TSX SYMBOL: BEI.UN August, 2008
Boardwalk REIT Announces Solid Second Quarter 2008 Financial Results; FFO Per Unit Up 13.2% and DI Per Unit up 15.1% YOY; its August 2008 Distribution and its intention to renew its Normal Course Issuer Bid
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SUPPLEMENTAL NOTES - Q2-2008 August 14, 2008 (Printer Friendly PDF File)
CALGARY, Aug. 14 /CNW/ - Boardwalk Real Estate Investment Trust ("BEI.UN"
- TSX) Boardwalk Real Estate Investment Trust ("Boardwalk REIT" or the
"Trust") today announced solid financial results for the second quarter of
2008; FFO per unit up 13.2% and DI per unit up 15.1% YOY; its August 2008
Distribution and its intention to renew its Normal Course Issuer Bid. FFO and
DI are non-GAAP measures; the reconciliation to Net Earnings and to Total
Operating Cash Flows, respectively, can be found in Management's Discussion
and Analysis (MD&A) for the second quarter ended June 30, 2008, under the
section titled, "Performance Measures".
For the second quarter ended June 30, 2008, the Trust reported Funds From
Operations ("FFO") of $32.9 million and FFO per unit of $0.60 on a diluted
basis, compared to FFO of $29.8 million and FFO per unit of $0.53 for the same
period last year. Distributable income ("DI") for the quarter was
$33.2 million and DI per unit was $0.61 on a diluted basis, compared to
$30.0 million and $0.53 per unit for the same period last year.
Highlights of the Trust's Second quarter 2008 financial results include:
- Rental revenues of $105.5 million, an increase of 13.8%, compared to
$92.7 million for the three-month period ended June 30, 2007.
- Net operating income of $66.7 million, representing a 13.6% increase,
from $58.7 million for the three-month period ended June 30, 2007.
- FFO of $32.9 million, an increase of 10.6%, compared to $29.8 million
for the three-month period ended June 30, 2007.
- FFO per Unit was $0.60 on a diluted basis, up 13.2%, compared to
$0.53 for the three-month period ended June 30, 2007.
- DI per Unit was $0.61, up 15.1%, from the $0.53 per Unit for the
three months ended June 30, 2007.
Commenting on the Trust's Q2 2008 results, Sam Kolias, C.E.O. and
Chairman of the Board, said: "We are pleased to report on a solid second
quarter of 2008 for the Trust. Economic strength in Western Canada continued
to support strong demand for rental accommodations in our largest markets this
quarter, producing positive revenue growth for the Trust. Funds from
Operations (FFO) and FFO per Unit increased approximately 10.6% and 13.2%,
respectively, over last year's second quarter.
Much of our success this quarter can be attributed to our three-pronged
revenue maximization strategy, in which we actively monitor occupancy, adjust
price and apply suite-specific incentives. In the first quarter of 2008, we
strategically reduced market rents on select properties in response to weaker
seasonal demand and quickly realized an increase in occupancy. In the second
quarter, this strategy continued to be very successful, with occupancy
improving overall in Alberta, Saskatchewan, British Columbia and Quebec. This
improved occupancy places the Trust in a strong position for continued revenue
growth over the third and fourth quarters of 2008. Despite some adjustments,
market rents remain quite stable, with slight increases or decreases depending
on the local rental market."
Roberto Geremia, President, added: "Saskatchewan's booming economy
continues to produce outstanding market fundamentals, particularly in
Saskatoon, Saskatchewan's largest centre. House prices in Saskatoon and Regina
continue to increase at a significant pace, creating a strong value
differential for the rental option. Monthly occupied rent in our property
portfolio increased approximately $44 in Saskatchewan in June 2008 over March
2008 and increased approximately $137 year-over-year. Average market rents in
Saskatchewan increased $63 in June 2008 compared to March 2008, and increased
$257 year-over-year.
Though some market fundamentals have tempered from their peak, Alberta
continues to exhibit solid economic strength. Strong employment growth, a
thriving energy sector and healthy international migration continue to bode
well for rental demand. With 54% of our portfolio located in the province, we
are pleased to note continued growth at a more sustainable pace.
Over the second quarter of 2008, a large housing inventory and a
continued tempering of housing prices were noted in Calgary and Edmonton.
Despite increased housing options for consumers, we are pleased to report
improved occupancy in both Calgary and Edmonton on a quarter-over-quarter
basis. We believe that our incremental approach to market rents, with a focus
on occupancy, continues to be the best way to maximize revenues in these
markets. Average occupied rents were up approximately $6 in Calgary and up
approximately $10 in Edmonton in June 2008, compared to March 2008. Market
rents increased approximately $51 in Calgary and decreased approximately $5 in
Edmonton in June 2008 compared to March 2008. Year-over-year market rent
decreased by $34 and $75 in Calgary and Edmonton, respectively."
Operational Highlights
- The average vacancy rate across the Trust's portfolio for the second
quarter of 2008 was 4.74%, down from 5.65% in the first quarter of
2008, and up from 4.16% for the second quarter of 2007.
- The average monthly rent realized in the second quarter of 2008 was
$955 per rental unit, up $90 from $865 per rental unit for the same
period last year.
- The average market rent for the Trust's properties at the end of June
2008 was an estimated $1,068 per rental unit per month, which
compares to an average in-place monthly rent per occupied unit of
$1,008. This translates to an estimated 'loss-to-lease' of
approximately $25.2 million on an annualized basis, or $0.46 per
outstanding Trust Unit, given existing occupancy levels.
- For the second quarter, 'same-property' (or properties owned for a
period of 24 months or longer) rental revenue grew by 9.6% compared
to the same period last year, overall operating costs increased by
12.0%, resulting in same-property NOI increase of 8.2%. A total of
33,854 units, representing approximately 92% of Boardwalk REIT's
total portfolio, were classified as stabilized as of June 30, 2008.
More detail on our operations will be found in our conference call
presentation to be posted on our web site today at
http://www.boardwalkreit.com/FinancialReports/ The conference call audio for
this presentation can also be found on our web site at
http://www.boardwalkreit.com/FinancialReports/ following the call.
Amendment to Declaration of Trust
On May 13, 2008 and July 30, 2008, respectively, Boardwalk REIT
Unitholders and Debenture Holders voted to adopt the amendment to its
Declaration of Trust and Trust Indenture to change the definition of "Gross
Book Value" by increasing the asset bump by $410 million, from $231 million to
$641 million. We believe that the amendment to the definition of Gross Book
Value will give the Trust increased flexibility to implement its strategic
plan, which includes the purchase of accretive multi-family assets in the
current competitive acquisition environment and, at the same time, execute its
Trust Unit buy-back program.
Same-Property Results
Boardwalk continued to show solid performance in its stabilized
properties (defined as properties owned for 24 months or longer). The
"same-property" results for the Trust's stabilized portfolio for the
three-month period ended June 30, 2008 showed rental revenue growth of 9.6% on
a year-over-year basis. Operating expenses increased 12.0%, resulting in an
increase in NOI of 8.2% compared to the same period last year. A total of
33,854 units, representing approximately 92.0% of Boardwalk's total portfolio,
were classified as stabilized as at June 30, 2008.
Same-Property Results - Stabilized Portfolio
-------------------------------------------------------------------------
% % Net % of
% Operating Operating Stabi-
No. of Revenue Expense Income lized
Jun 30 2008 - 3 M Units Growth Growth Growth NOI
-------------------------------------------------------------------------
Calgary 4,973 7.8% 13.9% 5.6% 20.2%
Edmonton 10,649 14.2% 18.1% 12.4% 35.2%
Other Alberta 1,680 6.1% 29.6% -3.1% 5.6%
British Columbia 871 5.8% -3.6% 12.0% 2.6%
Ontario 4,265 1.1% 6.1% -3.4% 7.6%
Quebec 6,756 3.3% 4.1% 2.7% 16.9%
Saskatchewan 4,660 20.9% 13.7% 25.3% 11.9%
-------------------------------------------------------------------------
33,854 9.6% 12.0% 8.2% 100.0%
-------------------------------------------------------------------------
-------------------------------------------------------------------------
% % Net % of
% Operating Operating Stabi-
No. of Revenue Expense Income lized
Jun 30 2008 - 6 M Units Growth Growth Growth NOI
-------------------------------------------------------------------------
Calgary 4,973 8.5% 17.0% 5.2% 20.3%
Edmonton 10,649 15.3% 17.9% 13.9% 35.7%
Other Alberta 1,680 5.9% 23.5% -1.8% 5.8%
British Columbia 871 6.0% 3.8% 7.6% 2.6%
Ontario 4,265 0.9% 1.6% 0.1% 7.6%
Quebec 6,756 3.0% 1.4% 4.2% 17.1%
Saskatchewan 4,660 18.4% 14.4% 21.6% 10.9%
-------------------------------------------------------------------------
33,854 9.6% 11.0% 8.8% 100.0%
-------------------------------------------------------------------------
Commenting on Boardwalk REIT's same-property results, William Wong, Chief
Financial Officer, said: "For the second quarter 2008, same-store revenue
increased by 9.6% compared to the same period in the prior year. Despite
rental expenses increasing by 12.0%, net operating income growth improved
overall by 8.2%. The increase in reported stabilized revenue was driven mainly
by the Trust's Alberta operations, which account for approximately 61.0% of
the Trust's reported stabilized net operating income. The majority of the
reported increase in rental operating expenses for the three months ended
June 30, 2008 was due to higher utility costs, particularly the cost of
natural gas.
For the six months ended June 30, 2008, same-store revenues increased by
9.6% over the same period last year, resulting in an overall increase in net
operating income of 8.8%, despite an increase of 11.0% in operating expenses
in the first six months of 2008. Overall, the increased operating expenses
were the result of an increase in the number of units in the portfolio and
higher utility costs."
