion
excluding
EAI
Equity
Accounted
Investments
Total
Proportionate
Share(1)
Variance of
Total
Proportionate
Share(1)
Net base rent
$546,878
$32,150
$579,028
$523,511
$24,674
$548,185
$30,843
Property tax and insurance recoveries
180,372
2,596
182,968
174,617
2,977
177,594
5,374
Property operating cost recoveries
102,882
4,770
107,652
100,078
4,890
104,968
2,684
Miscellaneous revenue
17,208
6,890
24,098
18,744
5,256
24,000
98
Rentals from investment properties
$847,340
$46,406
$893,746
$816,950
$37,797
$854,747
$38,999
Service and other revenues
13,068
—
13,068
16,378
—
16,378
(3,310)
Earnings (loss) from other
(317)
317
—
1,253
(1,253)
—
—
Rentals from investment properties and
other(2)
$860,091
$46,723
$906,814
$834,581
$36,544
$871,125
$35,689
Recoverable tax and insurance costs
(183,709)
(3,073)
(186,782)
(178,423)
(3,099)
(181,522)
(5,260)
Recoverable CAM costs
(115,026)
(4,719)
(119,745)
(109,801)
(4,766)
(114,567)
(5,178)
Property management fees and costs
(5,825)
(1,728)
(7,553)
(4,783)
(1,368)
(6,151)
(1,402)
Non-recoverable operating costs
(6,247)
(11,959)
(18,206)
(6,428)
(8,684)
(15,112)
(3,094)
ECL
(394)
(97)
(491)
(1,332)
(444)
(1,776)
1,285
Property operating costs
$(311,201)
$(21,576)
$(332,777)
$(300,767)
$(18,361)
$(319,128)
$(13,649)
Other expenses
(13,068)
—
(13,068)
(16,380)
—
(16,380)
3,312
Property operating costs and other(2)
$(324,269)
$(21,576)
$(345,845)
$(317,147)
$(18,361)
$(335,508)
$(10,337)
Net rental income and other
$535,822
$25,147
$560,969
$517,434
$18,183
$535,617
$25,352
Residential sales closings revenue
58,268
92
58,360
—
139,190
139,190
(80,830)
Residential cost of sales and marketing
costs
(46,582)
(211)
(46,793)
(3,873)
(110,178)
(114,051)
67,258
Net profit (loss) on residential sales
$11,686
$(119)
$11,567
$(3,873)
$29,012
$25,139
$(13,572)
NOI(3)
$547,508
$25,028
$572,536
$513,561
$47,195
$560,756
$11,780
Net rental income and other as a
percentage of rentals from investment
properties and other
62.3 %
53.8 %
61.9 %
62.0 %
49.8 %
61.5 %
0.4 %
Recovery Ratio
94.8 %
94.5 %
94.8 %
95.3 %
100.0 %
95.4 %
(0.6) %
(1)
This column contains non-GAAP measures because it includes figures that are recorded in equity accounted investments. The Trust’s method of calculating non-GAAP measures may
differ from other reporting issuers’ methods and, accordingly, may not be comparable. For definitions and basis of presentation of the Trust’s non-GAAP measures, refer to
“Presentation of Certain Terms Including Non-GAAP Measures” and “Non-GAAP Measures” in this MD&A.
(2)
As reflected under the column “Trust portion excluding EAI” in the table above, this amount represents a GAAP measure.
(3)
Represents a non-GAAP measure. The Trust’s method of calculating non-GAAP measures may differ from other reporting issuers’ methods and, accordingly, may not be comparable.
For definitions and basis of presentation of the Trust’s non-GAAP measures, refer to “Presentation of Certain Terms Including Non-GAAP Measures” and “Non-GAAP Measures” in this
MD&A.
NOI for the year ended December 31, 2024 increased by $11.8 million or 2.1% as compared to 2023. This increase was primarily
attributed to the following:
•
$31.0 million increase in base rent, of which $22.3 million relates to retail properties, and $8.7 million relates to self-
storage facilities and apartment rentals.
Partially offset by the following:
•
$13.6 million decrease due to higher profits from condo closings at Transit City 4 & 5 in 2023;
•
$2.5 million decrease in net recoveries compared to prior year primarily due to timing of certain operating costs and
incremental amortization costs related to capital expenditures for maintaining the high standard of the portfolio; and
•
$3.1 million higher non-recoverable expenses mainly from residential apartments with higher occupancy.
MANAGEMENT’S DISCUSSION AND ANALYSIS
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31
Same Properties NOI
Three Months Ended
Year Ended
(in thousands of dollars)
December 31, 2024
December 31, 2023
December 31, 2024
December 31, 2023
Net rental income and other
$141,580
$128,451
$547,508
$513,561
NOI from equity accounted investments(1)
7,034
7,898
25,028
47,195
Total portfolio NOI before adjustments(1)
$148,614
$136,349
$572,536
$560,756
Adjustments:
Lease termination
(172)
(984)
(1,240)
(1,675)
Net profit on condo and townhome closings
(2,633)
(2,643)
(11,567)
(25,139)
Non-recurring items and other adjustments(2)
(21)
5,426
4,002
7,516
Total portfolio NOI after adjustments(1)
$145,788
$138,148
$563,731
$541,458
NOI sourced from acquisitions, dispositions,
Earnouts and developments
(3,057)
(608)
(11,851)
(4,391)
Same Properties NOI(1)
$142,731
$137,540
$551,880
$537,067
(1)
Represents a non-GAAP measure. The Trust’s method of calculating non-GAAP measures may differ from other reporting issuers’ methods and, accordingly, may not be comparable.
For definitions and basis of presentation of the Trust’s non-GAAP measures, refer to “Presentation of Certain Terms Including Non-GAAP Measures” and “Non-GAAP Measures” in this
MD&A.
(2)
Includes non-recurring items such as one-time adjustments relating to royalties, straight-line rent and amortization of tenant incentives.
The Same Properties NOI for the three months and year ended December 31, 2024, increased by $5.2 million or 3.8% and $14.8
million or 2.8%, respectively, as compared to the respective periods in 2023, primarily due to lease-up activities.
The Same Properties NOI excluding Anchors for the three months and year ended December 31, 2024, increased by 6.0% and
4.6% as compared to the respective periods in 2023.
Adjusted EBITDA
The following table presents a reconciliation of net income and comprehensive income to Adjusted EBITDA:
Rolling 12 Months Ended
(in thousands of dollars)
December 31, 2024
December 31, 2023
Variance
Net income and comprehensive income
$292,070
$510,103
$(218,033)
Add (deduct) the following items:
Net interest expense
192,938
157,990
34,948
Amortization of equipment, intangible assets and tenant improvements
12,072
11,619
453
Fair value adjustments on investment properties and financial
instruments
47,077
(147,893)
194,970
Adjustment for supplemental costs
4,526
5,709
(1,183)
Gain (loss) on sale of investment properties
123
(44)
167
Adjusted EBITDA(1)
$548,806
$537,484
$11,322
(1)
Represents a non-GAAP measure. The Trust’s method of calculating non-GAAP measures may differ from other reporting issuers’ methods and, accordingly, may not be comparable.
For definitions and basis of presentation of the Trust’s non-GAAP measures, refer to “Presentation of Certain Terms Including Non-GAAP Measures” and “Non-GAAP Measures” in this
MD&A.
MANAGEMENT’S DISCUSSION AND ANALYSIS
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32
Other Measures of Performance
The following measures of performance are sometimes used by Canadian REITs and other reporting entities as indicators of
financial performance. Because these measures are not standardized as prescribed by IFRS, they may not be comparable to
similar measures presented by other reporting entities. Management uses these measures to analyze operating performance.
Because one of the factors that may be considered relevant by prospective investors is the cash distributed by the Trust relative
to the price of the Units, management believes these measures are useful supplemental measures that may assist prospective
investors in assessing an investment in Units. The Trust analyzes its cash distributions against these measures to assess the
stability of the monthly cash distributions to Unitholders. These measures are not intended to represent operating profits for the
year; nor should they be viewed as an alternative to net income and comprehensive income, cash flows from operating activities
or other measures of financial performance calculated in accordance with IFRS. The calculations are derived from the
consolidated financial statements for the years ended December 31, 2024 and December 31, 2023, unless otherwise stated, do
not include any assumptions and forward-looking information, and are consistent with prior reporting years.
Funds From Operations (“FFO”)
FFO is a non-GAAP financial measure of operating performance widely used by the Canadian real estate industry based on the
definition set forth by the REALPAC White Paper. It is the Trust’s view that IFRS net income does not necessarily provide a
complete measure of the Trust’s recurring operating performance. This is primarily because IFRS net income includes items such
as fair value changes of investment property that are subject to market conditions and capitalization rate fluctuations and gains
and losses on the disposal of investment properties, including associated transaction costs and taxes, which management
believes are not representative of a company’s economic earnings. For these reasons, the Trust has adopted the REALPAC
White Paper’s definition of FFO, which was created by the real estate industry as a supplemental measure of operating
performance. FFO is computed as IFRS consolidated net income and comprehensive income attributable to Unitholders adjusted
for items such as, but not limited to, unrealized changes in the fair value of investment properties and financial instruments and
transaction gains and losses on the acquisition or disposal of investment properties calculated on a basis consistent with IFRS.
Adjusted Funds From Operations (“AFFO”)
AFFO is a non-GAAP financial measure of operating performance widely used by the Canadian real estate industry based on the
definition set forth by the REALPAC White Paper. AFFO is a supplemental measure historically used by many in the real estate
industry to measure operating cash flow generated from the business. In calculating AFFO, the Trust adjusts FFO for actual
costs incurred relating to leasing activities, major maintenance costs (both recoverable and non-recoverable) and straight-line
rent in excess of contractual rent paid by tenants (a receivable). Working capital changes, viewed as short-term cash
requirements or surpluses, are deemed financing activities pursuant to the methodology and are not considered when
calculating AFFO. Capital expenditures that are excluded and not deducted in the calculation of AFFO comprise those which
generate a new investment stream, such as erecting a new pylon sign that generates sign rental income, constructing a new
retail pad during property expansion or intensification, development activities or acquisition activities. Accordingly, AFFO differs
from FFO in that AFFO excludes from its definition certain non-cash revenues and expenses recognized under IFRS, such as
straight-line rent and the amortization of financing costs, but also includes capital and leasing costs incurred during the period
that are capitalized for IFRS purposes. Management is of the view that AFFO is a useful measure of recurring economic earnings
generated from operations after providing for operating capital requirements and as a result is also useful in evaluating the
ability of the Trust to fund distributions to Unitholders. A reconciliation of AFFO to IFRS net income and comprehensive income
can be found below.
Management considers both FFO and AFFO as key performance indicators to assess the Trust’s operating performance and the
sustainability of the Trust's distribution level. FFO and AFFO should not be construed as an alternative to net income and
comprehensive income or cash flows provided by or used in operating activities determined in accordance with IFRS. The Trust’s
method of calculating FFO and AFFO is in accordance with the recommendations in the REALPAC White Paper, but may differ
from other issuers’ methods and, accordingly, may not be comparable to FFO and AFFO reported by other issuers.
MANAGEMENT’S DISCUSSION AND ANALYSIS
SMARTCENTRES REAL ESTATE INVESTMENT TRUST | 2024 ANNUAL REPORT 29
SMARTCENTRES REAL ESTATE INVESTMENT TRUST | 2024 ANNUAL REPORT 15
33
Reconciliation of FFO
Three Months Ended December 31
Year Ended December 31
(in thousands of dollars)
2024
2023
Variance
2024
2023
Variance
Net income and comprehensive income
$141,850
$14,165
$127,685
$292,070
$510,103
$(218,033)
Add (deduct):
Fair value adjustment on investment properties and
financial instruments(1)
(43,820)
56,197
(100,017)
69,234
(101,792)
171,026
Gain (loss) on derivative – TRS
(5,645)
13,314
(18,959)
10,027
(205)
10,232
Gain (loss) on sale of investment properties
3
(67)
70
123
(44)
167
Amortization of intangible assets and tenant improvement
allowance
2,387
2,469
(82)
9,208
9,199
9
Distributions on Units classified as liabilities and vested
deferred units and EIP
5,000
2,157
2,843
19,218
8,478
10,740
Salaries and related costs attributed to leasing activities(2)
2,279
2,709
(430)
9,549
8,519
1,030
Adjustments relating to equity accounted investments(3)
(5,409)
15,949
(21,358)
(6,873)
(33,293)
26,420
FFO(4)
$96,645
$106,893
$(10,248)
$402,556
$400,965
$1,591
Add (deduct) non-recurring adjustments:
Gain (loss) on derivative – TRS
5,645
(13,314)
18,959
(10,027)
205
(10,232)
FFO sourced from condo and townhome closings
(2,147)
(2,657)
510
(10,704)
(24,010)
13,306
Transactional FFO – sale of land(4)
1,218
440
778
1,218
(568)
1,786
FFO with adjustments(4)
$101,361
$91,362
$9,999
$383,043
$376,592
$6,451
(1)
Includes fair value adjustments on investment properties and financial instruments. Fair value adjustment on investment properties is described in “Investment Properties” in the
Trust’s MD&A. Fair value adjustment on financial instruments comprises the following financial instruments: units classified as liabilities, Deferred Unit Plan (“DUP”), Equity Incentive
Plan (“EIP”), TRS, and interest rate swap agreements. The significant assumptions made in determining the fair value are more thoroughly described in the Trust’s consolidated
financial statements for the year ended December 31, 2024. For details, please see discussion in “Results of Operations” section in this MD&A.
(2)
Salaries and related costs attributed to leasing activities of $9.5 million were incurred in the year ended December 31, 2024 (year ended December 31, 2023 – $8.5 million) and were
eligible to be added back to FFO based on the definition of FFO, in the REALPAC White Paper, which provided for an adjustment to incremental leasing expenses for the cost of
salaried staff. This adjustment to FFO results in more comparability between Canadian publicly traded real estate entities that expensed their internal leasing departments and those
that capitalized external leasing expenses.
(3)
Includes tenant improvement amortization, indirect interest with respect to the development portion, fair value adjustment on investment properties, loss (gain) on sale of investment
properties, and adjustment for supplemental costs.
(4)
Represents a non-GAAP measure. The Trust’s method of calculating non-GAAP measures may differ from other reporting issuers’ methods and, accordingly, may not be comparable.
For definitions and basis of presentation of the Trust’s non-GAAP measures, refer to “Presentation of Certain Terms Including Non-GAAP Measures” and “Non-GAAP Measures” in this
MD&A.
For the three months ended December 31, 2024, FFO decreased by $10.2 million or 9.6% to $96.6 million as compared to the
same period in 2023. This decrease was primarily attributable to:
•
$19.0 million decrease in fair value adjustment on TRS resulting from fluctuations in the Trust’s Unit price; and
•
$3.7 million increase in net interest expense due to higher interest rates and lower capitalization due to completion of
development projects compared to the prior year.
Partially offset by:
•
$12.3 million increase in NOI primarily due to lease-up activities for retail and mixed-use properties, and an increase in
CAM recoveries compared to the prior year period.
For the year ended December 31, 2024, FFO increased by $1.6 million or 0.4% to $402.6 million as compared to 2023. This
increase was primarily attributable to:
•
$25.4 million increase in NOI primarily due to lease-up activities for retail and mixed-use properties, and an increase in
CAM recoveries;
•
$10.2 million increase in fair value adjustment on TRS resulting from fluctuations in the Trust’s Unit price; and
•
$3.8 million increase in capitalized interest related to equity accounted investments due to development activities.
Partially offset by:
•
$24.3 million increase in net interest expense primarily due to higher interest rates and lower capitalization due to
completion of development projects compared to the prior year; and
•
$13.3 million decrease in net profits from condo and townhome closings at Transit City 4&5 in 2023.
For the three months and year ended December 31, 2024, FFO with adjustments increased by $10.0 million to $101.4 million and
by $6.5 million to $383.0 million, respectively, as compared to the same periods in 2023. The increase was attributable to an
increase in NOI primarily due to lease-up activities for retail and mixed-use properties, and an increase in CAM recoveries,
partially offset by an increase in net interest expense compared to the prior year periods.
MANAGEMENT’S DISCUSSION AND ANALYSIS
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14 SMARTCENTRES REAL ESTATE INVESTMENT TRUST | 2024 ANNUAL REPORT
34
Reconciliation of AFFO
Three Months Ended December 31
Year Ended December 31
(in thousands of dollars)
2024
2023
Variance
2024
2023
Variance
FFO(1)
$96,645
$106,893
$(10,248)
$402,556
$400,965
$1,591
Add (Deduct):
Straight-line rents
(1,273)
(479)
(794)
(4,127)
(690)
(3,437)
Adjusted salaries and related costs attributed to leasing
(2,279)
(2,709)
430
(9,549)
(8,519)
(1,030)
Capital expenditures, leasing commissions, and tenant
improvements(2)(3)
(8,089)
(11,518)
3,429
(29,484)
(37,332)
7,848
AFFO(1)
$85,004
$92,187
$(7,183)
$359,396
$354,424
$4,972
Add (deduct) non-recurring adjustments:
Gain (loss) on derivative – TRS
5,645
(13,314)
18,959
(10,027)
205
(10,232)
FFO sourced from condo and townhome closings
(2,147)
(2,657)
510
(10,704)
(24,010)
13,306
Transactional FFO – sale of land(1)
1,218
440
778
1,218
(568)
1,786
AFFO with adjustments(1)
$89,720
$76,656
$13,064
$339,883
$330,051
$9,832
(1)
Represents a non-GAAP measure. The Trust’s method of calculating non-GAAP measures may differ from other reporting issuers’ methods and, accordingly, may not be comparable.
For definitions and basis of presentation of the Trust’s non-GAAP measures, refer to “Presentation of Certain Terms Including Non-GAAP Measures” and “Non-GAAP Measures” in this
MD&A.
(2)
Please see the “Maintenance Capital Requirements” section in this MD&A for details of actual capital expenditures, actual leasing commissions and actual tenant improvements.
(3)
Balance as of December 31, 2024 includes capital expenditures, leasing commissions, and tenant improvements related to equity accounted investments of $0.6 million.
For the three months ended December 31, 2024, AFFO decreased by $7.2 million to $85.0 million as compared to the same
period in 2023. The decrease was primarily due to the decrease in FFO, partially offset by a decrease in capital expenditures.
For the year ended December 31, 2024, AFFO increased by $5.0 million to $359.4 million as compared to the same period in
2023, primarily due to a decrease in tenant improvements.
The following table presents per Unit FFO and per Unit AFFO with adjustments (non-GAAP measures):
Three Months Ended December 31
Year Ended December 31
2024
2023
Variance
2024
2023
Variance
Per Unit – basic/diluted(1):
FFO(2)
$0.54/$0.53 $0.60/$0.59
($0.06)/($0.06)
$2.26/$2.23
$2.25/$2.23
$0.01/$0.00
FFO with adjustments(2)
$0.57/$0.56
$0.51/$0.51
$0.06/$0.05
$2.15/$2.12
$2.11/$2.09
$0.04/$0.03
AFFO(2)
$0.48/$0.47
$0.52/$0.51
($0.04)/($0.04)
$2.02/$1.99
$1.99/$1.97
$0.03/$0.02
AFFO with adjustments(2)
$0.50/$0.50
$0.43/$0.43
$0.07/$0.07
$1.91/$1.88
$1.85/$1.83
$0.06/$0.05
Payout Ratio to AFFO(2)
97.0 %
89.4 %
7.6 %
91.7 %
93.0 %
(1.3) %
Payout Ratio to AFFO with
adjustments(2)
91.9 %
107.5 %
(15.6) %
97.0 %
99.9 %
(2.9) %
(1)
Diluted FFO and AFFO is adjusted for the dilutive effect of vested deferred and EIP units, which are not dilutive for net income purposes. The calculation of diluted FFO and AFFO is a
non-GAAP measure and does not consider the impact of unvested deferred units. To calculate diluted FFO and AFFO for the three months ended December 31, 2024, 2,985,307
vested deferred and EIP units are added back to the weighted average Units outstanding (three months ended December 31, 2023 – 1,898,600 vested deferred units). To calculate
diluted FFO and AFFO for the year ended December 31, 2024, 2,557,290 vested deferred and EIP units are added back to the weighted average Units outstanding (year ended
December 31, 2023 – 1,845,842 vested deferred units).
(2)
Represents a non-GAAP measure. The Trust’s method of calculating non-GAAP measures may differ from other reporting issuers’ methods and, accordingly, may not be comparable.
For definitions and basis of presentation of the Trust’s non-GAAP measures, refer to “Presentation of Certain Terms Including Non-GAAP Measures” and “Non-GAAP Measures” in this
MD&A.
MANAGEMENT’S DISCUSSION AND ANALYSIS
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SMARTCENTRES REAL ESTATE INVESTMENT TRUST | 2024 ANNUAL REPORT 15
35
Weighted Average Number of Units
The weighted average number of Trust Units and exchangeable LP Units is used in calculating the Trust’s net income and
comprehensive income per Unit, net income and comprehensive income excluding fair value adjustments per Unit, and FFO/
AFFO per Unit. The corresponding diluted per Unit amounts are adjusted for the dilutive effect of the vested portion of deferred
units granted under the Trust’s DUP unless they are anti-dilutive. To calculate diluted FFO/AFFO per Unit for the years ended
December 31, 2024 and 2023, vested EIP and deferred units are added back to the weighted average Units outstanding because
they are dilutive.
The following table sets forth the weighted average number of Units outstanding for the purposes of FFO/AFFO per Unit and
net income and comprehensive income per Unit calculations in this MD&A:
Three Months Ended December 31
Year Ended December 31
(number of Units)
2024
2023
2024
2023
Trust Units
144,687,634
144,625,322
144,659,062
144,625,322
Class B LP Units
16,424,430
16,424,430
16,424,430
16,424,430
Class D LP Units
311,022
311,022
311,022
311,022
Class F LP Units
8,708
8,708
8,708
8,708
Class B LP II Units
756,525
756,525
756,525
756,525
Class B LP III Units
4,129,420
4,117,096
4,120,329
4,107,038
Class B LP IV Units
3,112,565
3,112,565
3,112,565
3,112,565
Class B Oshawa South LP Units
710,416
710,416
710,416
710,416
Class D Oshawa South LP Units
260,417
260,417
260,417
260,417
Class B Oshawa Taunton LP Units
374,223
374,223
374,223
374,223
Class D Series 1 VMC West LP Units
3,623,188
3,623,188
3,623,188
3,623,188
Class D Series 2 VMC West LP Units
2,173,913
2,173,913
2,173,913
2,173,913
Class B Boxgrove LP Units
170,000
170,000
170,000
170,000
Class B Series ONR LP Units
1,186,431
1,248,140
1,214,756
1,248,140
Class B Series 1 ONR LP I Units
132,881
132,881
132,881
132,881
Class B Series 2 ONR LP I Units
139,302
139,302
139,302
139,302
Total Exchangeable LP Units
33,513,441
33,562,826
33,532,675
33,552,768
Total Units – Basic
178,201,075
178,188,148
178,191,737
178,178,090
Vested deferred units
2,321,453
1,898,600
2,237,683
1,845,842
Vested EIP units
663,854
—
319,607
—
Total Units, vested EIP and deferred units – Diluted
181,186,382
180,086,748
180,749,027
180,023,932
Determination of Distributions
Pursuant to the Trust’s declaration of trust (the “Declaration of Trust”) the Trust endeavours to distribute annually such amount
as is necessary to ensure the Trust will not be subject to tax on its net income under Part I of the Income Tax Act (Canada).
The Board of Trustees determines the Trust’s Unit cash distribution rate by, among other considerations, its assessment of cash
flow as determined using certain non-GAAP measures. As such, management believes the cash distributions are not an
economic return of capital, but a distribution of sustainable cash flow from operations. Given both existing AFFO and
distribution levels, and current facts and assumptions, the Board of Trustees has indicated that barring any unexpected events,
the Trust currently intends to maintain its monthly cash distribution levels.
In any given period, the distributions declared may differ from cash provided by operating activities, primarily due to seasonal
fluctuations in non-cash operating items (amounts receivable, prepaid expenses, deposits, accounts payable and accrued
liabilities). These seasonal or short-term fluctuations are funded, if necessary, by the Trust’s revolving operating facility. In
addition, the distributions declared previously included a component funded by the DRIP which was suspended by the Board of
Trustees effective April 13, 2020. The Board of Trustees anticipates that distributions declared will, in the foreseeable future,
continue to vary from net income and comprehensive income because net income and comprehensive income include fair value
adjustments to investment properties, fair value changes in financial instruments, and other adjustments, and also because
distributions are determined based on non-GAAP cash flow measures, which include consideration of the maintenance capital
requirements. Accordingly, the Trust does not use IFRS net income and comprehensive income as a proxy for distributions.
MANAGEMENT’S DISCUSSION AND ANALYSIS
32 SMARTCENTRES REAL ESTATE INVESTMENT TRUST | 2024 ANNUAL REPORT
14 SMARTCENTRES REAL ESTATE INVESTMENT TRUST | 2024 ANNUAL REPORT
36
Distributions and AFFO Highlights
Three Months Ended December 31
Year Ended December 31
(in thousands of dollars)
2024
2023
Variance
2024
2023
Variance
Cash flows provided by operating activities
$122,118
$93,745
$28,373
$374,208
$330,853
$43,355
Distributions declared
82,419
82,413
6
329,659
329,639
20
AFFO(1)
85,004
92,187
(7,183)
359,396
354,424
4,972
AFFO with adjustments(1)
89,720
76,656
13,064
339,883
330,051
9,832
Surplus of cash flows provided by operating activities
over distributions declared
39,699
11,332
28,367
44,549
1,214
43,335
Surplus of AFFO(1) over distributions declared
2,585
9,774
(7,189)
29,737
24,785
4,952
Surplus (shortfall) of AFFO(1) with adjustments over
distributions declared
7,301
(5,757)
13,058
10,224
412
9,812
(1)
Represents a non-GAAP measure. The Trust’s method of calculating non-GAAP measures may differ from other reporting issuers’ methods and, accordingly, may not be comparable.
For definitions and basis of presentation of the Trust’s non-GAAP measures, refer to “Presentation of Certain Terms Including Non-GAAP Measures” and “Non-GAAP Measures” in this
MD&A.
For the three months and year ended December 31, 2024, there was a $39.7 million and $44.5 million surplus of cash flows
provided by operating activities over distribution declared, respectively, as compared to $11.3 million surplus and $1.2 million
surplus in 2023. The surpluses were primarily driven by higher net rental income and other, due to higher lease-up activities and
base rent compared to the respective periods in 2023.
For the three months and year ended December 31, 2024, there was a $2.6 million and $29.7 million surplus of AFFO over
distributions declared, respectively, as compared to a $9.8 million and $24.8 million surplus for the respective period in 2023.
For the three months and year ended December 31, 2024, there was a $7.3 million and $10.2 million surplus of AFFO with
adjustments over distributions declared, respectively, as compared to a $5.8 million shortfall and $0.4 million surplus for the
respective periods of 2023. The surpluses primarily resulted from an increase in NOI due to lease-up activities for retail and
mixed-use properties, and a decrease in capital expenditures compared to prior year periods.
MANAGEMENT’S DISCUSSION AND ANALYSIS
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37
General and Administrative Expense
The following tables summarize general and administrative expense for the year ended December 31, 2024:
Year Ended December 31
(in thousands of dollars)
2024
2023
Variance
Salaries and benefits
$26,075
$24,556
$1,519
Professional fees
5,634
5,604
30
Public company costs
1,372
1,390
(18)
Amortization of intangible assets
1,331
1,331
—
Other costs including office rent, information technology, marketing, communications, and
other employee expenses
3,260
3,489
(229)
General and administrative expense
$37,672
$36,370
$1,302
For the year ended December 31, 2024, general and administrative expense increased by $1.3 million, as compared to 2023. This
increase was primarily driven by an increase in salaries and benefits due to the growth of the platform and inflation adjustments
compared to 2023.
Interest Income and Interest Expense
Interest Income
The following table summarizes the components of interest income:
Three Months Ended December 31
Year Ended December 31
(in thousands of dollars)
2024
2023
Variance
2024
2023
Variance
Mortgage interest
$—
$317
$(317)
$723
$2,038
$(1,315)
Loan interest
2,527
3,220
(693)
10,436
14,933
(4,497)
Notes receivable interest
66
66
—
263
263
—
Bank interest
423
776
(353)
2,679
2,413
266
$3,016
$4,379
$(1,363)
$14,101
$19,647
$(5,546)
For the year ended December 31, 2024, interest income decreased by $5.5 million, as compared to the same period in 2023,
mainly due to repayment of mortgages receivable and loans receivable.
MANAGEMENT’S DISCUSSION AND ANALYSIS
34 SMARTCENTRES REAL ESTATE INVESTMENT TRUST | 2024 ANNUAL REPORT
14 SMARTCENTRES REAL ESTATE INVESTMENT TRUST | 2024 ANNUAL REPORT
38
Interest Expense
The following table summarizes the components of interest expense:
Three Months Ended December 31
Year Ended December 31
(in thousands of dollars)
2024
2023
Variance
2024
2023
Variance
Mortgage interest
$6,753
$7,706
$(953)
$29,363
$32,670
$(3,307)
Debenture interest
26,852
23,083
3,769
98,843
88,918
9,925
Operating line interest and other
13,779
17,652
(3,873)
68,843
66,637
2,206
Interest at stated rates
$47,384
$48,441
$(1,057)
$197,049
$188,225
$8,824
Amortization of acquisition date fair value
adjustments on assumed debt
1
(43)
44
(113)
(285)
172
Amortization of deferred financing costs
1,058
958
100
4,015
3,750
265
Distributions on Units classified as liabilities and
vested deferred units
5,000
4,527
473
19,218
18,017
1,201
Total interest expense before capitalized interest
$53,443
$53,883
$(440)
$220,169
$209,707
$10,462
Less:
Interest capitalized to properties under
development
(7,800)
(11,567)
3,767
(35,587)
(44,444)
8,857
Interest capitalized to residential development
inventory
(298)
(430)
132
(1,483)
(1,522)
39
Total capitalized interest
$(8,098)
$(11,997)
$3,899
$(37,070)
$(45,966)
$8,896
Interest expense net of capitalized interest
expense
$45,345
$41,886
$3,459
$183,099
$163,741
$19,358
Capitalized interest as a percentage of interest
expense
15.2 %
22.3 %
(7.1) %
16.8 %
21.9 %
(5.1) %
For the three months and year ended December 31, 2024, interest expense net of capitalized interest increased by $3.5 million
and $19.4 million, respectively, compared to the same periods in 2023. The increase was mainly attributable to higher interest
rates and lower capitalization due to completion of development projects compared to the prior year periods.
MANAGEMENT’S DISCUSSION AND ANALYSIS
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39
Quarterly Results and Trends
in thousands of dollars, except percentage, square footage, Unit and per Unit amounts)
Q4
Q3
Q2
Q1
Q4
Q3
Q2
Q1
2024
2024
2024
2024
2023
2023
2023
2023
Results of operations
Net income (loss) and
comprehensive income (loss)
$141,850
$42,479
$128,916
$(21,175)
$14,165
$215,175
$167,902
$112,861
Per Unit
Basic
$0.80
$0.24
$0.72
$(0.12)
$0.08
$1.21
$0.94
$0.63
Diluted(3)
$0.78
$0.23
$0.71
$(0.12)
$0.08
$1.19
$0.93
$0.63
Net base rent(1)(2)
$148,282
$145,494
$143,578
$141,674
$140,442
$138,119
$135,617
$134,007
Rentals from investment properties
and other
$221,841
$211,737
$211,381
$215,637
$211,021
$206,016
$206,950
$210,594
NOI(1)(2)
$148,614
$148,785
$139,062
$136,075
$136,349
$143,834
$147,105
$133,468
Other measures of performance
FFO(2)
$96,645
$128,174
$90,780
$86,957
$106,893
$98,405
$98,534
$97,133
Per Unit
Basic(2)
$0.54
$0.72
$0.51
$0.49
$0.60
$0.55
$0.55
$0.55
Diluted(2)(3)
$0.53
$0.71
$0.50
$0.49
$0.59
$0.55
$0.55
$0.54
FFO with adjustments(2)
$101,361
$96,355
$92,421
$92,906
$91,362
$96,969
$97,247
$91,013
Per Unit
Basic(2)
$0.57
$0.54
$0.52
$0.52
$0.51
$0.54
$0.55
$0.51
Diluted(2)(3)
$0.56
$0.53
$0.51
$0.52
$0.51
$0.54
$0.54
$0.51
Cash flows provided by operating
activities
$122,118
$105,380
$76,991
$69,719
$93,745
$93,855
$61,322
$81,931
AFFO(2)
$85,004
$109,619
$83,386
$81,387
$92,187
$85,788
$87,848
$88,601
AFFO with adjustments(2)
$89,720
$77,800
$85,027
$87,336
$76,656
$84,352
$86,561
$82,481
Distributions declared
$82,419
$82,415
$82,413
$82,412
$82,413
$82,411
$82,410
$82,405
Payout ratio to AFFO
97.0 %
75.2 %
98.8 %
101.4 %
89.4 %
96.1 %
93.8 %
93.0 %
Units outstanding(4)
178,201,075
178,201,075
178,188,751
178,188,148
178,188,148
178,188,148
178,181,722
178,176,825
Weighted average Units
outstanding
Basic
178,201,075
178,189,287
178,178,870
178,188,148
178,188,148
178,184,795
178,179,652
178,159,373
Diluted(3)
181,186,382
180,858,726 180,664,749
180,265,745 180,086,748
180,069,508 180,045,789 179,891,028
Total assets
$11,939,689
$11,909,410
$11,953,142
$11,850,182
$11,905,422
$12,013,103
$11,833,262
$11,719,131
Total unencumbered assets(2)
$9,464,521
$9,366,921
$9,309,221
$9,176,421
$9,170,121
$9,067,121
$8,844,821
$8,653,321
Debt
$5,046,279
$5,027,500
$5,093,321
$5,043,206
$4,999,522
$5,052,722
$5,010,331
$4,956,957
Total leasable area (sq. ft.)
35,299,950
35,281,759
35,198,895
35,108,588
35,044,850
35,033,430
34,922,198
34,777,002
In-place occupancy rate
98.2 %
98.3 %
97.8 %
97.3 %
98.1 %
98.1 %
97.8 %
97.4 %
In-place and committed
occupancy rate
98.7 %
98.5 %
98.2 %
97.7 %
98.5 %
98.5 %
98.2 %
98.0 %
(1)
Includes the Trust’s proportionate share of equity accounted investments.
(2)
Represents a non-GAAP measure. The Trust’s method of calculating non-GAAP measures may differ from other reporting issuers’ methods and, accordingly, may not be comparable.
For definitions and basis of presentation of the Trust’s non-GAAP measures, refer to “Presentation of Certain Terms Including Non-GAAP Measures” and “Non-GAAP Measures” in this
MD&A.
(3)
Diluted metrics are adjusted for the dilutive effect of the vested portion of EIP and deferred units, unless they are anti-dilutive.
(4)
Total Units outstanding include Trust Units and LP Units, including Units classified as financial liabilities.
MANAGEMENT’S DISCUSSION AND ANALYSIS
36 SMARTCENTRES REAL ESTATE INVESTMENT TRUST | 2024 ANNUAL REPORT
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40
Section VI — Leasing Activities and Lease Expiries
Retail, Office and Industrial
Leasing Activities
Occupancy
The Trust’s value-oriented portfolio continued to provide an attractive place to shop and tenants’ confidence continued to grow
with the improving customer traffic resulting in demand for new locations in all markets and for all store sizes. In addition to the
regular staple of value-oriented tenants continuing to seek more space in Walmart-anchored sites, new uses are also enhancing
each centre’s offering with entertainment/experiential, pet supplies, furniture, specialty and takeout food all growing their store
counts. U.S.-based tenants are also re-engaging their search for new store openings in Canada.
As at December 31, 2024, the Trust’s in-place and committed occupancy rate was 98.7% (September 30, 2024 – 98.5%).
Occupancy(1)
December 31, 2024
September 30, 2024
Variance
Total leasable area (in sq. ft.)
35,299,950
35,281,759
18,191
In-place occupancy rate
98.2 %
98.3 %
(0.1) %
In-place and committed occupancy rate
98.7 %
98.5 %
0.2 %
(1) Excluding residential and self-storage area.
New Leasing Activity
During the year ended December 31, 2024, the Trust completed new leases with a wide array of tenants spanning diverse
categories such as specialty goods and services, leisure retail, pharmacies, personal services, apparel, and general merchandise.
Many of the Trust’s existing tenants continued their growth plans with retailers in furniture, general merchandise and specialty
stores expanding their brick-and-mortar footprint nationally. In the fourth quarter of 2024, the Trust executed 192,353 square
feet of new leasing on existing vacant built space, demonstrating strong leasing momentum and tenant demand. In addition,
during the year ended December 31, 2024, the Trust executed 253,000 square feet of new leasing for future newly built space.
The following graph presents the Trust’s cumulative leasing activity for the year ended on December 31, 2024(1):
(1) Commencing 2024, the Total New Lease balance includes new leasing for future newly built space.
