TSX SYMBOL: BEI.UN May 11, 2006
Boardwalk REIT Announces Solid First Quarter 2006 Financial Results and Upward Revision in Guidance
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Calgary, Alberta – May 11, 2006
CALGARY, May 11 /CNW/ - Boardwalk Real Estate Investment Trust
("Boardwalk REIT" or the "Trust") today announced solid financial results for
the first quarter of 2006.
For the first quarter ended March 31, 2006, the Trust reported Funds From
Operations ("FFO") of $17.2 million and FFO per unit of $0.32 on a diluted
basis, compared to FFO of $16.5 million and FFO per unit of $0.31 for the same
period last year. Distributable income ("DI") for the quarter was
$17.7 million and DI per unit was $0.33 on a diluted basis, compared to
$17.3 million and $0.33 per unit for the same period last year.
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.
Highlights of the Trust's first quarter 2006 financial results include:
- Rental revenues of $76.5 million, an increase of 5.1% compared to
$72.8 million for the three-month period ended March 31, 2005.
- Net operating income of $46.4 million, representing a 4.9% increase
from $44.2 million in the same period last year.
- FFO of $17.2 million, an increase of 4.5% compared to $16.5 million
for the three-month period ended March 31, 2005.
- FFO per unit was $0.32 on a diluted basis, up 3.2% compared to
$0.31 last year for the three-month period ended March 31, 2005.
- DI was $0.33 per unit, unchanged from $0.33 for the three months ended
March 31, 2005.
Commenting on the Trust's Q1 2006 results, Sam Kolias, President and
C.E.O., said
"We are pleased to report a solid first quarter. Though expenses
continued to rise, stronger revenues provided a better bottom-line overall.
Both our operating and financial results are beginning to reflect improving
rental market fundamentals. Lead by the robust Alberta economy, our portfolio
delivered revenue growth from increased occupancy and decreased incentives as
measured on a year-over-year basis. This quarter's positive results can be
attributed to our superior operating platform; our on-going focus on
developing a nationally diversified, sustainable portfolio; and the continued
strength and improvement in many of our major rental markets across the
country."
"We are especially pleased to be gaining traction in our Alberta market,
which make up approximately 51% of our portfolio. As the Alberta economy
continues to boom, dramatic increases in home prices, record low unemployment,
and substantial inter-provincial in-migration have resulted in significant
improvements to rental market fundamentals across the province. We expect the
revenue upside from the strengthening rental market, which is just beginning
to positively impact our financial performance, will grow well into the next
year."
"At all times, we remember that our customers are the cornerstone of our
business. We are committed to pursuing a balance between profitability and
customer relationship. Developing long-term, positive associations with our
customers ensures corporate sustainability into the future. While we are
certainly pleased to benefit from the Alberta market's increased rental rate
capacity, we stand by our internal, customer-focused rental rate policies."
Operational Highlights
The average vacancy rate across the Trust's portfolio for the first
quarter of 2006 was 4.17%, up slightly from 3.73% in the fourth quarter of
2005 as per anticipated market seasonality, but down from 5.19% in the first
quarter of 2005.
The average monthly rent realized in the first quarter of 2006 was
$760 per unit, an increase of $14, or 1.9%, from $746 per unit for the three
months ended March 31, 2005. Management estimates that market rents for its
properties at the end of March, 2006 averaged $884 per unit per month, which
compares to an average in-place monthly rent per occupied unit of $801 for the
three months ended March 31, 2006. This translates into an estimated "loss-to-
lease" of approximately $31 million, maintaining existing occupancy rates.
More detail on our operations can be found in our conference call
presentation and is posted on our web site:
www.boardwalkreit.com/FinancialReports/r2006/). The conference call audio for
this presentation is found on our web site at
http://investor.bwalk.com/PressReleases/p2006/pr060511.asp
Same-Property Results
Boardwalk continued to show solid performance in its stabilized
properties (defined as properties owned for over 24 months). The "same-
property" results for the Trust's stabilized portfolio for the three-month
period ended March 31, 2006 had rental revenue growth of 2.4% and NOI increase
of 4.5% compared to the period prior. A total of 31,203 units, representing
approximately 93% of Boardwalk's total portfolio, were classified as
stabilized as of March 31, 2006.