Sequential Revenue Analysis
-------------------------------------------------------------------------
Q2 2008 Q1 2008 Q4 2007 Q3 2007
Stabilized No. of vs. Q1 vs. Q4 vs. Q3 vs. Q2
Revenue Growth Units 2008 2007 2007 2007
-------------------------------------------------------------------------
Calgary 4,973 3.0% 3.3% 0.4% 0.8%
Edmonton 10,649 2.6% 5.3% 1.8% 3.9%
Other Alberta 1,680 0.1% 3.2% 1.9% 0.8%
British Columbia 871 1.9% 4.1% -1.9% 2.6%
Ontario 4,265 0.9% -0.4% 2.1% -1.4%
Quebec 6,756 1.1% 0.0% 0.2% 2.3%
Saskatchewan 4,660 6.6% 2.7% 4.6% 5.5%
-------------------------------------------------------------------------
33,854 2.5% 2.9% 1.5% 2.4%
-------------------------------------------------------------------------
Commenting on Boardwalk REIT's sequential stabilized revenue growth,
William Wong, Chief Financial Officer, said: "On a sequential basis,
stabilized revenues grew 2.5% from Q1 2008 to Q2 2008, 2.9% from Q4 2007 to Q1
2008, 1.5% from Q3 2007 to Q4 2007 and 2.4% from Q2 2007 to Q3 2007."
Real Estate Acquisition/Disposition Activity
Closed - 2008
No. of
Building Name City Units Type Price
-------------------------------------------------------------------------
Varsity Square
Apartments Calgary 297 High Rise $ 48,750,000
-------------------------------------------------------------------------
Total Acquisitions 297 $ 48,750,000
-------------------------------------------------------------------------
Closed - 2008
Year 1 Year 2
Building Name Cap Rate Cap Rate $/unit $/sq ft Date Closed
-------------------------------------------------------------------------
Varsity Square
Apartments 5.86% 6.12% $164,141 $207 June 12, 2008
-------------------------------------------------------------------------
Total
Acquisitions 5.86% 6.12% $164,141 $207
-------------------------------------------------------------------------
Excluded from the table is one additional unit acquired in an Edmonton,
Alberta property called, "Morningside", of which Boardwalk REIT already owned
220 units. Dispositions to date for 2008 consisted solely of the sales and
closings of 30 units in a 90-unit property converted into condominiums for
sale.
Commenting on the Trust's property acquisitions and dispositions, Bill
Chidley, Senior Vice President, Corporate Development, said: "In the second
quarter of 2008, the Trust closed on a previously announced acquisition of
297 rental units in Calgary, Alberta. The acquisition had a total purchase
price of $48.8 million and a year one cap rate of 5.86%."
Unit Buyback
We continue to believe that one of the best investments we can make is
purchasing our Trust Units at current levels. Under the Normal Course Issuer
Bid, the Trust purchased and cancelled 1,518,100 REIT Trust Units in the first
half of 2008, representing a total market value of approximately
$59.7 million, or an average of $39.33 per Trust Unit. Together with the
856,447 Trust Units purchased and cancelled in 2007, the Trust has purchased
and cancelled 2,374,547 Trust Units representing a total market value of
approximately $98.3 million at June 30, 2008, or an average of $41.39 per
Trust Unit.
Intention to Renew Normal Course Issuer Bid
Boardwalk Real Estate Investment Trust ("Boardwalk") wishes to announce
its intention to renew its normal course issuer bid (the "Bid") through the
facilities, and subject to regulatory approval, of The Toronto Stock Exchange.
Boardwalk's previous normal course issuer bid will expire on August 15, 2008.
As of July 31, 2008, Boardwalk has 49,712,541 issued and outstanding
trust units. The Bid, if approved, would allow Boardwalk to purchase up to
4,040,192 trust units, representing 10% of the public float of its trust unit
capital, through the facilities of The Toronto Stock Exchange. The average
daily trading volume for the six calendar months prior to the date hereof was
170,393 trust units. The Bid, if approved, is expected to commence on
August 18, 2008 and will terminate one year later, or at such earlier time as
the Bid is complete.
Continued Financial Strength
The Trust continued to build on its solid financial position throughout
the second quarter of 2008. Boardwalk REIT's total principal mortgage and debt
outstanding was $2.16 billion as of June 30, 2008, as compared to
$1.76 billion as of June 30, 2007. As of June 30, 2008, the Trust's total debt
had an average maturity of 3 years with a weighted average interest rate of
4.91% and debt-to-total enterprise value ratio was 50.2%.
We currently estimate that by the end of this fiscal year, the Trust
could have access to approximately $350 million of available capital in the
form of cash-on-hand; a secured, undrawn acquisition and operating facility;
and estimated additional mortgage proceeds for the remainder of the year. The
Trust's interest coverage ratio, excluding gains, for the six-month period
ended June 30, 2008 was 2.20 times compared to 2.27 times in the same period
last year.
Outlook and 2008 Financial Guidance
Each quarter, we review our key assumptions in providing our financial
guidance. Based on this review, we are revising our reported 2008 financial
guidance. We have adjusted the reported range of FFO from $2.35 - $2.50 to a
new range of $2.35 - $2.45 (DI from $2.37 - $2.52 to $2.37 - $2.47). The two
main catalysts for these adjustments are the higher-than-expected utility
costs and lower-than-anticipated acquisitions.
The following table summarises the changes to our 2008 Financial
Guidance:
-------------------------------------------------------------------------
Original Q1 Revised Q2 Revised
Description Guidance Guidance Guidance
-------------------------------------------------------------------------
Acquisitions $130 million to $65 million to $75 million
$260 million $130 million (500 units)
(1,000 to 2,000 (500 to 1,000
apartment units) apartment units)
-------------------------------------------------------------------------
Stabilized Building
NOI growth 8% to 14% 8% to 12% 8% to 10%
-------------------------------------------------------------------------
FFO per Trust Unit $2.35 to $2.50 $2.35 to $2.50 $2.35 to $2.45
-------------------------------------------------------------------------
DI per Trust Unit $2.37 to $2.52 $2.37 to $2.52 $2.37 to $2.47
-------------------------------------------------------------------------
Change to Quarterly Reporting Format
Commencing with the third quarter of 2008, we will be significantly
adjusting the format of our quarterly reporting to reduce redundancy. We
believe the new format will be easier to read and provide a high-level
overview of our quarterly results. A more detailed analysis will continue to
be provided in the MD&A and quarterly presentation.
August 2008 Monthly Distribution
The Trust has declared its August 2008 distribution in the amount of
15.00 cents per Trust Unit ($1.80 on an annualized basis). The August
distribution will be payable on September 15, 2008 to Unitholders of record on
August 29, 2008.
Supplementary Information
Boardwalk produces Quarterly Supplemental Information that provides
detailed information regarding the Trust's activities during the quarter. The
Second Quarter 2008 Supplemental Information is available on our investor
website at www.boardwalkreit.com.
Teleconference on Second Quarter 2008 Financial Results
We invite you to participate in the teleconference that will be held to
discuss these results this same morning (August 14, 2008) at 11:00 am EST.
Senior management will speak to the second quarter financial results and
provide a corporate update. Presentation materials will be made available on
our investor website at www.boardwalkreit.com prior to the call.
Participation & Registration: Please RSVP to Investor Relations at
403-206-6758 or by email to investor@bwalk.com.
Teleconference: The telephone numbers for the conference are:
416-644-3414 (within Toronto) or toll-free 800-733-7560 (outside Toronto).
Webcast: Investors will be able to listen to the call and view our slide
presentation over the Internet by visiting http://www.boardwalkreit.com
15 min. prior to the start of the call. An information page will be provided
for any software needed and system requirements. The live audiocast will also
be available at http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=2317260
Replay: An audio recording of the teleconference will be available from
1:00 pm ET on Thursday, August 14, 2008 until 11:59 pm ET on Thursday,
August 21, 2008. You can access it by dialling 416-640-1917 and using the
passcode 21275127 followed by the pound sign. An audio archive will also be
available on our website (http://www.boardwalkreit.com/) approximately
two hours after the conference call.
Corporate Profile
Boardwalk REIT is an open-ended real estate investment trust formed to
acquire all of the assets and undertakings of Boardwalk Equities Inc.
Boardwalk REIT's principal objectives are to provide its unitholders with
monthly cash distributions, partially on a Canadian income tax-deferred basis,
and to increase the value of its units through the effective management of its
residential multi-family revenue producing properties and the acquisition of
additional properties. Boardwalk REIT currently owns and operates in excess of
260 properties with 36,785 units totalling approximately 40 million net
rentable square feet, and is Canada's largest owner/operator of multi-family
rental communities. Boardwalk REIT's portfolio is concentrated in the
provinces of Alberta, British Columbia, Saskatchewan, Ontario and Quebec.
(1) Funds From Operations ("FFO") is a generally accepted measure of
operating performance of real estate investment trusts and companies;
however, it is a non-GAAP measure. The Trust calculates FFO by taking net
earnings after discontinued operations, adjusting for gains or losses on
disposal of discontinued operation assets and extraordinary items, and
adding non-cash expenses including future income taxes and amortization.
The determination of this amount may differ from that of other real
estate investment trusts and companies. Distributable Income ("DI") is
calculated based on the definition as set out in the Trust's declaration
of trust and is computed by taking FFO and adding back amortization on
any deferred financing charges incurred prior to May 3, 2004 as well as
adjusting for any discounts or premiums relating to the amortization of
mark-to-market debt adjustment incurred subsequent to the real estate
investment trust conversion date of May 3, 2004.
CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING STATEMENTS
This news release contains forward-looking statements relating to our
operations and the environment in which we operate, which are based on our
expectations, estimates, forecast and projections, which we believe are
reasonable as of the current date . These statements are not guarantees of
future performance and involve risks and uncertainties that are difficult to
control or predict. For more exhaustive information on these risks and
uncertainties you should refer to our most recently filed annual information
form which is available at www.sedar.com. Actual outcomes and results may
differ materially from those expressed in these forward-looking statements.
Readers, therefore, should not place undue reliance on any such
forward-looking statements. Further, a forward-looking statement speaks only
as of the date on which such statement is made and should not be relied upon
as of any other date. While we may elect to, we undertake no obligation to
publicly update any such statement to reflect new information or the
occurrence of future events or circumstances at any particular time.
CONSOLIDATED BALANCE SHEETS
(CDN$ THOUSANDS)
(UNAUDITED)
As at June 30, December 31,
2008 2007
-------------------------
Assets
Revenue producing properties (NOTE 4) $2,187,680 $2,149,853
Other assets (NOTE 5) 17,221 15,776
Mortgages and accounts receivable 9,242 10,071
Segregated tenants' security deposits 14,073 12,935
Cash and cash equivalents 76,185 960
Discontinued operations (NOTE 6) 1,564 6,293
-------------------------------------------------------------------------
$2,305,965 $2,195,888
-------------------------
-------------------------
Liabilities
Mortgages payable $1,969,394 $1,770,015
Debentures (NOTE 7) 118,920 118,768
Accounts payable and accrued liabilities 43,314 48,279
Refundable tenants' security deposits and other 17,343 16,186
-------------------------------------------------------------------------
2,148,971 1,953,248
Future income taxes (NOTES 3 and 11) 103,557 100,287
-------------------------------------------------------------------------
2,252,528 2,053,535
Unitholders' Equity
Unitholders' equity 53,437 142,353
-------------------------------------------------------------------------
$2,305,965 $2,195,888
-------------------------
-------------------------
Commitments and contingencies (NOTE 14)
Guarantees (NOTE 15)
SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF EARNINGS (LOSS) AND
COMPREHENSIVE INCOME (LOSS)
(CDN$ THOUSANDS, EXCEPT PER UNIT AMOUNTS)
(UNAUDITED)
3 months 3 months 6 months 6 months
ended ended ended ended
June 30, June 30, June 30, June 30,
2008 2007 2008 2007
-------------------------------------------------
Revenue
Rental income $105,460 $92,711 $207,669 $180,281
Expenses
Revenue producing
properties:
Operating expenses 18,577 16,202 37,136 31,743
Utilities 11,819 9,512 28,543 23,374
Utility rebate
(NOTE 14) - (8) (1,258) (933)
Property taxes 8,330 8,285 16,009 16,354
Administration 5,782 5,308 11,536 10,599
Financing costs 26,936 22,570 52,531 44,239
Amortization of
deferred financing
costs 1,114 1,100 2,582 2,379
Amortization of capital
assets 20,617 18,623 40,616 36,759
Amortization of
intangibles 1,021 1,810 2,960 3,008
-------------------------------------------------------------------------
94,196 83,402 190,655 167,522
-------------------------------------------------
Earnings from continuing
operations before
income taxes 11,264 9,309 17,014 12,759
Current income taxes - - 4 -
Future income taxes
(NOTE 11) 889 111,630 3,270 111,398
-------------------------------------------------------------------------
Earnings (loss) from
continuing operations 10,375 (102,321) 13,740 (98,639)
Earnings from discontinued
operations, net of tax
(NOTE 6) 1,355 4,821 3,622 4,769
-------------------------------------------------------------------------
Net earnings (loss) 11,730 (97,500) 17,362 (93,870)
Other comprehensive income - - - -
-------------------------------------------------
Comprehensive income
(loss) $11,730 $(97,500) $17,362 $(93,870)
-------------------------------------------------
-------------------------------------------------
Basic earnings (loss)
per unit (NOTE 10)
- from continuing
operations $0.19 $(1.82) $0.25 $(1.75)
- from discontinued
operations 0.02 0.09 0.07 0.09
-------------------------------------------------------------------------
Basic earnings (loss)
per unit $0.21 $(1.73) $0.32 $(1.66)
-------------------------------------------------
-------------------------------------------------
Diluted earnings (loss)
per unit (NOTE 10)
- from continuing
operations $0.19 $(1.82) $0.25 $(1.75)
- from discontinued
operations 0.02 0.09 0.07 0.09
-------------------------------------------------------------------------
Diluted earnings (loss)
per unit $0.21 $(1.73) $0.32 $(1.66)
-------------------------------------------------
-------------------------------------------------
SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF UNITHOLDERS' EQUITY
(CDN$ THOUSANDS, EXCEPT NUMBER OF UNITS)
(UNAUDITED)
6 months 6 months
ended ended
June 30, June 30,
2008 2007
-------------------------
Trust units (NOTE 9)
Balance, beginning of period $338,084 $365,744
Units issued under equity financing,
net of issue costs - (136)
Units issued under distribution reinvestment plan 2,121 4,232
Deferred unit plan (NOTE 8) 921 931
Units purchased and cancelled (NOTE 9) (59,707) -
-------------------------------------------------------------------------
Balance, end of period $281,419 $370,771
-------------------------
Cumulative earnings
Balance, beginning of period $95,591 $154,917
Net earnings (loss) for the period 17,362 (93,870)
-------------------------------------------------------------------------
Balance, end of period $112,953 $61,047
-------------------------
Accumulated other comprehensive income
Balance, beginning of period $- $-
Other comprehensive income for the period - -
-------------------------------------------------------------------------
Balance, end of period $- $-
-------------------------
Cumulative distributions to unitholders
Balance, beginning of period $(291,322) $(201,794)
Distributions declared to unitholders (NOTE 10) (49,613) (42,866)
-------------------------------------------------------------------------
Balance, end of period $(340,935) $(244,660)
-------------------------
Total unitholders' equity $53,437 $187,158
-------------------------
-------------------------
Units issued and outstanding 54,247,552 56,451,371
-------------------------
-------------------------
SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF CASH FLOWS
(CDN$ THOUSANDS)
(UNAUDITED)
3 months 3 months 6 months 6 months
ended ended ended ended
June 30, June 30, June 30, June 30,
2008 2007 2008 2007
------------------------------------------------
Operating activities
Net earnings (loss) $11,730 $(97,500) $17,362 $(93,870)
(Earnings) from
discontinued
operations,
net of tax (1,355) (4,821) (3,622) (4,769)
Future income taxes 889 111,630 3,270 111,398
Amortization of
capital assets 20,617 18,623 40,616 36,759
Amortization of
intangibles 1,021 1,810 2,960 3,008
Amortization of
deferred financing
costs 1,114 1,100 2,582 2,379
-------------------------------------------------------------------------
34,016 30,842 63,168 54,905
Cash from (used in)
discontinued operations - 19 - (9)
Net change in operating
working capital
(see below) (937) 8,555 (6,210) 8,401
-------------------------------------------------------------------------
Total operating
cash flows 33,079 39,416 56,958 63,297
------------------------------------------------
Financing activities
Issuance of trust units
(net of issue costs)
(NOTE 9) - 1,782 2,121 4,095
Distributions paid (24,749) (22,005) (49,761) (42,859)
Unit repurchase program
(NOTE 9) (36,698) - (59,707) -
Financing of revenue
producing properties 151,536 72,545 360,923 318,685
Repayment and maturity
of debt on revenue
producing properties (69,904) (22,536) (151,266) (132,237)
Deferred financing
costs incurred (5,192) (2,447) (12,214) (7,622)
-------------------------------------------------------------------------
14,993 27,339 90,096 140,062
------------------------------------------------
Investing activities
Purchases of revenue
producing properties
(NOTE 4) (48,925) (16,000) (48,925) (176,213)
Improvements to
properties (16,221) (19,146) (32,546) (33,494)
Net cash proceeds from
sale of properties
(NOTE 4) 1,906 12,275 10,287 12,275
Additions to corporate
technology assets (322) (358) (645) (693)
-------------------------------------------------------------------------
(63,562) (23,229) (71,829) (198,125)
------------------------------------------------
Net increase (decrease)
in cash and cash
equivalents balance (15,490) 43,526 75,225 5,234
Cash and cash equivalents
(bank indebtedness),
beginning of period 91,675 (42,334) 960 (4,042)
-------------------------------------------------------------------------
Cash and cash equivalents,
end of period $76,185 $1,192 $76,185 $1,192
------------------------------------------------
------------------------------------------------
Supplementary cash flow
information:
Taxes paid $- $- $4 $-
Interest paid $24,332 $15,118 $50,874 $31,291
-------------------------------------------------
-------------------------------------------------
Net change in operating
working capital:
Net change in mortgages
and accounts receivable $825 $927 $829 $261
Net change in other assets (81) (1,105) (2,093) (1,933)
Net change in tenants'
security deposits (12) (13) 19 176
Net change in accounts
payable and accrued
liabilities (1,669) 8,746 (4,965) 9,897
------------------------------------------------
$(937) $8,555 $(6,210) $8,401
------------------------------------------------
------------------------------------------------
SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three and six months ended June 30, 2008
(TABULAR AMOUNTS IN CDN$ THOUSANDS, EXCEPT NUMBER OF UNITS AND PER UNIT
AMOUNTS UNLESS OTHERWISE STATED)
(UNAUDITED)
1. ORGANIZATION OF TRUST
Boardwalk Real Estate Investment Trust ("Boardwalk REIT" or the
"Trust") is an unincorporated, open-ended real estate investment
trust created pursuant to the Declaration of Trust ("DOT"), dated
January 9, 2004 and as amended and restated on May 3, 2004, May 10,
2006, May 10, 2007, and May 13, 2008 under the laws of the Province
of Alberta. Boardwalk REIT was created to invest in revenue producing
multi-family residential properties or interests within Canada,
initially through the acquisition of operations of Boardwalk Equities
Inc. (the "Corporation"), which was acquired on May 3, 2004.