MANAGEMENT’S DISCUSSION AND ANALYSIS
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41
The following table presents a continuity of the Trust’s in-place and committed occupancy rate (excluding residential and self-
storage area) for the three months ended December 31, 2024:
(in square feet)
Vacant Area
Occupied Area
Leasable Area
Occupancy Rate
In place occupancy – October 1, 2024
610,521
34,671,238
35,281,759
98.3 %
New vacancies
135,285
(135,285)
—
Taking Occupancy in the period
(102,714)
102,714
—
Subtotal
643,092
34,638,667
35,281,759
Transferred from properties under development
to income properties
—
40,428
40,428
Transferred from income properties to properties
under development
(2,014)
—
(2,014)
Other including unit area remeasurements
2,157
(22,380)
(20,223)
In place occupancy – December 31, 2024
643,235
34,656,715
35,299,950
98.2 %
Committed new leases for future occupancy
(187,917)
187,917
—
Ending balance – December 31, 2024, including
committed leases for future occupancy
455,318
34,844,632
35,299,950
98.7 %
The following table presents a continuity of the Trust’s in-place and committed occupancy rate (excluding residential and self-
storage area) for the year ended December 31, 2024:
(in square feet)
Vacant Area
Occupied Area
Leasable Area
Occupancy Rate
In place occupancy – January 1, 2024
655,881
34,388,969
35,044,850
98.1 %
New vacancies
844,243
(844,243)
—
New leases
(754,506)
754,506
—
Subtotal
745,618
34,299,232
35,044,850
Acquisitions
—
2,232
2,232
Transferred from properties under development
to income properties
—
319,588
319,588
Transferred from income properties to properties
under development
(102,042)
—
(102,042)
Other including unit area remeasurements
(341)
35,663
35,322
In place occupancy – December 31, 2024
643,235
34,656,715
35,299,950
98.2 %
Committed new leases for future occupancy
(187,917)
187,917
—
Ending balance – December 31, 2024, including
committed leases for future occupancy
455,318
34,844,632
35,299,950
98.7 %
Renewal Activity
For the year ended December 31, 2024, the Trust achieved a tenant renewal rate of 91.7% (year ended December 31, 2023 –
83.8%) for tenants with expiring leases in 2024.
Renewal Summary(1)
December 31, 2024
December 31, 2023
Variance
Space expiring in calendar year (in sq. ft.)
5,488,557
5,084,673
403,884
Renewed (in sq. ft.)
4,852,561
3,992,923
859,638
Near completion (in sq. ft.)
179,223
266,748
(87,525)
Total renewed and near completion (in sq. ft.)
5,031,784
4,259,671
772,113
Renewal rate (including near completion)
91.7 %
83.8 %
7.9 %
Renewed rental rate (per sq. ft.) – including Anchors
$15.17
$16.44
$(1.27)
Renewed rental rate (per sq. ft.) – excluding Anchors
$22.40
$22.78
$(0.38)
Change in renewed rental rate over expiring rate(2) (including Anchors)
6.1 %
4.0 %
2.1 %
Change in renewed rental rate over expiring rate(2) (excluding Anchors)
8.8 %
5.3 %
3.5 %
(1) Excluding residential and self-storage area.
(2) Represents the change in rental rates for properties with lease renewals completed during the period.
MANAGEMENT’S DISCUSSION AND ANALYSIS
38 SMARTCENTRES REAL ESTATE INVESTMENT TRUST | 2024 ANNUAL REPORT
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42
Tenant Profile
The Trust’s portfolio is represented in all major markets across Canada particularly in the Greater-VECTOM markets (Vancouver,
Edmonton, Calgary, Toronto, Ottawa and Montreal). The Greater-VECTOM and primary markets account for 88.4% of revenue
and 89.7% of fair value, and have in-place occupancy of 97.9% and 98.4%, respectively.
Portfolio Summary by Market Type
Market
Number of
Income-Producing
Properties
Area
(000 sq. ft.)
Gross Revenue
Income Property
Fair Value
In-place
Occupancy
Greater-VECTOM
115
23,511
72.2 %
76.5 %
97.9 %
Primary
31
6,800
16.2 %
13.2 %
98.4 %
Secondary
28
4,989
11.6 %
10.3 %
99.2 %
Total
174
35,300
100.0 %
100.0 %
98.2 %
Tenant Categories
The portfolio is represented by strong individual shopping centres strategically located in every major market in Canada,
offering a diverse mix of tenants and services, reflecting almost every retail category. The following graph represents the Trust’s
portfolio exposure by annualized gross rent by category as at December 31, 2024:
MANAGEMENT’S DISCUSSION AND ANALYSIS
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43
Top 25 Tenants
The 25 largest tenants (by annualized gross rental revenue among retail, office and industrial tenants) accounted for 59.9% of
portfolio revenue as at December 31, 2024 and are presented in the following table:
#
Tenant
Number of
Stores
Annualized
Gross
Rental Revenue
($ millions)
Percentage of
Total Annualized
Gross Rental
Revenue
Leased
Area
(sq. ft.)
Leased Area as
a % of Total
Gross Leasable
Area
1
Walmart(1)
100
$198.3
23.2 %
14,182,084
40.2 %
2
Canadian Tire, Mark's and FGL Sports
76
38.4
4.5 %
1,492,768
4.2 %
3
Winners, HomeSense and Marshalls
56
38.0
4.4 %
1,464,401
4.1 %
4
Loblaws and Shoppers Drug Mart
27
23.7
2.8 %
924,614
2.6 %
5
Sobeys
16
18.1
2.1 %
721,142
2.0 %
6
Dollarama
65
17.8
2.1 %
629,592
1.8 %
7
LCBO
39
14.1
1.7 %
363,674
1.0 %
8
Lowes and Rona
7
13.6
1.6 %
773,106
2.2 %
9
Michaels
25
13.5
1.6 %
493,851
1.4 %
10
Best Buy
18
12.2
1.4 %
437,074
1.2 %
11
Recipe Unlimited
55
11.9
1.4 %
272,330
0.8 %
12
Staples
21
10.7
1.3 %
449,599
1.3 %
13
Reitmans
62
9.4
1.1 %
317,256
0.9 %
14
Gap Inc.
25
9.2
1.1 %
264,711
0.7 %
15
Toys R Us
8
8.8
1.0 %
304,515
0.9 %
16
Restaurant Brands International
60
8.2
1.0 %
162,515
0.5 %
17
Bulk Barn
49
8.0
0.9 %
229,252
0.6 %
18
Bonnie Togs
41
7.6
0.9 %
190,621
0.5 %
19
CIBC
27
7.5
0.9 %
149,560
0.4 %
20
The Brick
9
7.4
0.9 %
258,244
0.7 %
21
Dollar Tree and Dollar Giant
26
7.0
0.8 %
217,286
0.6 %
22
Metro
9
7.0
0.8 %
315,438
0.9 %
23
Sleep Country
38
7.0
0.8 %
181,622
0.5 %
24
GoodLife Fitness Clubs
11
6.8
0.8 %
255,759
0.7 %
25
PetSmart
16
6.7
0.8 %
209,678
0.6 %
886
$510.9
59.9 %
25,260,692
71.3 %
(1)
The Trust has a total of 100 Walmart locations under lease, of which 98 are Supercentres that represent stores that carry all merchandise that Walmart department stores offer
including a full assortment of groceries. The Trust also has another 13 shopping centres with Walmart as Shadow Anchors, all of which are Supercentres.
MANAGEMENT’S DISCUSSION AND ANALYSIS
40 SMARTCENTRES REAL ESTATE INVESTMENT TRUST | 2024 ANNUAL REPORT
14 SMARTCENTRES REAL ESTATE INVESTMENT TRUST | 2024 ANNUAL REPORT
44
Lease Expiries
The following table presents total retail, office and industrial lease expiries for the portfolio as at December 31, 2024:
Total Area
(sq. ft.)
Percentage of
Total Area
Annualized
Base Rent
Average Base Rent
psf(1)
Year of Expiry
Month-to-month and holdovers
731,629
2.1 %
$17,812
$24.35
2025
2,923,385
8.3 %
43,414
14.85
2026
4,095,883
11.6 %
63,740
15.56
2027
5,404,586
15.3 %
78,473
14.52
2028
4,829,031
13.7 %
83,648
17.32
2029
6,283,461
17.8 %
97,202
15.47
2030
2,757,829
7.8 %
44,489
16.13
2031
1,264,387
3.6 %
22,561
17.84
2032
1,908,485
5.4 %
31,548
16.53
2033
1,208,210
3.4 %
25,391
21.02
2034
1,233,296
3.5 %
24,820
20.12
2035
711,336
2.0 %
10,351
14.55
Beyond
717,654
2.1 %
11,655
16.24
Vacant
643,235
1.8 %
—
—
Total retail
34,712,407
98.4 %
$555,104
$16.29
Total office
359,018
1.0 %
Total industrial
228,525
0.6 %
Total retail, office and industrial
35,299,950
100.0 %
(1)
The total average base rent per square foot excludes vacant space of 643,235 square feet.
The following table presents total retail and office expiries for the portfolio excluding Anchor tenants as at December 31, 2024:
Total Area
(excluding Anchor
tenants)
(sq. ft.)
Percentage of
Total Area
(including Anchor
tenants)
Percentage of
Total Area
(excluding Anchor
tenants)
Annualized
Base Rent
Average Base Rent
psf(1)
Year of Expiry
Month-to-month and holdovers
713,851
2.0 %
4.7 %
$17,519
$24.54
2025
1,310,314
3.7 %
8.6 %
28,797
21.98
2026
1,675,100
4.7 %
11.0 %
39,154
23.37
2027
1,749,170
5.0 %
11.5 %
41,473
23.71
2028
2,178,613
6.2 %
14.3 %
53,033
24.34
2029
2,195,261
6.2 %
14.5 %
52,599
23.96
2030
1,185,359
3.4 %
7.8 %
26,664
22.49
2031
491,344
1.4 %
3.2 %
12,388
25.21
2032
589,824
1.7 %
3.9 %
14,631
24.81
2033
784,008
2.2 %
5.2 %
20,252
25.83
2034
799,029
2.3 %
5.3 %
19,774
24.75
2035
556,826
1.6 %
3.7 %
8,254
14.82
Beyond
170,893
0.5 %
1.1 %
3,566
20.87
Vacant
518,195
1.5 %
3.4 %
—
—
Total retail
14,917,787
42.4 %
98.2 %
$338,104
$23.48
Total office
266,485
0.8 %
1.8 %
Total retail and office
15,184,272
43.2 %
100.0 %
(1)
The total average base rent per square foot excludes vacant space of 518,195 square feet.
MANAGEMENT’S DISCUSSION AND ANALYSIS
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45
Retail Lease Expiries
(in millions of square feet)
Walmart
Other Anchors
Non-Anchor
MTM
Vacant
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
Beyond
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
5.5
6.0
6.5
Self-storage Rental Facilities
The following table provides information on the self-storage rental facilities completed as at December 31, 2024:
Self-storage location
Open date
Number of
units (1)
Leasable
area (1)
Total rental
revenue YTD(2)
Toronto (Dupont)
October 2019
730
46,100
$1,128
Toronto (Leaside)
June 2020
1,000
99,500
1,446
Brampton (Bramport)
November 2020
1,050
100,200
1,186
Vaughan NW
January 2021
880
84,900
992
Oshawa South
August 2021
950
92,700
1,158
Scarborough East
November 2021
1,000
98,000
1,232
Aurora
December 2022
960
99,500
1,001
Brampton (Kingspoint Plaza)
March 2023
1,070
97,000
853
Whitby
January 2024
870
84,500
197
Markham
May 2024
930
95,000
133
Stoney Creek
October 2024
970
99,000
7
10,410
996,400
$9,333
(1) Figures are shown at 100% ownership.
(2)Total rental figures are for the year ended December 31, 2024 and shown at the Trust’s share.
As at December 31, 2024, the average occupancy rate for self-storage rental facilities that have been operational for over one
year was 92%.
MANAGEMENT’S DISCUSSION AND ANALYSIS
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46
Residential Rentals
The following table provides information on the in-place and committed occupancy rate for residential rentals as at
December 31, 2024:
Project
Location
Ownership
Interest
Completion date
Number of units (1)
In-place and
committed
occupancy rate
Laval Centre
Laval, QC
50 %
May 2020, July 2023
382
96.9 %
Mascouche N
Mascouche, QC
80 %
November 2022
238
99.6 %
The Millway
Vaughan, ON
50 %
December 2023
458
94.5 %
1,078
96.4 %
occupancy rate
(1) Figures are shown at 100% ownership.
As at December 31, 2024, the weighted average occupancy rate for the residential rentals was 96.4%, based on the number of
units.
MANAGEMENT’S DISCUSSION AND ANALYSIS
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47
Section VII — Asset Profile
Proportionately Consolidated Balance Sheets (including the Trust’s interests in equity
accounted investments)
The following table presents the proportionately consolidated balance sheets, which includes a reconciliation of the Trust’s
proportionate share of equity accounted investments:
(in thousands of dollars)
December 31, 2024
December 31, 2023
GAAP Basis
Proportionate
Share
Reconciliation(1)
Total
Proportionate
Share(2)
GAAP Basis
Proportionate
Share
Reconciliation(1)
Total
Proportionate
Share(2)
Assets
Non-current assets
Investment properties
$10,659,783
$1,167,597
$11,827,380
$10,564,269
$1,083,865
$11,648,134
Equity accounted investments
749,619
(749,619)
—
756,919
(756,919)
—
Mortgages, loans and notes receivable
208,130
(68,017)
140,113
80,532
(54,145)
26,387
Other financial assets
94,974
—
94,974
152,162
—
152,162
Other assets
10,453
2,460
12,913
4,167
2,243
6,410
Amounts receivable
12,994
—
12,994
—
—
—
Intangible assets
41,145
—
41,145
42,476
—
42,476
$11,777,098
$352,421
$12,129,519
$11,600,525
$275,044
$11,875,569
Current assets
Residential development inventory
31,738
76,111
107,849
51,719
30,300
82,019
Current portion of mortgages, loans
and notes receivable
17,022
—
17,022
129,777
—
129,777
Amounts receivable and other
63,441
(12,615)
50,826
73,610
1,862
75,472
Prepaid expenses, deposits and
deferred financing costs
12,696
21,908
34,604
15,048
18,103
33,151
Cash and cash equivalents
37,694
34,539
72,233
34,743
50,850
85,593
$162,591
$119,943
$282,534
$304,897
$101,115
$406,012
Total assets
$11,939,689
$472,364
$12,412,053
$11,905,422
$376,159
$12,281,581
Liabilities
Non-current liabilities
Debt
4,059,364
296,909
4,356,273
4,394,044
301,375
4,695,419
Other financial liabilities
12,619
—
12,619
17,314
—
17,314
Other payables
8,158
—
8,158
17,727
—
17,727
$4,080,141
$296,909
$4,377,050
$4,429,085
$301,375
$4,730,460
Current liabilities
Current portion of debt
986,915
83,957
1,070,872
605,478
(11,607)
593,871
Current portion of other financial
liabilities
274,526
—
274,526
258,069
—
258,069
Accounts payable and current portion
of other payables
260,526
91,498
352,024
253,486
86,391
339,877
$1,521,967
$175,455
$1,697,422
$1,117,033
$74,784
$1,191,817
Total liabilities
$5,602,108
$472,364
$6,074,472
$5,546,118
$376,159
$5,922,277
Equity
Trust Unit equity
5,242,830
—
5,242,830
5,272,334
—
5,272,334
Non-controlling interests
1,094,751
—
1,094,751
1,086,970
—
1,086,970
$6,337,581
$—
$6,337,581
$6,359,304
$—
$6,359,304
Total liabilities and equity
$11,939,689
$472,364
$12,412,053
$11,905,422
$376,159
$12,281,581
(1)
Represents the Trust’s proportionate share of assets and liabilities in equity accounted investments.
(2)
This column contains non-GAAP measures because it includes figures that are recorded in equity accounted investments. The Trust’s method of calculating non-GAAP measures may
differ from other reporting issuers’ methods and, accordingly, may not be comparable. For definitions and basis of presentation of the Trust’s non-GAAP measures, refer to
“Presentation of Certain Terms Including Non-GAAP Measures” and “Non-GAAP Measures” in this MD&A.
MANAGEMENT’S DISCUSSION AND ANALYSIS
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48
Investment Properties
The following table summarizes the changes in fair values of investment properties, including the Trust’s proportionate share of
equity accounted investments:
(in thousands of dollars)
Income
Properties
Properties
Under
Development
Total
Investment
Properties
Income
Properties
Properties
Under
Development
Total
Investment
Properties
Investment properties
Opening balance
$8,743,808
$1,820,461
$10,564,269
$8,575,713
$1,753,499
$10,329,212
Transfer from properties under
development to income properties
81,795
(81,795)
—
64,318
(64,318)
—
Transfer from income properties to
properties under development
(19,441)
19,441
—
(7,308)
7,308
—
Transfer from properties under
development to equity accounted
investments
—
(4,500)
(4,500)
—
(1,500)
(1,500)
Transfer to properties under development
from equity accounted investments
—
—
—
—
47,440
47,440
Acquisitions, Earnouts, and related
adjustments of investment properties
—
23,378
23,378
—
2,435
2,435
Straight-line rents and tenant incentives
10,171
—
10,171
7,213
—
7,213
Dispositions
—
(16,630)
(16,630)
—
(50,208)
(50,208)
Fair value adjustment
89,141
(158,812)
(69,671)
65,771
25,677
91,448
Capital expenditures and other
36,815
115,951
152,766
38,101
100,128
138,229
Ending balance
$8,942,289
$1,717,494
$10,659,783
$8,743,808
$1,820,461
$10,564,269
Opening balance
635,419
448,446
1,083,865
396,239
583,898
980,137
Transfer from properties under
development to income properties
37,470
(37,470)
—
198,033
(198,033)
—
Transfer from properties under
development to equity accounted
investments
—
2,250
2,250
—
750
750
Transfer to properties under development
from equity accounted investments
—
—
—
—
(23,720)
(23,720)
Acquisitions, Earnouts, and related
adjustments of investment properties
—
11,381
11,381
—
7,174
7,174
Straight-line rents and tenant incentives
(416)
—
(416)
(388)
—
(388)
Dispositions
—
—
—
—
(13,624)
(13,624)
Fair value adjustment
20,578
1,579
22,157
41,004
4,892
45,896
Capital expenditures and other
4,676
43,684
48,360
531
87,109
87,640
Ending balance
$697,727
$469,870
$1,167,597
$635,419
$448,446
$1,083,865
Total balance (including investment
properties classified as equity accounted
investments) – end of year (Investment
Properties – non-GAAP)(1)
$9,640,016
$2,187,364
$11,827,380
$9,379,227
$2,268,907
$11,648,134
Year Ended December 31, 2024
Year Ended December 31, 2023
(1)
Represents a non-GAAP measure. The Trust’s method of calculating non-GAAP measures may differ from other reporting issuers’ methods and, accordingly, may not be comparable.
For definitions and basis of presentation of the Trust’s non-GAAP measures, refer to “Presentation of Certain Terms Including Non-GAAP Measures” and “Non-GAAP Measures” in this
MD&A.
The gross leasable retail, office and industrial area consists of 35.3 million square feet. In addition, the Trust may acquire 1.6
million square feet of future potential gross leasable retail area and has the option to acquire an additional 50.0% interest in
three investment properties and a 25.0% interest in another investment property (0.4 million square feet) on their completion
pursuant to the terms of Mezzanine Financing. The portfolio is located across Canada, with assets in each of the ten provinces.
By selecting well-located centres, the Trust seeks to attract high-quality tenants at market rental rates.
MANAGEMENT’S DISCUSSION AND ANALYSIS
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49
Valuation Methodology
Management internally appraises the entire portfolio of properties each quarter. In addition, the determination of which
properties are externally appraised to support management’s internal valuation process is based on a combination of factors,
including property size, property type, tenant mix, strength and type of retail node, age of property and location. The Trust, on
an annual basis, has had external appraisals performed on 15%–20% of the portfolio, rotating properties to ensure that at least
50% (by value) of the portfolio is valued externally over a three-year period.
The portfolio is valued internally by management utilizing valuation methodologies that are consistent with the external
appraisals. Management performed these valuations by updating cash flow information reflecting current leases, renewal terms,
ECL and market rents and applying updated discount rates determined, in part, through consultation with various external
appraisers and available market data. In addition, the fair value of properties under development reflects the impact of
development agreements.
Fair values were primarily determined through the discounted cash flows approach, which is an estimate of the present value of
future cash flows over a specified horizon. For land, development and construction costs recorded at market value, fair values
were marked to market, factoring in development risks such as planning, zoning, timing and market conditions.
Investment properties as recorded in the Trust’s consolidated financial statements for the year ended December 31, 2024, with a
total carrying value of $3.1 billion (December 31, 2023 – $1.3 billion) were valued by external national appraisers, and investment
properties with a total carrying value of $7.6 billion (December 31, 2023 – $9.3 billion) were internally valued by the Trust.
Based on these valuations, the weighted average discount rate on the Trust’s income properties portfolio as at December 31,
2024 was 6.53% (December 31, 2023 – 6.51%) and the weighted average terminal capitalization rate as at December 31, 2024
was 6.01% (December 31, 2023 – 5.98%).
Management’s reassessment of the valuation of certain investment properties based on the Trust’s continued ability to lease and
generate NOI in the foreseeable future, has resulted in a net fair value adjustment loss on investment properties of $69.7 million
(excluding investment properties recorded in equity accounted investments) for the year ended December 31, 2024, which was
primarily attributed to changes in market conditions for certain future development properties, partially offset by fair value gain
due to leasing activities.
Acquisitions and Earnouts
Acquisitions and Earnouts completed during the year ended December 31, 2024
The following table summarizes the Acquisitions and Earnouts completed during the year ended December 31, 2024:
Satisfied through
Date of
Acquisition
Type
Area
Purchase
Price
Cash
Issuance
of LP
Units
Debt
Other
Adjustments
Acquisitions
51 Yonge Street, Toronto,
Ontario
February
Property under
development 10,650 sq. ft.
$21,555
$11,536
$—
$10,000
$19
London, Ontario
July
Land parcel
6.1 acres
1,823
816
—
—
1,007
Earnouts
September
Retail
2,232 sq. ft.
1,071
751
320
—
—
Earnouts completed during the year ended December 31, 2023
The following table summarizes the Earnouts completed during the year ended December 31, 2023:
Satisfied through
Date of
Acquisition
Type
Area
Purchase
Price
Cash
Issuance
of LP
Units
Debt
Assumption of
Debt and Other
Adjustments
Earnouts
Varies
Land parcel /
Retail
12,610 sq. ft.
$8,196
$2,777
$1,471
$—
$3,948
MANAGEMENT’S DISCUSSION AND ANALYSIS
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Dispositions of Investment Properties
Dispositions of investment properties during the year ended December 31, 2024
(in thousands of dollars)
Location
Date of
Disposition
Type
Area
Ownership
Interest
Disposition
Proceeds
Bradford, Ontario
January
Land parcel
3.3 acres
100 %
$6,786
Laval, Quebec(1)
April
Land parcel
1.8 acres
100 %
4,500
Mascouche, Quebec
October
Land parcel
4.7 acres
100 %
9,893
(1) In April 2024, the Trust contributed its interest in a parcel of land located in Laval, Quebec to the joint venture with the intention to develop and operate self-storage facilities.
Dispositions of investment properties during the year ended December 31, 2023
(in thousands of dollars)
Location
Date of
Disposition
Type
Area
Ownership
Interest
Disposition
Proceeds
Whitby, Ontario(1)
January
Land parcel
1.4 acres
100 %
$—
Vaughan, Ontario
February
Land parcel
4.2 acres
67 %
42,300
Chilliwack, British Columbia
February
Land parcel
2.6 acres
100 %
4,800
Quesnel, British Columbia
November
Land parcel
5.3 acres
100 %
1,060
Stoney Creek, Ontario(1)
November
Land parcel
1.3 acres
100 %
1,500
(1)
During the year ended December 31, 2023, the Trust contributed its interest in two parcels of land located in Whitby and Stoney Creek, Ontario to two joint ventures, respectively, with
the intention to develop and operate self-storage facilities.
MANAGEMENT’S DISCUSSION AND ANALYSIS
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51
Maintenance Capital Requirements
Differentiating those costs incurred to achieve the Trust’s longer-term goals to produce increased cash flows and Unit
distributions, from those costs incurred to maintain the level and quality of the Trust’s existing cash flows is key in the Trust’s
consideration of capital expenditures. Acquisitions of investment properties and the development of new and existing
investment properties are the two main areas of capital expenditures that are associated with increasing or enhancing the
productive capacity of the Trust (value enhancing capital expenditures). In addition, there are capital expenditures incurred on
existing investment properties to maintain the productive capacity of the Trust (“sustaining capital expenditures”).
The sustaining capital expenditures are those of a capital nature that are not considered to increase or enhance the productive
capacity of the Trust, but rather maintain the productive capacity of the Trust. Leasing and related costs, which include tenant
improvements, leasing commissions and related costs, vary with the timing of new leases, renewals, vacancies, tenant mix and
market conditions. Leasing and related costs are generally lower for renewals of existing tenants when compared to new leases.
Leasing and related costs also include internal expenses for leasing activities, primarily salaries, which are eligible to be added
back to FFO based on the definition of FFO in the REALPAC White Paper. The sustaining capital expenditures and leasing costs
are based on actual costs incurred during the period and are adjusted for AFFO. FFO and AFFO are non-GAAP measures (see
“Presentation of Certain Terms Including Non-GAAP Measures”, “Non-GAAP Measures” and “Other Measures of Performance” in
this MD&A).
The following table and discussion present an analysis of capital expenditures of a maintenance nature (actual sustaining
recoverable and non-recoverable capital expenditures and leasing costs). Earnouts, acquisitions and developments are
discussed elsewhere in this MD&A. Given that a significant proportion of the Trust’s portfolio is relatively new, management does
not believe that sustaining capital expenditures will have an impact on the Trust’s ability to pay distributions at their current
level.
Three Months Ended December 31
Year Ended December 31
(in thousands of dollars)
2024
2023
Variance
2024
2023
Variance
Leasing commissions
$992
$757
$235
$2,906
$2,692
$214
Tenant improvements
122
459
(337)
122
9,431
(9,309)
Sustaining capital expenditures (recoverable and non-
recoverable)
6,975
10,302
(3,327)
26,456
25,209
1,247
AFFO adjustment for sustaining capital expenditures,
leasing commissions, and tenant improvements
$8,089
$11,518
$(3,429)
$29,484
$37,332
$(7,848)
Value enhancing capital expenditures
4,159
4,697
(538)
14,732
8,534
6,198
Total capital expenditures, leasing commissions, and
tenant improvements
$12,248
$16,215
$(3,967)
$44,216
$45,866
$(1,650)
Adjusted salaries and related costs attributed to leasing
$2,279
$2,709
$(430)
$9,549
$8,519
$1,030
For the three months and year ended December 31, 2024, the total capital expenditures, leasing commissions, and tenant
improvements were $12.2 million and $44.2 million, respectively, as compared to $16.2 million and $45.9 million for the
respective periods in 2023, representing a decrease of $4.0 million and $1.7 million, respectively. These decreases were primarily
due to lower costs associated with tenant improvements, landlord’s work, roof replacements and building improvements
compared to prior year periods. These capital expenditures were incurred to sustain rental revenue from income properties and
may vary widely from period to period and from year to year.
MANAGEMENT’S DISCUSSION AND ANALYSIS
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Equity Accounted Investments
The following table summarizes key components relating to the Trust’s equity accounted investments:
Year Ended December 31, 2024
Year Ended December 31, 2023
Investment in
Associates
Investment in
Joint Ventures
Total
Investment in
Associates
Investment in
Joint Ventures
Total
Investment – beginning of year
$466,089
$290,830
$756,919
$458,772
$222,227
$680,999
Operating Activities:
Earnings
5,352
15,237
20,589
15,545
59,625
75,170
Distributions – VMC Residences condo unit
closings(1)
(37,886)
—
(37,886)
(653)
—
(653)
Distributions – operating activities
(4,204)
(3,180)
(7,384)
(3,505)
(2,666)
(6,171)
Financing Activities:
Fair value adjustment on loan
2,833
—
2,833
2,875
—
2,875
Investing Activities:
Cash contribution
7,471
39,309
46,780
11,062
46,643
57,705
Transfer from equity accounted investments
to properties under development
—
—
—
—
(47,440)
(47,440)
Transfer from equity accounted investments
to debt and other
—
—
—
—
11,267
11,267
Property contribution
—
4,500
4,500
—
1,500
1,500
Development distributions
(3,218)
(33,514)
(36,732)
(18,007)
(326)
(18,333)
Investment – end of year
$436,437
$313,182
$749,619
$466,089
$290,830
$756,919
(1)
For the year ended December 31, 2024, the distributions in the amount of $37.9 million were satisfied by a non-cash settlement of the VMC Residences loan payable (for the year
ended December 31, 2023 – the distributions in the amount of $0.7 million were satisfied by a non-cash settlement of the VMC Residences loan payable) See also Note 10(b)(iv) in the
Trust’s consolidated financial statements for the year ended December 31, 2024.
The following table summarizes the asset profile (at 100%) of the Trust’s equity accounted investments, grouped by their
business focus:
As at December 31, 2024
Income
Properties
Properties
Under
Development
Residential
Development
Inventory
Other Assets
Total Assets
(in thousands of dollars)
Rental
Residential
$539,801
$126,194
$—
$8,675
$674,670
Self-storage facilities
366,165
127,921
—
12,309
506,395
Retail
154,097
—
—
2,621
156,718
Office
192,561
—
—
19,864
212,425
Mixed-use
145,527
651,688
—
116,389
(1)
913,604
Condo and townhome residential
development inventory
—
—
153,130
54,346
(2)
207,476
$1,398,151
$905,803
$153,130
$214,204
$2,671,288
(1) Consists of loans receivable of $112.1 million in connection with the purchase of 700 Applewood (see also Note 10, “Debt”, in the Trust’s consolidated financial statements), and cash and
cash equivalents of $1.1 million.
(2) Consists of cash and cash equivalents of $51.1 million.
As at December 31, 2023
Income
Properties
Properties
Under
Development
Residential
Development
Inventory
Other Assets
Total Assets
(in thousands of dollars)
Rental
Residential
$540,775
$122,551
$—
$7,459
$670,785
Self-storage facilities
266,387
97,701
—
8,588
372,676
Retail
143,743
7,505
—
2,224
153,472
Office
190,448
—
—
20,188
210,636
Mixed-use
127,259
638,210
—
120,739
(1)
886,208
Condo and townhome residential
development inventory
—
—
61,837
229,385
(2)
291,222
$1,268,612
$865,967
$61,837
$388,583
$2,584,999
(1) Consists of loans receivable of $112.5 million in connection with the purchase of 700 Applewood (see also Note 10, “Debt”, in the Trust’s consolidated financial statements), and cash and
cash equivalents of $3.7 million.
(2) Consists of notes receivable of $135.5 million in connection with the Transit City closing, and cash and cash equivalents of $62.8 million.
MANAGEMENT’S DISCUSSION AND ANALYSIS
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Summary of development credit facilities
Investment in associates
As at December 31, 2024, Penguin-Calloway Vaughan Partnership (“PCVP”) had credit facilities in the amount of $550.0 million
(December 31, 2023 – $460.0 million), bearing annual interest rate based on the Adjusted Canadian Overnight Repo Rate
Average (“Adjusted CORRA”) rate plus 1.45% with maturity date of June 2027. As at December 31, 2024, deducting amount
drawn on such development credit facilities of $458.1 million (December 31, 2023 – $391.4 million) and outstanding letters of
credit of $29.1 million (December 31, 2023 – $29.7 million), the remaining unused development credit facilities were $62.8 million
(December 31, 2023 – $38.9 million), of which the Trust’s share was $31.4 million (December 31, 2023 – $19.4 million).
The development financing relating to PCVP comprises pre-development, construction and letters of credit facilities. With
respect to the development credit facilities relating to PCVP, the obligations are joint and several to each of the PCVP limited
partners; however, by virtue of an indemnity agreement between the PCVP limited partners, the obligations are effectively
several. From time to time, the original facility amounts are reduced through repayments and through amended agreements
with the financial institutions from which the facilities were obtained.
Investment in joint ventures
As at December 31, 2024, the Trust’s joint ventures had credit facilities in the amount of $163.5 million (December 31, 2023 –
$171.8 million), bearing annual interest rates based on the Adjusted CORRA rate plus 1.35% to 2.70%, with maturity dates
between November 2024 and May 2026. As at December 31, 2024, deducting amount drawn on such credit facilities of
$130.0 million (December 31, 2023 – $155.1 million), and no outstanding letters of credit (December 31, 2023 – $2.6 million), the
remaining unused development credit facilities were $33.5 million (December 31, 2023 – $14.1 million), of which the Trust’s share
was $16.8 million (December 31, 2023 – $8.2 million).
Development financing includes credit facilities relating to Laval C Apartments and Mascouche residential, comprising pre-
development and construction facilities, and a construction facility relating to additional self-storage facilities. From time to time,
the facilities amounts may be reduced through repayments and through amended agreements with the financial institutions
from which the facilities were obtained.
MANAGEMENT’S DISCUSSION AND ANALYSIS
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Amounts Receivable and Other, Prepaid Expenses, Deposits and Deferred Financing Costs
The timely collection of amounts receivable is a critical component associated with the Trust’s cash and treasury management
functions. The following table presents the components of amounts receivable and other, deferred financing costs, and prepaid
expenses and deposits:
(in thousands of dollars)
December 31, 2024
December 31, 2023
Variance
Amounts receivable and other
Tenant receivables
$26,751
$26,794
$(43)
Unbilled other tenant receivables
8,164
9,526
(1,362)
Receivables from related party – excluding equity accounted
investments
15,441
12,923
2,518
Receivables from related party – equity accounted investments
10,034
15,052
(5,018)
Other non-tenant receivables
3,069
2,410
659
Other(1)
19,210
15,888
3,322
$82,669
$82,593
$76
Allowance for ECL
(6,234)
(8,983)
2,749
Amounts receivable and other, net of allowance for ECL
$76,435
$73,610
$2,825
Prepaid expenses, deposits and deferred financing costs(2)
12,696
15,048
(2,352)
$89,131
$88,658
$473
(1)
The amount includes a related party amount of $11.7 million (December 31, 2023 – $8.7 million).
(2)
Includes prepaid realty tax of $1.1 million (December 31, 2023 – $1.3 million).
Tenant receivables
The Trust and its tenants are well positioned for continued strength in demand for retail space and, as the Trust identifies
tenants for its vacant space, it continues to maintain an efficient rent collections and payment solutions for its existing tenants.
The table below represents a summary of total tenant receivables and ECL balances as at December 31, 2024 and December 31,
2023:
(in thousands of dollars)
December 31, 2024
December 31, 2023
Tenant receivables
$26,751
$26,794
Unbilled other tenant receivables
8,164
9,526
Total tenant receivables
$34,915
$36,320
Allowance for ECL
(6,234)
(8,983)
Total tenant receivables net of allowance for ECL
$28,681
$27,337
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Mortgages, Loans and Notes Receivable
The following table summarizes mortgages, loans and notes receivable:
(in thousands of dollars)
December 31, 2024
December 31, 2023
Variance
Mortgages, loans and notes receivable
Loans receivable
$222,226
$189,837
$32,389
Mortgages receivable (Mezzanine Financing)
2
17,548
(17,546)
Notes receivable
2,924
2,924
—
$225,152
$210,309
$14,843
Loans Receivable
The following table summarizes loans receivable:
(in thousands of dollars)
Issued to
December 31, 2024
December 31, 2023
Penguin
$76,115
$76,392
Equity accounted investments
136,034
108,815
Unrelated parties
10,077
4,630
$222,226
$189,837
See also Note 5(a) in the Trust’s consolidated financial statements for the year ended December 31, 2024 for more details about
loans receivable, including committed facilities, maturity dates and interest rates.
The following table illustrates the activity in loans receivable:
Year Ended December 31
(in thousands of dollars)
2024
2023
Balance – beginning of year
$189,837
$282,312
Loans issued
56,258
4,608
Principal advances
36,218
6,892
Interest accrued
8,814
8,040
Fair value adjustments(1)
3,169
3,200
Repayments
(72,070)
(115,215)
Balance – end of year
$222,226
$189,837
(1)
$3.2 million recorded during the year ended December 31, 2024 (year ended December 31, 2023 – $3.2 million) in connection with the loan issued as part of the 700 Applewood
purchase.
Mortgages Receivable (Mezzanine Financing)
The following table presents the details of the mortgages receivable provided to Penguin:
(in thousands of dollars)
Committed
Maturity Date
including
Extension Period
Annualized
Variable
Interest Rate
at Year End
Potential Area
Upon Exercising
Purchase Option
(sq. ft.) Amount Outstanding
Property
Pitt Meadows, BC(2)(3)
$49,884
August 2028
6.90 %
25,003
$1
Toronto (StudioCentre), ON(1)(2)(3)
22,778
August 2028
6.90 %
227,831
1
Salmon Arm, BC(1)(2)
13,398
August 2028
6.90 %
—
—
Aurora (South), ON(2)(3)
15,152
August 2028
6.90 %
57,741
—
Vaughan (7 & 427), ON(2)(3)
15,781
August 2028
6.90 %
76,000
—
$116,993
6.90 %
386,575
$2
(1)
The Trust owns a 50% interest in these properties, with the other 50% interest owned by Penguin. These loans are secured against Penguin’s interest in the property.
(2)
The weighted average interest rate on this mortgage is subject to an upper limit of 6.90%.
(3)
The Trust has a purchase option from the borrower in these properties upon a certain level of development and leasing being achieved. As at December 31, 2024, it is management’s
expectation that the Trust will exercise these purchase options. The purchase option for Aurora (South), ON, Pitt Meadows, BC, and Vaughan (7 & 427), ON are each 50%. The
purchase option for Toronto (StudioCentre), ON is 25%.
In February 2024, a committed mortgage receivable of $15.5 million with respect to a property located at Caledon (Mayfield),
ON was discharged. The outstanding balance at the time of discharge was $nil.
MANAGEMENT’S DISCUSSION AND ANALYSIS
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The mortgages receivable security includes a first or second charge on properties, and assignments of rents and leases. In
addition, the outstanding balance is guaranteed by Penguin. The loans are subject to individual loan guarantee agreements that
provide additional guarantees for all interest and principal advanced on outstanding amounts. The amounts that are guaranteed
decrease on achievement of certain specified value-enhancing events. Management considers all mortgages receivable to be
fully collectible.