< <
Same-Property Results - Stabilized
Rental revenue Operating costs NOI % of NOI
Calgary 3.2% -9.0% 8.6% 20%
Edmonton 3.2% -1.4% 5.8% 34%
Other Alberta 8.5% -7.9% 18.0% 6%
Saskatchewan 2.0% -3.1% 6.4% 11%
Ontario 1.5% -1.0% 4.4% 10%
Quebec 0.1% 9.8% -6.4% 18%
-----------------------------------------------------
2.5% -0.6% 4.5% 100%
-----------------------------------------------------
-----------------------------------------------------
Portfolio
Commenting on Boardwalk's same-property results, President and CEO, Sam
Kolias, said,
"In the first quarter, we were pleased to see revenue growth accelerating
more quickly than expense increases on a same store basis for the second
straight quarter."
Acquisition/Disposition Activity
In Q1 2006, Boardwalk REIT announced acquisitions of an additional
840 rental units in the provinces of Quebec, Alberta and British Columbia for
a total combined purchase price of $60.05 million. These acquisitions had, in
aggregate, a going-in cap rate of 6.86%. The acquisition of 560 of the
announced units was completed in Q1, while the remaining 280 units will be
finalized in Q2. Disposition activity in Q1 2006 involved two multi-family
residential properties consisting of 194 units sold for $20.7 million in
total. Further details on the Trust's acquisition and disposition activities
can be found in the supplemental information package available on Boardwalk
REIT's website, located at www.boardwalkreit.com.
Commenting on the Trust's property acquisitions and dispositions, Bill
Chidley, Senior Vice President, Corporate Development, said:
"The acquisitions announced in the first quarter of 2006 add positively
to our portfolio in three traditionally strong rental markets. We are
especially pleased to increase market capture in the Lower Mainland region of
British Columbia, an area characterized by low vacancy and low incentives
which we first entered only one year ago."
"The acquisition market for multi-family rentals in Canada continues to
be a highly competitive "seller's market". We are in discussion on a number of
possible acquisitions; however, we cannot be certain of closing on any of
these transactions. While market forces are making acquisitions more
difficult, Cap Rate compression continues to positively impact our portfolio's
overall value. This compression is expected to continue, further increasing
our portfolio's value as we look forward."
Continued Financial Strength
The Trust maintained its solid financial position in the first quarter of
2006. Boardwalk's total mortgage debt was $1.41 billion as of March 31, 2006,
down from $1.42 billion at December 31, 2005 and down from $1.44 billion at
March 31, 2005. As of March 31, 2006, the Trust's debt had an average term
maturity of 3.6 years with a weighted average interest rate of 5.36%, and the
Trust's debt-to-total-market capitalization ratio was 54.5%.
The Trust's interest coverage ratio, excluding gains, for the three-month
period ended March 31, 2006 decreased to 1.88 times compared to 1.86 times in
the same period last year. During the first quarter of 2006, Boardwalk
successfully completed approximately $23.7 million in mortgage refinancings
and renewals.
Outlook and 2006 Earnings Guidance
Commenting on the outlook for the Trust, Rob Geremia, Senior Vice
President, Finance and CFO, said "Our fiscal 2006 guidance for FFO has been
revised from $1.37 - $1.46 to $1.41 - $1.51. Our fiscal 2006 guidance for
Distributable Income has been similarly increased from $1.41 - $1.51 to
$1.45 - $1.55. The changes in these forecasts are based on an increased
expectation of the performance on our stabilized portfolio, particularly on
those stabilized properties located in Alberta. We have increased our
estimated stabilized NOI growth to 2.0%, up from the previously forecasted
expectation of 0.00%. These forecasts are further based on the expectation of
new property acquisitions of between 1,000 to 2,000 new residential units for
the year and have been adjusted for the recent issuance of Trust Units."
New Property Acquisitions and Dispositions
During March of 2006, the Trust closed on two property portfolios. The
acquisitions were previously announced in a press release distributed on
March 30, 2006.
- Complexe Deguire, a 322-unit portfolio in St. Laurent (Montreal),
Quebec, was purchased for an aggregate of $24 million, which
represents $74,534 per residential unit, or approximately $87 per
sq. ft. The transaction has a first year cap rate of 7.10% and
closed on March 13, 2006. The portfolio consists of three concrete
construction buildings ranging from six to 10 storeys in height
built between 1986 and 1988.
