Le Lézard
Classified in: Business, Covid-19 virus
Subject: EARNINGS

SmartCentres Real Estate Investment Trust Releases Second Quarter Results for 2022


TORONTO, Aug. 11, 2022 (GLOBE NEWSWIRE) -- SmartCentres Real Estate Investment Trust ("SmartCentres", the "Trust" or the "REIT") (TSX: SRU.UN) is pleased to report its financial and operating results for the quarter ended June 30, 2022.

"We continue to see improvement in customer traffic to our shopping centres which in turn generated steady increased levels of leasing activity that began earlier in 2022. We anticipate that this momentum will continue for the rest of 2022 which should have a positive impact on both our occupancy and earnings. We are pleased with this noticeable improvement in leasing activity and the associated improvement in metrics. Cash collections continue to improve, again exceeding 98% for the quarter, and we expect these levels to return to pre-COVID levels over the remainder of the year. Notwithstanding the recent upward movement in interest rates, our Walmart-anchored retail portfolio continues to demonstrate its strength and alignment with Canadian consumers; and thus has maintained its value for IFRS purposes during the quarter.

The improvement in our operating performance is further reflected in our financial results for the quarter. Our FFO per Unit as adjusted for anomalous items(1) increased by $0.03 or 5.8% to $0.55, and net income and comprehensive income per Unit increased by $0.34 or 60.8% to $0.90, as compared to the same quarter in the prior year".

At SmartVMC, currently our largest development initiative, but just one of many master-planned projects, beginning in Q3 2020, we have thus far closed on 1,763 units in the first three Transit City condominium phases, resulting in $0.38 in FFO per Unit(1) and $0.39 in net income and comprehensive income per Unit. Excitement around SmartVMC continues as the 120,000 square foot world class YMCA opened during the quarter, a huge step in the evolution at this city's growth. Through our residential banner, SmartLiving, our mixed-use intensification program continues to be a source of additional accretive growth, demonstrated by the launch of presale activity at Park Place where to date we have pre-sold approximately 50% of units released, demonstrating that SmartVMC operates outside the ebb and flow of other one-off residential developments owing to its master plan around mass transit and its strategic location in the GTA. Park Place, which includes approximately 1100 units in two stunning 56 and 48 storey towers, will be built on approximately two acres of the 53 acres of the recently acquired western lands at SmartVMC. At the Artwalk, another neighborhood within VMC, we have presold 100% of units released and we expect to begin construction of this multi-phased project later this year on a portion of lands previously occupied by Walmart at SmartVMC. Also, during the quarter, we successfully closed all 22 presold townhomes at Transit City and construction is progressing on time and on budget for the fourth and fifth fully sold-out phases of Transit City condominiums with full deposits representing 20% of each unit's purchase price having now been received, with closings expected to commence early in 2023. The 454-unit Millway rental tower is also proceeding on time and on budget with initial tenancies expected to begin later this year. We intend to develop approximately 20.0 million square feet of mixed-use space at SmartVMC alone, on which together with the City of Vaughan, we are also planning a 9-acre park which, over time, will become the focal point of this landmark city centre development.

Not that long ago our company was primarily focused on value-oriented retail with Walmart as its driving force. Today, our platform has evolved in new areas of growth. In 2015, we expanded our focus to various mixed-use forms of real estate including office, self-storage, condominiums and townhomes, high-rise rentals and seniors housing. SmartCentres now possesses industry leading, in-house expertise in all of these areas. Most notably, through our SmartLiving platform, we now have an internal team of professionals who facilitate the development, sales, construction, leasing, and management of our residential program across the country; a platform that did not exist a mere seven years ago. And now, with the acquisition of 32 acres of development lands in Pickering, we have begun our first initiative into the industrial sector; more to come. These evolving stages of growth in multiple disciplines permit us to continue to diversify our asset base and plant seeds for growth in NAV and FFO for many years into the future," said Mitchell Goldhar, Executive Chairman and CEO of SmartCentres REIT.

(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 additional information, please see "Non-GAAP Measures" in this Press Release.

Key Business Development, Financial and Operational Highlights for the Three Months Ended June 30, 2022

Mixed-Use Development and Intensification at SmartVMC

Other Business Development

Financial

Operational

(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 additional information, please see "Non-GAAP Measures" in this Press Release.
(3) Net of cash-on-hand of $133.2 million as at June 30, 2022 for the purposes of calculating the applicable ratios.

Selected Consolidated Operational, Mixed-Use Development and Financial Information

Key consolidated operational, mixed-use development and financial information shown in the table below includes the Trust's proportionate share of equity accounted investments:

(in thousands of dollars, except per Unit and other non-financial data)June 30, 2022December 31, 2021June 30, 2021
Portfolio Information   
Number of retail properties155155156
Number of office properties444
Number of self-storage properties664
Number of residential properties111
Number of properties under development191715
Total number of properties with an ownership interest185183180
    
Leasing and Operational Information(1)   
Gross leasable retail and office area (in thousands of sq. ft.)34,66134,11934,186
Occupied retail and office area (in thousands of sq. ft.)33,70733,21933,180
Vacant retail and office area (in thousands of sq. ft.)9549001,006
In-place occupancy rate (%)97.297.497.1
Committed occupancy rate (%)97.697.697.3
Average lease term to maturity (in years)4.44.44.6
Net retail rental rate (per occupied sq. ft.) ($)15.5415.4415.43
Net retail rental rate excluding Anchors (per occupied sq. ft.) ($)22.2622.0722.04
    
Mixed-Use Development Information   
Trust's share of future development area (in thousands of sq. ft.)40,20040,60032,400
Trust's share of estimated costs of future projects currently under construction, or for which construction is expected to commence within the next five years (in millions of dollars)9,8009,8007,800
Total number of residential rental projects10410496
Total number of seniors' housing projects272740
Total number of self-storage projects363650
Total number of office building projects887
Total number of hotel projects334
Total number of condominium developments959572
Total number of townhome developments91015
Total number of estimated future projects currently in development planning stage282283284
 
Financial Information   
Total assets ? GAAP(2)11,905,06611,293,24810,036,672
Total assets ? non-GAAP(3)(4)12,200,89011,494,37710,221,599
Investment properties ? GAAP(2)10,285,7539,847,0788,883,634
Investment properties ? non-GAAP(3)(4)11,191,06910,684,5299,490.636
Total unencumbered assets(3)8,413,0006,640,6005,937,900
Debt ? GAAP(2)5,128,6044,854,5274,492,948
Debt ? non-GAAP(3)(4)5,325,6304,983,0784,591,889
Debt to Aggregate Assets (%)(3)(4)(5)43.042.944.6
Debt to Gross Book Value (%)(3)(4)(5)51.950.850.1
Unsecured to Secured Debt Ratio(3)(4)(5)77%/23%71%/29%70%/30%
Unencumbered assets to unsecured debt(3)(4)(5)2.1X1.9X1.9X
Weighted average interest rate (%)(3)(4)3.303.113.27
Weighted average term of debt (in years)4.44.85.3
Interest coverage ratio(3)(4)(5)3.3X3.4X3.4X
Adjusted Debt to Adjusted EBITDA (net of cash)(3)(4)(5)10.0X9.2X8.2X
Adjusted Debt to Adjusted EBITDA (net of cash and TRS)(3)(4)(5)9.8X9.1X8.1X
Fixed Rate to Variable Rate Debt Ratio(3)(4)(5)84%/16%89%/11%96%/4%
Equity (book value)(2)6,216,3955,841,3155,168,610
Weighted average number of units outstanding ? diluted179,626,838173,748,819173,480,822

(1) Excluding residential and self-storage area.
(2) 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 additional information, please see "Non-GAAP Measures" in this Press Release.
(4) Includes the Trust's proportionate share of equity accounted investments.
(5) As at June 30, 2022, cash-on-hand of $133.2 million was excluded for the purposes of calculating the applicable ratios (December 31, 2021 ? $80.0 million, June 30, 2021 ? $55.7 million).