The following table illustrates the activity in mortgages receivable:
Year Ended December 31
(in thousands of dollars)
2024
2023
Balance – beginning of year
$17,548
$39,456
Interest accrued
723
2,038
Interest payments
(927)
(2,166)
Principal repayments
(17,342)
(21,780)
Balance – end of year
$2
$17,548
Notes Receivable
Notes receivable of $2.9 million (December 31, 2023 – $2.9 million) have been granted to Penguin (see also, “Related Party
Transactions”). These secured demand notes bear interest at 9.00% per annum (December 31, 2023 – 9.00%).
MANAGEMENT’S DISCUSSION AND ANALYSIS
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Section VIII — Financing and Capital Resources
Capital Resources and Liquidity
The following table presents the Trust’s capital resources available:
(in thousands of dollars)
December 31, 2024
December 31, 2023
Variance
Cash and cash equivalents
$37,694
$34,743
$2,951
Remaining operating facilities(1)
795,270
488,160
307,110
$832,964
$522,903
$310,061
Operating facility – accordion feature
250,000
250,000
—
$1,082,964
$772,903
$310,061
(1)
Excludes the Trust’s development facilities which have been arranged to fund project-specific development and related costs.
On the assumption that cash flow levels permit the Trust to obtain financing on reasonable terms, the Trust anticipates meeting
all current and future obligations. Management expects to finance future acquisitions, committed Earnouts, developments,
Mezzanine Financing commitments and maturing debt from: i) existing cash balances; ii) funds received from the closings of
mixed-use development initiatives, including condo and townhome sales; iii) a mix of mortgage debt secured by investment
properties, operating facilities and issuances of equity and unsecured debentures; iv) repayments of mortgages receivable; and
v) the sale of non-core assets. The Trust’s ability to meet these future obligations may be impacted by the liquidity risk
associated with receiving repayments of its mortgages, loans, and notes receivable, amounts receivable and other, deposits, and
cash equivalents on time and in full, and, infrequently, the realization of fair value on the disposition of the Trust’s non-core
assets. Cash flow generated from operating activities is the primary source of liquidity to pay Unit distributions and sustain
capital expenditures and leasing costs. See also the “Distributions and AFFO Highlights” subsection in this MD&A.
As at December 31, 2024, the Trust’s capital resources available increased by $310.1 million as compared to December 31, 2023.
The increase was mainly attributable to the repayment of outstanding floating rate debt on its operating lines and an increase in
the Trust’s unsecured revolving operating facility amount.
The Trust manages its cash flow from operating activities by maintaining a conservative debt level. As at December 31, 2024, the
Debt to Gross Book Value was 52.2% (December 31, 2023 – 51.9%).
Other than contractual maturity dates, the timing of payment of these obligations is management’s best estimate based on
assumptions with respect to the timing of leasing, construction completion, occupancy and Earnout dates at December 31, 2024.
In August 2024, the Trust issued $350.0 million principal amount of Series AA senior unsecured debentures by way of a private
placement (the “Series AA Debentures”). The Series AA Debentures bear interest at a rate of 5.162% per annum, with a maturity
date of August 1, 2030. The Trust used the proceeds from the Series AA Debentures primarily to repay the $100.0 million
aggregate principal of Series O senior unsecured debentures in full upon their maturity, and the outstanding floating rate debt
on its operating lines.
Subsequent to year end, in February 2025, the Trust issued $300.0 million principal amount of Series AB senior unsecured
debentures by way of a private placement (the “Series AB Debentures”). The Series AB Debentures bear interest at a rate of
4.737% per annum, with a maturity date of August 5, 2031. The Trust intends to use the net proceeds from the issuances to fully
repay the $160.0 million aggregate principal of Series N senior unsecured debentures upon their maturity and repayment of
existing debt.
The following table presents the estimated amount and timing of certain of the Trust’s future obligations, including development
obligations as at December 31, 2024:
(in thousands of dollars)
Total
2025
2026
2027
2028
2029
Thereafter
Secured debt
$717,520
$432,790
$115,368
$8,167
$23,899
$16,430
$120,866
Unsecured debt
4,225,199
511,915
701,004
1,200,172 600,000
562,108
650,000
Revolving operating facilities
43,049
43,049
—
—
—
—
—
Interest obligations(1)
467,109
122,192
103,594
88,783
65,664
49,695
37,181
Accounts payable
258,993
258,993
—
—
—
—
—
Other payable
33,435
17,783
1,884
1,884
1,884
—
10,000
$5,745,305
$1,386,722
$921,850
$1,299,006
$691,447
$628,233
$818,047
Mortgage receivable advances (repayments)
(2)
—
—
—
(2)
—
—
Development obligations (commitments)
49,589
49,589
—
—
—
—
—
Total
$5,794,892
$1,436,311
$921,850
$1,299,006
$691,445
$628,233
$818,047
(1)
Interest obligations represent expected interest payments on secured debt, unsecured debt, and revolving operating facilities under the assumption that the balances are repaid at
maturity, and do not represent a separate contractual obligation.
MANAGEMENT’S DISCUSSION AND ANALYSIS
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The following table presents the estimated amount and timing of certain of the equity accounted investments’ future obligations,
including development obligations, as at December 31, 2024:
(in thousands of dollars)
Total
2025
2026
2027
2028
2029
Thereafter
Secured and unsecured debt
$869,280
$172,506
$8,000
$510,493
$5,577
$54,284
$118,420
Development obligations (commitments)(1)
87,973
42,510
29,216
15,877
309
61
—
Total
$957,253
$215,016
$37,216
$526,370
$5,886
$54,345
$118,420
(1)
The Trust is in the process of refining its estimates of development obligations for the years subsequent to 2024. This total does not include expected costs associated with the
Trust’s mixed-use development initiatives except for current amounts outstanding for active projects currently underway.
The following table presents the estimated amount and timing of certain of the Trust’s proportionate share of equity accounted
investments’ future obligations, including development obligations, as at December 31, 2024:
(in thousands of dollars)
Total
2025
2026
2027
2028
2029
Thereafter
Secured and unsecured debt
$439,508
$85,872
$3,601
$245,978
$2,968
$41,879
$59,210
Development obligations (commitments)(1)
44,101
21,293
14,646
7,977
155
30
—
Total Trust’s share
$483,609
$107,165
$18,247
$253,955
$3,123
$41,909
$59,210
(1)
The Trust is in the process of refining its estimates of development obligations for the years subsequent to 2024. This total does not include expected costs associated with the
Trust’s mixed-use development initiatives except for current amounts outstanding for active projects currently underway.
The following table presents the Trust’s net working capital deficiency:
(in thousands of dollars)
December 31, 2024
December 31, 2023
Current assets
$162,591
$304,897
Less: Current liabilities
(1,521,967)
(1,117,033)
Working capital deficiency
$(1,359,376)
$(812,136)
Adjusted by:
Current portion of debt
(986,915)
(605,478)
Current portion of other financial liabilities
(274,526)
(258,069)
Net working capital surplus (deficiency)
$(97,935)
$51,411
As at December 31, 2024, the Trust had a net working capital deficiency of $97.9 million (December 31, 2023 – $51.4 million
surplus). This deficiency excludes mortgages, unsecured debentures and operating lines of credit of $986.9 million
(December 31, 2023 – $605.5 million) that mature within 12 months of the balance sheet date. It also excludes the current portion
of other financial liabilities amounting to $274.5 million (December 31, 2023 – $258.1 million), which relates to Units classified as
liabilities, vested deferred units, and earned EIP units expected to vest within 12 months. Management intends to either repay or
refinance the mortgages, unsecured debentures and operating lines of credit with cash and cash equivalents, newly issued
secured or unsecured debt, equity or, in certain circumstances not expected to occur frequently, the disposition of certain
assets. Regarding the current portion of other liabilities, management does not expect a significant portion of these liabilities to
be settled within 12 months of the balance sheet date. Including such mortgages, unsecured debentures, operating lines of credit
and other financial liabilities, the Trust has a working capital deficiency of $1.4 billion as at December 31, 2024 (December 31,
2023 – $812.1 million deficiency). The deficiencies are mainly as a result of timing differences in working capital and interest
accruals which are reported under cash flows from operating activities in the Trust’s financial statements.
As at December 31, 2024, the Trust has unencumbered assets (a non-GAAP financial measure) with an approximate fair value
totalling $9.5 billion (December 31, 2023 – $9.2 billion), which could generate gross financing proceeds on income properties of
approximately $6.0 billion (December 31, 2023 – $5.9 billion) using a 65% loan-to-value ratio. It is anticipated that requirements
for secured and unsecured debt, mortgage receivable advances and development obligations will be funded by additional term
mortgages, net proceeds on the sale of certain assets, existing cash or operating lines, the issuances of unsecured debentures,
and equity, as necessary.
MANAGEMENT’S DISCUSSION AND ANALYSIS
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Debt
The following table summarizes total debt including debt associated with equity accounted investments:
As at
December 31, 2024
December 31, 2023
(in thousands of dollars)
Balance
Weighted
Average Term
of Debt (in
years)
Weighted
Average
Interest Rate
of Debt
Balance
Weighted
Average Term
of Debt (in
years)
Weighted
Average
Interest Rate
of Debt
Secured debt
$716,495
2.4
3.97 %
$807,602
2.6
3.98 %
Unsecured debt
4,172,712
3.0
3.84 %
3,891,294
3.7
3.96 %
Unsecured loan from equity
accounted investments
114,023
N/A
— %
150,689
N/A
— %
Revolving operating facilities
43,049
1.0
4.75 %
149,937
0.4
6.67 %
Total debt before equity accounted
investments
$5,046,279
N/A
— %
$4,999,522
N/A
— %
Less: Unsecured loan from equity
accounted investments(1)
(58,642)
N/A
— %
(94,997)
N/A
— %
Subtotal
$4,987,637
3.0
3.82 %
$4,904,525
3.4
4.00 %
Share of secured debt (equity
accounted investments)
210,551
6.5
4.58 %
189,088
7.5
5.22 %
Share of unsecured debt (equity
accounted investments)
228,957
2.4
5.53 %
195,677
3.4
6.85 %
Share of debt classified as equity
accounted investments
$439,508
4.4
5.07 %
$384,765
5.4
6.05 %
Total debt including equity
accounted investments
$5,427,145
3.1
3.92 %
$5,289,290
3.6
4.15 %
(1)
This represents the Trust’s share of a loan from equity accounted investments.
Approximately 11% of the Trust’s debt is at variable rates, with a significant portion of that being linked to development projects.
The following table summarizes the activities in debt, including debt recorded in equity accounted investments, for the year
ended December 31, 2024:
(in thousands of dollars)
Secured
Debt
Unsecured
Debt
Revolving
Operating
Facilities
Equity
Accounted
Investments
Loan from
Equity
Accounted
Investments
Total
Balance – January 1, 2024
$807,602
$3,891,294
$149,937
$384,765
$55,692
$5,289,290
Borrowings
15,850
402,733
160,000
103,380
—
681,963
Scheduled amortization
(33,849)
—
—
(3,099)
—
(36,948)
Repayments
(49,397)
(147,237)
(268,500)
(43,449)
(3,480)
(512,063)
Amortization of acquisition fair value adjustments
(112)
—
—
(31)
3,169
3,026
Financing costs incurred, net of additions
68
735
—
(2,058)
—
(1,255)
Currency translation
—
1,520
1,612
—
—
3,132
Refinancing
(23,667)
23,667
—
—
—
—
Balance – December 31, 2024
$716,495
$4,172,712
$43,049
$439,508
$55,381
$5,427,145
MANAGEMENT’S DISCUSSION AND ANALYSIS
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Secured Debt
The Trust believes it will have continued access to secured debt due to its strong tenant base and high occupancy levels at
mortgage loan levels ranging from 60% to 70% of loan-to-value.
The following table summarizes future principal payments as a percentage of total secured debt:
(in thousands of dollars)
Instalment
Payments
Lump Sum
Payments
at Maturity
Total
% of Total
Weighted Average
Interest Rate of
Maturing Debt
2025
$23,419
$409,371
$432,790
60.3 %
3.54 %
2026
13,037
102,331 (1)
115,368
16.1 %
4.06 %
2027
8,167
—
8,167
1.1 %
— %
2028
8,146
15,753
23,899
3.3 %
5.39 %
2029
8,187
8,243
16,430
2.3 %
5.09 %
Thereafter
13,059
107,807
120,866
16.9 %
4.85 %
Total
$74,015
$643,505
$717,520
100.0 %
3.91 %
Acquisition date fair value adjustment
156
Unamortized financing costs
(1,181)
$716,495
3.97 %
(1) Includes construction loans in the amount of $5.5 million, which bear interest at adjusted CORRA rate plus 145 basis points.
Secured Non-revolving Construction Facility
In September 2024, the Trust entered into a secured non-revolving construction facility for the project on Laird Drive, Toronto,
totalling $61.3 million at the Trust’s share. The non-revolving facility bears interest at Adjusted CORRA plus 1.45%, with a
maturity date of September 27, 2026. As at December 31, 2024, $5.5 million was drawn.
Unsecured Debt
The following table summarizes the components of unsecured debt:
(in thousands of dollars)
December 31, 2024
December 31, 2023
Unsecured debentures (a)
$3,003,193
$2,752,816
Credit facilities (b)
1,073,524
995,246
$4,076,717
$3,748,062
TRS debt
95,995
143,232
Other unsecured debt from equity accounted investments (c)
114,023
150,689
$4,286,735
$4,041,983
MANAGEMENT’S DISCUSSION AND ANALYSIS
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a)
Unsecured debentures
As at December 31, 2024, unsecured debentures totalled $3,003.2 million (December 31, 2023 – $2,752.8 million). The
unsecured debentures mature at various dates between 2025 and 2030, with interest rates ranging from 1.74% to 5.35%,
and a weighted average interest rate of 3.57% as at December 31, 2024 (December 31, 2023 – 3.35%).
Unsecured debenture activities for the year ended December 31, 2024
In August 2024, the Trust issued $350,000 of 5.162% Series AA senior unsecured debentures (net proceeds of the issuance
in aggregate after issuance costs – $348,758). The Series AA debentures will mature on August 1, 2030. The debentures
have semi-annual payments due on February 1 and August 1 of each year, commencing on February 1, 2025. Concurrently,
the Trust repaid the $100,000 aggregate principal of Series O senior unsecured debentures in full upon their maturity.
The following table summarizes the components of unsecured debentures:
Series
Maturity Date
Annual
Interest Rate
Interest Payment Dates
December 31, 2024
December 31, 2023
Series O(2)
August 28, 2024
2.987 %
February 28 and August 28 $
— $
100,000
Series N
February 06, 2025
3.556 %
February 6 and August 6
160,000
160,000
Series X
December 16, 2025
1.740 %
June 16 and December 16
350,000
350,000
Series P
August 28, 2026
3.444 %
February 28 and August 28
250,000
250,000
Series V
June 11, 2027
3.192 %
June 11 and December 11
300,000
300,000
Series S
December 21, 2027
3.834 %
June 21 and December 21
250,000
250,000
Series Z
May 29, 2028
5.354 %
May 29 and November 29
300,000
300,000
Series Y
December 18, 2028
2.307 %
June 18 and December 18
300,000
300,000
Series U
December 20, 2029
3.526 %
June 20 and December 20
450,000
450,000
Series AA
August 1, 2030
5.162 %
February 1 and August 1
350,000
—
Series W
December 11, 2030
3.648 %
June 11 and December 11
300,000
300,000
3.568 %(1)
$
3,010,000 $
2,760,000
Unamortized financing costs
(6,807)
(7,184)
$
3,003,193 $
2,752,816
(1)
Represents the weighted average annual interest rate and excludes deferred financing costs.
(2)
The Series O debentures were repaid in full on the maturity date.
Credit rating of unsecured debentures
Dominion Bond Rating Services (“DBRS”) provides credit ratings of debt securities for commercial issuers that indicate the
risk associated with a borrower’s capabilities to fulfil its obligations. An investment-grade rating must exceed “BB”, with the
highest rating being “AAA”. In December 2024, DBRS kept the Trust’s credit rating at BBB and maintained a stable trend.
b)
Credit facilities
The following table summarizes the activity for unsecured credit facilities:
(in thousands of dollars)
(Issued in)
Maturity Date
Annual
Interest Rate
Facility
Amount
December 31,
2024
December 31,
2023
Non-revolving:
December 2022(1)
December 1, 2027
4.37 %
$100,000
$100,000
$100,000
December 2022(1)
December 1, 2027
4.88 %
100,000
100,000
100,000
December 2022(2)
December 20, 2027
SOFR + 1.70%
150,000
150,000
98,653
May 2019(1)
June 24, 2026
3.15 %
170,000
170,000
170,000
March 2019(1)
July 31, 2026
3.52 %
150,000
150,000
150,000
August 2018(1)
August 31, 2026
2.98 %
80,000
80,000
80,000
January 2022(1)(4)
January 19, 2027
4.48 %
300,000
300,000
300,000
Revolving:
March 2024(3)
March 8, 2026 Adjusted CORRA + 1.45%
40,000
26,400
—
$1,076,400
$998,653
Less:
Unamortized financing costs, debt modification adjustments, and others
(2,876)
(3,407)
$1,073,524
$995,246
(1)
The Trust entered into interest rate swap agreements to convert the variable interest rate into a weighted average fixed interest rate of 3.96% per annum. The weighted average
term to maturity of the interest rate swaps is 2.01 years. Hedge accounting has not been applied to the interest rate swap agreements. See additional details in the table below.
(2)
The Trust entered into cross currency swaps to exchange the U.S. dollar borrowings into Canadian dollar borrowings.
(3)
On March 8, 2024, the Trust amended its $40.0 million secured variable rate credit facility to an unsecured revolving facility and extended the maturity by two years to March
2026. As at December 31, 2024, the drawn amount was $26.4 million (December 31, 2023– $nil). In connection with the unsecured revolving facility, as at December 31, 2024, the
Trust had a $23.3 million letter of credit facility.
(4)
In September 2024, the Trust refinanced the loan and entered into interest rate swap agreement to convert the variable interest rate into a fixed interest rate of 4.48%.
MANAGEMENT’S DISCUSSION AND ANALYSIS
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The following table summarizes the fair value gain (loss) as at December 31, 2024 and December 31, 2023, relating to the
mark to market adjustments associated with the interest rate swap agreements:
Facility
Amount
Maturity Date
Fixed
Interest Rate
Variable
Interest Rate
December 31, 2024
December 31, 2023
$11,403
November 3, 2025
3.47 %
Adjusted CORRA + 1.50%
$118
$444
170,000
June 24, 2026
3.15 %
Adjusted CORRA + 1.20%
7,310
11,692
150,000
July 31, 2026
3.52 %
Adjusted CORRA + 1.20%
3,303
7,143
80,000
August 31, 2026
2.98 %
Adjusted CORRA + 1.20%
1,989
4,575
300,000
January 19, 2027
4.48 %
Adjusted CORRA + 1.45%
(50)
—
100,000
December 1, 2027
4.37 %
Adjusted CORRA + 1.20%
(1,609)
64
100,000
December 1, 2027
4.88 %
Adjusted CORRA + 1.45%
(1,261)
424
$9,800
$24,342
c)
Other unsecured debt from equity accounted investments
Other unsecured debt net of fair value adjustments totalling $114.0 million (December 31, 2023 – $150.7 million) pertains to
loans received from equity accounted investments in connection with contribution agreements relating to joint ventures.
The loans are non-interest-bearing with repayment terms based on the distributions that are to be paid pursuant to the
limited partnership agreements. The balances of the loans are expected to be paid at the end of their respective terms.
Revolving Operating Facilities
The following table summarizes components of the Trust’s revolving operating facilities:
Annual Interest Rate
Facility
Amount
Undrawn
Facilities
Outstanding
Letters of
Credit
Drawn Amount
Benchmark
Rate
Spread
December 31,
2024
December 31, 2023
Revolving facility maturing
December 2025(1)(2)
SOFR
1.55 % $ 100,000 $
56,951 $
— $
43,049 $
139,937
Revolving facility
maturing June 2029
Adjusted
CORRA
1.45 %
750,000
738,319
11,681
—
10,000
Prime Rate
0.45 %
$795,270
$11,681
$43,049
$149,937
(1)
The Trust has drawn in US$29.9 million which was translated to $43.0 million as at December 31, 2024 (December 31, 2023 – drawn in $105.7 million, which was translated to $139.9
million).
(2) The Trust entered into cross currency swaps to exchange the U.S. dollar borrowings into Canadian dollar borrowings.
In addition to the letters of credit outstanding on the Trust’s revolving operating facilities (see above), as at December 31, 2024,
the Trust also had $37.8 million of letters of credit outstanding with other financial institutions (December 31, 2023 – $33.9
million).
Unencumbered Assets
As at December 31, 2024, the Trust had $9.5 billion of unencumbered assets (a non-GAAP financial measure) (December 31,
2023 – $9.2 billion), which reflects the Trust’s share of the value of investment properties. Expressed as a percentage, the Trust
earned approximately 74.6% of its NOI from unencumbered assets (December 31, 2023 – 72.4%).
In connection with this pool of unencumbered assets, management estimates the total Annualized NOI for 2024 to be $427.2
million (December 31, 2023 – $406.2 million). Annualized NOI is computed by annualizing the current quarter NOI for the Trust’s
income properties that are not encumbered by secured debt, and is a forward-looking non-GAAP measure. See “Presentation of
Certain Terms Including Non-GAAP Measures” and “Non-GAAP Measures” in this MD&A.
MANAGEMENT’S DISCUSSION AND ANALYSIS
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Debt Maturities
The following graph illustrates the debt maturities(1)(2)(3) as at December 31, 2024:
and
Debt Maturities (in $ millions)
Secured Debt
Unsecured Debentures
Unsecured Credit Facilities and Other Debt
2025
2026
2027
2028
2029
2030
2031
Thereafter
$—
$500
$1,000
$1,500
(1)
Includes the Trust’s proportionate share of debt in equity accounted investments.
(2)
Excludes revolving operating facility of $43.0 million, which matures in December 2025.
(3)
For facilities where the initial maturity date can be extended at the sole option of the Trust, the final maturity date is assumed.
MANAGEMENT’S DISCUSSION AND ANALYSIS
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Financial Covenants
The Trust’s revolving operating facilities and unsecured debt contain numerous terms and covenants that limit the discretion of
management with respect to certain business matters. These covenants could in certain circumstances place restrictions on,
among other things, the ability of the Trust to create liens or other encumbrances, to pay distributions on its Units or make
certain other payments, investments, loans and guarantees and to sell or otherwise dispose of assets and merge or consolidate
with another entity.
In addition, the Trust’s revolving operating facilities and unsecured debt contain a number of financial covenants that require the
Trust to meet certain financial ratios and financial condition tests. A failure to comply with the financial covenants in the
revolving operating facilities and unsecured debt could result in a default, which, if not cured or waived, could result in a
reduction, suspension or termination of distributions by the Trust and permit acceleration of the relevant indebtedness.
The following table presents ratios which the Trust monitors. These ratios are either requirements stipulated by the Declaration
of Trust or significant financial covenants pursuant to the terms of revolving operating facilities and other credit facilities or
indentures, or indicators monitored by the Trust to manage an acceptable level of leverage. These ratios are not considered
measures in accordance with IFRS; nor is there an equivalent IFRS measure and may not be comparable to similarly titled
measures presented by other publicly traded entities. See “Presentation of Certain Terms Including Non-GAAP Measures” and
“Non-GAAP Measures” in this MD&A.
As at and for the year ended December 31, 2024, the Trust was in compliance with all financial covenants.
Ratio
Calculation
Threshold
December 31, 2024
December 31, 2023
Interest coverage ratio(1)
Adjusted EBITDA / Adjusted interest
expense including capitalized
interest(6)
≥1.65X
2.5X
2.7X
Fixed charge coverage ratio(3)
Adjusted EBITDA / Debt service
expense(7)
≥1.5X
2.1X
2.2X
Debt to aggregate assets(3)(4)(5)
Net debt / Aggregate assets(8)
≤65%
43.7 %
43.1 %
Debt to aggregate assets (excluding
TRS debt and receivable)(2)(5)
Net debt (excluding TRS debt)/
Aggregate assets (excluding TRS
receivable)(8)
≤65%
43.2 %
42.4 %
Debt to Gross Book Value (excluding
convertible debentures)(1)(4)(5)
Net debt / Gross book value(9)
≤60%
52.2 %
51.9 %
Debt to Gross Book Value (including
convertible debentures)(1)(4)(5)
Net debt / Gross book value(9)
≤65%
52.2 %
51.9 %
Adjusted Debt to Adjusted
EBITDA(2)(5)
Adjusted debt / Adjusted EBITDA(10)
N/A
9.6X
9.6X
Secured debt to aggregate assets(3)(5)
Secured debt including EAI /
Aggregate assets(11)
≤40%
7.5 %
8.2 %
Unsecured to secured debt ratio(2)(5)
Unsecured debt including EAI /
Secured debt including EAI(12)
N/A
83%/17%
81%/19%
Unencumbered assets to unsecured
debt(3)(5)
Unencumbered assets / Unsecured
debt including EAI(13)
≥1.3X
2.1X
2.2X
Unitholders’ equity (in thousands)(1)(3)
≥$2,000,000
$6,337,581
$6,359,304
Units classified as liabilities (in
thousands)
N/A
$191,665
$196,571
Total Unitholders’ equity including
Units classified as liabilities (in
thousands)
N/A
$6,529,246
$6,555,875
(1)
This ratio is required by the Trust’s indentures.
(2)
This ratio is disclosed for informational purposes only.
(3)
This ratio is a significant financial covenant pursuant to the terms of the Trust’s revolving operating facilities and other credit facilities.
(4)
This ratio is stipulated by the Declaration of Trust.
(5)
As at December 31, 2024, cash-on-hand of $34.9 million (December 31, 2023 – $31.4 million) was excluded for the purposes of calculating the ratios.
(6)
This ratio is calculated as: Adjusted EBITDA/Adjusted interest expense including capitalized interest. The calculation of Adjusted EBITDA and Adjusted interest expense including
capitalized interest are referenced in the “Non-GAAP Measures” section in this MD&A.
(7)
This ratio is calculated as: Adjusted EBITDA/Debt service expense. The calculation of Adjusted EBITDA is referenced in the “Non-GAAP Measures” section in this MD&A. Debt service
expense is calculated as total interest expense as per the proportionate income statement, less distributions on vested deferred units and Units classified as liabilities and interest
income from mortgages and loans receivable, plus capitalized interest and mortgage principal amortization payments.
(8)
This ratio is calculated as: Net debt/Aggregate assets. Net debt is calculated as total debt including equity accounted investments as referenced in “Debt,” less excess cash-on-hand.
Aggregate assets is calculated as total assets as per the proportionate balance sheet, less excess cash-on-hand.
When calculating this ratio excluding TRS receivable and debt, Net debt as calculated above, further minus debt borrowed concurrent with entering the TRS agreement as referenced
in “Debt”. Aggregate assets as calculated above further minus TRS receivable.
(9)
This ratio is calculated as: Net debt/Gross book value. Net debt is calculated as total debt including equity accounted investments as referenced in “Debt”, less excess cash-on-hand.
Gross book value is calculated as total assets as per the proportionate balance sheet, less excess cash-on-hand and fair value adjustment net of accumulated amortization.
(10)
This ratio is calculated as: Adjusted Debt/Adjusted EBITDA. Adjusted debt is calculated as total debt including equity accounted investments as referenced in “Debt”, less excess
cash-on-hand and less loans receivable. The calculation of Adjusted EBITDA is referenced in the “Non-GAAP Measures” section in this MD&A.
(11)
This ratio is calculated as: Secured debt including EAI/Aggregate assets. Secured debt is calculated as the Trust’s secured debt plus secured debt on equity accounted investments as
referenced in “Debt”. Aggregate assets is calculated as total assets as per the proportionate balance sheet, less excess cash-on-hand.
(12)
This ratio is calculated as: Unsecured debt including EAI/Secured debt including EAI. Unsecured debt is calculated as the Trust’s unsecured debt plus unsecured debt on equity
accounted investments as referenced in “Debt”. Secured debt is calculated as the Trust’s secured debt plus secured debt on equity accounted investments as referenced in “Debt”.
(13)
This ratio is calculated as: Unencumbered assets/Unsecured debt including EAI. Unencumbered assets is calculated as referenced in “Debt.” Unsecured debt is calculated as the
Trust’s unsecured debt plus unsecured debt on equity accounted investments as referenced in “Debt”. The calculation of Unencumbered Assets is referenced in the “Non-GAAP
Measures” section in this MD&A.
MANAGEMENT’S DISCUSSION AND ANALYSIS
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Unitholders’ Equity
The Unitholders’ equity of the Trust is calculated based on the equity attributable to the holders of Trust Units and LP Units
(“Exchangeable Securities”) that are exchangeable into Trust Units on a one-for-one basis. The Exchangeable Securities consist
of certain Class B Units of the Trust’s subsidiary limited partnerships. Certain of the Trust’s subsidiary limited partnerships also
have Units classified as liabilities that are exchangeable on a one-for-one basis for the Trust’s Units. The following table is a
summary of the number of Units outstanding:
Type
Class
December 31, 2024
December 31, 2023
Variance
Trust Units
N/A
144,687,634
144,625,322
62,312
Smart Limited Partnership
Class B
16,424,430
16,424,430
—
Smart Limited Partnership II
Class B
756,525
756,525
—
Smart Limited Partnership III
Class B
4,129,420
4,117,096
12,324
Smart Limited Partnership IV
Class B
3,112,565
3,112,565
—
Smart Oshawa South Limited Partnership
Class B
710,416
710,416
—
Smart Oshawa Taunton Limited Partnership
Class B
374,223
374,223
—
Smart Boxgrove Limited Partnership
Class B
170,000
170,000
—
Total Units classified as equity
170,365,213
170,290,577
74,636
Smart Limited Partnership
Class D
311,022
311,022
—
Smart Limited Partnership
Class F
8,708
8,708
—
Smart Oshawa South Limited Partnership
Class D
260,417
260,417
—
ONR Limited Partnership
Class B
1,186,431
1,248,140
(61,709)
ONR Limited Partnership I
Class B
272,183
272,183
—
SmartVMC West Limited Partnership
Class D
5,797,101
5,797,101
—
Total Units classified as liabilities
7,835,862
7,897,571
(61,709)
Total Units
178,201,075
178,188,148
12,927
As of February 12, 2025, the Trust has 170,365,213 Units outstanding which are classified as equity, and 7,835,862 Units
outstanding which are classified as liabilities. The following table is a summary of the activities having an impact on Unitholders’
equity:
Year Ended
Year Ended
(in thousands of dollars)
December 31, 2024
December 31, 2023
Unitholders’ Equity – beginning of year
$6,359,304
$6,163,101
Issuance of LP Units classified as equity
1,691
1,471
Net income and comprehensive income
292,070
510,103
Distributions
(315,484)
(315,371)
Unitholders’ Equity – end of year
$6,337,581
$6,359,304
LP Units classified as liabilities – beginning of year
196,571
211,497
Change in carrying value
(3,549)
(14,926)
Conversion of LP exchangeable units
(1,357)
—
LP Units classified as liabilities – end of year
$191,665
$196,571
Unitholders’ Equity and LP Units classified as liabilities – end of year
$6,529,246
$6,555,875
MANAGEMENT’S DISCUSSION AND ANALYSIS
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Distributions
The Board of Trustees is responsible for approving distributions. See also details in the “Determination of Distributions”
subsection in this MD&A.
For the year ended December 31, 2024, the Trust paid $330.0 million in cash distributions (for the year ended December 31,
2023 – $330.0 million in cash distributions). The following table summarizes declared distributions:
Year Ended December 31
(in thousands of dollars)
2024
2023
Distributions declared on:
Trust Units
$267,630
$267,563
LP Units
47,489
47,470
Other non-controlling interest
365
338
Distributions on Units classified as equity
$315,484
$315,371
Distributions on LP Units classified as liabilities – excluding SmartVMC West
3,815
3,881
Distributions on LP Units classified as liabilities – SmartVMC West
10,725
10,725
Distributions on LP Units classified as liabilities
$14,540
$14,606
Total distributions declared
$330,024
$329,977
Section IX — Related Party Transactions
Transactions with related parties are conducted in the normal course of operations.
Transactions and Agreements with Penguin
a) Penguin’s Ownership Interest and Voting Right
Pursuant to the Declaration of Trust, provided certain ownership thresholds are met, the Trust is required to issue such number
of additional Special Voting Units to Penguin that will entitle Penguin to cast 25.0% of the aggregate votes eligible to be cast at
a meeting of the Unitholders and Special Voting Unitholders (“Voting Top-Up Right”). As at December 31, 2024, there were
9,191,230 additional Special Voting Units outstanding (December 31, 2023 – 9,729,886). These Special Voting Units are not
entitled to any interest or share in the distributions or net assets of the Trust, nor are they convertible into any Trust securities.
There is no value assigned to the Special Voting Units. A five-year extension of the Voting Top-Up Right was approved by
Unitholders at the Trust’s annual general and special meeting held on December 9, 2020. For further discussion, see the Trust’s
management information circular dated November 6, 2020, filed on SEDAR+.
As at December 31, 2024, Penguin owned 21.3% of the aggregate issued and outstanding Trust Units in addition to the Special
Voting Units previously noted above. Penguin’s ownership of Trust Units would increase to 25.0% if Penguin exercised all
remaining options to purchase Units pursuant to existing development and exchange agreements (Earnouts). In addition, the
Trust has entered into property management, leasing, development and exchange, and co-ownership agreements with Penguin.
Pursuant to its rights under the Declaration of Trust, as at December 31, 2024, Penguin has appointed two of the eight trustees
on the Board of Trustees.
b) Agreements with Penguin entered into on November 6, 2020
The Trust entered into various agreements with Penguin in November 2020 coincident with the extension of the term of the
Voting Top-Up Right. For further discussion, see below and the Trust’s management information circular dated November 6,
2020, filed on SEDAR+.
Supplement to Development Services Agreement between the Trust and its Affiliates and Penguin (“Development and Services
Agreement”)
The following represent the key elements of the Development and Services Agreement with Penguin which is effective from July
1, 2020 until December 31, 2025:
i)
Penguin shall be reimbursed for 50% of disposition fees otherwise payable pursuant to the Development and Services
Agreement related to Penguin’s interest in properties sold by the Trust,
ii)
for future SmartVMC commercial phases and certain properties currently owned by Penguin (for which the Trust has
historically assisted with development and planning requirements), all development fees are payable to Penguin and all
other fees (management, leasing, etc.) are payable to the Trust,
iii)
when Penguin utilizes employees of the Trust to assist with its development projects, Penguin will pay for these
services provided by employees of the Trust based on annual estimates of time billings related to these projects,
charged at estimated total cost, including compensation,
iv)
the Trust will continue to manage and develop all other Penguin properties.
MANAGEMENT’S DISCUSSION AND ANALYSIS
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Support services are provided for a fee based on an allocation of the Trust’s relevant costs of the support services to Penguin.
Such relevant costs include: office administration, human resources, information technology, insurance, legal and marketing.
Penguin Services Agreement
The amended and restated services agreement entered into on November 5, 2020 (the “Penguin Services Agreement”), and
effective from February 2018 reflects the additional services provided by Penguin since that time. Under the agreement, Penguin
provides specified services to the Trust in connection with the development of its projects. In return for those services, Penguin
is entitled to receive: i) a fixed quarterly fee of $1.0 million (subject to inflation-related increments after 2018) and ii) an annual
variable fee between $1.5 million and $3.5 million (also inflation-adjusted after 2018) that is based on the achievement of the
Trust-level targets for “New Development Initiatives” and “New Projects” that the Trust uses to measure the performance of its
executive officers and other annual targets (other than such Trust-level targets) of a similar nature that the Trust uses to
measure the performance of its executive officers as determined by the Board of Trustees from time to time.
Omnibus Agreement between the Trust and Penguin
Effective December 9, 2020, pursuant to an Omnibus Agreement between the Trust and Penguin (the “Omnibus Agreement”),
Penguin has the option to extend all Earnouts by two years from the previous expiry date, and the Trust has been given a right
of first offer in connection with the sale of the economic and financial benefits and rights of any such development parcel during
any extended period. In addition, this agreement provides for the payment of certain outstanding amounts between the parties.
Mezzanine Loan Amending Agreements between the Trust and its Affiliates and Penguin (“Mezzanine Loan Agreements”)
Effective November 5, 2020, all loan maturity dates have been extended to August 31, 2028, with a new rate structure for the
extension period of each mortgage receivable (see also Note 5, “Mortgages, loans and notes receivable” in the Trust’s
consolidated financial statements for the year ended December 31, 2024). The Trust’s purchase option periods have been
extended and because these properties may now be subject to mixed-use development projects, the agreements provide that
the parties establish a new framework for the purchase options for the Trust related to mixed-use development.
Non-Competition Agreement
A non-competition agreement with Penguin entered into in 2020 replaced and superseded the previous non-competition
agreement extending the term by five years and broadening restricted competing initiatives to include various forms of mixed-
use development.
Executive Employment Agreement
This agreement confirms Mr. Goldhar’s position as Executive Chairman of the Trust for the period from February 14, 2018, to
December 31, 2025, for which Mr. Goldhar receives a salary, bonus, customary benefits, and is eligible to participate in the Trust’s
DUP and the EIP (see below).