- The Jones Portfolio, a 238-unit portfolio in Surrey and Coquitlam
(Greater Vancouver), British Columbia, was purchased for a total of
$17,550,000, which represents $73,739 per residential unit, or
$72 per sq. ft. The transaction has a first year cap rate of 6.39%
and closed on March 30, 2006. The portfolio, built in the late
1960's, consists of 105 residential units contained in three,
3-storey walkup buildings in Coquitlam, and 133 residential units in
three, 3-storey walkups in Surrey. Total rentable space is
243,275 sq. ft.
Additionally, the Trust announced the intended acquisition of 280 suites
in St. Albert (Edmonton), Alberta, with an anticipated closing date of May 17,
2006. Sturgeon Point Villas consists of 280 suites in one four-storey, wood-
frame walkup building situated along the Sturgeon River in St. Albert
(Edmonton), Alberta built in 1978. Total purchase consideration of the
transaction was $18,500,000, which represents $66,071 per residential unit, or
$65 per sq. ft. The transaction has a first year cap rate of 7.0%. The project
has a total rentable square footage of 284,953 sq. ft, which equates to a
sizeable, 1,018 sq. ft. average per residential unit.
The Trust sold two Calgary projects during the first quarter of 2006.
Leighton House, a 38-suite, mid-rise building, sold for $4,000,000, which
equates to $100,000 per suite and $146 per square foot and represents a 5.4%
capitalization rate. Glamis Green, a 156-unit townhouse project, sold for
$107,000 per suite and $96 per square foot and represents a 5.5%
capitalization rate.
Supplementary Information
Boardwalk produces Quarterly Supplemental Information that provides
detailed information regarding the Trust's activities during the quarter. The
First Quarter 2006 Supplemental Information is available on our investor
website at www.boardwalkreit.com.
Teleconference on First Quarter Financial Results
We invite you to participate in the teleconference that will be held to
discuss these results this same morning at 11:00 am EST. Senior management
will speak to the first 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
403-531-9255 or by email to investor@bwalk.com.
Teleconference: The telephone numbers for the conference are:
416-644-3424 (within Toronto) or toll-free 1-800-814-4859 (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(equal
sign)1449580
Replay: An audio recording of the teleconference will be available from
3:00 pm ET on Thursday, May 11, 2006 until 11:59 pm ET on Friday, May 19,
2006. You can access it by dialing 416-640-1917 and using the passcode
21185750 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 over 33,600 units totalling approximately 28 million net
rentable square feet, and is Canada's largest owner/operator of multifamily
rental communities. Boardwalk REIT's portfolio is concentrated in the
provinces of Alberta, British Columbia, Saskatchewan, Ontario and Quebec.
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)
As at March 31, December 31,
2006 2005
(Unaudited) (Audited)
------------------------
Assets
Revenue producing properties (NOTE 3) $1,818,660 $1,787,878
Deferred financing costs 42,815 43,029
Other assets (NOTE 4) 12,345 11,328
Future income taxes (NOTE 9) 1,031 929
Mortgages and accounts receivable 4,909 9,039
Segregated tenants' security deposits 7,715 7,280
Cash and cash equivalents 31,607 11,145
Discontinued operations (NOTE 5) - 12,758
-------------------------------------------------------------------------
$1,919,082 $1,883,386
------------------------
------------------------
Liabilities
Mortgages payable $1,410,273 $1,415,400
Debentures (NOTE 6) 120,000 120,000
Accounts payable and accrued liabilities 27,375 32,196
Refundable tenants' security deposits and other 11,016 10,486
Discontinued operations (NOTE 5) - 9,562
-------------------------------------------------------------------------
$1,568,664 $1,587,644
------------------------
------------------------
Unitholders' Equity
Unitholders' equity $350,418 $295,742
-------------------------------------------------------------------------
$1,919,082 $1,883,386
------------------------
------------------------
SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF EARNINGS
(CDN$ THOUSANDS, EXCEPT PER UNIT AMOUNTS)
3 months 3 months
ended ended
March 31, March 31,
2006 2005
------------------------
(Unaudited) (Unaudited)
Revenue
Rental income $76,503 $72,816
------------------------
Expenses
Revenue producing properties:
Operating expenses 10,346 9,245
Utilities 12,825 12,106
Utility rebate (NOTE 10) (1,391) (636)
Property taxes 8,333 7,885
Administration 7,933 6,895
Financing costs 20,403 20,111
Deferred financing costs amortization 776 924
Amortization of capital assets 17,534 18,424
-------------------------------------------------------------------------
76,759 74,954
------------------------
Earnings (loss) from continuing operations