Quarterly Comparison to Prior Year

The following table presents key financial, per Unit, and payout ratio information for the three months ended June 30, 2022 and June 30, 2021:

(in thousands of dollars, except per Unit information)June 30, 2022
 June 30, 2021 Variance 
 (A) (B) (A?B) 
Financial Information   
Rentals from investment properties and other(1) 198,296  193,937  4,359 
Net base rent(1) 127,232  123,500  3,732 
Total recoveries(1) 65,119  63,995  1,124 
Miscellaneous revenue(1) 3,416  2,998  418 
Service and other revenues(1) 2,529  3,444  (915)
Net income and comprehensive income(1) 161,997  96,985  65,012 
Net income and comprehensive income excluding fair value adjustments(2)(3) 89,646  93,156  (3,510)
Cash flows provided by operating activities(1) 43,970  62,168  (18,198)
Net rental income and other(1) 124,964  119,132  5,832 
NOI from condominium and townhome closings(2) 1,100  14,028  (12,928)
NOI(2) 130,034  136,091  (6,057)
Change in net rental income and other(2) 4.9% 12.8%(7.9)%
Change in SPNOI(2) 5.0% 9.6%(4.6)%
Change in SPNOI excluding ECL(2) 2.1%(2.0)% 4.1%
    
FFO(2)(3)(4)(5) 88,464  100,455  (11,991)
Other adjustments 982  625  357 
FFO with adjustments(2)(3)(4) 89,446  101,080  (11,634)
Adjusted for:   
ECL (1,214) 2,274  (3,488)
Loss (gain) on derivative ? TRS 7,843  (557) 8,400 
FFO sourced from condominium and townhome closings (1,100) (12,891) 11,791 
FFO sourced from SmartVMC West acquisition (207) ?  (207)
FFO with adjustments excluding impact of ECL, TRS, condominium and townhome closings, and SmartVMC West acquisition(2)(3)(4) 94,768  89,906  4,862 
    
ACFO(2)(3)(4)(5) 80,871  94,246  (13,375)
Other adjustments 982  625  357 
ACFO with adjustments(2)(3)(4) 81,853  94,871  (13,018)
Adjusted for:   
Loss (gain) on derivative ? TRS 7,843  (557) 8,400 
ACFO sourced from condominium and townhome closings (1,100) (14,028) 12,928 
ACFO sourced from SmartVMC West acquisition (207) ?  (207)
ACFO with adjustments excluding impact of TRS, condominium and townhome closings, and SmartVMC West acquisition(2)(3)(4) 88,389  80,286  8,103 
    
Distributions declared 82,422  79,685  2,737 
Shortfall of cash provided by operating activities over distributions declared(2) (38,452) (17,517) (20,935)
(Shortfall) surplus of ACFO over distributions declared(2) (1,551) 14,563  (16,114)
Surplus of ACFO with adjustments excluding impact of TRS, condominium and townhome closings, and SmartVMC West acquisition over distributions declared(2) 5,967  601  5,366 
Units outstanding(6) 178,122,655  172,280,187  5,842,468 
Weighted average ? basic 178,122,655  172,275,798  5,846,857 
Weighted average ? diluted(7) 179,662,689  173,543,923  6,118,766 
    
Per Unit Information (Basic/Diluted)   
Net income and comprehensive income(1)$0.91/$0.90
 $0.56/$0.56 $0.35/$0.34 
Net income and comprehensive income excluding fair value adjustments(2)(3)$0.50/$0.50
 $0.54/$0.54 $-0.04/$-0.04 
    
FFO(2)(3)(4)(5)$0.50/$0.49
 $0.58/$0.58 $-0.08/$-0.09 
Other adjustments$0.00/$0.01
 $0.01/$0.00 $-0.01/$0.01 
FFO with adjustments(2)(3)(4)$0.50/$0.50
 $0.59/$0.58 $-0.09/$-0.08 
Adjusted for:   
ECL$-0.01/$-0.01
 $0.01/$0.01 $-0.02/$-0.02 
Loss (gain) on derivative ? TRS$0.04/$0.04
 $0.00/$0.00 $0.04/$0.04 
FFO sourced from condominium and townhome closings$-0.01/$-0.01
 $-0.08/$-0.07 $0.07/$0.06 
FFO units impact from SmartVMC West LP Class D units$0.03/$0.03
 $0.00/$0.00 $0.03/$0.03 
FFO with adjustments excluding impact of ECL, TRS, condominium and townhome closings, and SmartVMC West acquisition(2)(3)(4)$0.55/$0.55
 $0.52/$0.52 $0.03/$0.03 
    
Distributions declared $0.463  $0.463  $? 
    
Payout Ratio Information   
Payout Ratio to cash flows provided by operating activities 187.5% 128.2% 59.3%
Payout Ratio to ACFO(2)(3)(4)(5) 101.9% 84.6% 17.3%
Payout Ratio to ACFO with adjustments(2)(3)(4) 100.7% 84.0% 16.7%
Payout Ratio to ACFO with adjustments excluding impact of TRS, condominium and townhome sales, and SmartVMC West acquisition(2)(3)(4) 90.2% 99.3%(9.1)%

(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 additional information, please see "Non-GAAP Measures" in this Press Release.
(3) Includes the Trust's proportionate share of equity accounted investments.
(4) See "Non-GAAP Measures" in this Press Release for a reconciliation of these measures to the nearest consolidated financial statement measure.
(5) The calculation of the Trust's FFO and ACFO and related payout ratios, including comparative amounts, are financial metrics that were determined based on the REALpac White Paper on FFO issued in January 2022 and REALpac White Paper on ACFO issued in February 2019, respectively. Comparison with other reporting issuers may not be appropriate. The payout ratio to FFO and the payout ratio to ACFO are calculated as declared distributions divided by FFO and ACFO, respectively.
(6) Total Units outstanding include Trust Units and LP Units, including Units classified as liabilities. LP Units classified as equity in the consolidated financial statements are presented as non-controlling interests.
(7) The diluted weighted average includes the vested portion of the deferred units issued pursuant to the deferred unit plan.

Year-to-Date Comparison to Prior Year

The following table presents key financial, per Unit, and payout ratio information for the six months ended June 30, 2022 and June 30, 2021:

(in thousands of dollars, except per Unit information)June 30, 2022
 June 30, 2021 Variance 
 (A) (B) (A?B) 
Financial Information   
Rentals from investment properties and other(1) 400,819  392,775  8,044 
Net base rent(1) 252,506  244,830  7,676 
Total recoveries(1) 137,505  135,777  1,728 
Miscellaneous revenue(1) 5,731  5,839  (108)
Service and other revenues(1) 5,077  6,329  (1,252)
Net income and comprehensive income(1) 532,107  157,544  374,563 
Net income and comprehensive income excluding fair value adjustments(2)(3) 169,983  169,709  274 
Cash flows provided by operating activities(1) 146,789  141,652  5,137 
Net rental income and other(1) 245,378  235,269  10,109 
NOI from condominium and townhome closings(2) 1,076  14,094  (13,018)
NOI(2) 253,902  255,072  (1,170)
Change in net rental income and other(2) 4.3% 2.5% 1.8%
Change in SPNOI(2) 3.5% 1.8% 1.7%
Change in SPNOI excluding ECL(2) 0.6%(2.6)% 3.2%
    
FFO(2)(3)(4)(5) 180,699  184,733  (4,034)
Other adjustments 1,897  861  1,036 
FFO with adjustments(2)(3)(4) 182,596  185,594  (2,998)
Adjusted for:   
ECL (2,276) 4,581  (6,857)
Loss (gain) on derivative ? TRS 6,238  (1,070) 7,308 
FFO sourced from condominium and townhome closings (1,076) (12,891) 11,815 
FFO sourced from SmartVMC West acquisition (459) ?  (459)
FFO with adjustments excluding impact of ECL, TRS, condominium and townhome closings, and SmartVMC West acquisition(2)(3)(4) 185,023  176,214  8,809 
    
FFO with adjustments and Transactional FFO(2)(3)(4) 182,596  187,181  (4,585)
    
ACFO(2)(3)(4)(5) 166,025  179,401  (13,376)
Other adjustments 1,897  861  1,036 
ACFO with adjustments(2)(3)(4) 167,922  180,262  (12,340)
Adjusted for:   
Loss (gain) on derivative ? TRS 6,238  (1,070) 7,308 
ACFO sourced from condominium and townhome closings (1,076) (14,094) 13,018 
ACFO sourced from SmartVMC West acquisition (459) ?  (459)
ACFO with adjustments excluding impact of TRS, condominium and townhome closings, and SmartVMC West acquisition(2)(3)(4) 172,625  165,098  7,527 
    