2. BASIS OF PRESENTATION
These unaudited interim consolidated financial statements have been
prepared in accordance with the recommendations of the handbook of
the Canadian Institute of Chartered Accountants ("CICA Handbook") and
are consistent with those used in the audited consolidated financial
statements as at and for the year ended December 31, 2007, except as
disclosed in NOTE 3 below. These interim financial statements do not
include all of the disclosures required by Canadian generally
accepted accounting principles ("Canadian GAAP") applicable to annual
financial statements and, therefore, they should be read in
conjunction with the audited consolidated financial statements.
The preparation of financial statements in accordance with Canadian
GAAP requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, and to make
disclosure of contingent assets and liabilities at the date of the
financial statements, and the reported amounts of revenues and
expenses during the reporting period. Actual results may differ from
those estimates.
The operating results for the three and six months ended June 30,
2008 are not necessarily indicative of the results that may be
expected for the full year ending December 31, 2008 due to seasonal
variations in utility costs and other factors. Historically,
Boardwalk REIT has experienced higher utility expenses in the first
quarter as a result of the winter months, resulting in variations in
the quarterly results.
Certain comparative figures have been reclassified to conform to the
presentation of the current period, or as a result of accounting
changes.
3. ACCOUNTING CHANGES
On January 1, 2008, the Trust adopted four new accounting standards
issued by the CICA as outlined below:
a) Section 1535 - Capital Disclosures
b) Section 3031 - Inventories
c) Section 3862 - Financial Instruments - Disclosure
d) Section 3863 - Financial Instruments - Presentation
Section 1535 - Capital Disclosures requires the disclosure of both
qualitative and quantitative information, which allows the users of
financial statements to evaluate the entity's objective, policies and
processes for managing capital.
Section 3031 - Inventories, which replaced Section 3030 -
Inventories, provides guidelines on the measurement and costing of
inventories, as well as allows for the reversal of inventory values
previously written-down. This new section also enhances disclosure
requirements for inventory to include accounting policies and
carrying amounts used to value inventory, inventory amounts
recognized as an expense and disclosure of any write-downs or the
reversal of any inventory write-downs previously recorded.
Section 3862 - Financial Instruments-Disclosure and Section 3863 -
Financial Instruments-Presentation, which replaced Section 3861 -
Financial Instruments Presentation and Disclosure, revises and
enhances the disclosure requirements for financial instruments and
carry forward unchanged the presentation requirements for financial
instruments. Section 3862 requires entities to provide disclosures in
their financial statements which allow the users to evaluate both the
significance of financial instruments for the entity's financial
position and performance; and the nature and extent of risks arising
from financial instruments to which the entity is exposed during the
period and at the balance sheet date, and how the entity manages
those risks. The purpose of Section 3863 is to enhance financial
statement users' understanding of the significance of financial
instruments to an entity's financial position, performance and cash
flows.
Impact of Adoption of Sections 1535, 3031, 3862 and 3863
Our consolidated financial statements include additional disclosures
on capital management (NOTE 12) and financial instruments (NOTE 13).
There was no material impact to the consolidated financial statements
on adoption of Section 3031 by the Trust.
Bill C-52
On June 22, 2007, Bill C-52 received Royal Assent in Canada. As a
result of this, under Canadian GAAP, once a bill is enacted, it is a
requirement to record the income tax implications effective on that
date. In accordance with Bill C-52, the assumption being made is
that, effective January 1, 2011, Boardwalk REIT will no longer
qualify as a Real Estate Investment Trust ("REIT") in accordance with
the definition contained in that legislation, and will remain within
certain "normal growth" limits such that it will be subject to income
tax pursuant to this new legislation.
Impact of Bill C-52
Our interpretation of Bill C-52 on Boardwalk REIT was that, at this
time, based on a detailed review of the legislation, it may be
interpreted that the Trust does not qualify as a REIT, which would be
exempt from the specified investment flow-through ("SIFT") rules, and
as such the Trust recorded an estimate of its the future income tax
liability at December 31, 2007 recognizing the probability that it
would be subject to the tax prescribed by the SIFT rules on
January 1, 2011. The result is that the Trust recorded a future
income tax liability at December 31, 2007 of $99.9 million, which was
revised upward by $2.8 million to $102.7 million at March 31, 2008
and $0.6 million to $103.3 million at June 30, 2008. At a future
time, if it has been deemed that the Trust would be in compliance
with the SIFT rules, the amount of the adjustment will be reversed.
Although the adjustment to earnings and cumulative earnings at
June 30, 2008 is significant, it is not large enough to affect any
existing debt covenants currently in place, including those
stipulated for Boardwalk REIT's unsecured debentures. At this time,
it is the belief of the Trust that it will be in compliance with the
existing and or amended legislation prior to the effective date of
January 1, 2011.
At June 30, 2008, the technical amendments announced in late December
2007 had not received Royal Assent; however, on July 14, 2008, draft
legislation was published for review, which mirrors the technical
amendments announced in late December 2007. If these amendments
receive Royal Assent, as was the case with Bill C-52, it is believed
that Boardwalk REIT would qualify as a REIT and management will
reverse the future income tax liability reported in these financial
statements.
Hedging Relationships
In the beginning of 2008, the Trust entered into a forward bond
transaction (the "Transaction") with a major Canadian financial
institution. In total, the Transaction, which comprised of bond
forward contracts on specific mortgages set to mature and be renewed
in 2008, was for a total nominal amount of $101.6 million with a
weighted average term and interest rate of 7.2 years and 3.63%,
respectively. Subsequent to entering into this Transaction, the Trust
initiated changes to the terms of one of the contracts in the
Transaction and negotiated a settlement loss of $100 thousand related
to the changes. This contract was assessed to be ineffective and the
settlement loss of $100 thousand was included in financing costs for
the quarter ended March 31, 2008. During the second quarter ended
June 30, 2008, the remaining bond forward contracts in the
Transaction were settled. Except for one of the contracts, all
remaining contracts were assessed to be ineffective and the net
settlement loss of $168 thousand was included in financing costs for
the quarter. The bond forward contract assessed to be effective was
settled for a loss of $284 thousand, which will be amortized over the
term of the new financing.
During the first quarter of 2008, the Trust entered into an interest
rate swap agreement on the mortgages of specific properties within
its portfolio in an effort to hedge the variability in cash flows
attributed to fluctuating interest rates. These interest rate swap
agreements were designated as cash flow hedges on March 11, 2008. The
effective date of the hedge was May 1, 2008 and will continue to be
designated as such until May 1, 2015. Settlements on both the fixed
and variable portion of the interest rate swap will occur on a
monthly basis. The fixed interest rate is 4.15%, plus a stamping fee
of 0.25%, while the total amount of the mortgage debt subject to the
interest rate swap is $91.5 million. Hedge accounting will be applied
to these agreements in accordance with CICA Handbook section 3865.
The Trust has assumed that there is no ineffectiveness in the hedge
of its interest rate exposure. The effectiveness of the hedging
relationship will be reviewed on a quarterly basis and measured at
fair value. The portion of the gain or loss on the swap transaction
that is determined to be an effective hedge will be recognized in
other comprehensive income ("OCI"). The ineffective portion of the
gain or loss on the swap transaction will be recognized immediately
in net earnings. On recognition of the financial liability of the
hedged item on the balance sheet, the associated gains or losses that
were recognized in OCI will be reclassified into net earnings in the
same period or periods during which the interest payments of the
hedged item affected net earnings. However, if all or a portion of
the net loss recognized in OCI will not be recovered in one or more
future periods, the amount not expected to be recovered will be
immediately reclassified into net earnings.
As at June 30, 2008, the interest rate swap agreement was assessed to
be effective and, consequently, any gains or losses on the interest
rate swap agreement were recognized in earnings in the periods during
which the interest payments on the hedged items were recognized.
Future Changes in Significant Accounting Policies
Boardwalk REIT monitored the recently issued CICA accounting
pronouncements to assess the applicability and impact, if any, of
these new pronouncements on our consolidated financial statements and
note disclosures. The CICA issued one new accounting standard that is
effective for the Trust's fiscal year commencing January 1, 2009:
Section 3064 - Goodwill and Intangible Assets, which replaces Section
3062 - Goodwill and Other Intangible Assets and Section 3450 -
Research and Development Costs, establishes standards for the
recognition, measurement, presentation and disclosure of goodwill
subsequent to its initial recognition and of intangible assets by
profit-oriented enterprises. Standards concerning goodwill remain
unchanged from the standards included in the previous Section 3062.
The new section will be applicable to financial statements relating
to fiscal years beginning on or after October 1, 2008. Section 1000 -
Financial Statement Concepts, was also amended to provide consistency
with this new standard.
The new accounting pronouncement is not expected to have any material
impact to the consolidated financial statements on adoption.