before income taxes (256) (2,138)
Large corporations taxes 149 245
Future income taxes (recovery) (NOTE 9) (102) (88)
-------------------------------------------------------------------------
Earnings (loss) from continuing operations (303) (2,295)
Earnings from discontinued operations,
net of tax (NOTE 5) 7,600 264
-------------------------------------------------------------------------
Net earnings (loss) $7,297 $(2,031)
------------------------
------------------------
Basic earnings (loss) per unit (NOTE 8)
- from continuing operations $0.00 $(0.04)
- from discontinued operations 0.14 -
-------------------------------------------------------------------------
Basic earnings (loss) per unit $0.14 $(0.04)
------------------------
------------------------
Diluted earnings (loss) per unit (NOTE 8)
- from continuing operations $0.00 $(0.04)
- from discontinued operations 0.14 -
-------------------------------------------------------------------------
Diluted earnings (loss) per unit $0.14 $(0.04)
------------------------
------------------------
SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF UNITHOLDERS' EQUITY
(CDN$ THOUSANDS, EXCEPT NUMBER OF UNITS)
3 months 3 months
ended ended
March 31, March 31,
2006 2005
------------------------
(Unaudited) (Unaudited)
Trust units (Note 7)
Balance, beginning of period $295,696 $293,503
Unit issue proceeds under equity financing, net 63,568 -
Unit issue proceeds under distribution
reinvestment plan 1,002 357
Restructuring costs (112) 81
-------------------------------------------------------------------------
Balance, end of period $360,154 $293,941
------------------------
Cumulative earnings
Balance, beginning of period $129,530 $124,498
Net earnings (loss) 7,297 (2,031)
-------------------------------------------------------------------------
Balance, end of period $136,827 $122,467
------------------------
Cumulative distributions to unitholders
Balance, beginning of period $(129,483) $(62,485)
Distributions declared to unitholders (Note 8) (17,080) (16,733)
-------------------------------------------------------------------------
Balance, end of period $(146,563) $(79,218)
------------------------
Total unitholders' equity $350,418 $337,190
------------------------
------------------------
Units issued and outstanding 56,185,618 53,126,948
------------------------
------------------------
SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF CASH FLOWS
(CDN$ THOUSANDS)
3 months 3 months
ended ended
March 31, March 31,
2006 2005
------------------------
(Unaudited) (Unaudited)
Operating activities
Net earnings (loss) $7,297 $(2,031)
Earnings from discontinued operations,
net of tax (7,600) (264)
Future income taxes (recovery) (102) (88)
Amortization of capital assets 17,534 18,424
-------------------------------------------------------------------------
Funds from continuing operations 17,129 16,041
Funds from discontinued operations 73 416
Net change in operating working capital (848) 4,530
-------------------------------------------------------------------------
Total operating cash flows 16,354 20,987
------------------------
Financing activities
Issue of trust units (net of issue costs)
(NOTE 7) 64,570 357
Restructuring costs (112) 81
Distributions paid (16,769) (16,737)
Issue of debentures (NOTE 6) - 120,000
Financing of revenue producing properties 3,288 46,468
Repayment of debt on revenue producing
properties (17,776) (29,814)
Capital lease obligations - (63)
Deferred financing costs incurred
(net of amortization) 214 (2,825)
-------------------------------------------------------------------------
33,415 117,467
------------------------
Investing activities
Purchases of revenue producing properties
(NOTE 3) (42,295) (103,289)
Improvements to revenue producing properties (6,979) (5,961)
Net cash proceeds from sale of properties 20,274 -
Additions to corporate technology assets (307) (395)
-------------------------------------------------------------------------
(29,307) (109,645)
------------------------
Net increase in cash and cash equivalents
balance 20,462 28,809
Cash and cash equivalents (bank indebtedness),
beginning of period 11,145 (2,723)
-------------------------------------------------------------------------
Cash and cash equivalents, end of period $31,607 $26,086
------------------------
------------------------
Supplementary cash flow information:
Capital taxes paid (received) $210 $(10)
Interest paid $21,990 $19,001
------------------------
------------------------
SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three months ended March 31, 2006
(TABULAR AMOUNTS IN CDN$ 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, dated January 9,
2004 and as amended and restated on May 3, 2004, 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, 2005. 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.