Equity Incentive Plan
In January 2021, the Trust granted 900,000 performance units to Mitchell Goldhar pursuant to the EIP adopted by Unitholders
effective December 9, 2020, which are subject to the achievement of Unit price thresholds (ranging from $26.00 to $34.00). The
performance period for this award granted under the EIP is from January 1, 2021 to December 31, 2027. The vesting period for
these performance units will commence on the date that the applicable performance measure is achieved, and will end on the
earlier of the third anniversary of the date that the applicable performance measure is achieved and the end of the performance
period. Distributions on these performance units will accumulate from January 1, 2021. Provided the various performance
measures are achieved, the performance units will be exchanged for Trust Units or paid out in cash (see also Note 20, “Related
party transactions”, in the Trust’s consolidated financial statements for the year ended December 31, 2024). Under the award
granted to Mitchell Goldhar, the $26.00 Unit price threshold was achieved on April 5, 2021, and the $28.00 Unit price threshold
was achieved on May 18, 2021, and under the awards granted to Mitchell Goldhar and other eligible associates in 2021, the
$30.00 Unit price threshold was achieved on September 22, 2021, and the $32.00 Unit price threshold was achieved on April 5,
2022. The performance units for $26.00 and $28.00 Unit price thresholds have been vested on April 5, 2024, May 18, 2024,
September 22, 2024, the remaining tranche will vest on April 5, 2025.
The following table summarizes the change in the carrying value of the EIP award granted to Mitchell Goldhar:
Year Ended December 31
(in thousands of dollars)
2024
2023
Balance – beginning of year
$17,917
$13,380
Amortization costs capitalized to properties under development(1)
3,726
5,372
Reinvested distributions on vested EIPs
527
—
Fair value adjustment to financial instruments
439
(835)
Balance – end of year
$22,609
$17,917
(1)
These amounts were capitalized to properties under development in connection with Mitchell Goldhar’s role in leading and completing development activities.
MANAGEMENT’S DISCUSSION AND ANALYSIS
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c) Summary of transactions and balances with Penguin
The following table summarizes related party transactions and balances with Penguin and other related parties, including
amounts relating to the Trust’s share in equity accounted investments:
Related party transactions with Penguin
Acquisitions and Earnouts:
Earnouts
$1,071
$8,196
Revenues:
Service and other revenues:
Management fee and other services revenue pursuant to the Development Services
Agreement
7,749
11,351
Support services
1,371
1,391
$9,120
$12,742
Interest income from mortgages and loans receivable
2,357
4,326
Rents and operating cost recoveries included in rentals from income properties
2,226
2,932
$13,703
$20,000
Expenses and other payments:
Fees paid pursuant to the Penguin Services Agreement – capitalized to properties under
development
7,671
7,189
EIP – capitalized to properties under development
3,726
5,372
Development fees and interest expense – capitalized to investment properties
741
140
Opportunity fees pursuant to the development management agreements – capitalized to
properties under development(1)
60
60
Marketing and other costs – included in general and administrative expense and property
operating costs
69
79
Disposition fees pursuant to the Development and Services Agreement – included in
general and administrative expense
412
788
$12,679
$13,628
Year Ended December 31
(in thousands of dollars)
2024
2023
(1)
These amounts include prepaid land costs that will offset the purchase price of future Earnouts.
(in thousands of dollars)
December 31, 2024
December 31, 2023
Related party balances with Penguin disclosed elsewhere in the financial statements
Receivables:
Amounts receivable and other(1) (2)
$27,110
$21,647
Loans receivable
76,115
76,392
Mortgages receivable
2
17,548
Notes receivable
2,924
2,924
Total receivables
$106,151
$118,511
Payables and other accruals:
Accounts payable and accrued liabilities
4,252
3,723
Future land development obligations
17,631
18,075
Total payables and other accruals
$21,883
$21,798
(1)
Excludes amounts receivable presented below as part of balances with equity accounted investments. This amount includes amounts receivable of $15.4 million and other of $11.7
million (December 31, 2023 – amounts receivable of $12.9 million and other of $8.7 million).
(2)
The non-current portion of amounts receivable represents a related party receivable from Penguin of $13.0 million (December 31, 2023 – $nil). The amount is related to services
provided to Penguin by the Trust in accordance with the development service agreement.
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Transactions and Agreements with the Trust’s equity accounted investments
a) Supplemental Development Fee Agreements
In accordance with the Supplemental Development Fee Agreements, the Trust invoiced PCVP and certain joint ventures a net
amount related to associated development fees. See Note 4, “Equity accounted investments”, in the Trust’s consolidated
financial statements for the year ended December 31, 2024.
b) Loans receivable issued
A loan receivable was provided to PCVP pursuant to a loan agreement. “PCVP” is a partnership in which each of SmartCentres
and a Penguin group company owns a 50% interest. Loans receivable were issued to certain joint ventures partnered with
SmartStop pursuant to a master credit loan agreement. See Note 5(a) in the Trust’s consolidated financial statements for the
year ended December 31, 2024.
c) Other unsecured debt
Other unsecured debt pertains to loans received from equity accounted investments in connection with either the 700
Applewood purchase or contribution agreements relating to joint ventures. See Note 10(b)(iv) in the Trust’s consolidated
financial statements for the year ended December 31, 2024.
d) Summary of transactions and balances with the Trust’s equity accounted investments
The following table summarizes related party transactions and balances with the Trust’s equity accounted investments:
Related party transactions with the Trust’s equity accounted investments
Revenues:
Supplemental Development Fee
$9,052
$11,418
Interest income from mortgages and loans receivable
7,773
11,212
Expenses and other payments:
Rent and operating costs (included in general and administrative expense and
property operating costs)
3,197
2,777
Year Ended December 31
(in thousands of dollars)
2024
2023
The following table summarizes the related party balances with the Trust’s equity accounted investments:
(in thousands of dollars)
December 31, 2024
December 31, 2023
Related party balances disclosed elsewhere in the financial statements
Amounts receivable(1)
$10,034
$15,052
Loans receivable(2)
136,034
108,815
Other unsecured debt(3)
114,023
150,689
(1)
Amounts receivable includes Penguin’s portion, which represents $4.8 million (December 31, 2023 – $5.1 million) relating to Penguin’s 50% investment in the PCVP and Residences
(One) LP.
(2)
Loans receivable includes Penguin’s portion, which represents $27.4 million (December 31, 2023 – $25.7 million) relating to Penguin’s 50% investment in PCVP.
(3)
Other unsecured debt does not consist of Penguin’s portion as at December 31, 2024 (December 31, 2023 – nil).
Other related party transactions
The following table summarizes other related party transactions:
Year Ended December 31
(in thousands of dollars)
2024
2023
Legal fees incurred from a law firm in which a partner is a Trustee:
Capitalized to investment properties
$801
$423
Included in general and administrative expense
480
1,461
$1,281
$1,884
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Section X — Accounting Policies, Risk Management
and Compliance
Material Accounting Estimates and Policies
A summary of material accounting policies is described in Note 2 of the Trust’s consolidated financial statements and
accompanying notes for the year ended December 31, 2024.
In preparing the Trust’s consolidated financial statements and accompanying notes, it is necessary for management to make
estimates, assumptions and judgments that affect the reported amounts of assets and liabilities, the disclosure of contingent
assets and liabilities, and the reported amounts of revenue and expenses during the period. The significant items requiring
estimates are discussed in the Trust’s consolidated financial statements for the year ended December 31, 2024, and the notes
contained therein.
Critical accounting estimates and assumptions
The preparation of the consolidated financial statements requires management to make judgments and estimates in applying the
Trust’s accounting policies that affect the reported amounts and disclosures made in the consolidated financial statements and
accompanying notes.
Within the context of these consolidated financial statements, a judgment is a decision made by management in respect of the
application of an accounting policy, a recognized or unrecognized financial statement amount and/or note disclosure, following
an analysis of relevant information that may include estimates and assumptions. Estimates and assumptions are used mainly in
determining the measurement of balances recognized or disclosed in the consolidated financial statements and are based on a
set of underlying data that may include management’s historical experience, knowledge of current events and conditions and
other factors that are believed to be reasonable under the circumstances. Management continually evaluates the estimates and
judgments it uses.
The following are the accounting policies subject to judgments and key sources of estimation uncertainty that the Trust believes
could have the most significant impact on the amounts recognized in the consolidated financial statements.
a) Investment properties
Judgment is applied in determining whether certain costs are additions to the carrying amount of an investment property and,
for properties under development, identifying the point at which substantial completion of the property occurs and identifying
the directly attributable borrowing costs to be included in the carrying value of the development property. The significant
assumptions in the land, development and construction costs recorded at market value include the market value per acre for
land. The Trust applies judgment in determining whether development projects are active and viable, otherwise previously
capitalized costs are written off.
The Trust also applies judgment in determining whether the properties it acquires are considered to be asset acquisitions or
business combinations. The Trust considers all the properties it has acquired to date to be asset acquisitions. Earnout options are
exercisable upon completion and rental of additional space on acquired properties. Judgment is applied in determining whether
Earnout options are considered to be contingent consideration relating to the acquisition of the acquired properties or
additional cost of services during the construction period. The Trust considers the Earnout options it has issued to date to
represent contingent considerations relating to the acquisitions and is considered to be a financial liability measured at fair value
(see Note 2.14(a) in the Trust’s consolidated financial statements for the year ended December 31, 2024).
The valuation of the investment properties is the main area of judgment exercised by the Trust. The valuations of investment
properties are dependent on: i) projected future cash flows for income properties and properties under development, and ii)
land, development and construction costs for properties under development, and discount rates applicable to those assets. The
projected cash flows for each property are based on the location, type and quality of the property and supported by the terms
of any existing leases, other contracts or external evidence such as current market rents for similar properties, and adjusted for
estimated vacancy rates and estimated maintenance costs. Discount rate is based on the location, size and condition of the
properties and take into account market data at the valuation date. These assumptions may not ultimately be achieved. The
critical estimates and assumptions underlying the valuation of investment properties are set out in Note 3, “Investment
properties”, in the Trust’s consolidated financial statements for the year ended December 31, 2024.
b) Joint arrangements
The Trust makes judgment in determining whether the Trust has joint control and whether the arrangements are joint operations
or joint ventures. In assessing whether the joint arrangements are joint operations or joint ventures, management applies
judgment to determine the Trust’s rights and obligations in the arrangement based on factors such as the structure, legal form
and contractual terms of the arrangement.
c) Intangible assets
The Trust makes judgments with respect to the amortization period relating to the joint venture relationships and trademarks
that have finite useful lives, while also reviewing for impairment when an indication of impairment exists. In addition, on an
annual basis or more frequently if there are any indications of impairment, the Trust evaluates whether goodwill may be impaired
by determining whether the recoverable amount is less than the carrying amount for the smallest identified cash-generating unit.
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d) Income taxes
The Trust is taxed as a mutual fund trust for Canadian income tax purposes and qualifies for the REIT Exemption under the SIFT
rules for tax purposes. The Trust endeavours to distribute a sufficient amount in each taxation year to ensure that the Trust will
not be subject to tax on its net income and net capital gains under Part I of the Income Tax Act (Canada) (“Tax Act”).
The Trust qualifies for the REIT Exemption under the specified investment flow-through (SIFT) trust rules for accounting
purposes. The Trust considers the tax deductibility of the Trust’s distributions to Unitholders to represent, in substance, an
exemption from current tax so long as the Trust continues to expect to distribute all of its taxable income and taxable capital
gains to its Unitholders. Accordingly, the Trust will not recognize any current tax or deferred income tax assets or liabilities on
temporary differences in the Trust’s financial statements.
e) EIP
The fair value of the EIP is based on the Monte Carlo simulation pricing model, which incorporates: (i) the performance of the
Trust relative to the Unit price thresholds for the performance period, (ii) the 10-day VWAP of Trust Units at each reporting date,
and (iii) the total granted performance units under the EIP including performance units that are reinvested. Any adjustments
made to the accrued value of the EIP are recorded in earnings.
Reclassification of comparative figures
a) On January 1, 2024, the Trust adopted the amendments to IAS 1 Presentation of Financial Statements – Classification of
Liabilities as Current or Non-Current. As a result of these amendments, the following reclassifications have been made to
the presentation of the current and comparative consolidated balance sheets:
As at
January 1, 2023
December 31, 2023
Before
reclassification
Classification
After
reclassification
Before
reclassification Classification
After
reclassification
Non-current liabilities
Other financial liabilities
277,400
(254,559)
22,841
275,383
(258,069)
17,314
Current liabilities
Current portion of other
financial liabilities
—
254,559
254,559
—
258,069
258,069
The application of these amendments has no impact on the measurement or recognition of any item in the Trust’s
consolidated financial statements, debt covenants based on the terms and definitions of the covenant calculations and
debt agreements, liquidity risks, and there is no change to the consolidated statements of income and comprehensive
income, consolidated statements of equity, and consolidated statements of cash flows.
b) The comparative figures relating to “Additions to equity accounted investments”, in the amount of $18,333 for the year
ended December 31, 2023, has been reclassified from “Additions to equity accounted investments” to “Development
distributions from equity accounted investments” to conform with the current year presentation.
Future Changes in Accounting Policies
The Trust monitors the potential changes proposed by the IASB and analyzes the effect that changes in the standards may have
on the Trust’s operations.
IFRS 18, Presentation and Disclosure in Financial Statements
In April 2024, IFRS 18, “Presentation and Disclosure in Financial Statements” was issued to achieve comparability of the financial
performance of similar entities. The standard, which replaces IAS 1, “Presentation of Financial Statements”, impacts the
presentation of primary financial statements and notes, including the statement of earnings where companies will be required to
present separate categories of income and expense for operating, investing, and financing activities with prescribed subtotals
for each new category. The standard will also require management-defined performance measures to be explained and included
in a separate note within the consolidated financial statements.
The standard is effective for annual reporting periods beginning on or after January 1, 2027, including interim financial
statements, and requires retrospective application. The Trust is currently assessing the impact of the new standard.
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Risks and Uncertainties
The ability of the Trust to meet its performance targets is dependent on its success in mitigating the various forms of risks that it
has identified. For a more comprehensive list of risks and uncertainties pertinent to the Trust, please see the additional factors
disclosed in the Trust’s AIF under the headings “Risk Factors”.
Real Property Ownership and Leasing/Tenant Risk
All real property investments are subject to elements of risk. Such investments are affected by general economic conditions,
local real estate markets, supply and demand for leased premises, competition from other available premises and various other
factors.
Real estate has a high fixed cost associated with ownership, and income lost due to declining rental rates or increased vacancies
cannot easily be minimized through cost reduction. Through well-located, well-designed and professionally managed properties,
management seeks to reduce this risk. Management believes prime locations will attract high-quality retailers with strong
covenants and will enable the Trust to maintain economic rents and high occupancy. By maintaining properties at the highest
standards through professional management practices, management seeks to increase tenant loyalty.
The value of real property and any improvements thereto may also depend on the credit and financial stability of the tenants
and on the vacancy rates of the Trust’s portfolio of income-producing properties. On the expiry of any lease, there can be no
assurance that the lease will be renewed or the tenant replaced, and the terms of any subsequent lease may be less favourable
to the Trust than the existing lease. In the event of default by a tenant, delays or limitations in enforcing rights as lessor, may be
experienced and substantial costs in protecting the Trust’s investment may be incurred. Furthermore, at any time, a tenant of
any of the Trust’s properties may seek the protection of bankruptcy, insolvency or similar laws that could result in the rejection
and termination of such tenant’s lease and thereby cause a reduction in the cash flow available to the Trust. The ability to rent
unleased space in the properties in which the Trust has an interest will be affected by many factors. Costs may be incurred in
making improvements or repairs to property. The failure to rent vacant space on a timely basis or at all would likely have an
adverse effect on the Trust’s financial condition.
Certain significant expenditures, including property taxes, maintenance costs, mortgage payments, insurance costs and related
charges must be made throughout the period of ownership of real property regardless of whether the property is producing any
income. If the Trust is unable to meet mortgage payments on any property, losses could be sustained as a result of the
mortgagee’s exercise of its rights of foreclosure or sale.
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. If the Trust were to be required to liquidate its real property investments,
the proceeds to the Trust might be significantly less than the aggregate carrying value of its properties.
The Trust will be subject to the risks associated with debt financing on its properties and it may not be able to refinance its
properties on terms that are as favourable as the terms of existing indebtedness. In order to minimize this risk, the Trust
attempts to appropriately structure the timing of the renewal of significant tenant leases on the properties in relation to the time
at which mortgage indebtedness on such properties becomes due for refinancing. In addition, the Trust attempts to stagger the
maturities of its various levels of debt over an extended period of time.
Significant deterioration of the retail shopping centre market in general, or the financial health of Walmart and other key tenants
in particular, could have an adverse effect on the Trust’s business, financial condition or results of operations. Also, the
emergence of e-commerce as a platform for retail growth has caused many retailers to change their approach to attracting and
retaining customers. To the extent that some retailers are unsuccessful in attracting and retaining customers because of the
impact of e-commerce on their respective businesses, the Trust may experience additional vacancy and its resulting adverse
effects on financial condition and results of operations, including occupancy rates, base rental income, tax and operating cost
recoveries, leasing and other similar costs.
With respect to residential rental properties, in addition to the risks highlighted above, the Trust is subject to the other risks
inherent in the multi-tenant rental property industry, including controlling bad debt exposure, rent control regulations, increases
in operating costs, including the costs of utilities (residential leases are often “gross” leases under which the landlord is not able
to pass on costs to its residents), the imposition of increased taxes or new taxes and capital investment requirements.
Liquidity Risk
The Trust’s ability to meet its financial obligations as they become due represents the Trust’s exposure to liquidity risk. It is
management’s intention to either repay or refinance maturing liabilities with newly issued secured or unsecured debt, equity or,
in certain circumstances not expected to occur frequently, the disposition of certain assets. Any net working capital deficiencies
are funded with the Trust’s existing revolving operating facilities. Management expects to finance future acquisitions, including
committed Earnouts, Developments, Mezzanine Financing commitments and maturing debt from: i) existing cash balances, ii) a
mix of mortgage debt secured by investment properties, operating facilities, issuance of equity and unsecured debentures, iii)
repayments of mortgages receivable, and iv) the sale of non-core assets. However, the Trust’s ability to meet these future
obligations may be impacted by the liquidity risk associated with receiving repayments of its mortgages, loans, and notes
receivable, amounts receivable and other, deposits, and cash equivalents on time and in full and the realization of fair value on
the disposition of the Trust’s non-core assets. Cash flow generated from operating activities is the primary source of liquidity to
pay Unit distributions, sustaining capital expenditures and leasing costs.
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Liquidity risk management implies maintaining sufficient cash and the availability of funding through an adequate amount of
committed credit facilities and the ability to lease out vacant units. In the next 12 months, $1,522.0 million of liabilities (including
$986.9 million of secured and unsecured debt, $274.5 million of other financial liabilities and $260.5 million of accounts and
other payable amounts) will mature and will need to be settled by means of renewal or payment.
The Trust aims to maintain flexibility and opportunities in funding by keeping committed credit lines available, obtaining
additional mortgages as the value of investment properties increases and issuing equity or unsecured debentures.
The key assumptions used in the Trust’s estimates of future cash flows when assessing liquidity risk are: the renewal or
replacement of the maturing revolving operating facilities, secured debt and unsecured debentures, at reasonable terms and
conditions in the normal course of business and no major bankruptcies of large tenants. Management believes that it has
considered all reasonable facts and circumstances in forming appropriate assumptions. However, as always, there is a risk that
significant changes in market conditions could alter the assumptions used.
Capital Requirements and Access to Capital
The Trust accesses the capital markets from time to time through the issuance of debt or equity securities. If the Trust were
unable to raise additional funds or renew existing maturing debt on favourable terms, then acquisition or development activities
could be curtailed, asset sales accelerated, property-specific financing, purchase and development agreements renegotiated and
monthly cash distributions reduced or suspended. However, the Trust anticipates accessing the capital markets on reasonable
terms due to its high occupancy levels and low lease maturities, combined with its strong national and regional tenant base and
its prime retail locations.
Environmental and Climate Change Risk
As an owner of real property, the Trust is subject to various federal, provincial, territorial and municipal laws relating to
environmental matters. Such laws provide that the Trust could be liable for the costs of removal of certain hazardous substances
and remediation of certain hazardous locations. The failure to remove or remediate such substances or locations, if any, could
adversely affect the Trust’s ability to sell such real estate or to borrow using such real estate as collateral and could potentially
also result in claims against the Trust. The Trust is not aware of any material non-compliance with environmental laws at any of
its properties. The Trust is also not aware of any pending or threatened investigations or actions by environmental regulatory
authorities in connection with any of its properties or any pending or threatened claims relating to environmental conditions at
its properties. The Trust has policies and procedures to review and monitor environmental exposure, including obtaining a Phase
I environmental assessment, as appropriate, prior to the completion of an acquisition of land, a shopping centre or other real
estate assets. Further investigation is conducted if the Phase I assessments indicate a problem. In addition, the standard lease
requires compliance with environmental laws and regulations and restricts tenants from carrying on environmentally hazardous
activities or having environmentally hazardous substances on site. The Trust has obtained environmental insurance on certain
assets to further manage risk.
The Trust is making the necessary capital and operating expenditures to comply with environmental laws and regulations.
Although there can be no assurances, the Trust does not believe that costs relating to environmental matters will have a material
adverse effect on the Trust’s business, financial condition or results of operations. However, environmental laws and regulations
can change, and the Trust may become subject to more stringent environmental laws and regulations in the future. Compliance
with more stringent environmental laws and regulations could have an adverse effect on the Trust’s business, financial condition
or results of operations.
Climate change continues to attract the focus of governments and the general public as an important threat, given the emission
of greenhouse gases and other activities which continue to negatively impact the planet. The Trust faces the risk that its
properties will be subject to government initiatives aimed at countering climate change, such as reduction of greenhouse gas
emissions, which could impose constraints on its operational flexibility. Furthermore, the Trust’s properties may be exposed to
the impact of events caused by climate change, such as natural disasters and increasingly frequent and severe weather
conditions. Such events could interrupt the Trust’s operations and activities, damage its properties, diminish traffic and require
the Trust to incur additional expenses, including an increase in insurance costs to insure its properties against natural disasters
and severe weather.
Potential Conflicts of Interest
The Trust may be subject to various conflicts of interest because of the fact that the Trustees and executive management, and
their associates, may be engaged in a wide range of real estate and other business activities. The Trust may become involved in
transactions which conflict with the interests of the foregoing. The Trustees, executive management and their associates or
affiliates may from time to time deal with persons, firms, institutions or corporations with which the Trust may be dealing, or
which may be seeking investments similar to those desired by the Trust. The interests of these persons could conflict with those
of the Trust. In addition, from time to time, these persons may be competing with the Trust for available investment
opportunities. The Declaration of Trust contains “conflicts of interest” provisions requiring Trustees or officers of the Trust to
disclose material interests in material contracts and transactions and refrain from voting.
Cyber Security
Cyber security has become an increasingly problematic issue for issuers and businesses in Canada and around the world,
including for the Trust and the real estate industry. Cyber attacks against large organizations are increasing in sophistication and
are often focused on financial fraud, compromising sensitive data for inappropriate use or disrupting business operations. Such
an attack could compromise the Trust’s confidential information as well as that of the Trust’s employees, tenants and third
parties with whom the Trust interacts and may result in negative consequences, including remediation costs, loss of revenue,
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additional regulatory scrutiny, litigation and reputational damage. As a result, the Trust continually monitors for malicious threats
and adapts accordingly in an effort to ensure it maintains high privacy and security standards. The Trust invests in cyber-defence
technologies to support its business model and to protect its systems, employees and tenants and seeks to employ industry best
practices. The Trust’s investments continue to manage the risks it faces today and position the Trust for the evolving threat
landscape. The Trust also follows certain protocols when it engages software and hardware vendors concerning data security
and access controls.
Debt Financing
The ability of the Trust to make cash distributions or make other payments or advances is subject to applicable laws and
contractual restrictions contained in the instruments governing its indebtedness. The degree to which the Trust is leveraged
could have important consequences to the holders of its securities, including: that the Trust’s ability to obtain additional
financing for working capital, capital expenditures or acquisitions in the future may be limited; that a significant portion of the
Trust’s cash flow from operations may be dedicated to the payment of the principal of and interest on its indebtedness, thereby
reducing funds available for future operations and distributions; that certain of the Trust’s borrowings may be at variable rates of
interest, which exposes it to the risk of increased interest rates; and that the Trust may be impacted by economic downturns,
including the Trust’s ability to retain and attract tenants. Also, there can be no assurance that the Trust will continue to generate
sufficient cash flow from operations to meet required interest and principal payments. Further, the Trust is subject to the risk
that any of its existing indebtedness may not be able to be refinanced upon maturity or that the terms of such financing may not
be as favourable as the terms of its existing indebtedness. These factors may adversely affect the Trust’s cash distributions.
The Trust’s credit facilities provide lenders with first charge security interests on most of the income-producing properties in its
portfolio. These credit facilities contain numerous terms and covenants that limit the discretion of management with respect to
certain business matters. These covenants place restrictions on, among other things, the ability of the Trust to create liens or
other encumbrances, to make certain payments, investments, loans and guarantees and to sell or otherwise dispose of assets
and merge or consolidate with another entity. In addition, the credit facilities contain a number of financial covenants that
require the Trust to meet certain financial ratios and financial condition tests. For example, certain of the Trust’s loans require
specific loan to value and debt service coverage ratios which must be maintained by the Trust. A failure to comply with the
obligations in the credit facilities could result in a default which, if not cured or waived, could result in acceleration of the
relevant indebtedness. If the indebtedness under the credit facilities were to be accelerated, there can be no assurance that the
assets of the Trust would be sufficient to repay that indebtedness in full.
Interest and Financing Risk
As a means of curbing inflation, the Bank of Canada increased interest rates through 2023. In 2024, interest rates remained
higher until the second half of the year at which time the Bank of Canada began to reduce the overnight interest rate. Sustained
higher interest or a downgrade in the Trust’s credit rating could significantly affect the Trust’s ability to meet its financial
obligations. Circumstances that may impair the Trust’s credit rating include an inability of the Trust to maintain its cash flow from
operating activities, an inability to meet covenants for both secured and unsecured debentures, an inability to meet expectations
of credit rating agencies, and/or a higher interest rate environment in the Canadian economy. In order to minimize this risk, the
Trust’s policy is to negotiate fixed rate secured debt and unsecured debt with staggered maturities on the portfolio and, where
appropriate, seek to match average lease maturity to average debt maturity. Derivative financial instruments may be utilized by
the Trust in the management of its interest rate exposure. The Trust’s policy is not to utilize derivative financial instruments for
trading or speculative purposes. In addition, the Declaration of Trust restricts total indebtedness permitted on the portfolio.
Interest rate changes will also affect the Trust’s development portfolio. The Trust has entered into development agreements that
obligate the Trust to acquire up to approximately 139,000 square feet of additional income properties at a cost determined by
capitalizing the rental income at predetermined rates. Subject to the ability of the Trust to obtain financing on acceptable terms,
the Trust anticipates that it will finance these acquisitions by issuing additional debt and equity. Changes in interest rates will
have an impact on the return from these acquisitions should the rate exceed the capitalization rate used and could result in a
purchase not being accretive. This risk is mitigated as management has certain rights of approval over the developments and
acquisitions.
Operating facilities, secured debt and unsecured debt exist that are priced at a risk premium over short-term rates. Changes in
short-term interest rates will have an impact on the cost of financing. In addition, there is a risk the lenders will not refinance on
maturity. By restricting the amount of both variable interest rate debt and short-term debt, the Trust minimizes the impact of
changes in short-term rates on financial performance.
The Canadian capital markets are competitively priced. In addition, the secured debt market remains strong with lenders seeking
quality products. Due to the quality and location of the Trust’s real estate, management expects to meet its financial obligations.
Inflation Risk
Canada’s inflation rate peaked at a historically high level in 2022 and began to decline in 2023 and 2024 and inflation rates at
the end of 2024 remained within the Bank of Canada’s target inflation range. Recent inflationary pressures experienced
domestically and globally, external supply constraints, tight labour markets and strong demand for goods and resources,
together with recently higher interest rates targeted at curbing inflationary increases, will put pressure on the Trust’s
development, financing, operation and labour costs and could negatively impact levels of demand for real property. Changes in
economic conditions, including supply chain constraints, logistics challenges, labour shortages, imposition of or adverse
amendments to duties, tariffs and other trade protection mechanisms (including any retaliation to such measures) and steps
taken by governments and central banks, including stimulus and spending programs, have, in some instances in the past, led to
(and could, in the future lead to) heightened inflation, resulting in an increase in costs and changes in fiscal and monetary policy,
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including increased interest rates. As a result of potential changes to U.S. policy, especially in light of recent developments with
the new U.S. administration, it is feasible that there maybe changes to existing trade agreements, the imposition of new tariffs
and restrictions on certain trade. Accordingly, continued inflationary pressures and the resulting economic impacts may
adversely affect the Trust’s financial condition and results of operations. If inflationary pressures return or interest rates remain
higher than recent norms, an economic contraction could be possible. Higher inflation and the prospect of moderated growth
also negatively impacts the debt and equity markets in which the Trust seeks capital, and in turn might impact the Trust’s ability
to obtain capital in the future on favourable terms, or at all. While the Trust’s portfolio and market position, as well as its strong
and stable tenant base, provide the Trust with flexibility to navigate volatile economic conditions, there can be no assurances
regarding the impact of a significant economic contraction on the business, operations, and financial performance of the Trust
and its tenants.
Joint Venture Risk
The Trust is a co-owner in several properties including but not limited to SmartVMC, Transit City, a residential unit project in
Laval, Quebec, a land parcel in Vaughan to build townhomes, and various other retail, self-storage, residential and other mixed-
use properties. As part of its growth strategy, the Trust expects to increase its participation in additional joint ventures in the
future, which may include additional joint ventures in condominiums, self-storage facilities, seniors’ housing and other initiatives.
The Trust is subject to the risks associated with the conduct of joint ventures. Such risks include disagreements with its partners
to develop and operate the properties efficiently, the inability of the partners to meet their obligations to the joint ventures or
third parties as they become due and decisions made by partners which may not be in favour of the Trust’s best interests, but
rather are in the best interests of the partnership. In addition, the Trust may be exposed to the risks of the actions taken by any
of the partners that may result in reputational damage to the Trust or the joint ventures. These risks could have a material
adverse effect on the joint ventures, which may have a material adverse effect on the Trust. The Trust attempts to mitigate these
risks by continuing to maintain strong relationships with its partners.
Development and Construction Risk
Development and construction risk arises from the possibility that completed developed space will not be leased or that costs of
development and construction will exceed original estimates, resulting in an uneconomic return from the leasing of such
developments. The Trust mitigates this risk by limiting construction of any development until sufficient lease-up has occurred
and by entering into fixed price contracts for a large proportion of both development and construction costs.
The Trust is becoming increasingly involved in mixed-use development initiatives that include residential condominiums and
townhomes, rental apartments, seniors’ housing and self-storage. Purchaser and tenant demand for these uses can be cyclical
and is affected by changes in general market and economic conditions, such as consumer confidence, employment levels,
availability of financing for home buyers, interest rates, demographic trends, and housing and similar commercial demand.
Furthermore, the market value of undeveloped land, buildable lots and housing inventories held by the Trust can fluctuate
significantly as a result of changing economic and real estate market conditions. An oversupply of alternative housing, such as
new homes, resale homes (including homes held for sale by investors and speculators), foreclosed home and rental properties
and apartments, accommodation of seniors’ housing and self-storage space may: i) reduce the Trust’s ability to sell new
condominiums and townhomes, depress prices and reduce margins from the sale of condominiums and townhomes, and ii) have
an adverse effect on the Trust’s ability to lease rental apartments, seniors’ housing and self-storage units and on the rents
charged.
The Trust’s construction commitments are subject to those risks usually attributable to construction projects, which include: i)
construction or other unforeseen delays, including delays in obtaining municipal approvals, ii) cost overruns, and iii) the failure of
tenants to occupy and pay rent in accordance with existing lease arrangements, some of which are conditional.
Credit Risk
Credit risk arises from cash and cash equivalents, as well as credit exposures with respect to tenant receivables and mortgages
and loans receivable. Tenants may experience financial difficulty and become unable to fulfil their lease commitments. The Trust
mitigates this risk of credit loss by reviewing tenants’ covenants, ensuring its tenant mix is diversified and limiting its exposure to
any one tenant, except Walmart Canada because of its creditworthiness. Further risks arise in the event that borrowers may
default on the repayment of amounts owing to the Trust. The Trust endeavours to ensure adequate security has been provided
in support of mortgages and loans receivable. The failure of the Trust’s tenants or borrowers to pay the Trust amounts owing on
a timely basis or at all would have an adverse effect on the Trust’s financial condition.
Litigation and Regulatory Risks
The Trust is subject to a wide variety of laws and regulations across all of its operating jurisdictions and faces risks associated
with legal and regulatory changes and litigation. If the Trust fails to monitor and become aware of changes in applicable laws
and regulations, or if the Trust fails to comply with these changes in an appropriate and timely manner, it could result in fines
and penalties, litigation or other significant costs, as well as significant time and effort to remediate any violations. The Trust, in
the normal course of operations, is subject to a variety of legal and other claims, including claims relating to personal injury,
property damage, property taxes, land rights and contractual and other commercial disputes. The final outcome with respect to
outstanding, pending or future actions cannot be predicted with certainty, and the resolution of such actions may have an
adverse effect on the Trust’s financial position or results of operations as well as reputational damage both from an operating
and an investment perspective. Management evaluates all claims on their apparent merits and accrues management’s best
estimate of the likely cost to satisfy such claims. Management believes the outcome of current legal and other claims filed
against the Trust, after considering insurance coverage, will not have a significant impact on the Trust’s consolidated financial
statements.
MANAGEMENT’S DISCUSSION AND ANALYSIS
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In addition, the Trust’s estimates and judgments could also be affected by various risks and uncertainties, which in turn could
have a significant risk on the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at
the date of the consolidated financial statements for the year ended December 31, 2024 and the reported amounts of revenues
and expenses during the reporting period and may potentially result in a material adjustment in a subsequent period.
Potential Volatility of Trust Unit Prices
The price for the Trust Units could be subject to wide fluctuations in response to quarter-to-quarter variations in operating
results, the gain or loss of significant properties, changes in income estimates by analysts and market conditions in the industry,
as well as general economic conditions or other risk factors set out herein. In addition, stock markets have experienced volatility
that has affected the market prices for many issuers’ securities and that often has been unrelated to the operating performance
of such issuers. These market fluctuations may adversely affect the market price of the Trust Units.
A publicly traded REIT will not necessarily trade at values determined solely by reference to the underlying value of its real
estate assets. Accordingly, the Trust Units may trade at a premium or a discount to the underlying value of the Trust’s real estate
assets.
One of the factors that may influence the market price of the Trust Units is market interest rates relative to the monthly cash
distributions to the Unitholders. An increase in market interest rates or a decrease in monthly cash distributions by the Trust
could adversely affect the market price of the Trust Units. In addition, the market price for the Trust Units may be affected by
changes in general market conditions, fluctuations in the markets for equity securities and numerous other factors beyond the
control of the Trust.
Cash Distributions are Not Guaranteed and will Fluctuate with the Trust’s Performance
A return on an investment in Units is not comparable to the return on an investment in a fixed-income security. The recovery of
an investment in Units is at risk, and any anticipated return on an investment in Units is based on many performance
assumptions.
Although the Trust intends to make distributions of a significant percentage of its available cash to its Unitholders, these cash
distributions are not assured and may be reduced or suspended. The ability of the Trust to make cash distributions and the
actual amount distributed will be dependent upon, among other things, the financial performance of the properties in its
property portfolio, its debt covenants and obligations, its working capital requirements and its future capital requirements. In
addition, the market value of the Units may decline for a variety of reasons, including if the Trust is unable to meet its cash
distribution targets in the future, and that decline may be significant.
It is important for a person making an investment in Units to consider the particular risk factors that may affect both the Trust
and the real estate industry in which the Trust operates and which may, therefore, affect the stability of the cash distributions on
the Units.
Availability of Cash Flow
Cash distributions to Unitholders may be reduced from time to time if such distributions would exceed the cash obligations of
the Trust from time to time due to items such as principal repayments, tenant allowances, leasing commissions and capital
expenditures and redemption of Units, if any. The Trust may be required to use part of its debt capacity or to reduce
distributions in order to accommodate such items. The Trust anticipates temporarily funding such items, if necessary, through an
operating line of credit in expectation of refinancing long-term debt on its maturity.
Significant Unitholder Risk
According to reports filed under applicable Canadian securities legislation, as at December 31, 2024, Mitchell Goldhar of
Vaughan, Ontario beneficially owned or controlled a number of the outstanding Units which, together with the securities he
beneficially owned or controlled that are exchangeable at his option for Trust Units for no additional consideration and the
associated Special Voting Units, represented an approximate 21.29% voting interest in the Trust. Further, according to the
above-mentioned reports, as at December 31, 2024, Mr. Goldhar beneficially owned or controlled additional rights to acquire
Trust Units which, if exercised or converted, would result in him increasing his beneficial economic and voting interest in the
Trust to as much as approximately 25.00%. In addition, pursuant to the Voting Top-Up Right Mr. Goldhar may be issued
additional Special Voting Units to entitle him (directly or indirectly through Penguin) to cast 25% of the votes attached to voting
Units at a meeting of the holders of voting Units.
If Mr. Goldhar sells a substantial number of Trust Units in the public market, the market price of the Trust Units could fall. The
perception among the public that these sales will occur could also produce such an effect. As a result of his voting interest in the
Trust, Mr. Goldhar may be able to exert significant influence over matters that are to be determined by votes of the Unitholders
of the Trust. The timing and receipt of any takeover or control premium by Unitholders could depend on the determination of
Mr. Goldhar as to when to sell Trust Units. This could delay or prevent a change of control that might be attractive to and
provide liquidity for Unitholders, and could limit the price that investors are willing to pay in the future for Trust Units.
Tax-Related Risks
There can be no assurance that Canadian federal income tax laws respecting the treatment of mutual fund trusts will not be
changed in a manner that would adversely affect the Unitholders.