Distributions declared 164,761  159,345  5,416 
Shortfall of cash flows provided by operating activities over distributions declared(2) (17,972) (17,693) (279)
Surplus of ACFO over distributions declared(2) 1,264  20,056  (18,792)
Surplus of ACFO with adjustments excluding impact of TRS, condominium and townhome closings, and SmartVMC West acquisition over distributions declared(2) 7,864  5,753  2,111 
Units outstanding(6) 178,122,655  172,280,187  5,842,468 
Weighted average ? basic 178,115,751  172,256,994  5,858,757 
Weighted average ? diluted(7) 179,626,838  173,480,822  6,146,016 
    
Per Unit Information (Basic/Diluted)   
Net income and comprehensive income(1)$2.99/$2.96
 $0.91/$0.91 $2.08/$2.05 
Net income and comprehensive income excluding fair value adjustments(2)(3)$0.95/$0.95
 $0.99/$0.98 $-0.04/$-0.03 
    
FFO(2)(3)(4)(5)$1.01/$1.01
 $1.07/$1.06 $-0.06/$-0.05 
Other adjustments$0.02/$0.01
 $0.01/$0.01 $0.01/$0.00 
FFO with adjustments(2)(3)(4)$1.03/$1.02
 $1.08/$1.07 $-0.05/$-0.05 
Adjusted for:   
ECL$-0.01/$-0.01
 $0.03/$0.03 $-0.04/$-0.04 
Loss (gain) on derivative ? TRS$0.04/$0.03
 $-0.01/$-0.01 $0.05/$0.04 
FFO sourced from condominium and townhome closings$-0.01/$-0.01
 $-0.08/$-0.07 $0.07/$0.06 
FFO units impact from SmartVMC West LP Class D units$0.02/$0.03
 $0.00/$0.00 $0.02/$0.03 
FFO with adjustments excluding impact of ECL, TRS, condominium and townhome closings, and SmartVMC West acquisition(2)(3)(4)$1.07/$1.06
 $1.02/$1.02 $0.05/$0.04 
        
FFO with adjustments and Transactional FFO(2)(3)(4)$1.03/$1.02
 $1.08/$1.07 $-0.05/$-0.05 
Distributions declared $0.925  $0.925  $? 
    
Payout Ratio Information   
Payout Ratio to cash flows provided by operating activities 112.2% 112.5%(0.3)%
Payout Ratio to ACFO(2)(3)(4)(5) 99.2% 88.8% 10.4%
Payout Ratio to ACFO with adjustments(2)(3)(4) 98.1% 88.4% 9.7%
Payout Ratio to ACFO with adjustments excluding impact of TRS, condominium and townhome sales, and SmartVMC West acquisition(2)(3)(4) 92.3% 96.5%(4.2)%

(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 additional information, please see "Non-GAAP Measures" in this Press Release.
(3) Includes the Trust's proportionate share of equity accounted investments.
(4) See "Non-GAAP Measures" in this Press Release for a reconciliation of these measures to the nearest consolidated financial statement measure.
(5) The calculation of the Trust's FFO and ACFO and related payout ratios, including comparative amounts, are financial metrics that were determined based on the REALpac White Paper on FFO issued in January 2022 and REALpac White Paper on ACFO issued in February 2019, respectively. Comparison with other reporting issuers may not be appropriate. The payout ratio to FFO and the payout ratio to ACFO are calculated as declared distributions divided by FFO and ACFO, respectively.
(6) Total Units outstanding include Trust Units and LP Units, including Units classified as liabilities. LP Units classified as equity in the consolidated financial statements are presented as non-controlling interests.
(7) The diluted weighted average includes the vested portion of the deferred units issued pursuant to the deferred unit plan.


Operational Highlights

For the three months ended June 30, 2022, net income and comprehensive income increased by $65.0 million as compared to the same period in 2021. This increase was primarily attributed to the following:

Partially offset by the following:

For the six months ended June 30, 2022, net income and comprehensive income increased by $374.6 million as compared to the same period in 2021. This increase was primarily attributed to the following:

Partially offset by the following:

Development and Intensification Summary
The following table summarizes the 282 identified mixed-use, recurring rental income and development income initiatives, which are included in the Trust's large development pipeline:

 UnderwayActiveFuture 
Description(Construction underway or expected to commence within next 2 years)(Construction expected to commence within
next 3?5 years)
(Construction expected to commence after 5 years)Total
Number of projects in which the Trust has an ownership interest    
Residential Rental242060104
Seniors' Housing491427
Self-storage1271736
Office Buildings?178
Hotels??33
Subtotal ? Recurring rental income initiatives4037101178
Condominium developments26224795
Townhome developments3159
Subtotal ? Development income initiatives292352104
Total6960153282
Trust's share of project area (in thousands of sq. ft.)    
Recurring rental income initiatives4,6003,90012,00020,500
Development income initiatives6,3003,5009,90019,700
Total Trust's share of project area (in thousands of sq. ft.)10,9007,40021,90040,200
Trust's share of such estimated costs (in millions of dollars)5,9003,900? (1)9,800

(1) The Trust has not fully determined the costs attributable to future projects expected to commence after five years and as such they are not included in this table.

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 as a result of, among other things, restrictions or delays related to the COVID-19 pandemic.

  1. 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 submitted in December 2019 and a site plan application for the first four residential buildings totalling 1,742 units submitted in October 2020. Currently working with the City of Vaughan on advancement of Weston & Highway 7 Secondary Plan;

  2. 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 zoning for five towers with a gross floor area of approximately 1,400,000 square feet and site plan application for a three-tower mixed-use phase, approximating 700,000 square feet, approved by Council in June 2022;

  3. the development of up to 5.5 million square feet of predominately residential space, in various forms, at Oakville North in Oakville, Ontario, with the rezoning application for an initial two-tower 585-unit residential phase submitted in April 2021;

  4. 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 an application for the first 35-storey mixed-use tower submitted in Q1 2021;

  5. 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. Approximately 60% of the 174 draft plan approved townhomes have been pre-sold and construction is soon expected to commence. Rezoning application for a seniors' apartment building and separate retirement residence, both of which are to be developed in partnership with Revera, along with three other residential buildings, was recently approved by Council;

  6. 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;

  7. the development of up to 200,000 square feet of residential townhomes at Oakville South in Oakville, Ontario, with a third-party homebuilder;

  8. the intensification of the Toronto StudioCentre ("StudioCentre") in Toronto, Ontario (zoning allows for up to 1.2 million square feet);

  9. 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 1 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;

  10. the development of a 35-storey high-rise purpose-built residential rental tower containing 439 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, with approvals expected in Q3 2022;

  11. 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 approved by municipal council in August 2020. Construction began in April 2021, and the first four floors opened in July 2022. Construction of a second phase is expected to commence in Q1 2023;

  12. the development of residential density at the Trust's shopping centre at 1900 Eglinton Avenue East in Scarborough, Ontario with rezoning applications for the first two residential towers (38 and 40 storeys) submitted in January 2021. Site plan application for both buildings was submitted in December 2021;

  13. the development of the first phase, 46-unit rental building, which is part of a multi-phase master plan in Alliston, Ontario, with a rezoning application approved by Council in December 2020 and a site plan application submitted in May 2020. The site plan application was resubmitted in March 2021 and again in July 2021 with approvals expected in 2022. The building permit application was submitted in October 2021;

  14. besides the seven self-storage projects completed or under construction, there are seven additional self-storage facilities in Ontario and British Columbia with the Trust's partner, SmartStop, in Markham, Stoney Creek, Toronto (3), Whitby, and Burnaby with zoning and/or site plan approval obtained or applications well underway. Project agreements for another four locations are being finalized;

  15. 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. Site plan applications for the first phase rental building with 168 units expected to be submitted in Q3 2022. Master plan of development is subject to approval;

  16. the development of a new residential block consisting of a 155-unit condo building in Phase 1 and approximately 345 rental units in Phases 2 and 3 at Laval Centre in Quebec. Application for architecture approval was submitted for the Phase 1 condo and another 155 units in the Phase 2 rental building in Q4 2021 and approval is expected in Q3 2022;

  17. the Trust has commenced the redevelopment of a portion of its 73-acre Cambridge retail property (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;