4. REVENUE PRODUCING PROPERTIES
Acquisitions
3 months 3 months 6 months 6 months
ended ended ended ended
June 30, June 30, June 30, June 30,
2008 2007 2008 2007
-----------------------------------------------
Cash paid $48,925 $16,000 $48,925 $176,213
Debt assumed - - - 31,209
---------------------------------------------------------------------
Total purchase price 48,925 16,000 48,925 207,422
Fair value adjustments
to debt - - - 376
---------------------------------------------------------------------
Book value $48,925 $16,000 $48,925 $207,798
-----------------------------------------------
-----------------------------------------------
Allocation of book
value to revenue
producing properties $47,413 $15,528 $47,413 $201,400
Allocation of book
value to other assets 1,512 472 1,512 6,398
---------------------------------------------------------------------
$48,925 $16,000 $48,925 $207,798
-----------------------------------------------
-----------------------------------------------
Multi-family units
acquired 298 160 298 1,703
-----------------------------------------------
-----------------------------------------------
Dispositions
3 months 3 months 6 months 6 months
ended ended ended ended
June 30, June 30, June 30, June 30,
2008 2007 2008 2007
-----------------------------------------------
Cash received $1,906 $12,275 $10,287 $12,275
Cost of dispositions - 125 - 125
---------------------------------------------------------------------
Total proceeds 1,906 12,400 10,287 12,400
Net book value 551 7,590 6,665 7,590
-----------------------------------------------
-----------------------------------------------
Gain on dispositions $1,355 $4,810 $3,622 $4,810
-----------------------------------------------
-----------------------------------------------
Multi-family
units sold 6 72 30 72
-----------------------------------------------
-----------------------------------------------
Dispositions for the second quarter ended June 30, 2008 consist
solely of the sales and closings of 6 units (30 units for the current
fiscal year to date) in a 90-unit property located in Calgary,
Alberta that is being developed into condominium units for sale (see
NOTE 6). Under the percentage of completion method, sales of
$1.9 million for the three months ($10.3 million for the current
fiscal year to date) ended June 30, 2008 were recorded against cost
of sales of $0.6 million ($6.7 million for the current fiscal year to
date).
5. OTHER ASSETS
As at
June 30, December 31,
2008 2007
-------------------------
Corporate technology assets (net of
accumulated amortization) $3,145 $3,100
Head office building (net of accumulated
amortization) 2,628 2,307
Prepaid parts and supplies 2,834 2,791
In-place lease and customer relationship
intangibles (net of accumulated amortization) 2,239 3,686
Prepaid property taxes 4,073 1,312
Prepaid insurance and other 2,302 2,580
---------------------------------------------------------------------
$17,221 $15,776
-------------------------
-------------------------
Accumulated amortization for corporate technology assets and head
office building at June 30, 2008 were $14.1 million and $1.2 million,
respectively (December 31, 2007 - $13.5 million and $1.1 million,
respectively). Accumulated amortization for in-place lease and
customer relationship intangibles at June 30, 2008 was $18.2 million
(December 31, 2007 - $15.2 million)
6. DISCONTINUED OPERATIONS
During the end of the third quarter of 2006, a revenue producing
property consisting of 90 units in Calgary was classified as
discontinued operations as a result of the Trust initiating an active
program to dispose of this property. This property is being developed
into condominium units for sale at a price that is reasonable in
relation to its current fair value (See NOTE 4). This Calgary
property formed part of our Alberta segment in our segmented
information disclosure.
During the first quarter of 2007, the Trust acquired a property in
Edmonton, Alberta, consisting of two buildings totalling 51 apartment
units. Prior to the closing of the acquisition, the Trust received an
unsolicited offer to sell this property to an unrelated third party,
which the Trust accepted. This property was, therefore, classified as
discontinued operations upon acquisition.
The following tables set forth the results of operations as well as
the assets and liabilities associated with the discontinued
operations.
3 months 3 months 6 months 6 months
ended ended ended ended
June 30, June 30, June 30, June 30,
2008 2007 2008 2007
-----------------------------------------------
Revenue
Rental income $- $31 $- $219
---------------------------------------------------------------------
Expenses
Revenue producing
properties:
Operating expenses - 14 - 101
Utilities - (4) - 41
Utility rebate - - - (5)
Property taxes - 2 - 25
Administration - - - 53
Financing costs - - - 13
Amortization of
capital assets - 8 - 32
---------------------------------------------------------------------
- 20 - 260
-----------------------------------------------
- 11 - (41)
Gain on dispositions 1,355 4,810 3,622 4,810
---------------------------------------------------------------------
Earnings
from discontinued
operations $1,355 $4,821 $3,622 $4,769
-----------------------------------------------
-----------------------------------------------
June 30, December 31,
2008 2007
-------------------------
Discontinued Assets
Properties held for redevelopment
and sale $1,564 $6,293
-------------------------
-------------------------
7. DEBENTURES
On January 21, 2005, Boardwalk REIT completed the issuance of
unsecured debentures in a public offering in the aggregate amount of
$120 million. The debentures are rated "BBB" with a stable trend by
Dominion Bond Rating Services, carry a coupon rate of 5.31% and will
mature on January 23, 2012. Net proceeds of approximately
$119 million were used to fund acquisitions, repay operating lines of
credit and for general trust purposes. In conjunction with the
debenture issue, the Trust also entered into a bond forward contract
to hedge the risk of interest rate fluctuations prior to the final
pricing of the debenture. The bond forward contract was settled when
the debentures were issued for the settlement amount of $0.7 million.
The settlement amount will be amortized over the term of the
unsecured debentures. At June 30, 2008 the Trust was in compliance
with all the covenants reported in the debenture. These covenants are
discussed in NOTE 13(d).
8. DEFERRED UNIT PLAN
During 2006, the Trust implemented a deferred unit plan. The plan
entitles trustees and officers, at the participant's option, to
receive deferred units in consideration for trustee fees or executive
bonuses, respectively, with the Trust matching the number of units
received. The deferred units vest 50% on the third anniversary and
25% on each of the fourth and fifth anniversaries, subject to
provisions for earlier vesting in certain events. The deferred units
earn additional deferred units for the distributions that would
otherwise have been paid on the deferred units (i.e., had they
instead been issued as Trust Units on the date of grant). Once
vested, participants are entitled, at their option, to receive an
equivalent number of Trust Units or the equivalent value in cash of
the vested deferred units and the corresponding additional deferred
units. The deferred unit plan was approved by unitholders on May 10,
2006. The deferred units had a weighted average fair value of
$39.02 per unit at the grant dates for 2008 to date (2007 - $45.87;
2006 - $25.48). For the three months ended June 30, 2008, total
compensation costs of $0.5 million (2007 - $0.3 million) were
recognized in income related to employee awards under the deferred
unit plan, while $0.9 million (2007 - $0.9 million) was recognized on
a year-to-date basis.
The status of the outstanding deferred units is as follows:
Summary of Deferred Unit Plan Outstanding Vested
December 31, 2006 73,746 -
Deferred units granted 51,722 -
Additional deferred units earned on
unvested units 3,487 -
Deferred units cancelled (10,478) -
---------------------------------------------------------------------
December 31, 2007 118,477 -
Deferred units granted 50,885 19,096
Additional deferred units earned on
unvested units 3,164 2,892
---------------------------------------------------------------------
June 30, 2008 172,526 21,988
---------------------------------------------------------------------
---------------------------------------------------------------------
9. UNITHOLDERS' CAPITAL
The Plan of Arrangement (the "Arrangement") to convert Boardwalk
Equities Inc. from a share corporation to a real estate investment
trust was completed on May 3, 2004. Under the Arrangement, the former
shareholders of Boardwalk Equities Inc. received Boardwalk REIT units
or Class B Limited Partnership ("LP Class B") units of a controlled
limited partnership of the Trust, Boardwalk REIT Limited Partnership.
The LP Class B units are non-transferable, except under certain
circumstances, but are exchangeable, on a one-for-one basis, into
Boardwalk REIT units at any time at the option of the holder. Prior
to such exchange, distributions will be made on the exchangeable
units in an amount equivalent to the distributions which would have
been made had the units of Boardwalk REIT been issued. Each LP
Class B unit was accompanied by a Special Voting unit, which will
entitle the holder to receive notice of, attend and vote at all
meetings of unitholders. There is no value assigned to the Special
Voting units. The LP Class B units issued are included in the
unitholders' capital contributions on the balance sheet. The changes
in unitholders' capital contribution are as follows:
Summary of Unitholders' Capital Contributions Units Amount
December 31, 2006 56,351,783 $365,744
Units issued under
distribution reinvestment plan 205,185 8,917
Issue costs - (151)
Deferred unit plan - 1,750
Units issued for vested deferred units 8,413 400
Units purchased and cancelled (856,447) (38,576)
------------------------
December 31, 2007 55,708,934 $338,084
Units issued under
distribution reinvestment plan 56,718 2,121
Deferred unit plan (NOTE 8) - 921
Units purchased and cancelled (see below) (1,518,100) (59,707)
------------------------
June 30, 2008 54,247,552 $281,419
------------------------
------------------------
In August of 2007 Boardwalk REIT filed an application for a normal
course issuer bid (the "Bid"), which received regulatory approval
from the Toronto Stock Exchange on August 10, 2007. The Bid allows
Boardwalk REIT to purchase and cancel up to 4,267,048 trust units,
representing 10% of the public float of its trust units at the time
of the TSX approval. The Bid will terminate on the earlier of one
year from the date of commencement of the Bid on August 17, 2007 or
at such time as purchases under the Bid are complete.
Under the Bid, the Trust has purchased and cancelled, on a cumulative
basis, 2,374,547 REIT units (1,518,100 in the first six months of
2008), representing a total market value of approximately
$98.2 million (2008 - $59.7 million), or an average of $41.39 per
trust unit (2008 - $39.33 per trust unit).
The Declaration of Trust authorizes Boardwalk REIT to issue an
unlimited number of units for the consideration and on terms and
conditions established by the Trustees without the approval of any
unitholders. The interests in Boardwalk REIT are represented by two
classes of units: a class described and designated as "REIT Units"
and a class described and designated as "Special Voting Units". The
beneficial interest of the two classes of units is as follows:
(a) REIT Units
REIT Units represent an undivided beneficial interest in Boardwalk
REIT and in distributions made by Boardwalk REIT. The REIT Units are
freely transferable, subject to applicable securities regulatory
requirements. Each REIT Unit entitles the holder to one vote at all
meetings of unitholders. Except as set out under the redemption
rights below, the REIT Units have no conversion, retraction,
redemption or pre-emptive rights.