If the Trust fails to qualify for the REIT Exception (as defined below), the Trust will be subject to the taxation regime under the
SIFT Rules. The Trust qualifies for the REIT Exception as at December 31, 2024. In the event that the REIT Exception did not
MANAGEMENT’S DISCUSSION AND ANALYSIS
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apply to the Trust, the corresponding application of the SIFT Rules to the Trust could impact the level of cash distributions which
would otherwise be made by the Trust and the taxation of such distributions to Unitholders. The REIT Exception is based upon
revenues of the REIT and the value of the REIT’s assets that may fluctuate during the year. The Trust intends to monitor its
revenues and the value of its assets and take all necessary steps to continue to qualify for the REIT Exception. However, there
can be no assurance that Canadian federal income tax laws with respect to the REIT Exception will not be changed, or that
administrative and assessment practices of the Canada Revenue Agency will not develop in a manner that adversely affects the
Trust or its Unitholders. Furthermore, the determination as to whether the Trust qualifies for the REIT Exception in a particular
taxation year can only be made at the end of such taxation year. Accordingly, no assurance can be given that the Trust will
continue to qualify for the REIT Exception.
The extent to which distributions will be tax deferred in the future will depend in part on the extent to which the Trust is able to
deduct capital cost allowance or other expenses relating to properties directly or indirectly held by the Trust.
Public Health Crises Risks
Public health crises, relating to any broad-reaching disease, virus, flu, epidemic, pandemic or other similar disease or illness
(each, a “Public Health Crisis”) can adversely impact the Trust’s and its tenants’ businesses, including the ability of some tenants
to legally operate thereby adversely impacting the ability of tenants to meet their payment obligations under leases. A Public
Health Crisis could result in a general or acute decline in economic activity, increased unemployment, staff shortages, reduced
tenant traffic, mobility restrictions and other quarantine measures, supply shortages, increased government regulations, and the
quarantine or contamination of one or more of the Trust’s properties.
A Public Health Crisis could impact the following material aspects of the Trust’s business, among others: i) the value of the
Trust’s properties and developments; ii) the Trust’s ability to make distributions to Unitholders; iii) the availability or the terms of
financing that the Trust currently has access to or may anticipate utilizing; iv) the Trust’s ability to make principal and interest
payments on, or refinance any outstanding debt when due; v) the occupancy rates in the Trust’s properties; vi) the ability of the
Trust to pursue its development plans or obtain construction financing on previously announced and anticipated timelines or
within budgeted terms; vii) the ability of our tenants to enter into new leasing transactions or to satisfy rental payments under
existing leases; viii) the impact to the Trust’s financial covenants; and (ix) changing consumer habits and foot traffic to the
Trust’s properties and tenants’ stores.
Income Taxes and the REIT Exception
In accordance with the Declaration of Trust, distributions to Unitholders are declared at the discretion of the Board of Trustees.
The Trust endeavours to distribute to Unitholders, in cash or in Units, in each taxation year its taxable income to such an extent
that the Trust will not be liable to income tax under Part I of the Income Tax Act (Canada) (the “Tax Act”). For specified
investment flow-through trusts (each a “SIFT”), the Tax Act imposes a special taxation regime (the “SIFT Rules”). A SIFT includes
a trust resident in Canada with publicly traded units that holds one or more “non-portfolio properties”. “Non-portfolio
properties” include certain investments in real properties situated in Canada and certain investments in corporations and trusts
resident in Canada and in partnerships with specified connections in Canada. Under the SIFT Rules, a SIFT is subject to tax in
respect of certain distributions that are attributable to the SIFT’s “non-portfolio earnings” (as defined in the Tax Act), at a rate
substantially equivalent to the combined federal and provincial corporate tax rate on certain types of income. The SIFT Rules are
not applicable to a SIFT that meets certain specified criteria relating to the nature of its revenues and investments in order to
qualify as a real estate investment trust for purposes of the Tax Act (the “REIT Exception”). The Trust qualifies for the REIT
Exception as at December 31, 2024.
MANAGEMENT’S DISCUSSION AND ANALYSIS
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Disclosure Controls and Procedures and Internal Controls Over Financial Reporting
Disclosure Controls and Procedures (“DCP”)
The Trust’s Chief Executive Officer (CEO) and Chief Financial Officer (CFO) have designed or caused to be designed under their
direct supervision, the Trust’s DCP (as defined in National Instrument 52-109 – Certification of Disclosure in Issuers’ Annual and
Interim Filings (“NI 52-109”), adopted by the Canadian Securities Administrators) to provide reasonable assurance that: i)
material information relating to the Trust, including its consolidated subsidiaries, is made known to them by others within those
entities, particularly during the period in which the annual filings are being prepared, and ii) material information required to be
disclosed in the annual filings is recorded, processed, summarized and reported on a timely basis. The Trust continues to
evaluate the effectiveness of DCP, and changes are implemented to adjust to the needs of new processes and enhancements as
required. There were no changes in the Trust’s internal controls over financial reporting in the year ended December 31, 2024
that materially affected, or are reasonably likely to materially affect, the Trust’s internal controls over financial reporting. Further,
the Trust’s CEO and CFO have evaluated, or caused to be evaluated under their direct supervision, the effectiveness of the
Trust’s DCP as at December 31, 2024, and concluded that it was effective.
Internal Controls Over Financial Reporting (“ICFR”)
The Trust’s CEO and CFO have also designed, or caused to be designed under their direct supervision, the Trust’s ICFR to
provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial
statements for external purposes in accordance with IFRS. Using the criteria established by the Committee of Sponsoring
Organizations of the Treadway Commission 2013 (COSO 2013), the Trust’s CEO and CFO have evaluated, or caused to be
evaluated under their direct supervision, the effectiveness of the Trust’s ICFR as at December 31, 2024, and concluded that it
was effective.
Inherent Limitations
Notwithstanding the foregoing, because of its inherent limitations a control system can provide only reasonable assurance that
the objectives of the control system are met and may not prevent or detect misstatements. Management’s estimates may be
incorrect, or assumptions about future events may be incorrect, resulting in varying results. In addition, management has
attempted to minimize the likelihood of fraud. However, any control system can be circumvented through collusion,
unauthorized override of controls and processes, and other illegal acts.
MANAGEMENT’S DISCUSSION AND ANALYSIS
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Section XI — Glossary of Terms
Term
Definition
Adjusted CORRA
Adjusted CORRA refers to the rate per annum comprising the Canadian
Overnight Repo Rate Average (“CORRA”) plus the applicable CORRA
Adjustment. CORRA is administered and published by the Bank of Canada or its
successor.
Anchors or Anchor tenants
Anchors or Anchor tenants are defined as tenants within a retail or office
property with gross leasable area greater than 30,000 square feet.
CAM
Defined as common area maintenance expenses.
ECL
Refers to expected credit losses.
Exchangeable Securities
Exchangeable Securities are securities issued by the limited partnership
subsidiaries of the Trust that are convertible or exchangeable directly for Units
without the payment of additional consideration, including Class B Smart
Limited Partnership Units (“Class B Smart LP Units”) and Units classified as
liabilities. Such Exchangeable Securities are economically equivalent to Units as
they are entitled to distributions equal to those on the Units and are
exchangeable for Units on a one-for-one basis. The issue of a Class B Smart LP
Unit and Units classified as liabilities is accompanied by a Special Voting Unit
that entitles the holder to vote at meetings of Unitholders.
Net Asset Value (“NAV”)
NAV represents the total assets less total liabilities of the Trust.
Penguin
Penguin refers to entities controlled by Mitchell Goldhar, a Trustee, Executive
Chairman, Chief Executive Officer and significant Unitholder of the Trust.
Shadow Anchor
A Shadow Anchor is a store or business that satisfies the criteria for
an Anchor tenant, but may be located at an adjoining property or on a portion.
Total Return Swap (“TRS”)
A contractual agreement to exchange payments based on a specified notional
amount and the underlying financial assets for a specific period. The Trust has a
total return swap agreement with a Canadian financial institution to exchange
returns based on a notional amount of up to 6.5 million Trust Units with a
notional value of approximately $156.0 million for a 48-month period, which,
subject to certain conditions, may be unwound prior to its maturity, either in
whole or in part.
Voting Top-Up Right
Mitchell Goldhar (either directly or indirectly through Penguin) is entitled to
have a minimum of 25.0% of the votes eligible to be cast at any meeting of
Unitholders provided certain ownership thresholds are met. Pursuant to the
Voting Top-Up Right, the Trust may issue additional Special Voting Units of the
Trust to Mitchell Goldhar and/or Penguin to increase his voting rights to 25.0%
in advance of a meeting of Unitholders. The total number of Special Voting
Units is adjusted for each meeting of the Unitholders based on changes in
Mitchell Goldhar’s, and Penguin’s, ownership interest. At the Trust’s annual
meeting of Unitholders in December 2020, Unitholders approved an extension
of the Voting Top-Up Right to December 31, 2025.
MANAGEMENT’S DISCUSSION AND ANALYSIS
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Consolidated
Financial
Statements
Consolidated Financial Statements
Independent Auditor’s Report
83
Consolidated Balance Sheets
88
Consolidated Statements of Income
and Compreshensive Income
89
Consolidated Statements of Cash Flows
90
Consolidated Statements of Equity
91
Notes to Consolidated Financial Statements
92
Independent auditor’s report
To the Unitholders of SmartCentres Real Estate Investment Trust
Our opinion
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects,
the financial position of SmartCentres Real Estate Investment Trust and its subsidiaries (together, the
Trust) as at December 31, 2024 and 2023 and January 1, 2023, and its financial performance and its cash
flows for the years ended December 31, 2024 and 2023 in accordance with International Financial
Reporting Standards as issued by the International Accounting Standards Board (IFRS Accounting
Standards).
What we have audited
The Trust’s consolidated financial statements comprise:
the consolidated balance sheets as at December 31, 2024, December 31, 2023 and January 1, 2023;
the consolidated statements of income and comprehensive income for the years ended December 31,
2024 and 2023;
the consolidated statements of cash flows for the years ended December 31, 2024 and 2023;
the consolidated statements of equity for the years ended December 31, 2024 and 2023; and
the notes to the consolidated financial statements, comprising material accounting policy information
and other explanatory information.
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Basis for opinion
We conducted our audit in accordance with Canadian generally accepted auditing standards. Our
responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of
the consolidated financial statements section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Independence
We are independent of the Trust in accordance with the ethical requirements that are relevant to our audit
of the consolidated financial statements in Canada. We have fulfilled our other ethical responsibilities in
accordance with these requirements.
PricewaterhouseCoopers LLP
Vaughan Metropolitan Centre, 200 Apple Mill Road, Vaughan, Ontario, Canada L4K 0J8
T.: +1 905 326 6800, F.: +1 905 326 5339, Fax to mail: ca_vaughan_office_faxes@pwc.com
“PwC” refers to PricewaterhouseCoopers LLP, an Ontario limited liability partnership.
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Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our
audit of the consolidated financial statements for the year ended December 31, 2024. These matters were
addressed in the context of our audit of the consolidated financial statements as a whole, and in forming
our opinion thereon, and we do not provide a separate opinion on these matters.
Key audit matter
How our audit addressed the key audit matter
Valuation of investment properties
Refer to note 2 – Material accounting policy
information and note 3 – Investment properties to
the consolidated financial statements.
The Trust measures its investment properties
at fair value and, as at December 31, 2024,
total investment properties were valued at
$10,660 million and include income properties and
properties under development (PUD). Fair values of
investment properties are determined using
valuations prepared by management, with
reference to available external data. PUD is valued
using the discounted cash flow valuation method, or
land, development and construction costs recorded
at market value, and income properties are valued
using the discounted cash flow valuation method.
Management applied significant judgment in
determining the fair values of investment properties
using the two methods described above (the
valuation methods). The significant assumptions in
the land, development and construction costs
recorded at market value include the market value
per acre for land. The significant assumptions used
in the discounted cash flow valuation method
include estimated future cash flows over an
average period of 10 years, discount rates and
terminal capitalization rates. The determination of
estimated future cash flows incorporates significant
assumptions including expectations of changes in
rental rates, occupancy rates, lease renewal rates
and downtime on existing lease expiries.
Our approach to addressing the matter included the
following procedures, among others:
For a sample of investment properties, tested
how management determined the fair value,
which included the following:
–
Tested the underlying data used in the
valuations.
–
Evaluated the reasonableness of the
estimated future cash flows over an
average period of 10 years used in the
discounted cash flow valuation method by
comparing assumptions, such as expected
changes in occupancy rates, to external
market and industry data and comparing
components of the year one cash flows to
the underlying accounting records.
–
Professionals with specialized skill and
knowledge in the field of real estate
valuations assisted us in evaluating the
appropriateness of the valuation methods
and in evaluating the reasonableness of the
discount rates, terminal capitalization rates,
changes in rental rates, lease renewal rates
and downtime on existing lease expiries.
–
Assessed the market value of land per acre
used by management by comparing it to
external market and industry data.
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Key audit matter
How our audit addressed the key audit matter
We considered this a key audit matter due to the
significant judgments by management when
determining the fair values of the income properties
and PUD, and the high degree of complexity in
assessing audit evidence related to the significant
assumptions used by management. In addition, the
audit effort involved the use of professionals with
specialized skill and knowledge in the field of real
estate valuations.
Other information
Management is responsible for the other information. The other information comprises the Management’s
Discussion and Analysis, which we obtained prior to the date of this auditor’s report and the information,
other than the consolidated financial statements and the auditor’s report thereon, included in the annual
report, which is expected to be made available to us after that date.
Our opinion on the consolidated financial statements does not cover the other information and we do not
and will not express any form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the other
information identified above and, in doing so, consider whether the other information is materially
inconsistent with the consolidated financial statements or our knowledge obtained in the audit, or
otherwise appears to be materially misstated.
If, based on the work we have performed on the other information that we obtained prior to the date of this
auditor’s report, we conclude that there is a material misstatement of this other information, we are
required to report that fact. We have nothing to report in this regard. When we read the information, other
than the consolidated financial statements and the auditor’s report thereon, included in the annual report,
if we conclude that there is a material misstatement therein, we are required to communicate the matter to
those charged with governance.
Responsibilities of management and those charged with governance for the
consolidated financial statements
Management is responsible for the preparation and fair presentation of the consolidated financial
statements in accordance with IFRS Accounting 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.
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In preparing the consolidated financial statements, management is responsible for assessing the Trust’s
ability to continue as a going concern, disclosing, as applicable, matters related to going concern and
using the going concern basis of accounting unless management either intends to liquidate the Trust or to
cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Trust’s financial reporting process.
Auditor’s responsibilities for the audit of the consolidated financial statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as
a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s
report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a
guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards
will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and
are considered material if, individually or in the aggregate, they could reasonably be expected to influence
the economic decisions of users taken on the basis of these consolidated financial statements.
As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise
professional judgment and maintain professional skepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the consolidated financial statements,
whether due to fraud or error, design and perform audit procedures responsive to those risks, and
obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of
not detecting a material misstatement resulting from fraud is higher than for one resulting from error,
as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of
internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Trust’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management.
Conclude on the appropriateness of management’s use of the going concern basis of accounting and,
based on the audit evidence obtained, whether a material uncertainty exists related to events or
conditions that may cast significant doubt on the Trust’s ability to continue as a going concern. If we
conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to
the related disclosures in the consolidated financial statements or, if such disclosures are inadequate,
to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our
auditor’s report. However, future events or conditions may cause the Trust to cease to continue as a
going concern.
Evaluate the overall presentation, structure and content of the consolidated financial statements,
including the disclosures, and whether the consolidated financial statements represent the underlying
transactions and events in a manner that achieves fair presentation.
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Plan and perform the group audit to obtain sufficient appropriate audit evidence regarding the financial
information of the entities or business units within the Trust as a basis for forming an opinion on the
consolidated financial statements. We are responsible for the direction, supervision and review of the
audit work performed for purposes of the group audit. We remain solely responsible for our audit
opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope
and timing of the audit and significant audit findings, including any significant deficiencies in internal
control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant
ethical requirements regarding independence, and to communicate with them all relationships and other
matters that may reasonably be thought to bear on our independence, and where applicable, related
safeguards.
From the matters communicated with those charged with governance, we determine those matters that
were of most significance in the audit of the consolidated financial statements of the current period and
are therefore the key audit matters. We describe these matters in our auditor’s report unless law or
regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we
determine that a matter should not be communicated in our report because the adverse consequences of
doing so would reasonably be expected to outweigh the public interest benefits of such communication.
The engagement partner on the audit resulting in this independent auditor’s report is Manisha Chen.
/s/PricewaterhouseCoopers LLP
Chartered Professional Accountants, Licensed Public Accountants
Vaughan, Ontario
February 12, 2025
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SMARTCENTRES REAL ESTATE INVESTMENT TRUST
CONSOLIDATED BALANCE SHEETS
(in thousands of Canadian dollars)
As at
Note
December 31, 2024
December 31, 2023
January 1, 2023
Assets
Non-current assets
Investment properties
3
$10,659,783
$10,564,269
$10,286,891
Equity accounted investments
4
749,619
756,919
680,999
Mortgages, loans and notes receivable
5
208,130
80,532
238,099
Other financial assets
6
94,974
152,162
171,807
Other assets
10,453
4,167
4,410
Amounts receivable
9
12,994
—
—
Intangible assets
7
41,145
42,476
43,807
$11,777,098
$11,600,525
$11,426,013
Current assets
Assets held for sale
—
—
42,321
Residential development inventory
8
31,738
51,719
40,373
Current portion of mortgages, loans and notes receivable
5
17,022
129,777
86,593
Amounts receivable and other
9
63,441
73,610
57,124
Prepaid expenses, deposits and deferred financing costs
9
12,696
15,048
14,474
Cash and cash equivalents
37,694
34,743
35,255
$162,591
$304,897
$276,140
Total assets
$11,939,689
$11,905,422
$11,702,153
Liabilities
Non-current liabilities
Debt
10
$4,059,364
$4,394,044
$4,523,987
Other financial liabilities
11
12,619
17,314
22,841
Other payables
12
8,158
17,727
17,265
$4,080,141
$4,429,085
$4,564,093
Current liabilities
Current portion of debt
10
986,915
605,478
459,278
Current portion of other financial liabilities
11
274,526
258,069
254,559
Accounts payable and current portion of other payables
12
260,526
253,486
261,122
$1,521,967
$1,117,033
$974,959
Total liabilities
$5,602,108
$5,546,118
$5,539,052
Equity
Trust Unit equity
$5,242,830
$5,272,334
$5,126,197
Non-controlling interests
1,094,751
1,086,970
1,036,904
$6,337,581
$6,359,304
$6,163,101
Total liabilities and equity
$11,939,689
$11,905,422
$11,702,153
The accompanying notes are an integral part of the consolidated financial statements.
Approved by the Board of Trustees.
Michael Young
Garry Foster
Trustee
Trustee
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SMARTCENTRES REAL ESTATE INVESTMENT TRUST
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(in thousands of Canadian dollars)
Note
2024
2023
Net rental income and other
Rentals from investment properties and other
16
$918,359
$834,581
Property operating costs and other
17
(370,851)
(321,020)
Net rental income and other
547,508
513,561
Other income and expenses
General and administrative expense, net
18
(37,672)
(36,370)
Earnings from equity accounted investments
4
20,589
75,170
Fair value adjustment on investment properties
3
(69,671)
91,448
Gain (loss) on sale of investment properties
(123)
44
Interest expense
10(d)
(183,099)
(163,741)
Interest income
14,101
19,647
Fair value adjustment on financial instruments
437
10,344
Net income and comprehensive income
$292,070
$510,103
Net income and comprehensive income attributable to:
Trust Units
$236,755
$413,700
Non-controlling interests
55,315
96,403
$292,070
$510,103
The accompanying notes are an integral part of the consolidated financial statements.
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SMARTCENTRES REAL ESTATE INVESTMENT TRUST
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands of Canadian dollars)
Note
2024
2023
Cash provided by (used in)
Operating activities
Net income and comprehensive income
$292,070
$510,103
Items not affecting cash and other items
19
225,661
(19,057)
Cash interest paid
10(d)
(152,952)
(151,199)
Interest received
7,300
10,879
Distributions from equity accounted investments
4
7,384
6,171
Expenditures on direct leasing costs and tenant incentives
(10,673)
(12,097)
Expenditures on tenant incentives for properties under development
(5,509)
(4,772)
Changes in other non-cash operating items
19
10,927
(9,175)
Cash flows provided by operating activities
$374,208
$330,853
Financing activities
Proceeds from issuance of unsecured debentures, net of issuance costs
10(b)
348,758
298,950
Proceeds from secured debt
5,450
3,133
Proceeds from unsecured debt
65,138
38,148
Proceeds from revolving operating facilities
155,109
242,486
Repayment of unsecured debentures
(100,000)
(200,000)
Repayments of secured debt
(80,332)
(174,787)
Repayments of unsecured debt
(15,666)
(35,359)
Repayments of revolving operating facility
(261,997)
(173,832)
Distributions paid on Trust Units
(267,630)
(267,563)
Distributions paid on non-controlling interests and Units classified as liabilities
(62,394)
(62,414)
Payment of lease liability
(2,168)
(1,652)
Cash flows used in financing activities
$(215,732)
$(332,890)
Investing activities
Acquisitions and Earnouts of investment properties
(13,122)
(2,777)
Additions to investment properties
(145,222)
(127,630)
Additions to equity accounted investments
4
(46,780)
(57,705)
Additions to equipment
(547)
(1,906)
Advances of mortgages and loans receivable
(92,476)
(11,500)
Repayments of mortgages and loans receivable
89,279
136,019
Development distributions from equity accounted investments
4
36,732
18,333
Net proceeds from sale of investment properties
16,611
48,691
Cash flows used in (provided by) investing activities
$(155,525)
$1,525
Increase (decrease) in cash and cash equivalents during the year
2,951
(512)
Cash and cash equivalents – beginning of year
34,743
35,255
Cash and cash equivalents – end of year
$37,694
$34,743
The accompanying notes are an integral part of the consolidated financial statements.
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SMARTCENTRES REAL ESTATE INVESTMENT TRUST
CONSOLIDATED STATEMENTS OF EQUITY
(in thousands of Canadian dollars)
Attributable to Unitholders
Attributable to LP Units
Classified as Non-Controlling
Interests
Note
Trust Units
Retained
Earnings
Trust
Unit
Equity
LP Units
Retained
Earnings
LP Unit
Equity
Other Non-
Controlling
Interest
Total
Equity
(Note 14)
(Note 14)
(Note 20)
Equity – January 1, 2023
$3,090,118 $2,036,079
$5,126,197
$643,223
$390,121
$1,033,344
$3,560
$6,163,101
Issuance of Units
14
—
—
—
1,471
—
1,471
—
1,471
Net income and
comprehensive income
—
413,700
413,700
—
95,977
95,977
426
510,103
Distributions
15
—
(267,563)
(267,563)
—
(47,470)
(47,470)
(338)
(315,371)
Equity – December 31, 2023
$3,090,118
$2,182,216
$5,272,334
$644,694
$438,628
$1,083,322
$3,648
$6,359,304
Equity – January 1, 2024
$3,090,118
$2,182,216
$5,272,334 $644,694
$438,628
$1,083,322
$3,648 $6,359,304
Net income and
comprehensive income
—
236,755
236,755
—
54,881
54,881
434
292,070
Units issued on exercise of
deferred units
11,14
14
—
14
—
—
—
—
14
Conversion of LP
exchangeable units
11,14
1,357
—
1,357
—
—
—
—
1,357
Issuance of Units
14
—
—
—
320
—
320
—
320
Distributions
15
—
(267,630)
(267,630)
—
(47,489)
(47,489)
(365)
(315,484)
Equity – December 31, 2024
$3,091,489
$2,151,341 $5,242,830
$645,014 $446,020
$1,091,034
$3,717
$6,337,581
The accompanying notes are an integral part of the consolidated financial statements.
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91
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2024 and December 31, 2023
(in thousands of Canadian dollars, except Unit, square foot and per Unit amounts)
1.
Organization
SmartCentres Real Estate Investment Trust and its subsidiaries (collectively, “the Trust”) is an unincorporated open-ended
mutual fund trust governed by the laws of the Province of Alberta created under a declaration of trust, dated December 4, 2001,
subsequently amended and last restated on December 9, 2020 (“the Declaration of Trust”). The Trust develops, leases,
constructs, owns and manages shopping centres, office buildings, high-rise and low-rise condos and rental residences, seniors’
housing, townhome units, self-storage rental facilities, and industrial facilities in Canada, both directly and through its
subsidiaries, Smart Limited Partnership, Smart Limited Partnership II, Smart Limited Partnership III, Smart Limited Partnership IV,
Smart Oshawa South Limited Partnership, Smart Oshawa Taunton Limited Partnership, Smart Boxgrove Limited Partnership,
ONR Limited Partnership, ONR Limited Partnership I, and SmartVMC West Limited Partnership. The exchangeable securities of
these subsidiaries, which are presented as non-controlling interests or as a liability, as appropriate, are economically equivalent
to voting trust units (“Trust Units”) as a result of voting, exchange and distribution rights as more fully described in Note 14. The
address of the Trust’s registered office is 3200 Highway 7, Vaughan, Ontario, L4K 5Z5. The Units of the Trust are listed on the
Toronto Stock Exchange (“TSX”) under the ticker symbol “SRU.UN”.
These consolidated financial statements have been approved for issue by the Board of Trustees on February 12, 2025. The Board
of Trustees has the power to amend the consolidated financial statements after issue.
As at December 31, 2024, the Penguin Group of Companies (“Penguin”), owned by Mitchell Goldhar, owned approximately 21.3%
(December 31, 2023 – 21.0%) of the issued and outstanding Units of the Trust and Limited Partnerships (see also Note 20,
“Related party transactions”).
2.
Material accounting policy information
2.1
Statement of Compliance
The consolidated financial statements of the Trust are prepared in accordance with International Financial Reporting
Standards as issued by the International Accounting Standards Board (“IFRS Accounting Standards”) and using the
accounting policies described herein.
2.2
Basis of presentation
The Trust’s consolidated financial statements are prepared on a going concern basis and have been presented in
Canadian dollars, which is the Trust’s functional currency, rounded to the nearest thousands unless otherwise stated.
The accounting policies set out below have been applied consistently to all periods presented in these consolidated
financial statements, unless otherwise indicated.
2.3
Principles of consolidation
Subsidiaries are all entities over which the Trust has control. The Trust controls an entity when the Trust is exposed to,
or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through
its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Trust.
They are deconsolidated from the date that control ceases.
Inter-entity transactions, balances, unrealized losses and unrealized gains on transactions between the Trust and its
subsidiaries are eliminated. Accounting policies of subsidiaries have been changed where necessary to ensure
consistency with the policies adopted by the Trust.
Non-controlling interests represent equity interests in subsidiaries not attributable to the Trust. The share of net assets
of subsidiaries attributable to non-controlling interests is presented as a component of equity. Net income and
comprehensive income are attributed to Trust Units and non-controlling interests.
2.4
Investment property acquisitions
When an investment is acquired, the Trust considers the substance of the assets and activities of the acquisition in
determining whether the acquisition represents an asset acquisition or a business combination. The transaction is
considered to be a business combination if the acquired investment meets the definition of a business, being an
integrated set of activities and assets that are capable of being managed for the purposes of providing a return to
Unitholders. The Trust elected to consistently use a concentration test that results in an asset acquisition conclusion
when substantially all of the fair value of the gross assets is concentrated in a single identifiable asset or group of
similar identifiable assets.
When acquisition of an investment does not represent a business, it is accounted for as an acquisition of a group of
assets and liabilities. The cost of the acquisition is allocated to the assets and liabilities acquired based upon their
relative fair values at the acquisition date, and no goodwill is recognized. Acquisition-related costs are capitalized to
the investment at the time the acquisition is completed.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2.5
Investment in associates
Investment in associates includes entities over which the Trust has significant influence but not control or joint control,
generally accompanying an ownership of between 20% and 50% of the voting rights. Investment in associates is
accounted for using the equity method of accounting and recorded as equity accounted investments on the
consolidated balance sheets. Under the equity method, the investment is initially recognized at cost, and the carrying
amount is increased or decreased to recognize the investor’s share of the profit or loss of the investee, including the
Trust’s pro rata share of changes in fair value of investment property held by the associate from the previous reporting
period, after the date of acquisition. The Trust’s investment in associates includes any notional goodwill identified on
acquisition.
When the Trust’s share of losses in an investment in associate equals or exceeds its interest in the investment in
associate, including any other unsecured receivables, the Trust does not recognize further losses, unless it has incurred
legal or constructive obligations or made payments on behalf of the investment in associate.
The Trust determines at each reporting date whether there is any objective evidence that the investment in associate is
impaired. If this is the case, the Trust calculates the amount of impairment as the difference between the recoverable
amount of the investment in associate and its carrying value and recognizes the amount in the consolidated statements
of income and comprehensive income.
2.6
Joint arrangements
Joint arrangements are arrangements of which two or more parties have joint control. Joint control is the contractual
sharing of control of an arrangement, which exists only when decisions about the relevant activities require unanimous
consent of the parties sharing control. Joint arrangements are classified as either joint operations or joint ventures
depending on the Trust’s rights and obligations in the arrangement based on factors such as the structure, legal form
and contractual terms of the arrangement.
a)
Investment in joint ventures
A joint venture is a joint arrangement whereby the parties that have joint control only have rights to the net assets of
the arrangement. Investment in joint ventures is accounted for using the equity method of accounting and recorded as
equity accounted investments on the consolidated balance sheets. Under the equity method, the investment is initially
recognized at cost, and the carrying amount is increased or decreased to recognize the investor’s share of the profit or
loss of the investee, including the Trust’s pro rata share of changes in fair value of investment property held by the
equity accounted investment from the previous reporting period, after the date of acquisition. The Trust’s investment in
joint ventures includes any notional goodwill identified on acquisition.
When the Trust’s share of losses in an investment in joint venture equals or exceeds its interest in the investment in
joint venture, including any other unsecured receivables, the Trust does not recognize further losses, unless it has
incurred legal or constructive obligations or made payments on behalf of the investment in joint venture.
The Trust determines at each reporting date whether there is any objective evidence that the investment in joint
venture is impaired. If this is the case, the Trust calculates the amount of impairment as the difference between the
recoverable amount of the investment in joint venture and its carrying value and recognizes the amount in the
consolidated statement of income and comprehensive income.
Investment in associates and investment in joint ventures, collectively, are refer to as “equity accounted investments”.
b)
Investment in joint operations
A joint operation is a joint arrangement whereby the parties that have joint control have rights to the assets and
obligations for the liabilities relating to the arrangement. The Trust is a co-owner in several properties that are subject
to joint control and has determined that certain current joint arrangements are joint operations as the Trust, through its
subsidiaries, is the direct beneficial owner of the Trust’s interests in the properties. For these properties, the Trust
recognizes its proportionate share of the assets, liabilities, revenue and expenses of these co-ownerships in the
respective lines in the consolidated financial statements (see Note 22, “Co-owned property interests”).
2.7
Investment properties
Investment properties include income properties and properties under development (land or building, or part of a
building, or both) that are held by the Trust, or leased by the Trust as a lessee, to earn rentals or for capital appreciation
or both.
Acquired investment properties are measured initially at cost, including related transaction costs in connection with
asset acquisitions. Certain properties are developed by the Trust internally, and other properties are developed and
leased to third parties under development management agreements with Penguin and other vendors (“Earnouts”).
Earnouts occur when the vendors retain responsibility for managing certain developments on land acquired by the
Trust for additional proceeds paid on completion calculated based on a predetermined, or formula-based, capitalization
rate, net of land and development costs incurred by the Trust. The completion of an Earnout is reflected as an
additional purchase within investment properties. Costs capitalized to properties under development include direct
development and construction costs, Earnout Fees (“Earnout Fees”), borrowing costs, property taxes and other
carrying costs, as well as capitalized staff compensation and other costs directly attributable to property under
development.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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93
Borrowing costs that are incurred for the purpose of, and are directly attributable to, acquiring or constructing a
qualifying investment property are capitalized as part of its cost. The amount of borrowing costs capitalized is
determined first by reference to borrowings specific to the project, where relevant, and otherwise by applying a
weighted average cost of borrowings to eligible expenditures after adjusting for borrowings associated with other
specific developments. Borrowing costs are capitalized while acquisition or construction is actively underway and cease
once the asset is ready for use as intended by management, or suspended if the development of the asset is
suspended, as identified by management.
After the initial recognition, investment properties are recorded at fair value, determined based on comparable
transactions, if any. If comparable transactions are not available, the Trust uses alternative valuation methods such as: i)
the discounted cash flow valuation method, and ii) land, development and construction costs recorded at market value.
Valuations, where obtained externally, are performed during the year with quarterly updates on capitalization rates by
professional valuers who hold recognized and relevant professional qualifications and have recent experience in the
location and category of the investment property being valued. Related fair value gains and losses are recorded in the
consolidated statements of income and comprehensive income in the period in which they arise.
Investment property held by the Trust under a lease is classified as investment property when the definition of an
investment property is met and the Trust accounts for the lease as a right-of-use asset. The Trust accounts for all
leasehold property interests that meet the definition of investment property held by the Trust as right-of-use assets.
Subsequent expenditure is capitalized to the investment property’s carrying amount only when it is probable that
future economic benefits associated with the expenditure will flow to the Trust and the cost of the item can be
measured reliably. All other repairs and maintenance costs are expensed when incurred. When part of an investment
property is replaced, the carrying amount of the replaced part is derecognized.
Initial direct leasing costs incurred by the Trust in negotiating and arranging tenant leases are added to the carrying
amount of investment properties.
2.8
Assets held for sale
An investment property is classified as held for sale when it is expected that its carrying amount will be recovered
principally through a sale transaction rather than through continuing use. For an investment property to be classified as
held for sale: i) it must be available for immediate sale in its present condition, subject only to terms that are usual and
customary for sales of such property, and ii) the sale must be highly probable, management must be committed to a
plan to sell the assets, and the sale is expected generally within one year of classification. Upon designation as held for
sale, the investment property continues to be measured at fair value and is presented separately on the consolidated
balance sheets.
2.9
Residential development inventory
Residential development inventory, which is developed for sale in the ordinary course of business within the normal
operating cycle, is stated at the lower of cost and estimated net realizable value. Residential development inventory is
reviewed for impairment at each reporting date. An impairment loss is recognized as an expense when the carrying
value of the property exceeds its net realizable value. Net realizable value is based on projections of future cash flows,
which take into account the development plans for each project and management’s best estimate of the most probable
set of anticipated economic conditions.
The cost of residential development inventory includes borrowing costs directly attributable to projects under active
development. The amount of borrowing costs capitalized is determined first by reference to borrowings specific to the
project, where relevant, and otherwise by applying a weighted average interest rate for the Trust’s other borrowings to
eligible expenditures. Borrowing costs are not capitalized on residential development inventory where no development
activity is taking place. Residential development inventory is presented separately on the consolidated balance sheets
as current assets, as the Trust intends to sell these assets in the ordinary course of business within the normal operating
cycle.
2.10
Intangible assets
The Trust’s intangible assets comprise key joint venture relationships, trademarks and goodwill. The joint venture
relationships and trademarks have finite useful lives, and as such are amortized over a period of 30 years and reviewed
for impairment when an indication of impairment exists. Goodwill is not amortized but tested for impairment at least
annually, or more frequently if there are indicators of impairment.
2.11
Classification of Units as equity and liabilities
a)
Trust Units
The Trust Units meet the definition of a financial liability under IFRS as the redemption feature of the Trust Units creates
an unavoidable contractual obligation to pay cash. Therefore, the Trust Units are considered to be “puttable
instruments” and are presented as equity.
To be presented as equity, a puttable instrument must meet all of the following conditions: i) it must entitle the holder
to a pro rata share of the entity’s net assets in the event of the entity’s dissolution; ii) it must be in the class of
instruments that is subordinate to all other instruments; iii) all instruments in the class in ii) must have identical features;
iv) other than the redemption feature, there can be no other contractual obligations that meet the definition of a
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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liability; and v) the expected cash flows for the instrument must be based substantially on the profit or loss of the entity
or change in fair value of the instrument. This is called the “Puttable Instrument Exemption”.
The Trust Units meet the Puttable Instrument Exemption criteria and, accordingly, are presented as equity in the
consolidated financial statements. The distributions on Trust Units are deducted from retained earnings.
b)
Limited Partnership Units
The Class B General Partnership Units and Class D Limited Partnership Units of Smart Limited Partnership (referred to
herein as “Smart LP Units”), Class B Limited Partnership Units of Smart Limited Partnership II (referred to herein as
“Smart LP II Units”), Class B General Partnership Units of Smart Limited Partnership III (referred to herein as “Smart LP
III Units”), Class B General Partnership Units of Smart Limited Partnership IV (referred to herein as “Smart LP IV Units”),
Class B General Partnership Units and Class D Limited Partnership Units of Smart Oshawa South Limited Partnership
(referred to herein as “Smart Oshawa South LP Units”), Class B General Partnership Units and Class D Limited
Partnership Units of Smart Oshawa Taunton Limited Partnership (referred to herein as “Smart Oshawa Taunton LP
Units”), Class B Limited Partnership Units of ONR Limited Partnership (referred to herein as “ONR LP Units”), Class B
Limited Partnership Units of ONR Limited Partnership I (referred to herein as “ONR LP I Units”), Class B Limited
Partnership Units of Smart Boxgrove Limited Partnership (referred to herein as “Smart Boxgrove LP Units”), and Class
D Limited Partnership Units of SmartVMC West Limited Partnership (referred to herein as “SmartVMC West LP Units”)
are exchangeable into Trust Units at the partners’ option. All limited partnership units that are presented as equity are
referred to herein as “LP Units” (individually, each of these limited partnerships are referred to herein as an LP).
Each respective LP Unit meets the Puttable Instrument Exemption conditions and, as such, are presented in equity as
non-controlling interests in the Trust’s consolidated financial statements.