  18. the development of a retirement living residence at the Trust's shopping centre at Bayview and Major Mackenzie in Richmond Hill, Ontario, with a rezoning application for a 9-storey retirement residences building submitted in Q1 2021 and a site plan application submitted in Q4 2021, to be developed in partnership with the existing partner and Revera;

  19. 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;

  20. the development of up to 720,000 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 1 for 498,000 square feet in July 2021;

  21. the Q4 2020 acquisition of a 50% interest in a property in downtown Markham for the development of a 243,000 square foot retirement residence with Revera. The rezoning application was submitted in December 2020;

  22. the development of approximately 900,000 square feet of residential density on the Trust's Parkway Plaza Centre in Stoney Creek, Ontario, with an application for a Phase 1 development for a two-tower (20 and 15 storeys), 400,000 square foot, 520-unit condo project submitted in Q4 2021;

  23. During the second quarter, the Trust completed the purchase of approximately 38 acres of industrial lands in Pickering, adjacent to Hwy 407, on which the Trust received approval to build 241,000 square feet of space for the 16-acre Phase 1 development, of which 53% has already been pre-leased. Yields from Phase 1 project are expected to be in the range of 6.0% ? 6.5% on completion which is currently scheduled for 2023; and

  24. The Trust, together with its partner, Penguin, have also commenced preliminary siteworks for the 215,000 square feet retail project on Laird Drive in Toronto, that is expected to feature a flagship 190,000 square-foot Canadian Tire store together with 25,000 square feet of additional retail space on completion which is currently scheduled for 2024.

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)June 30, 2022December 31, 2021
 GAAP BasisProportionate Share Reconciliation Total Proportionate Share(1)GAAP BasisProportionate Share ReconciliationTotal Proportionate Share(1)
Assets      
Non-current assets      
Investment properties10,285,753905,316 11,191,0699,847,078837,451 10,684,529
Equity accounted investments650,487(650,487)?654,442(654,442)?
Mortgages, loans and notes receivable352,921(93,702)259,219345,089(69,576)275,513
Other financial assets228,707? 228,70797,148? 97,148
Other assets82,8147,643 90,45780,9407,465 88,405
Intangible assets44,473? 44,47345,139? 45,139
 11,645,155168,770 11,813,92511,069,836120,898 11,190,734
       
Current assets      
Residential development inventory29,74981,670 111,41927,39967,828 95,227
Current portion of mortgages, loans and notes receivable95,254? 95,25471,947? 71,947
Amounts receivable and other55,829(8,564)47,26549,542(8,637)40,905
Prepaid expenses, deposits and deferred financing costs44,39315,220 59,61312,28913,118 25,407
Cash and cash equivalents34,68638,728 73,41462,2357,922 70,157
 259,911127,054 386,965223,41280,231 303,643
Total assets11,905,066295,824 12,200,89011,293,248201,129 11,494,377
       
Liabilities      
Non-current liabilities      
Debt4,750,365179,737 4,930,1024,176,12193,465 4,269,586
Other financial liabilities278,944? 278,944326,085? 326,085
Other payables17,73246 17,77818,243? 18,243
 5,047,041179,783 5,226,8244,520,44993,465 4,613,914
       
Current liabilities      
Current portion of debt378,23917,289 395,528678,40635,086 713,492
Accounts payable and current portion of other payables263,39198,752 362,143253,07872,578 325,656
 641,630116,041 757,671931,484107,664 1,039,148
Total liabilities5,688,671295,824 5,984,4955,451,933201,129 5,653,062
       
Equity      
Trust Unit equity5,175,826? 5,175,8264,877,961? 4,877,961
Non-controlling interests1,040,569? 1,040,569963,354? 963,354
 6,216,395? 6,216,3955,841,315? 5,841,315
Total liabilities and equity11,905,066295,824 12,200,89011,293,248201,129 11,494,377

(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 additional information, please see "Non-GAAP Measures" in this Press Release.

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 June 30, 2022Three Months Ended June 30, 2021 
 GAAP BasisProportionate Share Reconciliation Total Proportionate Share(1)GAAP BasisProportionate Share ReconciliationTotal Proportionate Share(1)Variance of Total Proportionate Share(1)
Net rental income and other       
Rentals from investment properties and other198,296 7,018 205,314 193,937 5,039 198,976 6,338 
Property operating costs and other(73,332)(3,108)(76,440)(74,805)(2,108)(76,913)473 
 124,964 3,910 128,874 119,132 2,931 122,063 6,811 
Condo and townhome closings revenue and other(2)? 4,511 4,511 ? 52,768 52,768 (48,257)
Condo and townhome cost of sales and other? (3,351)(3,351)? (38,740)(38,740)35,389 
 ? 1,160 1,160 ? 14,028 14,028 (12,868)
NOI124,964 5,070 130,034 119,132 16,959 136,091 (6,057)
        
Other income and expenses       
General and administrative expense, net(7,916)18 (7,898)(7,304)(5)(7,309)(589)
Earnings from equity accounted investments3,785 (3,785)? 21,751 (21,751)? ? 
Earnings from other(3)289 (289)? ? ? ? ? 
Fair value adjustment on revaluation of investment properties9,669 1,185 10,854 10,854 7,097 17,951 (7,097)
Gain (loss) on sale of investment properties18 ? 18 (68)? (68)86 
Interest expense(33,852)(1,637)(35,489)(36,653)(1,354)(38,007)2,518 
Interest income3,866 41 3,907 3,395 20 3,415 492 
Supplemental costs? (603)(603)? (966)(966)363 
Fair value adjustment on financial instruments61,497 ? 61,497 (14,122)? (14,122)75,619 
Acquisition-related costs(323)? (323)? ? ? (323)
Net income and comprehensive income 161,997 ? 161,997 96,985 ? 96,985 65,012 

(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 additional information, please see "Non-GAAP Measures" in this Press Release.
(2) Includes additional partnership profit and other revenues.
(3) Represents SmartVMC West's operating results.


Year-to-Date Comparison to Prior Year

(in thousands of dollars)Six Months Ended June 30, 2022Six Months Ended June 30, 2021 
 GAAP BasisProportionate Share Reconciliation Total Proportionate Share(1)GAAP BasisProportionate Share ReconciliationTotal Proportionate Share(1)Variance of Total Proportionate Share(1)
Net rental income and other       
Rentals from investment properties and other400,819 13,510 414,329 392,775 10,070 402,845 11,484 
Property operating costs and other(155,441)(6,121)(161,562)(157,506)(4,361)(161,867)305 
 245,378 7,389 252,767 235,269 5,709 240,978 11,789 
Condo and townhome closings revenue and other(2)? 4,517 4,517 ? 52,933 52,933 (48,416)
Condo and townhome cost of sales and other? (3,382)(3,382)? (38,839)(38,839)35,457 
 ? 1,135 1,135 ? 14,094 14,094 (12,959)
NOI245,378 8,524 253,902 235,269 19,803 255,072 (1,170)
        
Other income and expenses       
General and administrative expense, net(14,783)(104)(14,887)(14,784)(5)(14,789)(98)
Earnings from equity accounted investments3,211 (3,211)? 37,069 (37,069)? ? 
Earnings from other(3)594 (594)? ? ? ? ? 
Fair value adjustment on revaluation of investment properties281,014 1,631 282,645 (7,905)20,930 13,025 269,620 
Loss on sale of investment properties(104)? (104)(58)? (58)(46)
Interest expense(69,185)(3,028)(72,213)(73,854)(2,734)(76,588)4,375 
Interest income6,826 49 6,875 6,997 42 7,039 (164)
Supplemental costs? (3,267)(3,267)? (967)(967)(2,300)
Fair value adjustment on financial instruments79,479 ? 79,479 (25,190)? (25,190)104,669 
Acquisition-related costs(323)? (323)? ? ? (323)
Net income and comprehensive income532,107 ? 532,107 157,544 ? 157,544 374,563 

(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 additional information, please see "Non-GAAP Measures" in this Press Release.
(2) Includes additional partnership profit and other revenues.
(3) Represents SmartVMC West's operating results.