REIT Units are redeemable at any time, in whole or in part, on demand
by the holders. Upon receipt by Boardwalk REIT of a written
redemption notice and other documents that may be required, all
rights to and under the REIT Units tendered for redemption shall be
surrendered and the holder shall be entitled to receive a price per
REIT Unit equal to the lesser of:
i) 90% of the "market price" of the REIT Units on the principal
market on which the REIT Units are quoted for trading during the
twenty - day period ending on the trading day prior to the day on
which the REIT Units were surrendered to Boardwalk REIT for
redemption; and
ii) 100% of the "closing market price" of the REIT Units on the
principal market on which the REIT Units are quoted for trading
on the redemption date.
(b) Special Voting Units
The Declaration of Trust provides for the issuance of an unlimited
number of Special Voting Units that will be used to provide voting
rights to holders of LP Class B units or other securities that are,
directly or indirectly, exchangeable for REIT Units.
Each Special Voting Unit entitles the holder to the number of votes
at any meeting of unitholders, which is equal to the number of REIT
Units that may be obtained upon surrender of the LP Class B unit to
which the Special Voting Unit relates. The Special Voting Units do
not entitle or give any rights to the holders to receive
distributions or any amount upon liquidation, dissolution or winding-
up of Boardwalk REIT.
The breakdown of trust units of Boardwalk REIT by class is as
follows:
Units Amount
Boardwalk REIT Units 49,772,552
Special Voting Units issued to holders
of LP Class B units 4,475,000
------------------------
Total trust units 54,247,552 $281,419
------------------------
------------------------
10. DISTRIBUTABLE INCOME AND PER UNIT INFORMATION
Distributable income per unit
Boardwalk REIT makes distributions to unitholders on a monthly basis
on or about the 15th day of the following month. The reported
distributable income is defined under the Trust's DOT. Under the DOT,
as amended and restated, the Trust is required to distribute, at a
minimum, its reported taxable income. The reconciliation of
distributable income and per unit information begins with total
operating cash flows calculated in accordance with Canadian generally
accepted accounting principles and as defined in the Declaration of
Trust for Boardwalk REIT. However, distributable income and the per
unit information are non-GAAP measures that do not have any
standardized meaning prescribed by Canadian GAAP and they are,
therefore, unlikely to be comparable to similar measures presented by
other real estate companies and trusts.
3 months 3 months 6 months 6 months
ended ended ended ended
June 30, June 30, June 30, June 30,
2008 2007 2008 2007
-----------------------------------------------
Total operating
cash flows $33,079 $39,416 $56,958 $63,297
Net change in
operating working
capital 937 (8,555) 6,210 (8,401)
Deduct:
Deferred financing
costs amortization
post May 2, 2004 (707) (622) (1,438) (948)
Amortization of net
premium on long-term
debt assumed after
May 2, 2004 (92) (254) (216) (343)
---------------------------------------------------------------------
Distributable income $33,217 $29,985 $61,514 $53,605
-----------------------------------------------
-----------------------------------------------
Distributions declared
to unitholders $24,655 $22,005 $49,613 $42,866
Distributable income
withheld $8,562 $7,980 $11,901 $10,739
-----------------------------------------------
$33,217 $29,985 $61,514 $53,605
-----------------------------------------------
-----------------------------------------------
---------------------------------------------------------------------
---------------------------------------------------------------------
Weighted average units
outstanding - basic
and diluted 54,691,272 56,429,362 55,057,843 56,408,370
Distributable income
earned per unit $0.607 $0.531 $1.117 $0.950
Actual distributions
declared per unit $0.451 $0.390 $0.901 $0.760
Distributions declared
as a % of
distributable income 74.3% 73.4% 80.7% 80.0%
---------------------------------------------------------------------
---------------------------------------------------------------------
Earnings per unit
3 months 3 months 6 months 6 months
ended ended ended ended
June 30, June 30, June 30, June 30,
2008 2007 2008 2007
-----------------------------------------------
Numerator
Earnings (loss)
from continuing
operations $10,375 $(102,321) $13,740 $(98,639)
Earnings from
discontinued
operations $1,355 $4,821 $3,622 $4,769
---------------------------------------------------------------------
Denominator
Denominator for basic
earnings per unit
- weighted average
units 54,691,272 56,429,362 55,057,843 56,408,370
---------------------------------------------------------------------
Denominator for
diluted earnings
per unit adjusted
for weighted average
units and assumed
conversion 54,691,272 56,429,362 55,057,843 56,408,370
---------------------------------------------------------------------
---------------------------------------------------------------------
Earnings (loss) per
unit from continuing
operations
Basic $0.19 $(1.82) $0.25 $(1.75)
Diluted $0.19 $(1.82) $0.25 $(1.75)
---------------------------------------------------------------------
Earnings per unit
from discontinued
operations
Basic $0.02 $0.09 $0.07 $0.09
Diluted $0.02 $0.09 $0.07 $0.09
---------------------------------------------------------------------
---------------------------------------------------------------------
11. INCOME TAXES
Boardwalk REIT is a "mutual fund trust" as defined under the Income
Tax Act (Canada) and, accordingly, is not taxable on its income to
the extent that its income is distributed to its unitholders. This
exemption does not extend to the corporate subsidiaries of Boardwalk
REIT that are subject to income tax. On June 22, 2007, Bill C-52
received royal assent (see NOTE 3 for further details). As such, the
Trust, to be in compliance with Canadian GAAP, was required to
estimate what the impact of the reported tax amount would be on
January 1, 2011. This estimate is reviewed quarterly and adjusted, if
necessary.
3 months 3 months 6 months 6 months
ended ended ended ended
June 30, June 30, June 30, June 30,
2008 2007 2008 2007
-----------------------------------------------
Continuing operations $889 $111,630 $3,270 $111,398
---------------------------------------------------------------------
Total future
income taxes $889 $111,630 $3,270 $111,398
-----------------------------------------------
-----------------------------------------------
Future income taxes consist of the following:
3 months 3 months 6 months 6 months
ended ended ended ended
June 30, June 30, June 30, June 30,
2008 2007 2008 2007
-----------------------------------------------
Tax expense based on
expected rate $231 $40 $291 $149
Adjustment to future
income tax liabilities 658 111,590 2,979 111,249
---------------------------------------------------------------------
Future income taxes $889 $111,630 $3,270 $111,398
-----------------------------------------------
-----------------------------------------------
The future income tax liability is calculated as follows:
As at
June 30, December 31,
2008 2007
-------------------------
Tax asset (liability) related to
operating losses $70 $(90)
Tax liability related to differences in
tax and book basis (103,627) (100,197)
---------------------------------------------------------------------
Future income tax liability $(103,557) $(100,287)
-------------------------
-------------------------
12. CAPITAL MANAGEMENT
The Trust defines capital resources as the aggregate of unitholders'
equity, debt (both secured and unsecured), internally generated funds
and cash on hand. The Trust's capital management framework is
designed to maintain a level of capital that allows it to implement
its business strategy while complying with investment and debt
restrictions pursuant to Boardwalk REIT's DOT as well as existing
debt covenants and to continue building long-term unitholder value.
The main components of the Trust's capital allocation are approved by
its unitholders as stipulated in the Trust's DOT and on a regular
basis by its Board of Trustees (the "Board") through their annual
review of the Trust's strategic plan and budget, supplemented by
periodic Board and Board Committee meetings. Capital adequacy is
monitored by the Trust by assessing performance against the approved
annual plan throughout the year, which is updated accordingly, and by
monitoring adherence to investment and debt restrictions contained in
the DOT and debt covenants. Boardwalk REIT's DOT provides for maximum
total debt level of up to 70% of Gross Book Value ("GBV"), defined in
the DOT as total assets plus accumulated amortization of income
properties as recorded by the Trust (and calculated in accordance
with Canadian GAAP) and to this amount an additional amount of
$231 million (the "Bump") is added as was previously approved by the
Trust's unitholders. On May 13, 2008, the unitholders voted and
approved an amendment to the definition of GBV to increase the Bump
to its existing GBV calculation by an additional $410 million,
resulting in a total asset bump of $641 million. Subsequent to
June 30, 2008, the debenture holders, in a special meeting held
July 30, 2008, approved an amendment to the Trust Indenture amending
the definition of GBV to increase the Bump to its existing GBV
calculation by an additional $410 million, resulting in a total asset
bump of $641 million (see NOTE 17). As a matter of internal policy,
the Trust has a target of total debt levels not to exceed 65% of GBV.
The following table highlights Boardwalk REIT's existing leverage
ratio:
As at
June 30, December 31,
2008 2007
-------------------------
Total assets $2,305,965 $2,195,888
Amortization 553,331 513,514
Exchange value bump 641,460 231,460
---------------------------------------------------------------------
$3,500,756 $2,940,862
-------------------------
-------------------------
Mortgages payable $1,969,394 $1,770,015
Unsecured debentures 118,920 118,768
Adjustment to debt 5,450 10,560
-------------------------
$2,093,764 $1,899,343
-------------------------
-------------------------
Adjusted Debt-to-GBV 60% 65%
-------------------------
-------------------------
With a DOT limit not to exceed 70% on Adjusted Debt-to-Gross Book
Value, Boardwalk REIT has the ability to add additional leverage of
approximately $356.8 million to its existing portfolio. Additionally,
the Trust's DOT contains provisions that have the effect of limiting
capital expended by the Trust.