The Class D Smart LP Units, Class F Smart LP Units, Class D Smart Oshawa South LP Units, Class D Smart Oshawa
Taunton LP Units, Class B ONR LP Units, Class B ONR LP I Units, and Class D SmartVMC West LP Units (collectively
referred to herein as “Units classified as liabilities”), are considered puttable instruments and are classified as financial
liabilities at FVTPL. The distributions on such Units are classified as interest expense in the consolidated statement of
income and comprehensive income. The Trust considers distributions on such Units classified as interest expense to be
a financing activity in the consolidated statement of cash flows.
2.12
Financial assets and liabilities – Recognition and measurement
The Trust recognizes a financial asset or a financial liability when, and only when, it becomes a party to the contractual
provisions of the instrument.
Initial Recognition
Such financial assets or financial liabilities are initially recognized at their fair value, including directly attributable
transaction costs in the case of a financial asset or financial liability not subsequently measured at fair value through
profit or loss. Transaction costs of financial assets carried at fair value through profit or loss are expensed in profit or
loss. Subsequent measurement depends on the initial classification of the financial asset or financial liability.
Classification
The classification of financial assets depends on the Trust’s business model for managing the financial assets and their
contractual cash flows characteristics. Financial assets are classified and measured based on the following categories:
•
amortized cost;
•
fair value through other comprehensive income (“FVTOCI”); and
•
fair value through profit or loss (“FVTPL”).
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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The following table summarizes the Trust’s classification and measurement of financial assets and liabilities:
Note
Classification under IFRS 9
Financial assets
Mortgages, loans and notes receivable
Amortized cost
Amounts receivable and other
Amortized cost
Cash and cash equivalents
Amortized cost
Total return swap receivable
FVTPL
Other financial assets
FVTPL
Financial liabilities
Accounts payable and other payables
Amortized cost
Secured debt
Amortized cost
Revolving operating facilities
Amortized cost
Unsecured debt
Amortized cost
Units classified as liabilities
2.11
FVTPL
Earnout options
2.14
FVTPL
Deferred unit plan (“DUP”)
2.14
FVTPL
Equity incentive plan (“EIP”)
2.14
FVTPL
Other financial liabilities
FVTPL
The following table describes the valuation techniques used in the determination of the fair values of the financial
assets and liabilities:
Type
Valuation approach
Mortgages, loans and notes receivable
The fair value of each mortgage, loan and note receivable is based on the
current market conditions for financing with similar terms and risks.
Accounts receivable, cash and cash
equivalents, and trade payables and other
liabilities
The carrying amount approximates fair value due to the short-term maturity
of these instruments.
Total return swap receivable
Fair value is determined by reference to the value of the underlying notional
Trust Units at each reporting date.
Currency swap agreement
Fair value is determined as the difference between the foreign exchange rate
between Canadian dollars and U.S. dollars as per the swap agreement and the
foreign exchange rate at the reporting date on the specified notional amount.
Interest rate swap agreements
The fair value is determined using the discounted cash flow valuation
technique on the expected cash flows of the derivatives. The future fixed
cash payments and the expected variable cash receipts are discounted to the
reporting date, and then netted to determine the fair value of each interest
rate swap agreement.
Units classified as liabilities
The fair value is based on closing market trading price of the Trust’s Units.
Earnout options
The fair value is valued using a Black-Scholes option pricing model.
DUP
The fair value is based on closing market trading price of the Trust’s Units.
EIP
The fair value is valued using a Monte Carlo simulation pricing model.
Long-term debt
Fair value is based on the present value of contractual cash flows, discounted
at the Trust’s current incremental borrowing rate for similar types of
borrowing arrangements or, where applicable, quoted market prices.
Impairment
The Trust assesses, on a forward-looking basis, the expected credit losses (“ECL”) associated with its debt instruments
carried at amortized cost. The impairment is dependent on whether there has been a significant increase in credit risk.
To measure the expected credit losses, trade receivables and contract assets have been grouped based on shared
credit risk characteristics and the days past due. The contract assets (“Unbilled other tenant receivables”) relate to
unbilled work in progress and have substantially the same risk characteristics as the trade receivables for the same
types of contracts. The Trust has therefore concluded that the expected loss rates for trade receivables are a
reasonable approximation of the loss rates for the contract assets. The Trust applies the simplified approach permitted
by IFRS 9 to record the expected credit loss for tenant receivables where its loss allowance is measured at initial
recognition and throughout the life of the receivable at an amount equal to lifetime expected credit loss.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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All of the Trust’s loans receivable and mortgages receivable at amortized cost are considered to have low credit risk,
and the loss allowance recognized during the period was therefore limited to 12 months expected losses. These
financial assets are considered by management to be “low credit risk” when these financial assets have a low risk of
default and the borrower has a strong capacity to meet its contractual cash flow obligations in the near term.
2.13
Cash and cash equivalents
Cash and cash equivalents comprise cash and short-term investments with original maturities of three months or less.
2.14
Trust and Limited Partnership Unit based arrangements
a) Unit options issued to non-employees on acquisitions (the “Earnout options”)
In connection with certain acquisitions and the associated development agreements, the Trust may grant options
to acquire Units of the Trust or Limited Partnerships to Penguin or other vendors. These options are exercisable
only at the time of completion and rental of additional space on acquired properties at strike prices determined
on the date of grant. Earnout options that have not vested expire at the end of the term of the corresponding
development management agreement.
The Earnout options are considered to be a financial liability because there is a contractual obligation for the
Trust to deliver Trust or Limited Partnership Units upon exercise of the Earnout options. The Earnout options are
considered to be contingent consideration with respect to the acquisitions they relate to, and are initially
recognized at their fair value. The Earnout options are subsequently carried at fair value with changes in fair value
recognized in the fair value adjustment on financial instruments in the consolidated statements of income and
comprehensive income.
b) Unit based compensation
i.
DUP
Deferred units granted to Trustees with respect to their Trustee fees, as well as the matching deferred units,
vest immediately and are considered to be with respect to past services and are recognized as compensation
expense upon grant. Deferred units granted to eligible associates with respect to their bonuses vest
immediately, and the matching deferred units vest 50% on the third anniversary and 25% on each of the fourth
and fifth anniversaries. Deferred units granted relating to amounts matched by the Trust are considered to be
with respect to future services and are recognized as compensation expense based upon the fair value of
Trust Units over the vesting period of each deferred unit.
The deferred units earn additional deferred units for the distributions that would otherwise have been paid on
the deferred units as if they instead had been issued as Trust Units on the date of grant. The deferred units are
considered to be a financial liability because there is a contractual obligation for the Trust to deliver Trust
Units or settle in cash upon conversion or redemption of the deferred units.
The deferred units are measured at fair value using the market price of the Trust Units on each reporting date,
with changes in fair value recognized in the consolidated statements of income and comprehensive income as
additional compensation expense over their vesting period and as a gain or loss on financial instruments once
vested. The additional deferred units are recorded in the consolidated statements of income and
comprehensive income as compensation expense over their vesting period and as interest expense once
vested.
ii.
EIP
The Trust’s EIP awards officers and key employees of the Trust with performance units when the daily volume
weighted average price (“VWAP”) of all Trust Units traded on the TSX for 20 consecutive trading days meets
or exceeds certain Unit price thresholds set by the Board. Performance units vest over a performance period
of three years and are settled for cash or exchanged for Trust Units based on the 10-day VWAP of Trust Units
at the redemption date.
At each reporting date, the performance units are measured based on the performance of Trust Units relative
to the Unit price threshold targets, the market value of Trust Units and the total performance units granted
including additional units for distributions (see also Note 2.21(e).
2.15
Revenue recognition
a) Rentals from investment properties
The Trust’s rental from investment properties and other comes from different sources and is accounted for in
accordance with IFRS 15, “Revenue from Contracts with Customers” (“IFRS 15”) and IFRS 16, “Leases” (“IFRS 16”).
The Trust’s lease agreements may contain both lease and non-lease elements. IFRS 16 requires lessors to allocate
consideration in the contracts between lease and non-lease components based on their relative standalone prices.
Rentals from investment properties accounted for using IFRS 16 (lease components) include rents from tenants
under leases, recoveries of property tax and operating costs that do not relate to additional services provided to
lessees, percentage participation rents, lease cancellation fees, parking income and some incidental lease-related
income. Rents from tenants may include free rent periods and rental increases over the term of the lease and are
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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recognized in revenue on a straight-line basis over the term of the lease. The difference between revenue income
recognized and the cash received is included in investment properties as straight-line rents receivable. Lease
incentives provided to tenants are deferred and amortized against revenue rental income over the term of the
lease. Percentage participation rents are recognized after the minimum sales level has been achieved with each
lease. Lease cancellation fees are recognized as revenue income once an agreement is completed with the tenant
to terminate the lease and the collectibility is probable.
Rentals from investment properties also include certain amounts accounted for under IFRS 15 (non-lease
components) where the Trust provides lessees or others with a distinct service. Non-lease components include
revenue in a form of recoveries of operating costs where services are provided to tenants (common area
maintenance recoveries, chargeback recoveries and administrative recoveries), parking revenue and revenue from
other services that are distinct. The respective performance obligations are satisfied as services are rendered and
revenue is recognized over time. See also Note 16, “Rentals from investment properties and other”, for details on
amounts related to lease and non-lease components.
Typically, revenue from operating costs recoveries and other services is collected from tenants on a monthly basis
and parking revenue is collected at the day when the respective service has been provided. This results in
immaterial contract balances as at each reporting date.
b) Service and other revenues
The Trust provides asset and property management services to co-owners, partners and third parties for which it
earns market-based construction, development and other fees. These fees are recognized over time in
accordance with IFRS 15 as the service or activity is performed. Where a contract has multiple deliverables, the
Trust identifies the different performance obligations of the contract and recognizes the revenue allocated to
each obligation as the respective obligation is met.
The Trust recognizes non-lease component revenue to depict the transfer of goods or services to customers in
amounts that reflect the consideration to which the Trust expects to be entitled in exchange for those goods or
services. It applies to all contracts with customers, excluding leases, financial instruments and insurance contracts.
c) Residential development inventory
The revenue generated from contracts with customers on the sale of townhomes is recognized at a point in time
when control of the asset (i.e., townhome) has transferred to the purchaser (i.e., generally, when the purchaser
takes possession of the townhome) as the purchaser has the ability to direct the use of and obtain substantially all
of the remaining benefits from the asset. The amount of revenue recognized is based on the transaction price
included in the purchasers’ contracts. Any funds received prior to the purchasers taking possession of their
respective assets are recognized as deferred revenue (contractual liability).
d) Interest income
Interest income is recognized as interest accrues using the effective interest method. When a loan and receivable
are impaired, the Trust reduces the carrying amount to its recoverable amount, which is the estimated future cash
flow discounted at the original effective interest rate of the instrument, and continues unwinding the discount as
interest income. Interest income on impaired loans and receivables is recognized using the original effective
interest rate.
2.16
Tenant receivables
Tenant receivables are recognized initially at fair value and subsequently are measured at amortized cost using the
effective interest method, less impairment provision. The carrying amount receivable from tenants is net of the
allowance for expected credit losses. Increases in (or reversals of) expected credit losses are recorded as a charge
(recovery) in the consolidated statements of income and comprehensive income within “Property operating costs”. The
Trust records the expected credit loss to comply with IFRS 9’s simplified approach for tenant receivables where its loss
allowance is measured at initial recognition and throughout the life of the receivable at an amount equal to lifetime
expected credit loss.
2.17
Current and deferred income tax
The Trust is taxed as a mutual fund trust for Canadian income tax purposes. In accordance with the Declaration of
Trust, distributions to Unitholders are declared at the discretion of the Trustees. The Trust endeavours to distribute a
sufficient amount in each taxation year to ensure that the Trust will not be subject to tax on its net income and net
capital gains under Part I of the Income Tax Act (Canada) (“Tax Act”).
The Trust qualifies for the REIT Exception under the specified investment flow-through (“SIFT”) trust rules for
accounting purposes. The Trust considers the tax deductibility of the Trust’s distributions to Unitholders to represent, in
substance, an exemption from current tax so long as the Trust continues to expect to distribute all of its taxable income
and taxable capital gains to its Unitholders. Accordingly, the Trust will not recognize any current tax or deferred income
tax assets or liabilities on temporary differences in the Trust’s financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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2.18
Operating segments
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating
decision-maker. The chief operating decision-maker is the person or group that allocates resources to and assesses the
performance of the operating segments of an entity. The Trust has determined that its chief operating decision-maker
is the Executive Chairman and Chief Executive Officer.
2.19
Leases
Upon lease commencement where the Trust is the lessee, the Trust records a right-of-use asset at the amount equal to
the lease liability. The lease liability is initially measured at the present value of lease payments payable over the lease
term, discounted at the Trust’s incremental borrowing rate. The lease liability is subsequently measured at amortized
cost using the effective interest method.
However, as and when rent changes as a result of lease payments being linked to a rate or index, leased assets and
liabilities have to be remeasured. A lease modification is accounted for as a separate lease if:
•
the modification increases the scope of the lease by adding the right to use one or more underlying assets;
and
•
the consideration for the lease increases by an amount commensurate with the standalone price for the
increase in scope.
With respect to tenant improvements in connection with the sublease, under IFRS 16, tenant improvements provided by
the Trust are not included in the cost of the right-of-use asset. However, when the leased property meets the definition
of investment property under IAS 40 (see Note 2.7), the Trust presents tenant improvements that enhance the value of
the leased property as an adjustment together with right-of-use assets or incentives resulting in an adjustment to
revenue within investment.
2.20
Foreign currency translation
The Trust records foreign currency transactions initially at the rate of exchange at the date of the transaction. If the
transaction spans over a period of time, the Trust records the foreign currency transaction at the average rate of
exchange for the transaction period.
At each reporting date, foreign currency monetary amounts are reported using the closing rate, which is the spot
exchange rate at the end of the reporting period.
2.21
Critical accounting judgments and estimates
The preparation of the consolidated financial statements requires management to make judgments and estimates in
applying the Trust’s accounting policies that affect the reported amounts and disclosures made in the consolidated
financial statements and accompanying notes.
Within the context of these consolidated financial statements, a judgment is a decision made by management in
respect of the application of an accounting policy, a recognized or unrecognized financial statement amount and/or
note disclosure, following an analysis of relevant information that may include estimates and assumptions. Estimates
and assumptions are used mainly in determining the measurement of balances recognized or disclosed in the
consolidated financial statements and are based on a set of underlying data that may include management’s historical
experience, knowledge of current events and conditions and other factors that are believed to be reasonable under the
circumstances. Management continually evaluates the estimates and judgments it uses.
The following are the accounting policies subject to judgments and key sources of estimation uncertainty that the Trust
believes could have the most significant impact on the amounts recognized in the consolidated financial statements.
a) Investment properties
Judgment is applied in determining whether certain costs are additions to the carrying amount of an investment
property and, for properties under development, identifying the point at which substantial completion of the
property occurs and identifying the directly attributable borrowing costs to be included in the carrying value of
the development property. The significant assumptions in the land, development and construction costs recorded
at market value include the market value per acre for land. The Trust applies judgment in determining whether
development projects are active and viable, otherwise previously capitalized costs are written off.
The Trust also applies judgment in determining whether the properties it acquires are considered to be asset
acquisitions or business combinations. The Trust considers all the properties it has acquired to date to be asset
acquisitions. Earnout options are exercisable upon completion and rental of additional space on acquired
properties. Judgment is applied in determining whether Earnout options are considered to be contingent
consideration relating to the acquisition of the acquired properties or additional cost of services during the
construction period. The Trust considers the Earnout options it has issued to date to represent contingent
considerations relating to the acquisitions and is considered to be a financial liability measured at fair value (see
Note 2.14(a).
The valuation of the investment properties is the main area of judgment exercised by the Trust. The valuations of
investment properties are dependent on: i) projected future cash flows for income properties and properties
under development, and ii) land, development and construction costs for properties under development, and
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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discount rates applicable to those assets. The projected cash flows for each property are based on the location,
type and quality of the property and supported by the terms of any existing leases, other contracts or external
evidence such as current market rents for similar properties, and adjusted for estimated vacancy rates and
estimated maintenance costs. Discount rate is based on the location, size and condition of the properties and
takes into account market data at the valuation date. These assumptions may not ultimately be achieved. The
critical estimates and assumptions underlying the valuation of investment properties are set out in Note 3
“Investment properties”.
Management internally values the entire portfolio of investment properties, taking into account available external
data. In addition, the Trust endeavours to obtain external valuations of approximately 15%–20% (by value) of the
portfolio annually carried out by professionally qualified valuers in accordance with the Appraisal and Valuation
Standards of the Royal Institution of Chartered Surveyors. Properties are rotated annually to ensure that
approximately 50% (by value) of the portfolio is appraised externally over a three-year period. Judgment is
applied in determining the extent and frequency of independent appraisals.
b) Joint arrangements
The Trust makes judgment in determining whether the Trust has joint control and whether the arrangements are
joint operations or joint ventures. In assessing whether the joint arrangements are joint operations or joint
ventures, management applies judgment to determine the Trust’s rights and obligations in the arrangement based
on factors such as the structure, legal form and contractual terms of the arrangement.
c) Intangible assets
The Trust makes judgments with respect to the amortization period relating to the joint venture relationships and
trademarks that have finite useful lives, while also reviewing for impairment when an indication of impairment
exists. In addition, on an annual basis or more frequently if there are any indications of impairment, the Trust
evaluates whether goodwill may be impaired by determining whether the recoverable amount is less than the
carrying amount for the smallest identified cash-generating unit.
d) Income taxes
The Trust is taxed as a mutual fund trust for Canadian income tax purposes and qualifies for the REIT Exemption
under the SIFT rules for tax purposes. The Trust endeavours to distribute a sufficient amount in each taxation year
to ensure that the Trust will not be subject to tax on its net income and net capital gains under Part I of the
Income Tax Act (Canada) (“Tax Act”).
The Trust qualifies for the REIT Exemption under the specified investment flow-through (SIFT) trust rules for
accounting purposes. The Trust considers the tax deductibility of the Trust’s distributions to Unitholders to
represent, in substance, an exemption from current tax so long as the Trust continues to expect to distribute all of
its taxable income and taxable capital gains to its Unitholders. Accordingly, the Trust will not recognize any
current tax or deferred income tax assets or liabilities on temporary differences in the Trust’s financial statements.
e) EIP
The fair value of the EIP is based on the Monte Carlo simulation pricing model, which incorporates: (i) the
performance of the Trust relative to the Unit price thresholds for the performance period, (ii) the 10-day VWAP of
Trust Units at each reporting date, and (iii) the total granted performance units under the EIP including
performance units that are reinvested. Any adjustments made to the accrued value of the EIP are recorded in
earnings.
2.22
Reclassification of comparative figures
a) On January 1, 2024, the Trust adopted the amendments to IAS 1 Presentation of Financial Statements –
Classification of Liabilities as Current or Non-Current. As a result of these amendments, the following
reclassifications have been made to the presentation of the current and comparative consolidated balance sheets:
As at
January 1, 2023
December 31, 2023
Before
reclassification
Classification
After
reclassification
Before
reclassification Classification
After
reclassification
Non-current liabilities
Other financial liabilities
277,400
(254,559)
22,841
275,383
(258,069)
17,314
Current liabilities
Current portion of other
financial liabilities
—
254,559
254,559
—
258,069
258,069
The application of these amendments has no impact on the measurement or recognition of any item in the Trust’s
consolidated financial statements, debt covenants based on the terms and definitions of the covenant calculations
and debt agreements, liquidity risks, and there is no change to the consolidated statements of income and
comprehensive income, consolidated statements of equity, and consolidated statements of cash flows.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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b) The comparative figures relating to “Additions to equity accounted investments”, in the amount of $18,333 for the
year ended December 31, 2023, has been reclassified from “Additions to equity accounted investments” to
“Development distributions from equity accounted investments” to conform with the current year presentation of
statements of cash flows.
2.23
Future changes in accounting policies
The Trust monitors the potential changes proposed by the IASB and analyzes the effect that changes in the standards
may have on the Trust’s operations.
IFRS 18, Presentation and Disclosure in Financial Statements (“IFRS 18”)
In April 2024, IFRS 18 was issued to achieve comparability of the financial performance of similar entities. The standard,
which replaces IAS 1, “Presentation of Financial Statements”, impacts the presentation of primary financial statements
and notes, including the statement of earnings where companies will be required to present separate categories of
income and expense for operating, investing, and financing activities with prescribed subtotals for each new category.
The standard will also require management-defined performance measures to be explained and included in a separate
note within the consolidated financial statements.
The standard is effective for annual reporting periods beginning on or after January 1, 2027, including interim financial
statements, and requires retrospective application. The Trust is currently assessing the impact of the new standard.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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3. Investment properties
The following table summarizes the activities in investment properties:
Year Ended December 31, 2024
Year Ended December 31, 2023
Note
Income
Properties
Properties
Under
Development
Total
Income
Properties
Properties
Under
Development
Total
Balance – beginning of year
$8,743,808
$1,820,461
$10,564,269
$8,575,713
$1,753,499
$10,329,212
Additions (deductions):
Acquisitions, Earnouts and related
adjustments of investment properties
—
23,378
23,378
—
2,435
2,435
Earnout Fees on properties subject
to development management
agreements
3(e)(ii)
998
—
998
1,666
—
1,666
Transfer to income properties from
properties under development
81,795
(81,795)
—
64,318
(64,318)
—
Transfer from income properties to
properties under development
(19,441)
19,441
—
(7,308)
7,308
—
Transfer from properties under
development to equity accounted
investments
3(d)
—
(4,500)
(4,500)
—
(1,500)
(1,500)
Transfer to properties under
development from equity accounted
investments
—
—
—
—
47,440
47,440
Capital and development expenditures
35,817
80,364
116,181
36,435
55,684
92,119
Capitalized interest
10(d)
—
35,587
35,587
—
44,444
44,444
Dispositions
3(c)
—
(16,630)
(16,630)
—
(50,208)
(50,208)
Straight-line rents and tenant
incentives(1)
10,171
—
10,171
7,213
—
7,213
Fair value adjustment on investment
properties
24
89,141
(158,812)
(69,671)
65,771
25,677
91,448
Balance – end of year
$8,942,289
$1,717,494
$10,659,783
$8,743,808
$1,820,461
$10,564,269
(1)
The amount is net of amortization of straight-line rents and tenant incentives in the amount of $8,063 and $7,422, respectively (year ended December 31, 2023 – $7,475 and $7,662,
respectively).
Secured debt with a carrying value of $716,495 (December 31, 2023 – $807,602) is secured by investment properties with a fair
value of $2,362,859 (December 31, 2023 – $2,478,013).
a)
Valuation methods underlying management’s estimation of fair value
i) Income properties
The Trust applies the discounted cash flow valuation method to estimate the value of income properties, which include:
freehold properties, properties with leasehold interests with purchase options, and properties with leasehold interests
without purchase options. The Trust applies this valuation method as it believes that the discounted cash flow valuation
method represents the Trust’s estimate of fair values of income properties based on expectations of changes in rental
rates, occupancy rates, lease renewal rates, leasing costs, expected credit losses and downtime on lease expiries,
among others.
Using the discounted cash flow valuation method, the fair value of income properties is estimated based on
assumptions of the asset’s benefits and liabilities over its life, over an average period of 10 years in addition to its
terminal value. The 10 years of annual net cash flows and the terminal cash flows are projected for each property, and
then a discount rate is applied to each of these cash flows to establish the present value of future cash flows for each
property. Annual net cash flows are estimated as rental revenue, less operating expenses, a vacancy allowance and
other adjustments. The terminal value is estimated based on the application of a terminal capitalization rate to each
property’s stabilized net operating income (“NOI”). The sum of the present value of future cash flows, including its
discounted terminal value, represents the estimated fair value of each property.
The significant areas of estimation uncertainty in determining the fair value of income properties include among other
things the projected cash flows and the discount rate for each property. The projected cash flows for each property are
based on expected inflows and outflows, and are based on the location, type and quality of the property and supported
by the terms of any existing leases, other contracts or external evidence such as current market rents for similar
properties, and adjusted for estimated vacancy rates based on current and expected future market conditions after
expiry of any current leases and expected maintenance costs. The discount rate for each property is based on the
location, size and quality of the property, taking into account market data at the valuation date.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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ii) Properties under development
Properties under development are valued using two primary methods: i) discounted cash flow method, factoring in
future cash inflows and outflows such as construction costs to complete development, leasing costs and other fees, and
Earnout Fees, if any; or ii) land, development and construction costs are recorded at market value, factoring in
development risks such as planning, zoning, timing and market conditions.
Using the discounted cash flow valuation method, the fair value of properties under development is estimated based on
assumptions of the asset’s benefits and liabilities over its life, over an average period of 10 years in addition to its
terminal value. The 10 years of annual net cash flows and the terminal cash flows are projected for each property, and
then a discount rate is applied to each of these cash flows to establish the present value of future cash flows for each
property. Annual net cash flows are estimated as rental revenue, less operating expenses, construction costs, a vacancy
allowance and other adjustments. The terminal value is estimated based on the application of a terminal capitalization
rate to each property’s stabilized NOI. The sum of the present value of future cash flows, including its discounted
terminal value, represents the estimated fair value of each property.
The following table summarizes significant assumptions in Level 3 valuations:
December 31, 2024
Terminal Capitalization Rate
Discount Rate
Valuation Method
Weighted
Average
Range
Weighted
Average
Range
Income properties
Discounted cash flow
6.01 %
4.20% – 7.75%
6.53 %
4.60% – 8.25%
Properties under development
Land, development and construction costs recorded at
market value
N/A
N/A
N/A
N/A
Discounted cash flow
5.88 %
4.20% – 7.40%
6.51 %
4.60% – 7.90%
December 31, 2023
Terminal Capitalization Rate
Discount Rate
Valuation Method
Weighted
Average
Range
Weighted
Average
Range
Income properties
Discounted cash flow
5.98 %
4.20% – 7.70%
6.51 %
4.60% – 8.20%
Properties under development
Land, development and construction costs recorded at
market value
N/A
N/A
N/A
N/A
Discounted cash flow
5.97 %
4.20% – 7.40%
6.57 %
4.60% – 7.90%
The following table summarizes the fair value sensitivity for the portion of the Trust’s investment properties that are
sensitive to changes in discount rates as at December 31, 2024:
Income Properties
Properties Under Development
Discount Rate
Sensitivity
Weighted
Average Overall
Discount Rate
Estimated Fair
Value of
Investment
Properties
Fair Value
Variance
Weighted
Average Overall
Discount Rate
Estimated Fair
Value of
Investment
Properties
Fair Value
Variance
(1.00)%
5.53 %
$10,703,049
$1,813,839
5.51 %
$173,928
$24,900
(0.50)%
6.03 %
$9,709,349
$820,139
6.01 %
$160,228
$11,200
(0.25)%
6.28 %
$9,279,149
$389,939
6.26 %
$154,428
$5,400
—%
6.53 %
$8,889,210
$—
6.51 %
$149,028
$—
0.25%
6.78 %
$8,523,949
$(365,261)
6.76 %
$144,128
$(4,900)
0.50%
7.03 %
$8,191,049
$(698,161)
7.01 %
$139,928
$(9,100)
1.00%
7.53 %
$7,598,149
$(1,291,061)
7.51 %
$131,928
$(17,100)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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b) Acquisitions and Earnouts
Acquisitions and Earnouts completed during the year ended December 31, 2024
The following table summarizes the Acquisitions and Earnouts completed during the year ended December 31, 2024:
Satisfied through
Date of
Acquisition
Type
Area
Purchase
Price
Cash
Issuance
of LP
Units
Debt
Other
Adjustments
Acquisitions
51 Yonge Street, Toronto,
Ontario
February
Property under
development 10,650 sq. ft.
$21,555
$11,536
$—
$10,000
$19
London, Ontario
July
Land parcel
6.1 acres
1,823
816
—
—
1,007
Earnouts
September
Retail
2,232 sq. ft.
1,071
751
320
—
—
Earnouts completed during the year ended December 31, 2023
The
following
table
summarizes
the
Earnouts
completed
during
the
year
ended
December
31,
2023:
Satisfied through
Date of
Acquisition
Type
Area
Purchase
Price
Cash
Issuance
of LP
Units
Debt
Other
Adjustments
Earnouts
Varies
Land parcel /
Retail
12,610 sq. ft.
$8,196
$2,777
$1,471
$—
$3,948
See also Note 4, “Equity accounted investments”, for additional details on acquisitions reflected in equity accounted
investments.
c) Dispositions
Dispositions of investment properties during the year ended December 31, 2024
The following table summarizes the dispositions completed during the year ended December 31, 2024:
Location
Date of
Disposition
Type
Area
Ownership
Interest
Disposition
Proceeds
Bradford, Ontario
January
Land parcel
3.3 acres
100 %
$6,786
Laval, Quebec(1)
April
Land parcel
1.8 acres
100 %
$4,500
Mascouche, Quebec
October
Land parcel
4.7 acres
100 %
$9,893
(1) In April 2024, the Trust contributed its interest in a parcel of land located in Laval, Quebec to the joint venture with the intention to develop and operate self-storage facilities.
Dispositions of investment properties during the year ended December 31, 2023
The following table summarizes the dispositions completed during the year ended December 31, 2023:
Location
Date of
Disposition
Type
Area
Ownership
Interest
Disposition
Proceeds
Whitby, Ontario(1)
January
Land parcel
1.4 acres
100 %
$—
Vaughan, Ontario
February
Land parcel
4.2 acres
67 %
42,300
Chilliwack, British Columbia
February
Land parcel
2.6 acres
100 %
4,800
Quesnel, British Columbia
November
Land parcel
5.3 acres
100 %
1,060
Stoney Creek, Ontario(1)
November
Land parcel
1.3 acres
100 %
1,500
(1) During the year ended December 31, 2023, the Trust contributed its interest in two parcels of land located in Whitby and Stoney Creek, Ontario to two joint ventures, respectively,
with the intention to develop and operate self-storage facilities.
d) Leasehold property interests
At December 31, 2024, 15 (December 31, 2023 – 16) investment properties with a fair value of $960,323 (December 31, 2023
– $976,751) are leasehold property interests accounted for as leases.
i)
Leasehold property interests without bargain purchase options
The Trust previously prepaid its entire lease obligations for the 14 leasehold interests with Penguin (see also Note
20, “Related party transactions”) in the amount of $889,931 (December 31, 2023 – $889,931), including prepaid land
rent of $229,846 (December 31, 2023 – $229,846).
ii)
Leasehold property interest with bargain purchase option
A leasehold interest commenced in 2003 under the terms of a 35-year lease with Penguin (see also Note 20,
“Related party transactions”). The lease requires a $10,000 payment at the end of the lease term in 2038 to
exercise a purchase option, which is considered to be a bargain purchase option. The Trust prepaid its entire lease
obligation for this property of $58,561 (December 31, 2023 – $57,997). As the Trust expects to exercise the
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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purchase option in 2038, the purchase option price has been included in accounts payable in the amount of $2,822
(December 31, 2023 – $2,575), and future lease obligation on the amount of $7,178 (December 31, 2023 – $7,425)
net of imputed interest at 9.18% (see also Note 12, “Accounts and other payables”).
In February 2024, the Trust exercised the purchase option in the amount of $6,000 on a second leasehold interest
which was previously purchased on February 11, 2015, and consequently acquired the ownership of the land.
e) Properties under development
i)
Properties under development not subject to development management agreements
At December 31, 2024, properties under development with a carrying value of $22,766 (December 31, 2023 –
$61,687) are subject to development management agreements.
During the year ended December 31, 2024, the Trust completed the development and leasing of certain properties
under development not subject to development management agreements, for which the fair value of the
investment properties has been reclassified from properties under development to income properties.
For the year ended December 31, 2024, the Trust incurred land and development costs for completed projects of
$81,566 (year ended December 31, 2023 – $59,795).
ii)
Properties under development subject to development management agreements (Earnout agreements)
These properties under development (including certain leasehold property interests) are subject to various
development management agreements with Penguin and Walmart.
In certain events, the developer/vendor may sell a portion of undeveloped land to accommodate the construction
plan that provides the best use of the property, reimbursing the Trust its costs related to such portion, and
provides a profit based on a pre-negotiated formula. Pursuant to the development management agreements, the
developers/vendors assume responsibility for managing the development of the land on behalf of the Trust and are
granted the right for a period of up to 10 years to earn an Earnout Fee (subject to options and extensions in certain
circumstances). On completion and rental of additional space on these properties, the Trust is obligated to pay the
Earnout Fee and any additional development costs not previously incurred by the Trust, at a total price calculated
by a formula using the net operating rents and predetermined negotiated capitalization rates, on the date rent
becomes payable on the additional space (“Gross Cost”). The Earnout Fee is calculated as the Gross Cost less the
associated land and development costs incurred by the Trust.
For certain of these properties under development, Penguin and others have been granted Earnout options that
give them the right, at their option, to invest up to 40% of the Earnout Fee for one of the agreements and up to
30% to 40% of the Gross Cost for the remaining agreements in Trust Units, Class B, D and F Smart LP Units, Class B
and D Smart LP III Units, Class B Smart LP IV Units, Class B and D Smart Oshawa South LP Units, Class B and D
Smart Oshawa Taunton LP Units, Class B Smart Boxgrove LP Units and Class B ONR LP I Units at predetermined
option strike prices subject to a maximum number of Units. On December 9, 2020, the Trust entered into an
Omnibus Agreement with Mitchell Goldhar that provided a right to extend the terms of certain Earnout
agreements for an additional two years. As a result, the Earnout agreements for Earnout options that were
originally set to expire between 2020 and 2025 may be extended up to 2027. See also Note 11, “Other financial
liabilities”.
The following table summarizes the development costs incurred (exclusive of the cost of land previously acquired)
and Earnout Fees paid to vendors relating to the completed retail spaces that have been reclassified to income
properties:
Year Ended December 31
2024
2023
Development costs incurred
$229
$4,523
Earnout Fees paid
998
1,666
$1,227
$6,189
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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4. Equity accounted investments
The Trust has entered into a number of arrangements with other parties for the purpose of jointly developing, owning and
operating investment properties. The following table summarizes the Trust’s ownership interest in each associate and joint
venture investments grouped by their asset class:
As at
December 31, 2024
December 31, 2023
Description of Equity Accounted Investments
Partner(s)
Number of
Investments
Ownership
Interest
Number of
Investments
Ownership
Interest
Investments in Associates:(1)
Penguin-Calloway Vaughan Partnership (“PCVP”)
Penguin
1
50.0 %
1
50.0 %
Residences LP – Transit City
Penguin,
CentreCourt
3
25.0 %
3
25.0 %
Residences (One & Two) LP
Penguin
2 50.0%-66.7%
2 50.0%-66.7%
Investments in Joint Ventures:
Retail investment properties
Fieldgate
1
30.0 %
1
30.0 %
Self-storage facilities
SmartStop
19
50.0 %
16
50.0 %
Residential apartments
Jadco
1
50.0 %
1
50.0 %
Residential apartments
Cogir
1
80.0 %
1
80.0 %
Residential apartments
Greenwin
1
75.0 %
1
75.0 %
Residential apartments
Other
1
50.0 %
2
50.0 %
(1)
The Trust’s investments in associates are partnered with Penguin. See also Note 20, “Related party transactions”.
The following table summarizes key components relating to the Trust’s equity accounted investments:
Year Ended December 31, 2024
Year Ended December 31, 2023
Investment in
Associates
Investment in
Joint Ventures
Total
Investment in
Associates
Investment in
Joint Ventures
Total
Investment – beginning of year
$466,089
$290,830
$756,919
$458,772
$222,227
$680,999
Operating Activities:
Earnings
5,352
15,237
20,589
15,545
59,625
75,170
Distributions – VMC Residences
condo unit closings(1)
(37,886)
—
(37,886)
(653)
—
(653)
Distributions – operating
activities
(4,204)
(3,180)
(7,384)
(3,505)
(2,666)
(6,171)
Financing Activities:
Fair value adjustment on loan
2,833
—
2,833
2,875
—
2,875
Investing Activities:
Cash contribution
7,471
39,309
46,780
11,062
46,643
57,705
Transfer from equity accounted
investments to properties
under development
—
—
—
—
(47,440)
(47,440)
Transfer from equity accounted
investments to debt and other
—
—
—
—
11,267
11,267
Property contribution
—
4,500
4,500
—
1,500
1,500
Development distributions
(3,218)
(33,514)
(36,732)
(18,007)
(326)
(18,333)
Investment – end of year
$436,437
$313,182
$749,619
$466,089
$290,830
$756,919
(1)
For the year ended December 31, 2024, the distributions in the amount of $37,886 were satisfied by a non-cash settlement of the VMC Residences loan payable (for the year ended
December 31, 2023 – the distributions in the amount of $653 were satisfied by a non-cash settlement of the VMC Residences loan payable) (see Note 10(b)(iv)).
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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106
a) Summary of balance sheets
The following table summarizes the balance sheets for investment in associates and joint ventures:
As at
December 31, 2024
December 31, 2023
Equity accounted
investments in:
Associates
Joint
Ventures
Total
Associates
Joint
Ventures
Total
PCVP
VMC
Residences(1)
PCVP
VMC
Residences(1)
Non-current assets
$1,419,166
$—
$1,014,087
$2,433,253
$1,382,727
$—
$881,208
$2,263,935
Current assets
56,078
164,764
17,193
238,035
15,240
291,222
12,643
319,105
Total assets
$1,475,244
$164,764
$1,031,280
$2,671,288
$1,397,967
$291,222
$893,851 $2,583,040
Non-current liabilities
$610,676
$—
$223,576
$834,252
$497,314
$—
$218,482
$715,796
Current liabilities(2)
48,095
107,955
191,722
347,772
103,471
94,898 128,369
326,738
Total liabilities
$658,771
$107,955
$415,298
$1,182,024
$600,785
$94,898
$346,851
$1,042,534
Net assets
$816,473
$56,809
$615,982
$1,489,264
$797,182
$196,324 $547,000
$1,540,506
Trust’s share of net assets
before adjustments
408,236
27,062
313,182
748,480
400,894
64,037 290,830
755,761
Fair value adjustment on loan
716
423
—
1,139
841
317
—
1,158
Trust’s share of net assets
$408,952
$27,485
$313,182
$749,619
$401,735
$64,354
$290,830
$756,919
(1)
VMC Residences LP, Residences III LP, East Block Residences LP, Residences (One) LP, and Residences (Two) LP, collectively referred to as “VMC Residences”, all of which are
involved in residential condo development.