FFO, FFO with adjustments, and FFO with adjustments and Transactional FFO

The following tables reconciles net income and comprehensive income to FFO, FFO with adjustments, and FFO with adjustments and Transactional FFO:

Quarterly Comparison to Prior Year

 Three Months Ended Three Months Ended   
(in thousands of dollars, except per Unit amounts)June 30, 2022 June 30, 2021 Variance ($) Variance (%) 
Net income and comprehensive income161,997 96,985 65,012 N/R(7)
Add (deduct):    
Fair value adjustment on revaluation of investment properties(1)(9,669)(10,854)1,185 N/R(7)
Fair value adjustment on financial instruments(2)(61,497)14,122 (75,619)N/R(7)
(Loss) Gain on derivative ? TRS(7,843)557 (8,400)N/R(7)
(Loss) Gain on sale of investment properties(18)68 (86)N/R(7)
Amortization of intangible assets333 333 ? ? 
Amortization of tenant improvement allowance and other1,578 1,447 131 9.1 
Distributions on Units classified as liabilities recorded as interest expense1,083 970 113 11.6 
Distributions on vested deferred units recorded as interest expense728 416 312 75.0 
Adjustment on debt modification(1,960)? (1,960)N/R(7)
Salaries and related costs attributed to leasing activities(3)1,952 1,199 753 62.8 
Acquisition-related costs323 ? 323 N/R(7)
Adjustments relating to equity accounted investments:    
Rental revenue adjustment ? tenant improvement amortization96 101 (5)(5.0)
Indirect interest with respect to the development portion(4)1,943 1,712 231 13.5 
Adjustment to indirect interest with respect to Transit City condo closings(4)? (470)470 N/R(7)
Fair value adjustment on revaluation of investment properties(1,185)(7,097)5,912 N/R(7)
Adjustment for supplemental costs603 966 (363)(37.6)
FFO(5)88,464 100,455 (11,991)(11.9)
Adjustments:    
Other adjustments(6)982 625 357 57.1 
FFO with adjustments(5)89,446 101,080 (11,634)(11.5)

(1) Fair value adjustment on revaluation of investment properties is described in "Investment Properties" in the Trust's MD&A.
(2) Fair value adjustment on financial instruments comprises the following financial instruments: units classified as liabilities, Earnout options, DUP, EIP, LTIP, TRS, interest rate swap agreement(s), and loans receivable and Earnout options recorded in the same period in 2021. The significant assumptions made in determining the fair value and fair value adjustments for these financial instruments are more thoroughly described in the Trust's unaudited interim condensed consolidated financial statements for the three and six months ended June 30, 2022. For details please see discussion in "Results of Operations" in the Trust's MD&A.
(3) Salaries and related costs attributed to leasing activities of $2.0 million were incurred in the three months ended June 30, 2022 (three months ended June 30, 2021 ? $1.2 million) and were eligible to be added back to FFO based on the definition of FFO, in the REALpac White Paper published in January 2022, 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.
(4) Indirect interest is not capitalized to properties under development and residential development inventory of equity accounted investments under IFRS but is a permitted adjustment under REALpac's definition of FFO. The amount is based on the total cost incurred with respect to the development portion of equity accounted investments multiplied by the Trust's weighted average cost of debt.
(5) 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 additional information, please see "Non-GAAP Measures" in this Press Release.
(6) Represents adjustments relating to $1.0 million of costs associated with COVID-19 vaccination centres (three months ended June 30, 2021 ? $0.6 million).
(7) N/R ? Not representative.

Year-to-Date Comparison to Prior Year

(in thousands of dollars, except per Unit amounts)Six Months Ended June 30, 2022 Six Months Ended June 30, 2021 Variance ($) Variance (%) 
Net income and comprehensive income532,107 157,544 374,563 N/R(7)
Add (deduct):    
Fair value adjustment on revaluation of investment properties(1)(281,014)7,905 (288,919)N/R(7)
Fair value adjustment on financial instruments(2)(79,479)25,190 (104,669)N/R(7)
(Loss) gain on derivative ? TRS(6,238)1,070 (7,308)N/R(7)
Gain (loss) on sale of investment properties104 (186)290 N/R(7)
Amortization of intangible assets666 666 ? ? 
Amortization of tenant improvement allowance and other3,237 3,768 (531)(14.1)
Distributions on Units classified as liabilities recorded as interest expense2,127 1,941 186 9.6 
Distributions on vested deferred units recorded as interest expense1,405 948 457 48.2 
Adjustment on debt modification(1,960)? (1,960)N/R(7)
Salaries and related costs attributed to leasing activities(3)3,778 2,702 1,076 39.8 
Acquisition-related costs323 ? 323 N/R(7)
Adjustments relating to equity accounted investments:    
Rental revenue adjustment ? tenant improvement amortization191 200 (9)(4.5)
Indirect interest with respect to the development portion(4)3,816 3,418 398 11.6 
Adjustment to indirect interest with respect to Transit City condo closings(4)? (470)470 N/R(7)
Fair value adjustment on revaluation of investment properties(1,631)(20,930)19,299 (92.2)
Adjustment for supplemental costs3,267 967 2,300 N/R(7)
FFO(5)180,699 184,733 (4,034)(2.2)
Adjustments:    
Other adjustments(6)1,897 861 1,036 N/R(7)
FFO with adjustments(5)182,596 185,594 (2,998)(1.6)
Transactional FFO ? gain on sale of land to co-owners? 1,587 (1,587)N/R(7)
FFO with adjustments and Transactional FFO(5)182,596 187,181 (4,585)(2.4)

(1) Fair value adjustment on revaluation of investment properties is described in "Investment Properties" in the Trust's MD&A.
(2) Fair value adjustment on financial instruments comprises the following financial instruments: units classified as liabilities, Earnout options, DUP, EIP, LTIP, TRS, interest rate swap agreement(s), and loans receivable and Earnout options recorded in the same period in 2021. The significant assumptions made in determining the fair value and fair value adjustments for these financial instruments are more thoroughly described in the Trust's unaudited interim condensed consolidated financial statements for the three and six months ended June 30, 2022. For details please see discussion in "Results of Operations" in the Trust's MD&A.
(3) Salaries and related costs attributed to leasing activities of $3.8 million were incurred in the six months ended June 30, 2022 (six months ended June 30, 2021 ? $2.7 million) and were eligible to be added back to FFO based on the definition of FFO, in the REALpac White Paper published in January 2022, 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.
(4) Indirect interest is not capitalized to properties under development and residential development inventory of equity accounted investments under IFRS but is a permitted adjustment under REALpac's definition of FFO. The amount is based on the total cost incurred with respect to the development portion of equity accounted investments multiplied by the Trust's weighted average cost of debt.
(5) 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 additional information, please see "Non-GAAP Measures" in this Press Release.
(6) Represents adjustments relating to $1.9 million of costs associated with COVID-19 vaccination centres (six months ended June 30, 2021 ? $0.9 million).
(7) N/R ? Not representative.


The following table presents FFO excluding anomalous transactions for the three and six months ended June 30, 2022:

 Three Months Ended June 30
 Six Months Ended June 30
 
(in thousands of dollars)2022 2021 Variance ($) 2022 2021 Variance ($) 
FFO with adjustments(1)89,446 101,080 (11,634)182,596 185,594 (2,998)
Adjusted for:      
ECL(1,214)2,274 (3,488)(2,276)4,581 (6,857)
Loss (gain) on derivative ? TRS7,843 (557)8,400 6,238 (1,070)7,308 
FFO sourced from condominium and townhome closings(1,100)(12,891)11,791 (1,076)(12,891)11,815 
FFO sourced from SmartVMC West acquisition(207)? (207)(459)? (459)
FFO with adjustments excluding impact of ECL, TRS, condominium and townhome closings, and SmartVMC West acquisition(1)94,768 89,906 4,862 185,023 176,214 8,809 

(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 additional information, please see "Non-GAAP Measures" in this Press Release.