Due to seasonality, the operating results for the three months ended
March 31, 2006 are not necessarily indicative of the results that may
be expected for the full year ending December 31, 2006 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, which create 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. REVENUE PRODUCING PROPERTIES
Acquisitions
3 months 3 months
ended ended
March 31, March 31,
2006 2005
------------------------
Cash paid $42,295 $103,289
Debt assumed - 13,144
---------------------------------------------------------------------
Total purchase price 42,295 116,433
Fair value adjustments to debt - (207)
---------------------------------------------------------------------
Book value $42,295 $116,226
------------------------
------------------------
Allocation of book value to revenue
producing properties $40,764 $112,569
Allocation of book value to other assets 1,531 3,657
---------------------------------------------------------------------
$42,295 $116,226
------------------------
------------------------
Multi-family units acquired 560 1,325
------------------------
------------------------
Dispositions
3 months 3 months
ended ended
March 31, March 31,
2006 2005
------------------------
Cash received $20,274 $-
Cost of dispositions 426 -
---------------------------------------------------------------------
Total proceeds 20,700 -
Net book value 13,173 -
---------------------------------------------------------------------
Gain on dispositions $7,527 $-
------------------------
------------------------
Multi-family units sold 194 -
------------------------
------------------------
Included in revenue producing properties is capitalized wages of
$1.1 million for the three months ended March 31, 2006 (March 31,
2005 - $1.0 million) relating to capital upgrades.
4. OTHER ASSETS
As at March 31, December 31,
2006 2005
------------------------
Corporate technology assets (net of
amortization) $3,488 $3,502
Head office building (net of amortization) 2,323 2,350
Deposits on potential property acquisitions 500 200
Prepaid parts and supplies 1,749 2,037
Lease goodwill and customer relationship
intangibles, net of accumulated amortization 1,455 125
Prepaid and other 2,830 3,114
---------------------------------------------------------------------
$12,345 $11,328
------------------------
------------------------
Accumulated amortization for corporate technology assets and head
office building at March 31, 2006 were $11.1 million and
$0.9 million, respectively (December 31, 2005 - $10.8 million and
$0.8 million, respectively).
5. DISCONTINUED OPERATIONS
During the first quarter of 2006, the Trust completed the sale of a
156-unit and a 38-unit rental property, both located in Calgary,
Alberta. These two properties formed part of our Alberta segment in
our segmented information disclosure. 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
ended ended
March 31, March 31,
2006 2005
------------------------
Revenue
Rental income $219 $983
------------------------
Expenses
Revenue producing properties:
Operating expenses 61 114
Utilities 25 149
Utilities rebate (3) -
Property taxes 28 61
Administration 8 26
Financing costs 27 211
Deferred financing cost amortization - 6
Amortization of capital assets - 113
---------------------------------------------------------------------
146 680
------------------------
73 303
Gain on dispositions 7,527 -
---------------------------------------------------------------------
Operating earnings from discontinued
operations before income taxes 7,600 303
Future income taxes - 39
---------------------------------------------------------------------
Earnings from discontinued operations $7,600 $264
------------------------
------------------------
March 31, December 31,
2006 2005
------------------------
Discontinued Assets
Revenue producing properties $- $12,490
Other assets - 268
---------------------------------------------------------------------
Total $- $12,758
------------------------
------------------------
Discontinued Liabilities
Mortgages payable $- $9,562
---------------------------------------------------------------------
Total $- $9,562
------------------------
------------------------
6. 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 was be 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.
7. 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. On conversion of Boardwalk
Equities Inc. to a trust, $10.3 million were incurred for
restructuring costs. 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, 2004 53,107,567 $293,503
Units issued under distribution reinvestment
plan 116,627 2,202
Restructuring costs - (9)
------------------------
December 31, 2005 53,224,194 $295,696
Units issued under equity financing 2,915,000 63,568
Units issued under distribution
reinvestment plan 46,424 1,002
Restructuring costs - (112)
------------------------
March 31, 2006 56,185,618 $360,154
------------------------
------------------------
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 51,710,618
Special Voting Units issued to holders
of LP Class B units 4,475,000
------------------------
Total trust units 56,185,618 $360,154
------------------------
------------------------
8. 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 Declaration of
Trust ("DOT"). Under this current DOT, the Trust is required to
distribute, at a minimum, its reported taxable income. The
reconciliation of distributable income and per unit information
begins with net earnings 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,
therefore, unlikely to be comparable to similar measures presented by
other real estate companies and trusts.