(2)
As at December 31, 2024, the balance includes loan payable to the Trust of $54,843 in respect to its investments in associates (December 31, 2023 – $51,482), see also Note
5(a).
The investments in associates listed above have entered into various development construction contracts with existing
commitments totalling $60,144 (December 31, 2023 – $17,517).
The joint ventures listed above have entered into various development construction contracts with existing commitments
totalling $27,829 (December 31, 2023 – $51,217).
With respect to the development credit facilities relating to PCVP, the obligations are joint and several to each of the PCVP
limited partners; however, by virtue of an indemnity agreement between the PCVP limited partners, the obligations are
effectively several. As of December 31, 2024, the investment in associates had development credit facilities with an
outstanding balance of $458,100 (December 31, 2023 – $391,400), of which the Trust’s share was $229,050 (December 31,
2023 – $195,700). The development credit facilities bearing interest based on the Adjusted Canadian Overnight Repo Rate
Average (“Adjusted CORRA”) plus 1.45%, maturing in June 2027.
As of December 31, 2024, the joint ventures had development credit facilities with an outstanding balance of $130,014
(December 31, 2023 – $155,066), of which the Trust’s share was $65,007 (December 31, 2023 – $92,844). The development
credit facilities bearing interest based on the Adjusted CORRA rate plus 1.35% to 2.70%, maturing between February 2025
and May 2026.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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107
b) Summary of earnings (losses)
The following table summarizes the earnings (losses) for investment in associates and joint ventures:
Year Ended December 31, 2024
Year Ended December 31, 2023
Net Income from equity accounted
investments in:
Associates
Joint
Ventures
Total
Associates
Joint
Ventures
Total
PCVP
VMC
Residences
PCVP
VMC
Residences
Revenue
Rental revenue(1)
$49,753
$94
$43,744
$93,591
$39,072
$—
$34,028
$73,100
Residential sales revenue
—
510
—
510
—
544,462
— 544,462
Operating expense
Rental operating costs
(25,128)
(43)
(16,688)
(41,859)
(21,228)
—
(14,268) (35,496)
Residential cost of sales
—
(749)
—
(749)
— (440,677)
— (440,677)
Revenue net of operating expense
$24,625
$(188)
$27,056
$51,493
$17,844
$103,785
$19,760
$141,389
Fair value adjustment on
investment properties
18,190
—
26,992
45,182 (29,755)
—
120,189
90,434
Interest (expense) income
(28,499)
3,638
(18,366) (43,227)
(10,168)
4,665
(16,855) (22,358)
Earnings (Losses)
$14,316
$3,450
$35,682
$53,448 $(22,079)
$108,450
$123,094
$209,465
Trust’s share of earnings before
supplemental cost and additional
profit sharing
7,158
1,813
16,144
25,115
(11,039)
27,995
60,728
77,684
Additional Trust’s share of
earnings(2)
—
—
—
—
—
3,195
—
3,195
Supplemental cost
(3,619)
—
(907)
(4,526)
(4,606)
—
(1,103)
(5,709)
Trust’s share of earnings (losses)
$3,539
$1,813
$15,237
$20,589
$(15,645)
$31,190
$59,625
$75,170
(1)
Includes office rental revenue from the Trust in the amount of $3,197 for the year ended December 31, 2024 (year ended December 31, 2023 – $2,777).
(2)
Additional profit allocated to the Trust for Transit City closing pursuant to the development agreement and limited partnership agreement.
In accordance with the VMC Supplemental Development Fee Agreement, the Trust invoiced PCVP a net amount of $7,237
related to associated development fees for the year ended December 31, 2024 (year ended December 31, 2023 – $9,212).
In accordance with the Supplemental Development and Construction Fee Agreements, the Trust invoiced certain
investments in joint ventures for a net amount of $1,815 related to associated supplemental development fees for the year
ended December 31, 2024 (year ended December 31, 2023 – $2,206).
Acquisitions completed during the year ended December 31, 2024
The following table summarizes the acquisitions completed in equity accounted investments:
Purchase
Price(1)(2)
Type
Date
Segment
Area
Acquisitions
Montreal (Notre Dame St. W), Quebec
Land parcel
January
Self-storage
1.9 acres
$9,396
Laval E (Boulevard Robert-Bourassa), Quebec
Land parcel
April
Self-storage
1.8 acres
4,541
Victoria, British Columbia
Land Parcel
April
Self-storage
0.9 acres
11,655
(1) The purchase price is shown at 100% ownership.
(2) Purchase price includes acquisition costs.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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108
5.
Mortgages, loans and notes receivable
The following table summarizes mortgages, loans and notes receivable:
As at
Note
December 31, 2024
December 31, 2023
Loans receivable (a)
$222,226
$189,837
Mortgages receivable (b)
20
2
17,548
Notes receivable (c)
20
2,924
2,924
$225,152
$210,309
Current
17,022
129,777
Non-current
208,130
80,532
$225,152
$210,309
a)
The following table presents loans receivable:
Issued to
Committed
Maturity Date
Interest Rate
Note
December 31, 2024
December 31, 2023
Penguin(1)
23,019
March 2026
Variable
20
$13,787
$13,071
Penguin(2)
N/A
December 2029
Interest-free
10(b)(iv),
20
55,382
55,429
Penguin(3)
1,069
August 2030
Variable
20
1
1
Penguin(4)
12,493
—
Variable
20
6,945
7,891
Total loans issued to Penguin
$76,115
$76,392
PCVP(5)
N/A
March 2026
Variable
20
54,843
51,482
Self-storage facilities(6)
114,700
May 2026
Variable
20
81,191
57,333
Total loans issued to equity accounted investments
$136,034
$108,815
Greenwin(7)
10,000
December 2025
10.00 %
10,077
—
Vaughan NW Residence(8)
—
November 2026
Variable
—
4,630
Total loans issued to unrelated parties
$10,077
$4,630
$222,226
$189,837
(1)
The loan security includes a first or second charge on the property, assignments of rents and leases and general security agreements, and is guaranteed by Penguin. In April
2024, the loan term was extended by two years with a variable interest rate based on the Trust's operating line interest rate plus 20 basis points.
(2)
The loan has a principal amount outstanding of $67,475, is non-interest-bearing, and is repayable at the end of 10 years. As at December 31, 2024, the loan balance of $55,382 is
net of a cumulative fair value adjustment totalling $12,093.
(3)
The loan bears interest at: i) the Adjusted CORRA rate plus 220 basis points, up to 60% of the facility limit, and ii) the Adjusted CORRA rate plus 370 basis points, for the
remainder. The loan was repaid during the year ended December 31, 2023.
(4)
The loan bears a variable interest rate based on the Trust’s operating line interest rate plus 10 basis points.
(5)
The loan security includes a first or second charge on properties, assignments of rents and leases and general security agreements, and is guaranteed by Penguin up to its 50%
share of the loan. In April 2024, the loan term was extended by two years with a variable interest rate based on the Trust's operating line interest rate plus 20 basis points.
(6)
The Trust entered into a master credit loan agreement with its partner SmartStop to provide funding for the development of certain self-storage facilities. The master credit
loan agreement bears interest at a variable rate based on the Adjusted CORRA rate plus 270 basis points.
(7)
In December 2024, the Trust entered into a loan agreement with Greenwin secured by two investment properties.
(8)
The Trust entered into a credit agreement with Fieldgate, a co-owned residential townhome development partner, to finance development and construction of the residential
townhomes. The credit agreement bears interest at a variable rate based on the BA rate plus 245 basis points.
Management considers all outstanding loans to be fully collectible.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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109
b)
The Trust is committed to lend up to $116,993 (December 31, 2023 – $150,763) to fund costs associated with both the
original acquisition and development of five properties. The Trust holds a purchase option for these properties, exercisable
upon achieving certain levels of development and leasing. As of December 31, 2024, management expects the Trust to
exercise these purchase options. The Trust also holds a 50% interest in the Toronto (StudioCentre), ON, and Salmon Arm,
BC, properties, with the other 50% owned by Penguin. These loans are secured by Penguin’s interest in the properties.
In February 2024, a committed mortgage receivable of $15,498 with respect to a property located at Caledon (Mayfield),
ON was discharged. The outstanding balance at the time of discharge was $nil.
The mortgages receivable security includes a first or second charge on properties, and assignments of rents and leases. In
addition, the outstanding balance is guaranteed by Penguin. The loans are subject to individual loan guarantee agreements
that provide additional guarantees for all interest and principal advanced on outstanding amounts. The amounts that are
guaranteed decrease on achievement of certain specified value-enhancing events. Management considers all mortgages
receivable to be fully collectible.
c) Notes receivable of $2,924 (December 31, 2023 – $2,924) have been granted to Penguin. As at December 31, 2024, these
secured demand notes bear interest at the rate of 9.00% per annum (December 31, 2023 – 9.00%).
The estimated fair values of mortgages, loans and notes receivable are based on their respective current market rates,
bearing similar terms and risks. This information is disclosed in Note 13, “Fair value measurement”.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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6. Other financial assets
The following table summarizes the components of other financial assets:
As at
December 31, 2024
December 31, 2023
Total return swap (“TRS”) receivable (a)
$81,831
$127,820
Interest rate swap agreements
12,720
24,342
Currency swap agreements
423
—
$94,974
$152,162
a)
TRS receivable
The total return swap is a contractual agreement to exchange payments based on a specified notional amount and the
underlying financial assets for a specific period. The total return to the Trust includes the total return generated by the
underlying notional Trust Units, plus any appreciation, if there is any, in the market value of the notional Trust Units, less the
amount equal to any decline, if there is any, in the market value of the underlying notional Trust Units. The TRS agreement
requires the exchange of net contractual payments periodically without the exchange of the notional principal amounts on
which the payments are based. Changes in market value are recorded in net income and comprehensive income. The Trust
has funded the total return swap agreement by a loan from the counterparty which is measured at amortized cost.
The total return swap receivable reflects the market value of the swap agreement, and is determined by reference to the
value of the underlying notional Trust Units at each reporting date. The gain (loss) will be realized when the total return
swap agreement matures or is unwound.
The following table summarizes the activities in the total return swap receivable:
Year Ended
Year Ended
December 31, 2024
December 31, 2023
Balance – beginning of year
$127,820
$137,526
Distributions received
(8,673)
(9,501)
Settlement(1)
(47,237)
—
Fair value adjustments
9,921
(205)
Balance – end of year
$81,831
$127,820
(1) The TRS receivable was settled on a non-cash basis with the corresponding TRS debt as referenced in Note 10(b)(iii).
7. Intangible assets
The following table summarizes the components of intangible assets:
As at
December 31, 2024
December 31, 2023
Cost
Accumulated
Amortization
Net
Cost
Accumulated
Amortization
Net
Intangible assets with finite lives:
Key joint venture relationships
$36,944
$11,815
$25,129
$36,944
$10,584
$26,360
Trademarks
2,995
958
2,037
2,995
858
2,137
Total intangible assets with finite lives
$39,939
$12,773
$27,166
$39,939
$11,442
$28,497
Goodwill
13,979
—
13,979
13,979
—
13,979
Total intangible assets
$53,918
$12,773
$41,145
$53,918
$11,442
$42,476
The total amortization expense recognized for the year ended December 31, 2024 amounted to $1,331 (year ended December 31,
2023 – $1,331).
8. Residential development inventory
Residential development inventory consists of development lands, co-owned with Fieldgate, located at Vaughan NW, Ontario,
for the purpose of developing and selling residential townhome units.
The following table summarizes the activity in residential development inventory:
As at
December 31, 2024
December 31, 2023
Balance – beginning of year
$51,719
$40,373
Development costs
21,381
9,824
Capitalized interest
1,483
1,522
Cost of sales
(42,845)
—
Balance – end of year
$31,738
$51,719
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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9. Amounts receivable and other, prepaid expenses, deposits and deferred financing costs
The following table presents the components of amounts receivable and other, prepaid expenses, deposits and financing costs:
As at
December 31, 2024
December 31, 2023
Amounts receivable and other
Tenant receivables
$26,751
$26,794
Unbilled other tenant receivables
8,164
9,526
Receivables from related party – excluding equity accounted investments
15,441
12,923
Receivables from related party – equity accounted investments
10,034
15,052
Other non-tenant receivables
3,069
2,410
Other(1)
19,210
15,888
$82,669
$82,593
Allowance for expected credit loss (“ECL”)
(6,234)
(8,983)
Amounts receivable and other, net of allowance for ECL
$76,435
$73,610
Non-current portion of amounts receivable
(12,994)
—
$63,441
$73,610
Prepaid expenses, deposits and deferred financing costs(2)
$12,696
$15,048
(1)
The amount includes a related party amount of $11,669 (December 31, 2023 – $8,724).
(2)
Includes prepaid realty tax of $1,105 (December 31, 2023 – $1,263).
The non-current portion of amounts receivable represents a related party receivable from Penguin of $12,994 (December 31,
2023 – $nil), repayment of which is expected to be made by way of certain development fees payable to Penguin. The balance is
also prepayable by Penguin at any time. The amount is related to services provided to Penguin by the Trust in accordance with
the development service agreement. The receivable bears a variable interest rate based on the interest rate on the Trust’s
operating credit facility plus 20 basis points. See also Note 20, “Related party transactions”.
Allowance for ECL
The Trust records the ECL to comply with IFRS 9’s simplified approach for amounts receivable where its allowance for ECL is
measured at initial recognition and throughout the life of the amounts receivable at a total equal to lifetime ECL.
The following table summarizes the reconciliation of changes in the allowance for ECL on amounts receivable:
Year Ended December 31
2024
2023
Balance – beginning of year
$8,983
$8,771
Net allowance
(2,749)
212
Balance – end of year
$6,234
$8,983
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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10. Debt
The following table presents debt balances:
As at
December 31, 2024
December 31, 2023
Secured debt (a)
$716,495
$807,602
Unsecured debt (b)
4,286,735
4,041,983
Revolving operating facilities (c)
43,049
149,937
$5,046,279
$4,999,522
Current
986,915
605,478
Non-current
4,059,364
4,394,044
$5,046,279
$4,999,522
a)
Secured debt
As at December 31, 2024, the secured debt balance of $716,495 (December 31, 2023 – $807,602) bears a weighted average
interest rate of 3.97% (December 31, 2023 – 3.98%), and comprises $711,045 (December 31, 2023 – $784,335) at fixed
interest rate, and $5,450 (December 31, 2023 – $23,267) at variable interest rates of Adjusted CORRA rate plus 1.45%. The
secured debt, maturing between 2025 and 2034, is secured by first or second registered mortgages over specific income
properties and properties under development and first general assignments of leases, insurance and registered chattel
mortgages.
The following table presents principal repayment requirements for secured debt:
Instalment
Payments
Lump Sum
Payments
at Maturity
Total
2025
$23,419
$409,371
$432,790
2026
13,037
102,331 (1)
115,368
2027
8,167
—
8,167
2028
8,146
15,753
23,899
2029
8,187
8,243
16,430
Thereafter
13,059
107,807
120,866
$74,015
$643,505
$717,520
Unamortized acquisition date fair value adjustments
156
Unamortized financing costs
(1,181)
$716,495
(1) Includes construction loans in the amount of $5,450, which bear interest at Adjusted CORRA rate plus 145 basis points.
b)
Unsecured debt
The following table summarizes the components of unsecured debt:
As at
December 31, 2024
December 31, 2023
Unsecured debentures i)
$3,003,193
$2,752,816
Credit facilities ii)
1,073,524
995,246
TRS debt iii)
95,995
143,232
Other unsecured debt iv)
114,023
150,689
$4,286,735
$4,041,983
i)
Unsecured debentures
As at December 31, 2024, unsecured debentures totalled $3,003,193 (December 31, 2023 – $2,752,816). Unsecured
debentures mature at various dates between 2025 and 2030, with interest rates ranging from 1.74% to 5.35%, and a
weighted average interest rate of 3.57% as at December 31, 2024 (December 31, 2023 – 3.35%).
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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The following table summarizes the components of unsecured debentures:
Series
Maturity Date
Annual
Interest Rate
Interest Payment Dates
December 31, 2024
December 31, 2023
Series O(2)
August 28, 2024
2.987 %
February 28 and August 28
$—
$100,000
Series N
February 6, 2025
3.556 %
February 6 and August 6
160,000
160,000
Series X
December 16, 2025
1.740 %
June 16 and December 16
350,000
350,000
Series P
August 28, 2026
3.444 %
February 28 and August 28
250,000
250,000
Series V
June 11, 2027
3.192 %
June 11 and December 11
300,000
300,000
Series S
December 21, 2027
3.834 %
June 21 and December 21
250,000
250,000
Series Z
May 29, 2028
5.354 %
May 29 and November 29
300,000
300,000
Series Y
December 18, 2028
2.307 %
June 18 and December 18
300,000
300,000
Series U
December 20, 2029
3.526 %
June 20 and December 20
450,000
450,000
Series AA
August 1, 2030
5.162 %
February 1 and August 1
350,000
—
Series W
December 11, 2030
3.648 %
June 11 and December 11
300,000
300,000
3.568 %(1)
$3,010,000
$2,760,000
Unamortized financing costs
(6,807)
(7,184)
$3,003,193
$2,752,816
(1)
Represents the weighted average annual interest rate and excludes unamortized financing costs.
(2)
The Series O debentures were repaid in full on the maturity date.
Unsecured debenture activities for the year ended December 31, 2024
In August 2024, the Trust issued $350,000 of 5.162% Series AA senior unsecured debentures (net proceeds of the
issuance in aggregate after issuance costs – $348,758). The Series AA debentures will mature on August 1, 2030. The
debentures have semi-annual payments due on February 1 and August 1 of each year, commencing on February 1, 2025.
Concurrently, the Trust repaid the $100,000 aggregate principal of Series O senior unsecured debentures in full upon
their maturity.
Credit rating of unsecured debentures
Dominion Bond Rating Services (“DBRS”) provides credit ratings of debt securities for commercial issuers that indicate
the risk associated with a borrower’s capabilities to fulfil its obligations. An investment-grade rating must exceed “BB”,
with the highest rating being “AAA”. In December 2024, DBRS kept the Trust’s credit rating at BBB and maintained a
stable trend.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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ii) Credit facilities
The following table summarizes the activity for unsecured credit facilities:
Drawn Amount
(Issued In)
Maturity Date
Annual
Interest Rate
Facility
Amount
December 31, 2024
December 31, 2023
Non-revolving:
August 2018(1)
August 31, 2026
2.98 %
$80,000
$80,000
$80,000
March 2019(1)
July 31, 2026
3.52 %
150,000
150,000
150,000
May 2019(1)
June 24, 2026
3.15 %
170,000
170,000
170,000
December 2022(1)
December 1, 2027
4.37 %
100,000
100,000
100,000
December 2022(1)
December 1, 2027
4.88 %
100,000
100,000
100,000
December 2022(2)
December 20, 2027
SOFR + 1.70%
150,000
150,000
98,653
January 2022(1)(4)
January 19, 2027
4.48 %
300,000
300,000
300,000
Revolving:
March 2024(3)
March 8, 2026
Adjusted CORRA + 1.45%
40,000
26,400
—
$1,076,400
$998,653
Less:
Unamortized financing costs, debt modification adjustments, and others
(2,876)
(3,407)
$1,073,524
$995,246
(1)
The Trust entered into interest rate swap agreements to convert the variable interest rate into a weighted average fixed interest rate of 3.96% per annum. The weighted
average term to maturity of the interest rate swaps is 2.01 years. Hedge accounting has not been applied to the interest rate swap agreements.
(2)
The Trust entered into cross currency swaps to exchange the U.S. dollar borrowings into Canadian dollar borrowings.
(3)
On March 8, 2024, the Trust amended its $40,000 secured variable rate credit facility to an unsecured revolving facility and extended the maturity by two years to March
2026. As at December 31, 2024, the drawn amount was $26,400 (December 31, 2023 – $nil). In connection with the unsecured revolving facility, as at December 31, 2024,
the Trust had a $23,333 letter of credit facility.
(4)
In September 2024, the Trust refinanced the loan and entered into an interest rate swap agreement to convert the variable interest rate into fixed interest rate of 4.48%.
iii) TRS debt
The Trust borrowed TRS debt concurrent with entering the TRS agreement in February 2021. As at December 31, 2024,
TRS unsecured debt of $95,995 (December 31, 2023 – $143,232) carries variable interest of Adjusted CORRA plus 145
basis points. The interest on this TRS debt includes floating amounts that are payable at each May, August, November
and February. In September 2024, the Trust settled $47,237 of TRS debt and the corresponding TRS receivable (see
Note 6, “Other financial assets”).
iv) Other unsecured debt
Other unsecured debt net of fair value adjustments totalling $114,023 (December 31, 2023 – $150,689) pertains to loans
received from equity accounted investments in connection with contribution agreements relating to joint ventures. The
loans are non-interest-bearing with repayment terms based on the distributions that are to be paid pursuant to the
limited partnership agreements. The balances of the loans are expected to be paid at the end of their respective terms.
The following table summarizes components of the Trust’s other unsecured debt:
As at
December 31, 2024
December 31, 2023
PCVP (5.00% discount rate)(1)
$56,726
$57,112
PCVP (5.75% discount rate)(2)
55,382
55,429
Self-storage LP
1,915
262
VMC Residences(3)
—
37,886
$114,023
$150,689
(1)
In connection with the purchase of 700 Applewood in December 2019, the loan has a principal amount outstanding of $67,475 (December 31, 2023 – $70,692), is non-
interest-bearing, and is repayable at the end of 10 years. As at December 31, 2024, the loan balance of $56,726 is net of the unamortized fair value adjustment totalling
$10,749 (December 31, 2023 – the loan balance of $57,112 is net of a fair value adjustment totalling $13,580).
(2)
In connection with the purchase of 700 Applewood in March 2020, the Trust assumed a loan payable to PCVP from Penguin. The loan has a principal amount outstanding
of $67,475 (December 31, 2023 – $70,692), is non-interest-bearing, and is repayable at the end of 10 years. As at December 31, 2024, the loan balance of $55,382 is net of
the unamortized fair value adjustment totalling $12,093 (December 31, 2023 – the loan balance of $55,429 is net of a fair value adjustment totalling $15,263). See also Note
5(a) reflecting offsetting loan receivable amount.
(3)
In connection with the Transit City closing, $37,886 was settled during the year ended December 31, 2024 (year ended December 31, 2023 – $37,886 was received and
$653 was settled). See Note 4, “Equity accounted investments.”
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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c)
Revolving operating facilities
As at December 31, 2024, the Trust had two revolving operating facilities, aggregating to $850,000 (December 31, 2023 –
$650,000).
i) $100,000 revolving senior unsecured term facility
In January 2024, the Trust entered into a $100,000 revolving senior unsecured term facility amendment agreement,
under which the Trust has the ability to draw funds based on bank prime rates and Adjusted CORRA rate for
Canadian dollar-denominated borrowings, and SOFR rates or U.S. prime rates for U.S. dollar-denominated
borrowings. Concurrently with the U.S. dollar draws, the Trust enters into cross currency swaps to exchange its U.S.
dollar borrowings into Canadian dollar borrowings.
ii) $750,000 unsecured revolving operating facility
In June 2024, the Trust renewed and amended its $500,000 unsecured revolving operating facility. The amendment
increased the facility amount from $500,000 to $750,000, extended the maturity of the facility from March 2028 to
June 2029, and updated the variable interest rate to Adjusted CORRA plus 145 basis points. Additionally, the Trust
has an accordion feature of $250,000 whereby the Trust has an option to increase its facility amount with the
lenders to sustain future operations as required.
The following table summarizes components of the Trust’s revolving operating facilities:
Annual Interest Rate
Facility
Amount
Undrawn
Facilities
Outstanding
Letters of
Credit
Drawn Amount
Benchmark
Rate
Spread
December 31, 2024
December 31, 2023
Revolving facility maturing
December 2025(1)(2)
SOFR
1.55 %
$100,000
$56,951
$—
$43,049
$139,937
Revolving facility maturing
June 2029
Adjusted
CORRA
1.45 %
750,000
738,319
11,681
—
10,000
Prime Rate
0.45 %
$795,270
$11,681
$43,049
$149,937
(1)
The Trust has drawn in US$29,930 which was translated to $43,049 as at December 31, 2024 (December 31, 2023 – drawn in US$105,700 which was translated to $139,937).
(2)
The Trust entered into cross currency swaps to exchange the U.S. dollar borrowings into Canadian dollar borrowings.
d)
Interest expense
The following table summarizes interest expense:
Year Ended December 31
2024
2023
Interest at stated rates
$197,049
$188,225
Amortization of acquisition date fair value adjustments on assumed debt
(113)
(285)
Amortization of deferred financing costs
4,015
3,750
Distributions on Units classified as liabilities, vested deferred units, and vested EIP
19,218
18,017
$220,169
$209,707
Capitalized to properties under development
(35,587)
(44,444)
Capitalized to residential development inventory
(1,483)
(1,522)
$183,099
$163,741
The following table presents a reconciliation between the interest expense and the cash interest paid:
Year Ended December 31
2024
2023
Interest expense
$183,099
$163,741
Amortization of acquisition date fair value adjustments on assumed debt
113
285
Amortization of deferred financing costs
(4,015)
(3,750)
Distributions on Units classified as liabilities, vested deferred units, and vested EIP, net
of amounts capitalized to properties under development
(19,218)
(8,478)
Change in accrued interest payable
(7,027)
(599)
Cash interest paid
$152,952
$151,199
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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For the year ended December 31, 2024, total interest paid was $190,022, (for the year ended December 31, 2023 – $197,165),
which included cash interest paid of $152,952 (for the year ended December 31, 2023 – $151,199), and interest capitalized to
both properties under development and residential development inventory of $37,070 (for the year ended December 31,
2023 – $45,966).
e)
Liquidity
The Trust’s liquidity position is monitored by management on a regular basis. The table below provides the contractual
maturities of the Trust’s material financial obligations, including debentures, mortgage receivable advances and
development commitments:
Total
2025
2026
2027
2028
2029
Thereafter
Secured debt
$717,520
$432,790
$115,368
$8,167
$23,899
$16,430
$120,866
Unsecured debt
4,225,199
511,915
701,004
1,200,172
600,000
562,108
650,000
Revolving operating facilities
43,049
43,049
—
—
—
—
—
Interest obligations(1)
467,109
122,192
103,594
88,783
65,664
49,695
37,181
Accounts payable
258,993
258,993
—
—
—
—
—
Other payable
33,435
17,783
1,884
1,884
1,884
—
10,000
$5,745,305
$1,386,722
$921,850 $1,299,006
$691,447
$628,233
$818,047
Mortgage receivable advances
(repayments)(2)
(2)
—
—
—
(2)
—
—
Development obligations (commitments)
49,589
49,589
—
—
—
—
—
Total
$5,794,892
$1,436,311
$921,850 $1,299,006
$691,445
$628,233
$818,047
(1)
Interest obligations represent expected interest payments on secured debt, unsecured debt, and revolving operating facilities under the assumption that the balances are repaid
at maturity, and do not represent a separate contractual obligation.
(2)
Mortgages receivable of $2 at December 31, 2024 mature over a period extending to 2028 if the Trust does not exercise its option to acquire the investment properties. Refer to
Note 5, “Mortgages, loans and notes receivable”, for timing of principal repayments.
11. Other financial liabilities
The following table summarizes the components of other financial liabilities:
As at
December 31, 2024
December 31, 2023
Units classified as liabilities (a)
$191,665
$196,571
Deferred unit plan (c)
63,550
53,650
Equity incentive plan (“EIP”) (d)
29,010
22,327
Currency swap agreement(1)
—
2,835
Interest rate swap agreements
2,920
—
$287,145
$275,383
Current(2)
274,526
258,069
Non-current
12,619
17,314
$287,145
$275,383
(1)
The notional amounts to which the cross currency swap agreements apply are recorded in the credit facilities and revolving operating facilities balances as reflected in Note 10(b)(ii)
and Note 10(c).
(2)
Includes units classified as liabilities of $191,665 (December 31, 2023 – $196,571), vested deferred units of $57,107 (December 31, 2023 – $47,791), vested and earned EIP units expected
to vest within 12 months of $25,754 (December 31, 2023 – $13,707) as a result of the amendments to IAS 1 adopted by the Trust.
a)
Units classified as liabilities
The following table represents the number and carrying value of Units classified as liabilities that are issued and
outstanding. The fair value measurement of the Units classified as liabilities is described in Note 13, “Fair value
measurement”.
Number of Units Issued
and Outstanding
Carrying Value
Balance – January 1, 2024
7,897,571
$196,571
Conversion of LP exchangeable units
(61,709)
(1,357)
Change in carrying value
N/A
(3,549)
Balance – December 31, 2024
7,835,862
$191,665
Balance – January 1, 2023
7,897,571
$211,497
Change in carrying value
N/A
(14,926)
Balance – December 31, 2023
7,897,571
$196,571
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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b)
Earnout options
As part of the consideration paid for certain investment property acquisitions, the Trust has granted options in connection
with the development management agreements (see also Note 3(e)).
The following table summarizes the number of Earnout options exercised and proceeds received:
For the year ended December 31
2024
2023
Options
Strike Price
Options
Exercised
Amounts from
Options
Exercised
Options
Exercised
Amounts from
Options
Exercised
Options to acquire Class B Smart LP III Units(1)
Market price
16,651
$428
62,121
$1,471
16,651
$428
62,121
$1,471
(1)
Each option is represented by a corresponding Class C Smart LP III Unit. For the year ended December 31, 2024, 12,458 Earnout options on the amount of $320 were converted
into Class B Smart LP III Units, and 4,193 Earnout options on the amount of $108, were redeemed into cash.
c)
DUP
The following table summarizes the number of outstanding deferred units:
Year Ended December 31
2024
2023
Balance – beginning of year
2,234,187
1,888,509
Granted
342,159
269,199
Reinvested units from distributions
205,596
163,752
Redeemed for cash
(48,359)
(75,973)
Redeemed for units
(1,227)
—
Forfeited
(11,007)
(11,300)
Balance – end of year
2,721,349
2,234,187
As at December 31, 2024, total outstanding deferred units included 2,334,704 vested units (December 31, 2023 – 1,920,086).
The following table summarizes the change in the carrying value of the deferred unit plan:
Year Ended December 31
2024
2023
Carrying value – beginning of year
$53,650
$48,402
Deferred units granted
4,211
3,606
Reinvested distributions on vested deferred units
4,118
3,411
Compensation expense – reinvested distributions and amortization
3,925
3,745
Redeemed for cash
(1,174)
(1,909)
Redeemed for units
(28)
—
Fair value adjustment
(1,152)
(3,605)
Carrying value – end of year
$63,550
$53,650
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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d)
EIP
The Trust granted performance units in connection with the EIP, subject to the achievement of Unit price thresholds. The
performance period for the EIP is specified in the participants’ award notices. Distributions on performance units will
accumulate on the performance units that have been granted. Performance units, including distributions on performance
units, vest for the lesser of three years after they are earned or on the end of the applicable Performance Period. Upon
vesting, performance units will be exchanged for Trust Units or paid out in cash at the option of the holders.
The following summarizes the outstanding number of performance units associated with the EIP:
Year Ended December 31
2024
2023
Balance – beginning of year(1) (2)
1,562,207
1,370,540
Granted
—
134,000
Reinvested units from distributions
124,331
109,238
Forfeited
—
(51,571)
Balance – end of year
1,686,538
1,562,207
(1)
The beginning balance of 2024 and 2023 includes performance units that were granted to Mitchell Goldhar and eligible associates, as well as performance units that were
reinvested from distributions, and certain performance units that were forfeited.
(2)
Under the EIP granted to Mitchell Goldhar in 2021 totalling 900,000 Units, the $26.00 Unit price threshold was achieved on April 5, 2021, and the $28.00 Unit price threshold
was achieved on May 18, 2021, and under the EIP granted to Mitchell Goldhar and other eligible associates in 2021, the $30.00 Unit price threshold was achieved on September
22, 2021, and the $32.00 Unit price threshold was achieved on April 5, 2022. The performance units for $26.00, $28.00, and $30 Unit price thresholds have been vested on April
5, 2024, May 18, 2024, September 22, 2024, the remaining tranche will vest on April 5, 2025.
As at December 31, 2024, total outstanding performance units included 669,757 vested units (December 31, 2023 – nil).
The following table summarizes the change in the carrying value of the EIP:
Year Ended December 31
Carrying Value
2024
2023
Balance – beginning of year
$22,327
$16,204
Compensation expense – reinvested distributions and amortization
6,373
8,080
Reinvested distributions on vested EIPs
563
—
Fair value adjustment
(253)
(1,957)
Balance – end of year
$29,010
$22,327
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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12. Accounts and other payables
The following table presents accounts payable and the current portion of other payables that are classified as current liabilities:
As at
December 31, 2024
December 31, 2023
Accounts payable(1)
$99,601
$95,357
Tenant prepaid rent, deposits, and other payables
90,652
92,942
Residential sales deposits
800
11,853
Accrued interest payable
21,719
14,692
Distributions payable
26,579
26,577
Realty taxes payable
1,753
2,718
Current portion of other payables
19,422
9,347
$260,526
$253,486
(1)
Includes accounts payable to Penguin in the amount of $4,252 as at December 31, 2024 (December 31, 2023 – $3,723). See also Note 20, “Related party transactions”.
The following table presents other payables that are classified as non-current liabilities:
As at
December 31, 2024
December 31, 2023
Future land development obligations with Penguin
$17,631
$18,075
Lease liability – investment properties(1)
2,822
8,575
Lease liability – other
7,127
424
Total other payables
$27,580
$27,074
Less: Current portion of other payables
(19,422)
(9,347)
Total non-current portion of other payables
$8,158
$17,727
(1)
A leasehold property with bargain purchase option is accounted for as lease.
Future land development obligations
The future land development obligations represent payments required to be made to Penguin (see also Note 20, “Related party
transactions”) for certain undeveloped lands acquired from 2006 to 2015, either on completion and rental of additional space on
the undeveloped lands or, if no additional space is completed on the undeveloped lands, at the expiry of the development
management agreement period ending in 2025, which may be extended up to 2027. The accrued future land development
obligations are measured at their amortized values using imputed interest rates ranging from 4.50% to 5.50%. For the year
ended December 31, 2024, imputed interest of $462 (for the year ended December 31, 2023 – $442), was capitalized to
properties under development.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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13. Fair value measurement
The fair value of financial instruments is the amount for which an asset could be exchanged or a liability settled between
knowledgeable, willing parties in an arm’s-length transaction based on the current market for assets and liabilities with the same
risks, principal and remaining maturity.
Assets and liabilities carried at amortized cost
The fair values of the Trust’s accounts receivable and other, cash and cash equivalents and accounts and other payables
approximate their carrying amounts due to the relatively short periods to maturity of these financial instruments.
The fair values of certain mortgage receivables, secured debt and unsecured debt have been determined by discounting the
cash flows of these financial obligations using market rates of debt of similar terms and credit risks.
Fair value of assets and liabilities
Assets and liabilities measured at fair value in the consolidated balance sheets, or disclosed in the notes to the financial
statements, are categorized using fair value hierarchy that reflects the significance of the inputs used in determining the fair
values as follows:
The use of quoted market prices for identical assets or liabilities (Level 1), internal models using observable market information
as inputs (Level 2) and internal models without observable market information as inputs (Level 3).
Fair Value
December 31, 2024
Carrying value
Level 1
Level 2
Level 3
Assets measured at fair value:
Investment properties
$10,659,783
$—
$—
$10,659,783
TRS receivable
81,831
—
81,831
—
Interest rate swap agreements
12,720
—
12,720
—
Currency swap agreement
423
—
423
—
Assets measured at amortized cost:
Mortgages, loans and notes receivable
$225,152
$—
$225,152
$—
Liabilities measured at fair value:
Units classified as liabilities
$191,665
$—
$191,665
$—
DUP
63,550
—
63,550
—
EIP
29,010
—
29,010
—
Interest rate swap agreement
2,920
—
2,920
—
Financial liabilities measured at amortized cost:
Secured debt
$716,495
$—
$726,144
$—
Unsecured debt
4,286,735
— 4,251,956
—
Revolving operating facilities
43,049
—
43,049
—
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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Fair Value
December 31, 2023
Carrying value
Level 1
Level 2
Level 3
Assets measured at fair value:
Investment properties
$10,564,269
$—
$—
$10,564,269
TRS receivable
127,820
—
127,820
—
Interest rate swap agreements
24,342
—
24,342
—
Assets measured at amortized cost:
Mortgages, loans and notes receivable
$210,309
$—
$208,296
$—
Liabilities measured at fair value:
Units classified as liabilities
$196,571
$—
$196,571
$—
DUP
53,650
—
53,650
—
EIP
22,327
—
22,327
—
Currency swap agreement
2,835
—
2,835
—
Financial liabilities measured at amortized cost:
Secured debt
$807,602
$—
$808,639
$—
Unsecured debt
4,041,983
— 3,877,650
—
Revolving operating facilities
149,937
—
149,937
—
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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14. Unit equity
The following table presents the number of Units issued and outstanding and the related carrying value of Unit equity. The
Limited Partnership Units are classified as non-controlling interests in the consolidated balance sheets and the consolidated
statements of equity.