ACFO and ACFO with adjustments

The following table reconciles cash flows provided by operating activities to ACFO and ACFO with adjustments:

Quarterly Comparison to Prior Year

(in thousands of dollars)Three Months Ended June 30, 2022 Three Months Ended June 30, 2021Variance ($)/(%)
Cash flows provided by operating activities43,970 62,168 (18,198)
Adjustments to working capital items that are not indicative of sustainable cash available for distribution(1)25,261 5,462 19,799 
Distributions on Units classified as liabilities recorded as interest expense1,083 970 113 
Distributions on vested deferred units recorded as interest expense728 416 312 
Expenditures on direct leasing costs and tenant incentives1,922 1,583 339 
Expenditures on tenant incentives for properties under development596 458 138 
Actual sustaining capital expenditures(2,847)(1,569)(1,278)
Actual sustaining leasing commissions(419)(1,251)832 
Actual sustaining tenant improvements(1,506)(790)(716)
Non-cash interest expense, net of other financing costs7,252 12,782 (5,530)
Non-cash interest income1,572 (961)2,533 
Acquisition-related costs, net323 ? 323 
Distributions from equity accounted investments(1,533)(962)(571)
Adjustments relating to equity accounted investments:   
Cash flows from operating activities including working capital adjustments2,674 14,653 (11,979)
Notional interest capitalization(2)1,943 1,712 231 
Adjustment to indirect interest with respect to Transit City condo closings(3)? (470)470 
Actual sustaining capital and leasing expenditures(179)(14)(165)
Non-cash interest expense31 59 (28)
ACFO(3)80,871 94,246 (13,375)
Other adjustments(4)982 625 357 
ACFO with adjustments(3)81,853 94,871 (13,018)
    
ACFO(3)80,871 94,246 (13,375)
Distributions declared82,422 79,685 2,737 
Surplus of ACFO over distributions declared(1,551)14,561 (16,112)
    
Payout Ratio Information:   
Payout Ratio to ACFO(3)101.9%84.6%17.3%
Payout Ratio to ACFO with adjustments(3)100.7%84.0%16.7%
Payout Ratio to ACFO with adjustments excluding impact of TRS, condominium and townhome closings, and SmartVMC West acquisition(3)(5)90.2%99.3%(9.1) %

(1) Adjustments to working capital items include, but are not limited to, changes in prepaid expenses and deposits, accounts receivables, accounts payables and other working capital items that are not indicative of sustainable cash available for distribution.
(2) See the "Indirect interest with respect to the development portion" as presented in the "Funds From Operations" subsection in the Trust's MD&A.
(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 additional information, please see "Non-GAAP Measures" in this Press Release.
(4) Represents adjustments relating to $1.0 million of costs associated with COVID-19 vaccination centres (three months ended June 30, 2021 ? $0.6 million).
(5) For the three months ended June 30, 2022, excludes $2.7 million of distributions declared in connection with SmartVMC West LP Class D units (three months ended June 30, 2021 ? $nil).

Year-to-Date Comparison to Prior Year

(in thousands of dollars)Six Months Ended June 30, 2022Six Months Ended June 30, 2021Variance ($)/(%)
Cash flows provided by operating activities146,789 141,652 5,137 
Adjustments to working capital items that are not indicative of sustainable cash available for distribution(1)20,872 7,461 13,411 
Distributions on Units classified as liabilities recorded as interest expense2,127 1,941 186 
Distributions on vested deferred units recorded as interest expense1,405 948 457 
Expenditures on direct leasing costs and tenant incentives4,361 2,644 1,717 
Expenditures on tenant incentives for properties under development2,276 730 1,546 
Actual sustaining capital expenditures(5,022)(2,930)(2,092)
Actual sustaining leasing commissions(929)(1,855)926 
Actual sustaining tenant improvements(3,454)(1,247)(2,207)
Non-cash interest expense, net of other financing costs(8,953)11,189 (20,142)
Non-cash interest income733 (239)972 
Acquisition-related costs, net323 ? 323 
Gain on sale of land to co-owners? 1,587 (1,587)
Distributions from equity accounted investments(1,959)(1,570)(389)
Adjustments relating to equity accounted investments:   
Cash flows from operating activities including working capital adjustments3,796 16,204 (12,408)
Notional interest capitalization(2)3,816 3,418 398 
Adjustment to indirect interest with respect to Transit City condo closings(2)? (470)470 
Actual sustaining capital and leasing expenditures(272)(88)(184)
Non-cash interest expense116 26 90 
ACFO(3)166,025 179,401 (13,376)
Other adjustments(4)1,897 861 1,036 
ACFO with adjustments(3)167,922 180,262 (12,340)
    
ACFO(3)166,025 179,401 (13,376)
Distributions declared164,761 159,345 5,416 
Surplus of ACFO over distributions declared1,264 20,056 (18,792)
    
Payout Ratio Information:   
Payout Ratio to ACFO(3)99.2%88.8%10.4%
Payout Ratio to ACFO with adjustments(3)98.1%88.4%9.7%
Payout Ratio to ACFO with adjustments excluding impact of TRS, condominium and townhome closings, and SmartVMC West acquisition(3)(5)92.3%96.5%(4.2) %

(1) Adjustments to working capital items include, but are not limited to, changes in prepaid expenses and deposits, accounts receivables, accounts payables and other working capital items that are not indicative of sustainable cash available for distribution.
(2) See the "Indirect interest with respect to the development portion" as presented in the "Funds From Operations" subsection in the Trust's MD&A.
(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 additional information, please see "Non-GAAP Measures" in this Press Release.
(4) Represents adjustments relating to $1.9 million of costs associated with COVID-19 vaccination centres (six months ended June 30, 2021 ? $0.9 million).
(5) For the six months ended June 30, 2022, excludes $5.4 million of distributions declared in connection with SmartVMC West LP Class D units (six months ended June 30, 2021 ? $nil).


The following table presents ACFO excluding anomalous transactions for the three and six months ended June 30, 2022:

 Three Months Ended June 30
 Six Months Ended June 30
 
(in thousands of dollars)2022 2021 Variance ($) 2022 2021 Variance ($) 
ACFO with adjustments(1)81,853 94,871 (13,018)167,922 180,262 (12,340)
Adjusted for:      
Loss (gain) on derivative ? TRS7,843 (557)8,400 6,238 (1,070)7,308 
ACFO sourced from condominium and townhome closings(1,100)(14,028)12,928 (1,076)(14,094)13,018 
ACFO sourced from SmartVMC West acquisition(207)? (207)(459)? (459)
ACFO with adjustments excluding impact of TRS, condominium and townhome closings, and SmartVMC West acquisition(1)88,389 80,286 8,103 172,625 165,098 7,527 

(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 additional information, please see "Non-GAAP Measures" in this Press Release.


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 June 30, 2022Three Months Ended June 30, 2021 
 Trust portion excluding EAI Equity Accounted Investments Total Proportionate Share(1)Trust portion excluding EAIEquity Accounted InvestmentsTotal Proportionate Share(1)Variance(1)
   (A)  (B)(A?B)
        
Net base rent127,232 4,311 131,543 123,500 3,158 126,658 4,885 
Property tax and insurance recoveries44,788 734 45,522 45,370 565 45,935 (413)
Property operating cost recoveries20,331 1,036 21,367 18,625 735 19,360 2,007 
Miscellaneous revenue3,416 937 4,353 2,998 581 3,579 774 
Rentals from investment properties195,767 7,018 202,785 190,493 5,039 195,532 7,253 
Service and other revenues2,529 ? 2,529 3,444 ? 3,444 (915)
Rentals from investment properties and other(2)198,296 7,018 205,314 193,937 5,039 198,976 6,338 
        
Recoverable tax and insurance costs(46,055)(775)(46,830)(47,668)(578)(48,246)1,416 
Recoverable CAM costs(22,299)(991)(23,290)(19,736)(682)(20,418)(2,872)
Property management fees and costs(882)(243)(1,125)(172)(157)(329)(796)
Non-recoverable operating costs(2,435)(1,076)(3,511)(1,508)(679)(2,187)(1,324)
ECL1,237 (23)1,214 (2,262)(12)(2,274)3,488 
Property operating costs(70,434)(3,108)(73,542)(71,346)(2,108)(73,454)(88)
Other expenses(2,529)? (2,529)(3,459)? (3,459)930 
Property operating costs and other(2)(72,963)(3,108)(76,071)(74,805)(2,108)(76,913)842 
Net rental income and other125,333 3,910 129,243 119,132 2,931 122,063 7,180 
Condo and townhome closings revenue? 4,511 4,511 ? 52,768 52,768 (48,257)
Condo and townhome cost of sales? (3,106)(3,106)? (38,705)(38,705)35,599 
Marketing and selling costs(369)(245)(614)? (35)(35)(579)
Net profit on condo and townhome closings(369)1,160 791 ? 14,028 14,028 (13,237)
NOI(3)124,964 5,070 130,034 119,132 16,959 136,091 (6,057)
        