As outlined in NOTE 13(d), Boardwalk REIT's debenture and credit
facility agreements contain financial covenants.
Boardwalk REIT's available capital is comprised of long-term fixed
rate debt (both secured and unsecured), unitholders' capital and
drawings under lines of credit and totalled $2.4 billion as at
June 30, 2008 (December 31, 2007 - $2.3 billion). As at June 30,
2008, the Trust was in compliance with all covenants in both its DOT
and all existing debt facilities.
13. FINANCIAL INSTRUMENTS
Fair Value of Financial Instruments
The Trust's financial instruments consist of mortgages and accounts
receivable, tenants' security deposits, cash or bank indebtedness,
mortgages payable, debentures and accounts payable and accrued
liabilities. All of the Trust's financial instruments were classified
as either held for trading (cash), loans and receivables (carried at
amortized cost) or other financial liabilities (carried at amortized
cost using the effective interest rate method). The fair values of
the Trust's financial instruments were determined as follows:
i) The carrying amounts of mortgages and accounts receivable,
tenants' security deposits, cash or bank indebtedness and
accounts payable and accrued liabilities approximate their fair
values due to their short-term nature.
ii) The fair values of the Trust's mortgages payable and debentures
are estimates made at a specific point in time, based on relevant
market information. These estimates are based on quoted market
prices for the same or similar issues or on the current rates
offered to the Trust for similar financial instruments subject to
similar risks and maturities. These estimates are subjective in
nature and involve uncertainties and matters of significant
judgement and, therefore, cannot be determined with precision.
Changes in estimates could significantly affect fair values. The
significant financial instruments of Boardwalk REIT and their
carrying values as at June 30, 2008 are as follow:
As at June 30,
2008
------------
Mortgages and accounts receivable
Carrying value $9,242
Fair market value $9,242
---------------------------------------------------------------------
Mortgages payable and debentures
Carrying value $2,088,314
Fair market value $2,104,134
At January 1, 2008 and for the three and six months ended June 30,
2008, the Trust had no embedded derivatives requiring separate
recognition.
The nature of these financial instruments and the Trust's operations
expose the Trust to certain principal financial risks. The main
objective of the Trust's risk management process is to properly
identify financial risks and minimize the exposure to potential
losses arising from those risks. The principal financial risks to
which the Trust is exposed are described below.
Risk Management
a) Interest rate risk
The Trust is exposed to interest rate risk as a result of its
mortgages payable, debentures and credit facilities; however, this
risk is minimized through the Trust's current strategy of having the
majority of its mortgage payable and debentures in fixed terms
arrangements. As such, the Trust's cash flows are not significantly
impacted by a change in market interest rates. In addition, the Trust
structures its financings so as to stagger the maturities of its
debt, thereby minimizing the Trust's exposure to interest rates in
any one year. The majority of the Trust's mortgages are also insured
by the Canadian Mortgage and Housing Corporation ("CMHC") under the
National Housing Act ("NHA") mortgage program. This added level of
insurance offered to lenders allows the Trust to receive the best
possible financing and interest rates, and significantly reduces the
potential for a lender to call a loan prematurely. In addition,
management is constantly reviewing its credit facility (floating-rate
debt) and, if market conditions warrant, the Trust has the ability to
convert its existing floating-rate debt to fixed rate debt.
As at June 30, 2008, the Trust had no credit facility debt
outstanding and, as such, of the Trust's total debt at June 30, 2008,
100% was fixed-rate debt and 0% was floating-rate debt. For the three
and six months ended June 30, 2008, all else being equal, the
increase or decrease in net earnings for each 1% change in market
interest rates would be $0.
b) Credit risk
The Trust is exposed to credit risk as a result of its mortgages and
accounts receivable. This balance is comprised of mortgage holdbacks
and refundable mortgage fees, accounts receivable from significant
customers and tenant receivables. As at June 30, 2008, no balance
relating to mortgage holdbacks, refundable mortgage fees or accounts
receivable from significant customers was past due.
In relation to mortgage holdbacks and refundable mortgage fees, the
Trust's exposure to credit risk is low given the nature of these
balances. These funds will be advanced when the Trust has met the
conditions pursuant to the mortgage agreement (in the case of the
mortgage holdback) or when financing is completed (in the case of
refundable mortgage fees), both of which are expected to occur.
Similar to mortgage holdbacks and refundable mortgage fees, the Trust
assesses the credit risk on accounts receivable to be low due to the
assured collection of these balances. The majority of the balance
relates to money owing from an energy provider as a result of the
Alberta government natural gas rebate program and the Trust's revenue
sharing initiatives. Given the Trust's collection history and the
nature of these customers, credit risk is assessed as low. An amount
was owing pursuant to the unit sales (see NOTE 4), all of which was
collected subsequent to June 30, 2008. Additionally, an amount is
owed by insurance companies in relation to current outstanding
claims. In all circumstances, the insurance deductible has been paid
and amounts incurred and owing for reimbursement are due to an
insurable event. Recoverability may differ from the amount owing
solely due to discrepancies between the Trust and the insurance
provider regarding the value of replacement costs.
With tenant receivables, credit risk arises from the possibility that
tenants may experience financial difficulty and be unable to fulfill
their lease term commitments. The maximum exposure to credit risk is
equal to the carrying value of the financial assets.
As stated above, the carrying amount of tenant receivables reflects
management's assessment of the credit risk associated with its
tenants; however, the Trust mitigates this risk of credit loss by
geographically diversifying its existing portfolio, by limiting its
exposure to any one tenant and by conducting thorough credit checks
with respect to all new rental leasing arrangements. In addition,
where legislation allows, the Trust obtains a security deposit from a
tenant to assist in the recovery of monies owed to the Trust.
Past due receivables are reviewed by management on a monthly basis
and tenant receivables are considered for impairment on a case-by-
case basis. The Trust takes into consideration the tenant's payment
history, their credit worthiness and the current economic environment
however tenant receivable balances exceeding 60 days are typically
written off to bad debt expense as the Trust does not utilize an
allowance for doubtful accounts. The amount of the loss is recognized
in the consolidated statement of earnings and comprehensive income
within operating expenses. Subsequent recoveries of amounts
previously written off are credited against operating expenses during
the period of settlement. As tenant receivables are typically written
off after 60 days, none of the balance is considered to be past due
by the Trust.
c) Liquidity risk
Liquidity risk is the risk that the Trust will not be able to meet
its financial obligations as they become due. The Trust maintains
what it believes to be a conservatively leveraged balance sheet and
can finance any future growth through one or a combination of
internally generated cash flows, borrowing under existing credit
facility, the issuance of debt or the issuance of equity, according
to its capital management objectives. In addition, the Trust
structures its financings so as to stagger the maturities of its
debt, thereby minimizing the Trust's exposure to liquidity risk in
any one year. In addition, cash flow projections are completed on a
regular basis to ensure the Trust has sufficient cash flows to make
its monthly distributions to its Unitholders. Given the Trust's
currently available liquid resources (from both financial assets and
on-going operations) as compared to its contractual obligations,
management assesses the Trust's liquidity risk to be low.
d) Debt covenants
As outlined in its mortgages payable agreements, the Trust is
required to make equal monthly payments of principal and interest
based on the respective amortization period. Additionally, the Trust
must ensure that all property taxes have been paid in full when they
become due and that no arrears exist.
CMHC provides mortgage loan insurance in connection with mortgages
made to Boardwalk REIT. In an agreement dated September 13, 2002 and
as amended and restated on January 19, 2005 and April 25, 2006, the
Trust agreed to provide certain financial information to the CMHC and
be subject to certain restrictive covenants, including limitation on
additional debt, payment of distributions in respect to unitholders'
capital in the event of default, and maintenance of certain financial
ratios. In the event of default, the Trust's total financial
liability under this Agreement is limited to a one-time penalty
payment of $250 thousand under a Letter of Credit issued in favour of
CMHC.
In accordance with the debenture agreement, the Trust is required to
pay semi-annual interest instalments on January 23 and July 23 of
each year. The Trust is also required to maintain in good condition,
repair and working order all of the properties owned by it or any of
its subsidiaries while maintaining property and liability insurance.
The debenture agreement contains three financial covenants as
follows:
i) the Trust will maintain a Consolidated Earnings Before Interest,
Taxes, Depreciation and Amortization ("EBITDA") to Consolidated
Interest Expense of not less than 1.50 to 1. As outlined in
NOTE 17, this covenant was amended to 1.75 to 1 on July 30,
2008. As at June 30, 2008, this ratio was 2.2 to 1 and, as such,
the Trust was in compliance.
ii) the Trust will not incur or assume any indebtedness unless the
quotient obtained by dividing the Adjusted Consolidated
Indebtedness by the Adjusted Gross Book Value would be less than
or equal to 70%. As outlined in NOTE 12, on May 13, 2008, the
unitholders approved an amendment to the definition of GBV;
however, as noted in NOTE 17, this amendment was not approved by
the debenture holders until July 30, 2008. As such, as at
June 30, 2008, this amount was 68% based on the previous
definition for GBV and the Trust was in compliance.
iii) the Trust will maintain at all times, an Adjusted Unitholders'
Equity of at least $300 million. Adjusted Unitholders' Equity
was $833 million as at June 30, 2008.
The Trust has a committed revolving credit facility with a major
financial institution. This credit facility is secured by a pledge of
a group of specific real estate assets (carrying value of
$292 million). The amount available through the revolving credit
facility varies with the value of the pledged assets, with a maximum
limit not to exceed $200 million. The revolving facility requires
monthly interest payments and is renewable annually subject to the
mutual consent of the lender and the Trust. To the extent the
revolving credit facility is not extended, the drawn-down principal
would be due 364 days later.