Balance – December 31, 2024
144,687,634 25,677,579 170,365,213
$3,091,489
$645,014
$3,736,503
Number of Units Issued and Outstanding
Carrying Value
Note
Trust Units
Smart LP
Units
Total Units
Trust Units
Smart LP
Units
Total
Balance – January 1, 2023
144,625,322 25,610,960 170,236,282
$3,090,118
$643,223
$3,733,341
Options exercised
3(e), 11(b)
—
54,295
54,295
—
1,471
1,471
Balance – December 31, 2023
144,625,322 25,665,255 170,290,577
$3,090,118
$644,694
$3,734,812
Balance – January 1, 2024
144,625,322 25,665,255 170,290,577
$3,090,118
$644,694
$3,734,812
Units issued on exercise of deferred
units
603
—
603
14
—
14
Options exercised
3(e), 11(b)
—
12,324
12,324
—
320
320
Conversion of LP exchangeable
units
61,709
—
61,709
1,357
—
1,357
The following tables present the number and carrying values of LP Class B Units issued and outstanding:
Number of Units Issued and
Outstanding
Carrying Value
LP Class B Unit Type
Balance –
January 1,
2024
Options
Exercised
(Note 11(b))
Balance –
December
31, 2024
Balance –
January 1,
2024
Value From
Options
Exercised
(Note 11(b))
Balance –
December
31, 2024
Smart Limited Partnership
16,424,430
— 16,424,430
$392,327
$—
$392,327
Smart Limited Partnership II
756,525
—
756,525
17,680
—
17,680
Smart Limited Partnership III
4,117,096
12,324
4,129,420
110,275
320
110,595
Smart Limited Partnership IV
3,112,565
—
3,112,565
89,429
—
89,429
Smart Oshawa South Limited Partnership
710,416
—
710,416
20,441
—
20,441
Smart Oshawa Taunton Limited Partnership
374,223
—
374,223
11,033
—
11,033
Smart Boxgrove Limited Partnership
170,000
—
170,000
3,509
—
3,509
25,665,255
12,324 25,677,579
$644,694
$320
$645,014
Number of Units Issued and
Outstanding
Carrying Value
LP Class B Unit Type
Balance –
January 1,
2023
Options
Exercised
(Note 11(b))
Balance –
December
31, 2023
Balance –
January 1,
2023
Value From
Options
Exercised
(Note 11(b))
Balance –
December
31, 2023
Smart Limited Partnership
16,424,430
— 16,424,430
$392,327
$—
$392,327
Smart Limited Partnership II
756,525
—
756,525
17,680
—
17,680
Smart Limited Partnership III
4,062,801
54,295
4,117,096
108,804
1,471
110,275
Smart Limited Partnership IV
3,112,565
—
3,112,565
89,429
—
89,429
Smart Oshawa South Limited Partnership
710,416
—
710,416
20,441
—
20,441
Smart Oshawa Taunton Limited Partnership
374,223
—
374,223
11,033
—
11,033
Smart Boxgrove Limited Partnership
170,000
—
170,000
3,509
—
3,509
25,610,960
54,295
25,665,255
$643,223
$1,471
$644,694
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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Authorized Units
Trust Units (authorized – unlimited)
Each voting Trust Unit represents an equal undivided interest in the Trust. All Trust Units outstanding from time to time are
entitled to participate pro rata in any distributions by the Trust and, in the event of termination or windup of the Trust, in the net
assets of the Trust. All Trust Units rank among themselves equally and ratably without discrimination, preference or priority.
Unitholders are entitled to require the Trust to redeem all or any part of their Trust Units at prices determined and payable in
accordance with the conditions provided for in the Declaration of Trust. A maximum amount of $50 may be redeemed in total in
any one month unless otherwise waived by the Board of Trustees.
In accordance with the Declaration of Trust, distributions to Unitholders are declared at the discretion of the Trustees. The Trust
endeavours to declare distributions in each taxation year in such an amount as is necessary to ensure that the Trust will not be
subject to tax on its net income and net capital gains under Part I of the Income Tax Act.
The Trust is authorized to issue an unlimited number of Special Voting Units that will be used to provide voting rights to holders
of securities exchangeable, including all series of Class B Smart LP Units, Class D Smart LP Units, Class B Smart LP II Units, Class
B Smart LP III Units, Class B Smart LP IV Units, Class B Smart Oshawa South LP Units, Class D Smart Oshawa South LP Units,
Class B Smart Oshawa Taunton Units, Class D Oshawa Taunton Units, Class B Smart Boxgrove LP Units, Class B ONR LP Units
and Class B ONR LP I Units, into Trust Units. Special Voting Units are not entitled to any interest or share in the distributions or
net assets of the Trust. Each Special Voting Unit entitles the holder to the number of votes at any meeting of Unitholders of the
Trust that is equal to the number of Trust Units into which the exchangeable security is exchangeable or convertible. Special
Voting Units are cancelled on the issuance of Trust Units on exercise, conversion or cancellation of the corresponding
exchangeable securities.
As at December 31, 2024, there were 33,504,733 (December 31, 2023 – 33,554,118) Special Voting Units outstanding, which are
associated with those LP Units that have voting rights. There is no value assigned to the Special Voting Units. These Special
Voting Units are not entitled to any interest or share in the distributions or net assets of the Trust; nor are they convertible into
any Trust securities.
Pursuant to the Voting Top-Up Right agreement made in December 2020 between the Trust and Penguin, which was approved
by Unitholders, the following amendments were made: i) extension of the Voting Top-Up Right for five years, ending December
31, 2025, ii) extension of the designation of Units as Variable Voting Units until December 31, 2025, and iii) an increase to the
alternative ownership threshold from 20,000,000 Units to 22,800,000 Units, including exchangeable LP Units. The total number
of Special Voting Units is adjusted for each annual meeting of the Unitholders based on changes in Penguin’s ownership interest
(see also Note 20, “Related party transactions”).
15. Unit distributions
Pursuant to the Declaration of Trust, the Trust endeavours to distribute annually such amount as is necessary to ensure the Trust
will not be subject to tax on its net income under Part I of the Income Tax Act. The following table presents Unit distributions
declared:
Year Ended December 31
Unit Type Subject to Distributions
2024
2023
Trust Units
$267,630
$267,563
Limited Partnership Units
47,489
47,470
Other non-controlling interest
365
338
Distributions on Units classified as equity
$315,484
$315,371
Distributions on Units classified as liabilities
14,540
14,606
Total Unit distributions
$330,024
$329,977
On January 17, 2025, the Trust declared a distribution for the month of January 2025 of $0.15417 per Unit, representing $1.85 per
Unit on an annualized basis, to Unitholders of record on January 31, 2025.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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16. Rentals from investment properties and other
The following table presents rentals from investment properties and other:
Year Ended December 31
2024
2023
Gross base rent
$554,543
$531,221
Less: Amortization of tenant incentives
(7,665)
(7,710)
Net base rent
$546,878
$523,511
Property tax and insurance recoveries
180,372
174,617
Property operating cost recoveries
102,882
100,078
$283,254
$274,695
Miscellaneous revenue
17,208
18,744
Rentals from investment properties
$847,340
$816,950
Residential closing revenue
58,268
—
Service and other revenues
12,751
17,631
Rentals from investment properties and other
$918,359
$834,581
The following table summarizes the future contractual minimum base rent payments under non-cancellable operating leases
expected from tenants in investment properties:
As at
December 31, 2024
2025
$537,636
2026
480,211
2027
413,044
2028
324,579
2029
235,272
Thereafter
569,450
17. Property operating costs and other
The following table summarizes property operating costs and other:
Year Ended December 31
2024
2023
Recoverable property operating costs(1)
$298,735
$288,224
Property management fees and costs
5,825
4,783
Expected credit loss
394
1,332
Non-recoverable costs
6,247
6,428
Property operating costs
$311,201
$300,767
Residential cost of sales and marketing costs
46,582
3,873
Other expenses relating to service and other revenues(2)
13,068
16,380
Other expenses
$59,650
$20,253
Property operating costs and other
$370,851
$321,020
(1)
Includes recoverable property tax and insurance costs.
(2)
Related to service and other revenues as disclosed in Note 16, “Rentals from investment properties and other”.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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18. General and administrative expense
The following table summarizes general and administrative expense:
Year Ended December 31
2024
2023
Salaries and benefits
$26,075
$24,556
Professional fees
5,634
5,604
Public company costs
1,372
1,390
Amortization of intangible assets
1,331
1,331
Other costs including office rent, information technology, marketing, communications, and other
employee expenses
3,260
3,489
General and administrative expense
$37,672
$36,370
19. Supplemental cash flow information
The following table presents items not affecting cash and other items relating to the Trust’s operating activities:
Year Ended December 31
2024
2023
Fair value adjustments
$69,234
$(101,792)
Loss (gain) on sale of investment properties
123
(44)
Earnings from equity accounted investments
(20,589)
(75,170)
Interest expense
183,099
163,741
Other financing costs
(5,042)
(1,364)
Interest income
(14,101)
(19,647)
Amortization of other assets and intangible assets
7,359
10,641
Lease obligation interest
183
614
Deferred unit compensation expense, net of cash redemptions
2,751
1,836
LTIP and EIP amortization, net of payment
2,644
2,128
$225,661
$(19,057)
The following table presents changes in other non-cash operating items:
Year Ended December 31
2024
2023
Amounts receivable and other
$(2,825)
$(16,486)
Prepaid expenses, deposits and deferred financing costs
2,352
(574)
Accounts payable
4,244
8,765
Realty taxes payable
(965)
(228)
Tenant prepaid rent, deposits and other payables, and residential sales deposits
(13,343)
(15,259)
Other working capital changes
21,464
14,607
$10,927
$(9,175)
The following table presents the Trust’s non-cash investing and financing balances:
Year Ended December 31
Non-cash investing and financing balances
2024
2023
Total return swap receivable
$81,831
$127,820
Units issued on acquisition
320
1,471
Liabilities assumed on acquisition, net of other assets
1,026
3,948
Distributions payable at year end
26,579
26,577
Total return swap debt
95,995
143,232
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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20. Related party transactions
Transactions with related parties are conducted in the normal course of operations.
Transactions and Agreements with Penguin
a) Penguin’s Ownership Interest and Voting Right
The Trust’s largest Unitholder is Penguin, which as at December 31, 2024, held approximately 21.3% of the issued and
outstanding Units (December 31, 2023 – 21.0%) of the Trust. The following table presents Units owned by Penguin:
Units owned by Penguin
Type
Class
December 31, 2024
December 31, 2023
Trust Units
N/A
15,896,863
15,442,763
Smart Limited Partnership
Class B
13,584,561
13,584,561
Smart Limited Partnership
Class F
8,708
8,708
Smart Limited Partnership III
Class B
4,129,420
4,117,096
Smart Limited Partnership IV
Class B
2,873,132
2,873,132
Smart Oshawa South Limited Partnership
Class B
630,880
630,880
Smart Oshawa Taunton Limited Partnership
Class B
374,223
374,223
Smart Boxgrove Limited Partnership
Class B
170,000
170,000
ONR Limited Partnership I
Class B
272,183
272,183
Units owned by Penguin
37,939,970
37,473,546
Pursuant to the Declaration of Trust, provided certain ownership thresholds are met, the Trust is required to issue or cancel such
number of additional Special Voting Units to Penguin that will entitle Penguin to cast 25.0% of the aggregate votes eligible to be
cast at a meeting of the Unitholders and Special Voting Unitholders (“Voting Top-Up Right”). As at December 31, 2024, there
were 9,191,230 additional Special Voting Units outstanding (December 31, 2023 – 9,729,886). These Special Voting Units are not
entitled to any interest or share in the distributions or net assets of the Trust, nor are they convertible into any Trust securities.
There is no value assigned to the Special Voting Units. A five-year extension of the Voting Top-Up Right was approved by
Unitholders at the Trust’s annual general and special meeting held on December 9, 2020. For further details, see the Trust’s
management information circular dated November 6, 2020, filed on the System for Electronic Document Analysis and Retrieval+
(“SEDAR+”).
Pursuant to its rights under the Declaration of Trust, at December 31, 2024, Penguin has appointed two Trustees out of eight.
The other non-controlling interest, which is included in equity, represents a 5.0% equity interest by Penguin in five consolidated
investment properties.
b) Distributions declared to Penguin
During the year ended December 31, 2024, distributions declared to Penguin totalled $69,848 (year ended December 31, 2023 –
$68,898).
c) Properties under development subject to development management agreements (“Earnout Agreements”)
Properties under development in the amount of $22,766 (December 31, 2023 – $61,687) are subject to various development
management agreements with Penguin and Walmart. See Note 3(e).
The following table presents those Units which Penguin has Earnout options to acquire, upon completion of Earnout events:
Type
Class
December 31, 2024
December 31, 2023
Trust Units
N/A
1,286,833
1,286,833
Smart Limited Partnership
Class B
5,031,072
5,031,072
Smart Limited Partnership III
Class B
1,613,308
1,629,959
Smart Limited Partnership IV
Class B
353,135
353,135
Smart Oshawa South Limited Partnership
Class B
18,983
18,983
Smart Oshawa Taunton Limited Partnership
Class B
132,711
132,711
Smart Boxgrove Limited Partnership
Class B
267,179
267,179
ONR Limited Partnership I
Class B
429,599
429,599
9,132,820
9,149,471
At December 31, 2024, Penguin’s ownership would increase to 25.0% (December 31, 2023 – 24.8%) if Penguin were to exercise all
remaining Earnout options pursuant to the Omnibus Agreement between the Trust and Penguin.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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Omnibus Agreement between the Trust and Penguin
The Trust and Penguin amended the development management agreements in November 2020. Effective December 9, 2020,
pursuant to an omnibus agreement between the Trust and Penguin (the “Omnibus Agreement”), Penguin has the option to
extend all Earnouts by two years from the previous expiry date, and the Trust has been given a right of first offer in connection
with the sale of the economic and financial benefits and rights of any such development parcel during any extended period. In
addition, this agreement provides for the payment of certain outstanding amounts between the parties.
d) Leasehold property interest
At December 31, 2024, the Trust had lease obligations for the 14 leasehold interests without bargain purchase options and one
leasehold interest with bargain purchase option with Penguin. See Note 3(d).
e) Loans receivable issued
Four loans receivable were issued to Penguin, either pursuant to development management agreement or in connection with
acquisitions of land parcels. See Note 5(a).
f) Future land development obligations
The future land development obligations represent payments required to be made to Penguin for certain undeveloped lands
acquired. See Note 12, “Accounts and other payables”.
g) Other agreements with Penguin
The Trust entered into various agreements with Penguin in November 2020 coincident with the extension of the term of the
Voting Top-Up Right. For further details, see the Trust’s management information circular dated November 6, 2020, filed on
SEDAR+ and below.
Supplement to Development Services Agreement between the Trust and its Affiliates and Penguin (“Development and Services
Agreement”)
The following represent the key elements of this agreement which is effective from July 1, 2020 until December 31, 2025:
i)
Penguin shall be reimbursed for 50% of disposition fees otherwise payable pursuant to the Development and Services
Agreement related to Penguin’s interest in properties sold by the Trust,
ii)
for future SmartVMC commercial phases and certain properties currently owned by Penguin (for which the Trust has
historically assisted with development and planning requirements), all development fees are payable to Penguin and all
other fees (management, leasing, etc.) are payable to the Trust,
iii)
when Penguin utilizes employees of the Trust to assist with its development projects, Penguin will pay for these
services provided by employees of the Trust based on annual estimates of time billings related to these projects,
charged at estimated total cost, including compensation,
iv)
the Trust will continue to manage and develop all other Penguin properties.
Support services are provided for a fee based on an allocation of the Trust’s relevant costs of the support services to Penguin.
Such relevant costs include: office administration, human resources, information technology, insurance, legal and marketing.
Penguin Services Agreement
The amended and restated services agreement entered into on November 5, 2020 (the “Penguin Services Agreement”), and
effective from February 2018 reflects the additional services provided by Penguin since that time. Under the agreement, Penguin
provides specified services to the Trust in connection with the development of its projects. In return for those services, Penguin
is entitled to receive: i) a fixed quarterly fee of $1,000 (subject to inflation-related increments after 2018) and ii) an annual
variable fee between $1,500 and $3,500 (also inflation-adjusted after 2018) that is based on the achievement of the Trust-level
targets for “New Development Initiatives” and “New Projects” that the Trust uses to measure the performance of its executive
officers and other annual targets (other than such Trust-level targets) of a similar nature that the Trust uses to measure the
performance of its executive officers as determined by the Board of Trustees from time to time.
Mezzanine Loan Amending Agreements between the Trust and its Affiliates and Penguin (“Mezzanine Loan Agreements”)
Effective November 5, 2020, all loan maturity dates have been extended to August 31, 2028, with a new rate structure for the
extension period of each mortgage receivable (see also Note 5, “Mortgages, loans and notes receivable”). The Trust’s purchase
option periods have been extended and because these properties may now be subject to mixed-use development projects, the
agreements provide that the parties establish a new framework for the purchase options for the Trust related to mixed-use
development.
Non-Competition Agreement
Effective November 2020, a non-competition agreement with Penguin replaced and superseded the previous non-competition
agreement extending the term by five years and broadening restricted competing initiatives to include various forms of mixed-
use development.
Executive Employment Agreement
This agreement confirms Mr. Goldhar’s position as Executive Chairman of the Trust for the period from February 14, 2018 to
December 31, 2025, for which Mr. Goldhar receives a salary, bonus, customary benefits, and is eligible to participate in the Trust’s
Deferred Unit Plan and the Equity Incentive Plan.
In January 2021, the Trust granted 900,000 performance units to Mitchell Goldhar pursuant to the EIP adopted by Unitholders
effective December 9, 2020. See also Note 11, “Other financial liabilities”.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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h) Summary of transactions and balances with Penguin
The following tables summarize related party transactions and balances with Penguin:
Related party transactions with Penguin
Acquisitions and Earnouts:
Earnouts
3(e)(ii)
$1,071
$8,196
Revenues:
Service and other revenues:
Management fee and other services revenue pursuant to the Development
and Services Agreement
7,749
11,351
Support services
1,371
1,391
$9,120
$12,742
Interest income from mortgages and loans receivable
2,357
4,326
Rents and operating cost recoveries included in rentals from income properties
2,226
2,932
$13,703
$20,000
Expenses and other payments:
Fees paid pursuant to the Penguin Services Agreement – capitalized to
properties under development
7,671
7,189
EIP – capitalized to properties under development
3,726
5,372
Development fees and interest expense – capitalized to investment
properties
741
140
Opportunity fees pursuant to the development management agreements –
capitalized to properties under development(1)
60
60
Marketing and other costs – included in general and administrative expense
and property operating costs
69
79
Disposition fees pursuant to the Development and Services Agreement –
included in general and administrative expense
412
788
$12,679
$13,628
Year Ended December 31
Note
2024
2023
(1)
These amounts include prepaid land costs that will offset the purchase price of future Earnouts.
As at
Note
December 31, 2024
December 31, 2023
Related party balances with Penguin disclosed elsewhere in the financial statements
Receivables:
Amounts receivable and other(1) (2)
9
$27,110
$21,647
Loans receivable
5(a)
76,115
76,392
Mortgages receivable
5(b)
2
17,548
Notes receivable
5(c)
2,924
2,924
Total receivables
$106,151
$118,511
Payables and other accruals:
Accounts payable and accrued liabilities
4,252
3,723
Future land development obligations
12
17,631
18,075
Total payables and other accruals
$21,883
$21,798
(1)
Excludes amounts receivable presented below as part of balances with equity accounted investments. This amount includes amounts receivable of $15,441 and other of $11,669
(December 31, 2023 – amounts receivable of $12,923 and other of $8,724).
(2)
The non-current portion of amounts receivable represents a related party receivable from Penguin of $12,994 (December 31, 2023 – $nil). The amount is related to services provided
to Penguin by the Trust in accordance with the development service agreement (see Note 9).
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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Transactions and Agreements with the Trust’s equity accounted investments
a) Supplemental Development Fee Agreements
In accordance with the Supplemental Development Fee Agreements, the Trust invoiced PCVP and certain joint ventures a net
amount related to associated development fees. See Note 4, “Equity accounted investments”.
b) Loans receivable issued
A loan receivable was provided to PCVP pursuant to a loan agreement. Loans receivable were issued to certain joint ventures
partnered with SmartStop pursuant to a master credit loan agreement. See Note 5(a).
c) Other unsecured debt
Other unsecured debt pertains to loans received from equity accounted investments in connection with either the 700
Applewood purchase or contribution agreements relating to joint ventures. See Note 10(b)(iv).
d) Summary of transactions and balances with the Trust’s equity accounted investments
The following table summarizes related party transactions with the Trust’s equity accounted investments:
Related party transactions with the Trust’s equity accounted investments
Revenues:
Supplemental Development Fee
$9,052
$11,418
Interest income from mortgages and loans receivable
7,773
11,212
Expenses and other payments:
Rent and operating costs (included in general and administrative expense and property
operating costs)
3,197
2,777
Year Ended December 31
2024
2023
The following table summarizes the related party balances with the Trust’s equity accounted investments:
As at
Note
December 31, 2024
December 31, 2023
Related party balances disclosed elsewhere in the financial statements
Amounts receivable(1)
9
$10,034
$15,052
Loans receivable(2)
5(a)
136,034
108,815
Other unsecured debt(3)
10(b)(iv)
114,023
150,689
(1)
Amounts receivable includes Penguin’s portion, which represents $4,778 (December 31, 2023 – $5,083) relating to Penguin’s 50% investment in the PCVP and Residences (One) LP.
(2)
Loans receivable includes Penguin’s portion, which represents $27,422 (December 31, 2023 – $25,741) relating to Penguin’s 50% investment in the PCVP.
(3)
Other unsecured debt does not consist of Penguin’s portion as at December 31, 2024 (December 31, 2023 – nil).
Other related party transactions
The following table summarizes other related party transactions:
Year Ended December 31
2024
2023
Legal fees incurred from a law firm in which a partner is a Trustee:
Capitalized to investment properties
$801
$423
Included in general and administrative expense
480
1,461
$1,281
$1,884
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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21. Key management and Trustees’ compensation
Key management personnel are those individuals having authority and responsibility for planning, directing and controlling the
activities of the Trust, directly or indirectly. Currently, the Trust’s key management personnel include the Executive Chairman
and Chief Executive Officer (see also Note 20, “Related party transactions”), Chief Financial Officer, and Executive Vice
Presidents. In addition, the Trustees have oversight responsibility for the Trust.
The following table presents the compensation relating to key management:
Year Ended December 31
2024
2023
Salaries and other short-term employee benefits
$3,246
$2,574
Deferred unit plan
3,174
2,548
EIP
5,567
7,147
LTIP
—
3
$11,987
$12,272
The following table presents the compensation relating to Trustees:
Year Ended December 31
2024
2023
Trustees’ fees
$749
$743
Deferred unit plan
749
743
$1,498
$1,486
22. Co-owned property interests
The Trust has the following co-owned property interests and includes in these consolidated financial statements its
proportionate share of the related assets, liabilities, revenues and expenses of these properties, as presented in the table below:
As at
December 31, 2024
December 31, 2023
Number of Co-owned
Properties(1)
Ownership
Interest
Number of Co-owned
Properties(1)
Ownership
Interest
Income properties
15
40% – 60%
15
40% – 60%
Properties under development
4
25% – 67%
4
25% – 67%
Mixed-use
1
67%
1
67%
Residential development
2
50%
2
50%
Total
22
22
(1)
Penguin is a co-owner of eight investment properties, consisting of four properties under development, three income properties and one mixed-use property (December 31, 2023 –
eight investment properties, consisting of four properties under development, three income properties and one mixed-use property) (see also Note 20, “Related party transactions”).
23. Segmented information
As at December 31, 2024, the Trust has one reportable segment, which comprises the development, ownership, management
and operation of investment properties located in Canada. In measuring performance, the Trust does not distinguish or group its
operations on a geographical or any other basis and, accordingly, has a single reportable segment for disclosure purposes.
The Trust’s major tenant is Walmart, accounting for 23.2% of the Trust’s annualized rentals from investment properties for the
year ended December 31, 2024 (year ended December 31, 2023 – 24.0%).
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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24. Risk management
a)
Financial risks
The Trust’s activities expose it to a variety of financial risks, including interest rate risk, liquidity risk and credit risk. The
Trust’s overall financial risk management focuses on the unpredictability of financial markets and seeks to minimize
potential adverse effects on the Trust’s financial performance. The Trust may use derivative financial instruments to hedge
certain risk exposures.
i)
Interest rate risk
A significant proportion of the Trust’s debt is financed at fixed rates with maturities staggered over a number of years,
thereby mitigating its exposure to changes in interest rates and financing risks. At December 31, 2024, approximately
24.40% (December 31, 2023 – 26.30%) of the Trust’s debt is financed at variable rates, of which 73.92% is subject to
interest rate swap agreements with fixed interest rates. The remaining variable rate debt (6.36% of total debt) not
subject to interest rate swap agreements represents the Trust’s exposure to changes in interest rates on such debt.
The Trust analyzes its interest rate exposure on a regular basis. The Trust monitors the historical movement of 10-year
Government of Canada bonds and performs a sensitivity analysis to identify the possible impact on net income of an
interest rate shift. The simulation is performed on a regular basis to ensure the maximum loss potential is within the
limit acceptable to management. Management performs the simulation for secured debt, unsecured debt, revolving
operating facilities, and mortgages and loans receivable:
Change in interest rate of:
(1.50)%
(1.00)%
(0.50)%
0.50%
1.00%
1.50%
Net income increase (decrease) from variable-
rate debt
$4,816
$3,211
$1,605
$(1,605)
$(3,211)
$(4,816)
Net income increase (decrease) from variable-
rate mortgages and loans receivable
$(1,322)
$(881)
$(441)
$441
$881
$1,322
From time to time, the Trust may enter into interest rate swaps as part of its strategy for managing certain interest rate
risks. The Trust recognizes any change in fair value associated with interest rate swap agreements in the consolidated
statements of income and comprehensive income.
The sensitivity analysis in the table below reflects the fair value gain (loss) on interest rate swap agreements from
possible changes in interest rates.
Change in interest rate of:
(1.50)%
(1.00)%
(0.50)%
0.50%
1.00%
1.50%
Fair value gain (loss) on interest rate swap
agreements
$(39,150)
$(25,503)
$(11,934)
$14,974
$28,315
$41,584
The Trust’s exposure to interest rate risk is monitored by management on a regular basis (see also Note 10, “Debt”).
ii)
Liquidity risk
Liquidity risk management implies maintaining sufficient cash and the availability of funding through an adequate
amount of committed credit facilities and the ability to lease out vacant units. In the next 12 months, $1,521,967 of
liabilities (including $986,915 of secured and unsecured debt, $274,526 of other financial liabilities and $260,526 of
accounts and other payable amounts) will mature and will need to be settled by means of renewal or payment.
The Trust aims to maintain flexibility and opportunities in funding by keeping committed credit lines available,
obtaining additional mortgages as the value of investment properties increases, issuing equity or unsecured
debentures. The Trust’s ability to meet its financial obligations as they become due represents the Trust’s exposure to
liquidity risk. It is management’s intention to either repay or refinance maturing liabilities with newly issued secured or
unsecured debt, equity or, in certain circumstances not expected to occur frequently, the disposition of certain
assets. Any net working capital deficiencies are funded with the Trust’s existing revolving operating facilities. As at
December 31, 2024, the Trust had: a) cash and cash equivalents of $37,694; b) the remaining funds available to be
drawn from its $850,000 in operating facilities and its $250,000 accordion feature; c) project-specific financing
arrangements; and d) $9,464,521 in unencumbered assets that could be used to obtain additional secured financing to
assist with its liquidity requirements.
The key assumptions used in the Trust’s estimates of future cash flows when assessing liquidity risk are: the renewal or
replacement of the maturing revolving operating facilities, secured debt and unsecured debentures, at reasonable
terms and conditions in the normal course of business and no major bankruptcies of principal tenants. Management
believes that it has considered all reasonable facts and circumstances in forming appropriate assumptions.
The Trust’s liquidity position is monitored by management on a regular basis. A schedule of principal repayments on
secured debt and other debt maturities is disclosed in Note 10, “Debt”.
iii)
Credit risk
Credit risk arises from cash and cash equivalents, as well as credit exposures with respect to mortgages and loans
receivable (see also Note 5, “Mortgages, loans and notes receivable”) and tenant receivables (see also Note 9,
“Amounts receivable and other, deferred financing costs, and prepaid expenses and deposits”). Tenants may
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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experience financial difficulty and become unable to fulfil their lease commitments. The Trust mitigates this risk of
credit loss by reviewing tenants’ covenants, by ensuring its tenant mix is diversified and by limiting its exposure to any
one tenant except Walmart. Further risks arise in the event that borrowers of mortgages and loans receivable default
on the repayment of amounts owing to the Trust. The Trust endeavours to ensure adequate security has been
provided in support of mortgages and loans receivable. The Trust limits cash transactions to high-credit-quality
financial institutions to minimize its credit risk from cash and cash equivalents.
The ECL model requires an entity to measure the loss allowance for a financial instrument at an amount equal to the
lifetime ECL if the credit risk on that financial instrument has increased significantly since initial recognition or at an
amount equal to 12-month expected credit losses if the credit risk on that financial instrument has not increased
significantly since initial recognition. The Trust uses a provision matrix based on historical credit loss experiences to
estimate 12-month expected credit losses as the Trust has deemed the risk of credit loss has not increased significantly
for both mortgages and loans receivable (see also Note 5, “Mortgages, loans and notes receivable”) and tenant
receivables (see also Note 9, “Amounts receivable and other, deferred financing costs, and prepaid expenses and
deposits”). Credit risks for both have been mitigated by various measures, including ensuring adequate security has
been provided in support of mortgages and loans receivable and reviewing tenant’s covenants, ensuring its tenant mix
is diversified and by limiting its exposure to any one tenant except Walmart for tenant receivables. However, the
assumptions and estimates underlying the manner in which ECLs have been implemented historically may not be
appropriate in the current economic environment, including but not limited to the inflationary environment, rising
interest rates, etc. Accordingly, the Trust has not applied its existing ECL methodology mechanically. Instead, during
the current economic environment, the Trust has been in discussions with tenants on a case-by-case basis to
determine optimal rent payment solutions and has incorporated this available, reasonable and supportable information
when estimating ECL on tenant receivables.
iv)
Currency risk
The Trust has drawn funds in U.S. dollars, and is exposed to currency risk in the fluctuation of the Canadian dollar to
U.S. dollar exchange rate when the liabilities are repaid. At December 31, 2024, approximately 3.83% (December 31,
2023 – 4.77%) of the Trust’s debt is financed in U.S. dollar borrowings.
The Trust analyzes its exchange rate exposure on a regular basis. As part of its strategy for managing certain currency
risks, the Trust entered into currency swaps. The Trust recognizes any change in fair value associated with currency
swap agreements in the consolidated statements of income and comprehensive income. As currency gains or losses
on the Trust’s debt are offset by fair value gains or losses in the currency swap agreements, the Trust is not exposed
to significant currency risk on a net basis.
The Trust’s exposure to currency risk is monitored by management on a regular basis (see also Note 10, “Debt”).
b)
Capital risk management
The Trust defines capital as the aggregate amount of Unitholders’ equity, debt and Units classified as liabilities. The Trust’s
primary objectives when managing capital are: i) to safeguard the Trust’s ability to continue as a going concern so that it
can continue to provide returns for Unitholders; and ii) to ensure the Trust has access to sufficient funds for operating,
acquisitions (including Earnouts) and development activities.
The Trust sets the amount of capital in proportion to risk. The Trust manages its capital structure and makes adjustments to
it in light of changes in economic conditions and the risk characteristics of the underlying assets. In order to maintain or
adjust the capital structure, the Trust may adjust the amount of distributions paid to Unitholders, issue new Units and debt,
or sell assets to reduce debt or fund operating, acquisition and development activities.
The Trust anticipates meeting all current and future obligations. Management expects to finance operating, future
acquisitions, mortgages receivable, development costs and maturing debt from: i) existing cash balances; ii) a mix of debt
secured by investment properties, operating and credit facilities, issuance of equity and unsecured debentures; and iii) the
sale of non-core assets. Cash flows generated from operating activities is the source of liquidity to service debt (except
maturing debt), sustaining capital expenditures, leasing costs and Unit distributions.
The Trust monitors its capital structure based on the following ratios: interest coverage ratio, debt to total assets and debt
to total earnings before interest, taxes, depreciation and amortization and fair value changes associated with investment
properties and financial instruments. These ratios are used by the Trust to manage an acceptable level of leverage and are
not considered measures in accordance with IFRS, nor are there equivalent IFRS measures.
The following table shows the significant financial covenants that the Trust is required, pursuant to the terms of its revolving
operating facilities and other credit facilities, to maintain:
Financial covenants
Threshold
Debt as a percentage of total aggregate assets
≤ 65%
Secured debt as a percentage of aggregate assets
≤ 40%
Fixed charge coverage multiple
≥ 1.5X
Unencumbered assets to unsecured debt multiple
≥ 1.3X
Minimum Unitholders’ equity
≥ $2,000,000
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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The Trust’s indentures require its unsecured debentures to maintain debt to gross book value, including convertible
debentures not more than 65%, an interest coverage ratio not less than 1.65X and Unitholders’ equity not less than
$500,000.
These covenants are required to be calculated based on Canadian generally accepted accounting principles (“GAAP”) at the
time of debt issuance. If the Trust does not meet all externally imposed financial covenants, then the related debt will
become immediately due and payable unless the Trust is able to remedy the default or obtain a waiver from lenders. For the
year ended December 31, 2024, the Trust was in compliance with all financial covenants.
25. Commitments and contingencies
The Trust has certain obligations and commitments pursuant to development management agreements to complete the
purchase of Earnouts totalling approximately 139,000 square feet (December 31, 2023 – 165,000 square feet) of development
space from Penguin and others, based on a pre-negotiated formula, as more fully described in Note 3, “Investment properties”.
As at December 31, 2024, the carrying value of these obligations and commitments included in properties under development
was $22,766 (December 31, 2023 – $61,687). The timing of completion of the purchase of the Earnouts, and the final prices,
cannot be readily determined because they are a function of future tenant leasing.
The Trust has also entered into various other development construction contracts totalling $49,589 (December 31, 2023 –
$22,068).
The Trust entered into agreements with Penguin in which the Trust will lend funds in the form of mortgages receivable, as
disclosed in Note 5(b). The maximum amount that may be provided under the agreements totals $116,993 (December 31, 2023 –
$150,763) (see also Note 5, “Mortgages, loans and notes receivable”), of which $2 has been provided as at December 31, 2024
(December 31, 2023 – $17,548).
As at December 31, 2024, letters of credit totalling $49,467 (December 31, 2023 – $45,808) – including letters of credit drawn
down under the revolving operating facilities described in Note 10(c) – have been issued on behalf of the Trust by financial
institutions as security for debt and for maintenance and development obligations to municipal authorities.
The Trust carries insurance and indemnifies its Trustees and officers against any and all claims or losses reasonably incurred in
the performance of their services to the Trust to the extent permitted by law.
The Trust, in the normal course of operations, is subject to a variety of legal and other claims. Management and the Trust’s legal
counsel evaluate all claims on their apparent merits and accrue management’s best estimate of the likely cost to satisfy such
claims. Management believes the outcome of current legal and other claims filed against the Trust, after considering insurance
coverage, will not have a significant impact on the Trust’s consolidated financial statements.
26. Subsequent event
On February 5, 2025, the Trust issued Series AB senior unsecured debentures by way of private placement (the “Series AB
Debentures”) in the amount of $300,000. Series AB Debentures bear an annual interest rate of 4.737% per annum, with a
maturity date of August 5, 2031. The Trust used a portion of the net proceeds to repay the full $160,000 principal of Series N
senior unsecured debentures upon maturity, with the remaining balance being used to repay existing debt and for general
corporate purposes.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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Trustees
Mitchell Goldhar 2
Executive Chairman and CEO SmartCentres
Real Estate Investment Trust, Owner
The Penguin Group of Companies
Janet Bannister 1, 3, 5
Managing Partner
Real Ventures
Garry Foster 1, 2, 4
Chief Executive Officer
Cortleigh Capital Inc.
Gregory Howard 2
Partner
Davies Ward Phillips & Vineberg LLP
Sylvie Lachance 1, 2, 5
Managing Director
Tribal Partners Canada Inc.
Neil Cunningham 3, 4
Trustee
Sharm Powell 2, 3, 4
Trustee
Michael Young 2, 3, 4
Principal
Quadrant Capital Partners Inc.
1 Audit Committee
2 Investment Committee
3 Corporate Governance and Compensation Committee
4 Independent Committee
5 ESG Subcommittee
Executive Officers
Mitchell Goldhar
Executive Chairman and CEO
Peter Slan
Chief Financial Officer
Rudy Gobin
Executive Vice President
Portfolio Management & Investments
Paula Bustard
Executive Vice President of Development
Allan Scully
Executive Vice President of Development
Dan Markou
Executive Vice President & Chief People
and Culture Officer
Bankers
BMO Capital Markets
CIBC World Markets
Desjardins Securities Inc.
Mizuho Bank, Ltd.
National Bank of Canada
RBC Capital Markets
Scotia Capital
TD Bank Financial Group
Auditors
PricewaterhouseCoopers LLP
Toronto, Ontario
Legal Counsel
Osler Hoskin & Harcourt LLP
Toronto, Ontario
Davies Ward Phillips & Vineberg LLP
Toronto, Ontario
Registrar & Transfer Agent
Computershare Trust Company of Canada
Toronto, Ontario
Investor Relations
Hammad Rawra
Vice President, Corporate Finance
& Investor Relations
T: 905 326 6400 x7166
E: investorrelations@smartcentres.com
smartcentres.com/investing
TSX: SRU.UN
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