Net rental income and other as a percentage of net base rent (%)98.5 90.7 98.3 96.5 92.8 96.4 1.9 
Net rental income and other as a percentage of rentals from investment properties (%)64.0 55.7 63.7 62.5 58.2 62.4 1.3 
Net rental income and other as a percentage of rentals from investment properties and other (%)63.2 55.7 62.9 61.4 58.2 61.3 1.6 
Recovery Ratio (including prior year adjustments) (%)95.3 100.2 95.4 94.9 103.2 95.1 0.3 
Recovery Ratio (excluding prior year adjustments) (%)94.8 99.9 94.9 95.4 113.0 95.7 (0.8)

(1) This column contains non-GAAP measures because it includes figures that are recorded in equity accounted investments ? that are not explicitly disclosed and/or presented in the unaudited interim condensed consolidated financial statements for the three and six months ended June 30, 2022 and June 30, 2021. The Trust's method of calculating non-GAAP measures may differ from other reporting issuers' methods and, accordingly, may not be comparable. For additional information, please see "Non-GAAP Measures" in this Press Release.
(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 additional information, please see "Non-GAAP Measures" in this Press Release.


Year-to-Date Comparison to Prior Year

(in thousands of dollars)Six Months Ended June 30, 2022Six Months Ended June 30, 2021 
 Trust portion excluding EAIEquity Accounted Investments Total Proportionate Share(1)Trust portion excluding EAIEquity Accounted InvestmentsTotal Proportionate Share(1)Variance of Total Proportionate Share(1)
   (A)  (B)(A?B)
        
Net base rent252,506 8,391 260,897 244,830 6,202 251,032 9,865 
Property tax and insurance recoveries89,850 1,504 91,354 92,744 1,221 93,965 (2,611)
Property operating cost recoveries47,655 1,957 49,612 43,033 1,603 44,636 4,976 
Miscellaneous revenue5,731 1,658 7,389 5,839 1,044 6,883 506 
Rentals from investment properties395,742 13,510 409,252 386,446 10,070 396,516 12,736 
Service and other revenues5,077 ? 5,077 6,329 ? 6,329 (1,252)
Rentals from investment properties and other(2)400,819 13,510 414,329 392,775 10,070 402,845 11,484 
        
Recoverable tax and insurance costs(93,148)(1,558)(94,706)(97,024)(1,231)(98,255)3,549 
Recoverable CAM costs(52,292)(1,941)(54,233)(46,124)(1,489)(47,613)(6,620)
Property management fees and costs(1,940)(453)(2,393)(461)(300)(761)(1,632)
Non-recoverable operating costs(4,939)(2,095)(7,034)(2,982)(1,331)(4,313)(2,721)
ECL2,350 (74)2,276 (4,571)(10)(4,581)6,857 
Property operating costs(149,969)(6,121)(156,090)(151,162)(4,361)(155,523)(567)
Other expenses(5,077)? (5,077)(6,344)? (6,344)1,267 
Property operating costs and other(2)(155,046)(6,121)(161,167)(157,506)(4,361)(161,867)700 
Net rental income and other245,773 7,389 253,162 235,269 5,709 240,978 12,184 
Condo and townhome closings revenue? 4,517 4,517 ? 52,933 52,933 (48,416)
Condo and townhome cost of sales? (3,110)(3,110)? (38,804)(38,804)35,694 
Marketing and selling costs(395)(272)(667)? (35)(35)(632)
Net profit on condo and townhome closings(395)1,135 740 ? 14,094 14,094 (13,354)
NOI(3)245,378 8,524 253,902 235,269 19,803 255,072 (1,170)
        
Net rental income and other as a percentage of net base rent (%)97.3 88.1 97.0 96.1 92.1 96.0 1.0 
Net rental income and other as a percentage of rentals from investment properties (%)62.1 54.7 61.9 60.9 56.7 60.8 1.1 
Net rental income and other as a percentage of rentals from investment properties and other (%)61.3 54.7 61.1 59.9 56.7 59.8 1.3 
Recovery Ratio (including prior year adjustments) (%)94.5 98.9 94.6 94.9 103.8 95.0 (0.4)
Recovery Ratio (excluding prior year adjustments) (%)94.3 97.7 94.3 95.2 108.6 95.5 (1.2)

(1) This column contains non-GAAP measures because it includes figures that are recorded in equity accounted investments ? that are not explicitly disclosed and/or presented in the unaudited interim condensed consolidated financial statements for the three and six months ended June 30, 2022 and June 30, 2021. The Trust's method of calculating non-GAAP measures may differ from other reporting issuers' methods and, accordingly, may not be comparable. For additional information, please see "Non-GAAP Measures" in this Press Release.
(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 additional information, please see "Non-GAAP Measures" in this Press Release.


Same Properties NOI
NOI (a non-GAAP financial measure) from continuing operations represents: i) rentals from investment properties and other revenues less property operating costs and other expenses, and ii) net profit from condominium sales. Disclosing the NOI contribution from each of same properties, acquisitions, dispositions, Earnouts and Development activities highlights the impact each component has on aggregate NOI. Straight-line rent, lease terminations and other adjustments, and amortization of tenant incentives have been excluded from Same Properties NOI, as have NOI from acquisitions, dispositions, Earnouts and Development activities, and ECL. This has been done in order to more directly highlight the impact of changes in occupancy, rent uplift and productivity.

Quarterly Comparison to Prior Year

 Three Months Ended Three Months Ended   
(in thousands of dollars)June 30, 2022 June 30, 2021 Variance ($) Variance (%) 
Net rental income124,964 119,147 5,817 4.9 
Service and other revenues2,529 3,444 (915)(26.6)
Other expenses(2,529)(3,459)930 (26.9)
NOI(1)124,964 119,132 5,832 4.9 
NOI from equity accounted investments(1)5,070 16,959 (11,889)(70.1)
Total portfolio NOI before adjustments(1)130,034 136,091 (6,057)(4.5)
     
Adjustments:    
Royalties276 208 68 32.7 
Straight-line rent(304)(553)249 (45.0)
Lease termination and other adjustments97 (496)593 N/R(2)
Net profit on condo and townhome closings(3)(791)(14,028)13,237 N/R(2)
Amortization of tenant incentives1,725 1,600 125 7.8 
Total portfolio NOI after adjustments(1)131,037 122,822 8,215 6.7 
     
NOI sourced from:    
Acquisitions(1,699)25 (1,724)N/R(2)
Dispositions(19)(469)450 (95.9)
Earnouts and Developments(863)(43)(820)N/R(2)
Same Properties NOI(1)128,456 122,335 6,121 5.0 
Add back: Bad debt expense/ECL(1,230)2,300 (3,530)N/R(2)
Same Properties NOI excluding ECL(1)127,226 124,635 2,591 2.1 

(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 additional information, please see "Non-GAAP Measures" in this Press Release.
(2) N/R ? Not representative.
(3) Includes marketing costs.

Year-to-Date Comparison to Prior Year

 Six Months Ended Six Months Ended   
(in thousands of dollars)June 30, 2022 June 30, 2021 Variance ($) Variance (%) 
Net rental income245,378 235,284 10,094 4.3 
Service and other revenues5,077 6,329 (1,252)(19.8)
Other expenses(5,077)(6,344)1,267 20.0 
NOI(1)245,378 235,269 10,109 4.3 
NOI from equity accounted investments(1)8,524 19,803 (11,279)(57.0)
Total portfolio NOI before adjustments(1)253,902 255,072 (1,170)(0.5)
     
Adjustments:    
Royalties512 409 103 25.2 
Straight-line rent(381)(89)(292)N/R(2)
Lease termination and other adjustments(145)(940)795 (84.6)
Net profit on condo and townhome closings(3)(740)(14,094)13,354 N/R(2)
Amortization of tenant incentives3,534 4,074 (540)(13.3)
Total portfolio NOI after adjustments(1)256,682 244,432 12,250 5.0 
     
Less NOI sourced from:    
Acquisitions(3,015)125 (3,140)N/R(2)
Dispositions(13)(1,038)1,025 N/R(2)
Earnouts and Developments(1,808)(191)(1,617)N/R(2)
Same Properties NOI(1)251,846 243,328 8,518 3.5 
Add back: ECL(2,275)4,636 (6,911)N/R(2)
Same Properties NOI excluding ECL(1)249,571 247,964 1,607 0.6 

(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 additional information, please see "Non-GAAP Measures" in this Press Release.
(2) N/R ? Not representative.