3 months 3 months
ended ended
March 31, March 31,
2006 2005
------------------------
Net earnings (loss) 7,297 $(2,031)
Add:
Amortization of capital assets 17,534 18,537
Amortization of deferred financing costs
incurred prior to May 3, 2004 510 863
Deduct:
Gain on disposition (7,527) -
Future income taxes (recovery) (102) (49)
Amortization of net premium on long-term
debt assumed after May 2, 2004 (11) (4)
---------------------------------------------------------------------
Distributable income $17,701 $17,316
Distribution declared to unitholders $17,080 $16,733
---------------------------------------------------------------------
---------------------------------------------------------------------
Weighted average units outstanding -
basic and diluted 53,309,392 53,116,533
Distributable income earned per unit $0.332 $0.326
Actual distributions declared per unit $0.320 $0.315
---------------------------------------------------------------------
---------------------------------------------------------------------
Earnings per unit
3 months 3 months
ended ended
March 31, March 31,
2006 2005
------------------------
Numerator
Earnings (loss) from continuing operations $(303) $(2,295)
Earnings from discontinued operations $7,600 $264
---------------------------------------------------------------------
Denominator
Denominator for basic earnings per unit -
weighted average units (THOUSANDS) 53,309 53,117
---------------------------------------------------------------------
Denominator for diluted earnings per unit
adjusted for weighted average units and
assumed conversion (THOUSANDS) 53,309 53,117
---------------------------------------------------------------------
---------------------------------------------------------------------
Earnings (loss) per unit from continuing
operations
Basic $0.00 $(0.04)
Diluted $0.00 $(0.04)
---------------------------------------------------------------------
Earnings per unit from discontinued operations
Basic $0.14 $0.00
Diluted $0.14 $0.00
---------------------------------------------------------------------
---------------------------------------------------------------------
9. 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.
3 months 3 months
ended ended
March 31, March 31,
2006 2005
------------------------
Continuing operations $(102) $(88)
Discontinued operations - 39
---------------------------------------------------------------------
Total future income taxes (recovery) $(102) $(49)
------------------------
------------------------
Future income taxes (recovery) consist of the following:
3 months 3 months
ended ended
March 31, March 31,
2006 2005
------------------------
Tax (recovery) expense based on expected rate $(155) $(49)
Adjustment to future income tax liabilities 53 -
---------------------------------------------------------------------
Future income taxes (recovery) $(102) $(49)
------------------------
------------------------
The future income tax asset is calculated as follows:
As at March 31, December 31,
2006 2005
------------------------
Tax asset related to operating losses $536 $403
Tax asset related to differences in tax
and book basis 495 526
---------------------------------------------------------------------
Future income tax asset $1,031 $929
------------------------
------------------------
10. COMMITMENTS AND CONTINGENCIES
At March 31, 2006, the Trust had long-term supply arrangements with
two electrical utility companies to supply the Trust with its
electrical power needs for Alberta for the next nine to thirty-three
months at a blended rate of approximately $0.0561/kwh. These
agreements provide that the Trust purchase its power for all Alberta
properties under contract for the upcoming months.
While the above utility contracts for electrical power reduce the
risk of exposure to adverse changes in commodity prices, they also
reduce the potential benefits of favourable changes in commodity
prices. For accounting purposes, all settlements are recorded as
utility expense in the period the settlement occurs.
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
March 2006, Boardwalk REIT was eligible for estimated rebates
totalling $1.4 million. For January to March 2005, Boardwalk REIT was
eligible for rebates totalling approximately $0.6 million.
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.
11. GUARANTEES
In the normal course of business, various agreements may be entered
that may contain features that meet the 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
March 31, 2006 is approximately $5.6 million (March 31, 2005 -
$5.8 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 asset will cover, and in most likelihood exceed, the maximum
potential liability associated with the amount being guaranteed.
Therefore, at March 31, 2006, no amounts have been recorded in the
consolidated financial statements with respect to the above noted
indirect guarantees.