The credit facility contains three financial covenants as follows:
i) the Trust will maintain an overall Debt Service Coverage Ratio
of at least 1.20. As at June 30, 2008, this ratio was 1.67 and,
as such, the Trust was in compliance.
ii) the Trust will maintain a Debt Service Coverage Ratio, specific
to the Security Portfolio of at least 1.15 (tested semi-
annually). As at June 30, 2008, this ratio was 1.26 and, as
such, the Trust was in compliance.
iii) Total indebtedness of the Trust will not exceed 70% of the GBV
of all assets as defined in the DOT. As outlined in NOTE 12, as
at June 30, 2008, this amount was 60% based on the new
definition of GBV and, as such, the Trust was in compliance.
As at June 30, 2008, the Trust was in compliance with all covenants.
e) Utility risk
The Trust is exposed to utility risk as a result of fluctuations in
the prices of natural gas and electricity service charges. As
outlined in NOTE 14, the Trust has commitments to certain utility
contracts to reduce the risk of exposure to adverse changes in
commodity prices.
14. COMMITMENTS AND CONTINGENCIES
At June 30, 2008, the Trust had a long-term supply arrangement with
one electrical utility company to supply the Trust with its
electrical power needs for its southern Alberta properties for the
next six months at a blended rate of approximately $0.068/kwh. The
agreement provides that the Trust purchase its power for all southern
Alberta properties under contract for the upcoming months.
Beginning in November 2003, the Alberta government implemented a
natural gas rebate program covering the winter usage months of
November through March. In October 2005, the natural gas rebate
program was extended to cover the month of October. In January of
2006, the Alberta government announced a three-year extension to the
program covering the winter months of October through March. The
extension of the natural gas rebate program will end March 31, 2009.
The rebate program becomes active when the natural gas consumer price
charged by two of the three major gas companies in Alberta exceeds
$5.50/GJ for any individual winter usage month. For January through
June 2007, Boardwalk REIT was eligible for estimated rebates
totalling approximately $0.9 million. For January to June 2008,
Boardwalk REIT was eligible for rebates totalling approximately
$1.3 million.
The Trust also entered into one natural gas supply contract, which
provides a degree of price certainty for natural gas usage in the
province of Saskatchewan. The contract covers between 75 - 100% of
the Trust's natural gas requirements for this province. The physical
supply agreement for Saskatchewan covered the period from November 1,
2006 to October 31, 2007, and has been extended to October 31, 2008.
The supply contract provides the commodity at a price of $8.95/GJ.
Currently, the Trust's gas contract provider has declared bankruptcy,
which may limit the Trust's ability to buy gas from this provider for
the remaining term of the contract.
Boardwalk REIT, in the normal course of operations, will become
subject to a variety of legal and other claims against the Trust.
Management and the Trust's legal counsel evaluate all claims on their
apparent merits, and accrue management's best estimate of the
estimated costs to satisfy such claims. Management believes that the
outcome of legal and other claims filed against the Trust or its
predecessor will not be material to Boardwalk REIT.
15. GUARANTEES
In the normal course of business, various agreements may be entered
that may contain features that meet the CICA Accounting Handbook
Guideline 14 ("AcG-14") definition of a guarantee. AcG-14 defines a
guarantee to be a contract (including an indemnity) that contingently
requires an entity to make payments to the guaranteed party based on
(i) changes in an underlying interest rate, foreign exchange rate,
equity or commodity instrument, index or other variable, that is
related to an asset, a liability or an equity security of the
counterparty, (ii) failure of another party to perform under an
obligating agreement or (iii) failure of a third party to pay its
indebtedness when due.
In connection with the sales of properties, a mortgage assumed by the
purchaser will have an indirect guarantee provided to the lender
until the mortgage is refinanced by the purchaser. In the event of
default by the purchaser, the seller would be liable for the
outstanding mortgage balance. Boardwalk REIT's maximum exposure at
June 30, 2008 is approximately $4.9 million (June 30, 2007 -
$5.3 million). In the event of default, Boardwalk REIT's recourse for
recovery includes the sale of the respective building asset.
Boardwalk REIT expects that the proceeds from the sale of the
building will cover, and in most likelihood exceed, the maximum
potential liability associated with the amount being guaranteed.
Therefore, at June 30, 2008, no amounts have been recorded in the
consolidated financial statements with respect to the above noted
indirect guarantees.
16. SEGMENTED INFORMATION
Boardwalk REIT specializes in multi-family residential housing and
operates primarily within one business segment in five provinces
located in Canada. The following summary presents segmented financial
information for Boardwalk REIT's business by geographic location.
3 months 3 months 6 months 6 months
ended ended ended ended
June 30, June 30, June 30, June 30,
2008 2007 2008 2007
-----------------------------------------------
Alberta
Revenue $62,860 $53,842 $123,979 $103,008
-----------------------------------------------
Expenses
Operating 10,017 7,907 20,500 15,443
Utilities 6,845 5,116 15,710 11,764
Utility rebates - (8) (1,255) (930)
Property taxes 3,584 3,387 7,075 6,582
---------------------------------------------------------------------
20,446 16,402 42,030 32,859
-----------------------------------------------
Net operating
income $42,414 $37,440 $81,949 $70,149
-----------------------------------------------
Saskatchewan
Revenue $11,387 $9,420 $22,069 $18,632
-----------------------------------------------
Expenses
Operating 2,005 1,615 3,669 3,209
Utilities 977 797 3,340 2,522
Property taxes 1,075 1,157 2,207 2,328
---------------------------------------------------------------------
4,057 3,569 9,216 8,059
-----------------------------------------------
Net operating
income $7,330 $5,851 $12,853 $10,573
-----------------------------------------------
Ontario
Revenue $9,522 $9,412 $18,957 $18,788
-----------------------------------------------
Expenses
Operating 1,667 1,395 3,260 2,910
Utilities 1,503 1,350 3,515 3,378
Property taxes 1,615 1,766 3,188 3,522
---------------------------------------------------------------------
4,785 4,511 9,963 9,810
-----------------------------------------------
Net operating
income $4,737 $4,901 $8,994 $8,978
-----------------------------------------------
British Columbia
Revenue $3,020 $2,854 $5,986 $5,625
-----------------------------------------------
Expenses
Operating 598 568 1,218 1,189
Utilities 397 439 894 840
Property taxes 155 152 305 300
-----------------------------------------------
1,150 1,159 2,417 2,329
-----------------------------------------------
Net operating
income $1,870 $1,695 $3,569 $3,296
-----------------------------------------------
Quebec
Revenue $17,659 $17,099 $35,129 $34,113
-----------------------------------------------
Expenses
Operating 3,307 3,452 6,870 6,417
Utilities 2,030 1,610 4,922 4,604
Property taxes 1,880 1,893 3,183 3,782
---------------------------------------------------------------------
7,217 6,955 14,975 14,803
-----------------------------------------------
Net operating
income $10,442 $10,144 $20,154 $19,310
-----------------------------------------------
Total
Net operating
income $66,793 $60,031 $127,519 $112,306
Unallocated
revenue(*) 1,012 84 1,549 115
Unallocated
expenses(**) (56,075) (157,615) (111,706) (206,291)
---------------------------------------------------------------------
Net earnings (loss)
for the period $11,730 $(97,500) $17,362 $(93,870)
-----------------------------------------------
-----------------------------------------------
As at June 30, December 31,
2008 2007
-------------------------
Alberta
Identifiable assets
Revenue producing properties $1,287,570 $1,244,328
Mortgages and accounts receivable 5,085 5,863
Tenants' security deposits 11,104 10,385
-------------------------
$1,303,759 $1,260,576
-------------------------
Saskatchewan
Identifiable assets
Revenue producing properties $167,241 $168,581
Mortgages and accounts receivable 506 202
Tenants' security deposits 2,492 2,096
-------------------------
$170,239 $170,879
-------------------------
Ontario
Identifiable assets
Revenue producing properties $204,200 $206,366
Mortgages and accounts receivable 99 237
-------------------------
$204,299 $206,603
-------------------------
Quebec
Identifiable assets
Revenue producing properties $419,458 $421,473
Mortgages and accounts receivable 774 800
-------------------------
$420,232 $422,273
-------------------------
British Columbia
Identifiable assets
Revenue producing properties $104,803 $104,491
Mortgages and accounts receivable 1,241 1,049
Tenants' security deposits 474 444
-------------------------
$106,518 $105,984
-------------------------
Total assets
Identifiable assets $2,205,047 $2,166,315
Unallocated assets(***) 100,918 29,573
-------------------------
$2,305,965 $2,195,888
-------------------------
-------------------------
(*) Unallocated revenue includes property sales, interest income,
revenue from discontinued operations and other non-rental
income.
(**) Unallocated expenses include cost of property sales, operating
expenses from discontinued operations, non-rental operating
expenses, corporate administration, financing costs,
amortization, income taxes and other provisions.
(***) Unallocated assets include discontinued assets, cash and cash
equivalents and other assets.
17. SUBSEQUENT EVENTS
Subsequent to the quarter ended June 30, 2008, the debenture holders,
in a special meeting held July 30, 2008, approved an amendment to the
Trust Indenture amending the definition of Gross Book Value to
increase the Bump to its existing GBV calculation by an additional
$410 million, resulting in a total asset bump of $641 million. In
addition, the Consolidated EBITDA to Consolidated Interest Expense
financial covenant was amended to 1.75 to 1 from the current 1.50 to
1 and the rate of interest on the debenture was increased to 5.61%
from the current 5.31% commencing July 30, 2008 until the maturity
date of January 23, 2012.
%SEDAR: 00020684E
For further information please contact:
Boardwalk REIT
Sam Kolias,
CEO,
(403) 531-9255;
Roberto Geremia,
President,
(403) 531-9255;