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)June 30, 2022 June 30, 2021 Variance ($) 
Net income and comprehensive income1,362,238 316,959 1,045,279 
    
Add (deduct) the following items:   
    
Interest expense147,566 156,129 (8,563)
Interest income(12,169)(15,167)2,998 
Yield maintenance costs? 11,954 (11,954)
Amortization of equipment and intangible assets3,741 4,540 (799)
Amortization of tenant improvements6,964 8,166 (1,202)
Fair value adjustments on revaluation of investment properties(948,875)(2,904)(945,971)
Fair value adjustments on revaluation of financial instruments(72,401)40,715 (113,116)
Fair value adjustment on TRS(1,666)1,070 (2,736)
Adjustment for supplemental costs4,919 2,094 2,825 
Loss (gain) on sale of investment properties20 (388)408 
Gain on sale of land to co-owners (Transactional FFO)336 2,332 (1,996)
Acquisition-related costs3,114 166 2,948 
Adjusted EBITDA(1)493,787 525,666 (31,879)
    
    
Adjusted EBITDA(1)493,787 525,666 (31,879)
Less: Condo and townhome closings(7,080)(61,912)54,832 
Add: ECL(3,109)19,760 (22,869)
Adjusted EBITDA excluding condo and townhome closings and ECL(1)483,598 483,514 84 

(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 additional information, please see "Non-GAAP Measures" in this Press Release.

Non-GAAP Measures

The non-GAAP measures used in this Press Release, including but not limited to, FFO per Unit, Unencumbered Assets, NOI, Debt to Aggregate Assets, Interest Coverage Ratio, Adjusted Debt to Adjusted EBITDA, Unsecured/Secured Debt Ratio, FFO, FFO with adjustments, FFO per Unit with adjustments, Transactional FFO, ACFO, Payout Ratio to ACFO, Same Properties NOI, Investment properties ? non-GAAP, Debt ? non-GAAP, Debt to Gross Book Value, Unencumbered Assets to Unsecured Debt, Weighted Average Interest Rate, and Total Proportionate Share, do not have any standardized meaning prescribed by International Financial Reporting Standards ("IFRS") and are therefore unlikely to be comparable to similar measures presented by other issuers. Additional information regarding these non-GAAP measures is available in the Management's Discussion and Analysis of the Trust for the three and six months ended June 30, 2022, dated August 11, 2022 (the "MD&A), and is incorporated by reference. The information is found in the "Presentation of Certain Terms Including Non-GAAP Measures" and "Non-GAAP Measures" sections of the MD&A, which is available on SEDAR at www.sedar.com. Reconciliations of non-GAAP financial measures to the most directly comparable IFRS measures are found in the following sections of this Press Release: "Proportionately Consolidated Balance Sheets (including the Trust's interests in equity accounted investments)", "Proportionately Consolidated Statements of Income and Comprehensive Income (including the Trust's Interests in Equity Accounted Investments)", "FFO, FFO with adjustments, and FFO with adjustments and Transactional FFO", "ACFO and ACFO with adjustments", "Net Operating Income", "Same Properties NOI", and "Adjusted EBITDA".

Full reports of the financial results of the Trust for the three and six months ended June 30, 2022 are outlined in the unaudited interim condensed consolidated financial statements and the related MD&A of the Trust for the three and six months ended June 30, 2022, which are available on SEDAR at www.sedar.com.

Conference Call

SmartCentres will hold a conference call on Friday, August 12, 2022 at 10:00 a.m. (ET). Participating on the call will be members of SmartCentres' senior management.

Investors are invited to access the call by dialing 1-855-353-9183 and then keying in the participant access code 37281#. You will be required to identify yourself and the organization on whose behalf you are participating.

A recording of this call will be made available Friday, August 12, 2022 beginning at 8:30 p.m. (ET) through to 8:30 p.m. (ET) on Friday, August 19, 2022. To access the recording, please call 1-855-201-2300, enter the conference access code 37281# and then key in the playback access code 0112310#.

About SmartCentres

SmartCentres Real Estate Investment Trust is one of Canada's largest fully integrated REITs, with a best-in-class portfolio featuring 185 strategically located properties in communities across the country. SmartCentres has approximately $11.9 billion in assets and owns 34.7 million square feet of income producing value-oriented retail and first-class office space with 97.6% occupancy, on 3,500 acres of owned land across Canada.

SmartCentres continues to focus on enhancing the lives of Canadians by planning and developing complete, connected, mixed-use communities on its existing retail properties. Project 512, a publicly announced $15.2 billion intensification program ($9.8 billion at SmartCentres' share) represents the REIT's current major development focus on which construction is expected to commence within the next five years. This intensification program consists of rental apartments, condos, seniors' residences and hotels, to be developed under the SmartLiving banner, and retail, office, and storage facilities, to be developed under the SmartCentres banner.

SmartCentres' intensification program is expected to produce an additional 58.3 million square feet (40.2 million square feet at SmartCentres' share) of space, 28.3 million square feet (18.3 million square feet at SmartCentres' share) of which has or will commence construction within the next five years. From shopping centres to city centres, SmartCentres is uniquely positioned to reshape the Canadian urban and urban-suburban landscape.

Included in this intensification program is the Trust's share of SmartVMC which, when completed, is expected to include approximately 20.0 million square feet of mixed-use space in Vaughan, Ontario. Construction of the first five sold-out phases of Transit City Condominiums that represent 2,789 residential units continues to progress. Final closings of the first three phases of Transit City Condominiums began ahead of budget and ahead of schedule in August 2020 and all 1,741 units, in addition to the 22 townhomes that complete these phases, have now closed. The fourth and fifth sold-out phases representing 1,026 units are currently under construction and are expected to close in 2023.

Certain statements in this Press Release are "forward-looking statements" that reflect management's expectations regarding the Trust's future growth, results of operations, performance and business prospects and opportunities. More specifically, certain statements including, but not limited to, statements related to SmartCentres' expectations relating to cash collections, SmartCentres' expected or planned development plans and joint venture projects, including the described type, scope, costs and other financial metrics and the expected timing of construction and condominium closings and statements that contain words such as "could", "should", "can", "anticipate", "expect", "believe", "will", "may" and similar expressions 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 the Trust's Unitholders and financial analysts in understanding 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 actual results to differ materially from the results discussed in the forward-looking statements, including risks associated with potential acquisitions not being completed or not being completed on the contemplated terms, public health crises such as the COVID-19 pandemic, real property ownership and development, debt and equity financing for development, interest and financing costs, construction and development risks, and the ability to obtain commercial and municipal consents for development. These risks and others are more fully discussed under the heading "Risks and Uncertainties" and elsewhere in SmartCentres' most recent Management's Discussion and Analysis, as well as under the heading "Risk Factors" in SmartCentres' most recent annual information form. Although the forward-looking statements contained in this Press Release are based on what management believes to be reasonable assumptions, SmartCentres cannot assure investors that actual results will be consistent with these forward-looking statements. The forward-looking statements contained herein are expressly qualified in their entirety by this cautionary statement. These forward-looking statements are made as at the date of this Press Release and SmartCentres assumes no obligation to update or revise them to reflect new events or circumstances unless otherwise required by applicable securities legislation.

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 stable retail environment; a continuing trend toward land use intensification, including residential development in urban markets and continued growth along transportation nodes; access to equity and debt capital markets to fund, at acceptable costs, future capital requirements and to enable our refinancing of debts as they mature; that requisite consents for development will be obtained in the ordinary course, construction and permitting costs consistent with the past year and recent inflation trends.

For more information, please visit www.smartcentres.com or contact:

Mitchell Goldhar
Executive Chairman and CEO
SmartCentres
(905) 326-6400 ext. 7674
mgoldhar@smartcentres.com
 Peter Sweeney
Chief Financial Officer
SmartCentres
(905) 326-6400 ext. 7865
psweeney@smartcentres.com


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