12. SEGMENTED INFORMATION
Boardwalk REIT specializes in multi-family residential housing and
operates primarily within one business segment in four provinces
located in Canada. The following summary presents segmented financial
information for Boardwalk REIT's business by geographic location.
3 months 3 months
ended ended
March 31, March 31,
2006 2005
------------------------
Alberta
Revenue $40,277 $38,228
------------------------
Expenses
Operating 4,684 4,552
Utilities 6,541 5,606
Utility rebates (1,387) (636)
Property taxes 3,241 3,216
---------------------------------------------------------------------
13,079 12,738
------------------------
Net operating income $27,198 $25,490
------------------------
Saskatchewan
Revenue $8,693 $8,551
------------------------
Expenses
Operating 1,141 1,154
Utilities 1,469 1,606
Property taxes 1,251 1,226
---------------------------------------------------------------------
3,861 3,986
------------------------
Net operating income $4,832 $4,565
------------------------
Ontario
Revenue $9,378 $9,249
------------------------
Expenses
Operating 1,187 1,328
Utilities 1,883 2,026
Property taxes 1,859 1,677
---------------------------------------------------------------------
4,929 5,031
------------------------
Net operating income $4,449 $4,218
------------------------
British Columbia
Revenue $1,651 $932
------------------------
Expenses
Operating 261 16
Utilities 139 107
Property taxes 189 22
------------------------
589 145
------------------------
Net operating income $1,062 $787
------------------------
Quebec
Revenue $16,398 $15,668
------------------------
Expenses
Operating 2,348 1,766
Utilities 2,811 2,606
Property taxes 1,760 1,733
---------------------------------------------------------------------
6,919 6,105
------------------------
Net operating income $9,479 $9,563
------------------------
Total
Net operating income $47,020 $44,623
Unallocated revenue* 21,026 401
Unallocated expenses(xx) (60,749) (47,055)
---------------------------------------------------------------------
Net earnings for the period $7,297 $(2,031)
------------------------
------------------------
As at March 31, December 31,
2006 2005
------------------------
Alberta
Identifiable assets
Revenue producing properties $928,187 $934,503
Mortgages and accounts receivable 693 5,277
Deferred financing costs 26,154 26,083
Tenants' security deposit 5,991 5,688
------------------------
$961,025 $971,551
------------------------
Saskatchewan
Identifiable assets
Revenue producing properties $174,859 $176,116
Mortgages and accounts receivable 201 185
Deferred financing costs 4,284 4,320
Tenants' security deposits 1,385 1,341
------------------------
$180,729 $181,962
------------------------
Ontario
Identifiable assets
Revenue producing properties $212,136 $213,490
Mortgages and accounts receivable 166 236
Deferred financing costs 3,458 3,508
------------------------
$215,760 $217,234
------------------------
British Columbia
Identifiable assets
Revenue producing properties $78,902 $62,014
Mortgages and accounts receivable 8 285
Tenants security deposits 339 250
------------------------
$79,249 $62,549
------------------------
Quebec
Identifiable assets
Revenue producing properties $420,852 $398,109
Mortgages and accounts receivable 479 5,032
Deferred financing costs 5,844 5,927
------------------------
$427,175 $409,068
------------------------
Total assets
Identifiable assets $1,863,938 $1,842,364
Unallocated assets(xxx) 55,144 41,022
------------------------
$1,919,082 $1,883,386
------------------------
------------------------
* Unallocated revenue includes property sales, interest income,
revenue from discontinued operations and other non-rental
income.
(xx) Unallocated expenses include cost of property sales, operating
expenses from discontinued operations, non-rental operating
expenses, administration, financing costs, amortization, income
taxes and other provisions.
(xxx) Unallocated assets include discontinued assets, cash, short-
term investments and other assets.
13. SUBSEQUENT EVENTS
Subsequent to March 31, 2006, Boardwalk REIT contracted to acquire
280 residential units in the province of Alberta from unrelated third
parties for an aggregate purchase price of approximately
$18.5 million. Cash from Boardwalk REIT's recently completed equity
financing will finance the acquisition.
> >
%SEDAR: 00020684E
For further information please contact:
Boardwalk REIT
Sam Kolias,
President and CEO,
(403) 531-9255;
Roberto Geremia,
Senior Vice President, Finance
and Chief Financial Officer,
(403) 531-9255;
