Boardwalk Investor 2000 Stub Year Financial Reports

Boardwalk Posts Strong Rental Revenue Growth for Q1 2001 Fiscal Year

Strong Portfolio Performance and Rental Cash Flow Will Fuel Boardwalk’s Second Quarter Growth

Boardwalk began its 2001 year with strong rental cash flows and continued progress in our horizontal revenue enhancement programs. We added roughly $116 million in assets to our balance sheet over the past twelve months, and increased our gross rental revenue by $6.2 million or 15 percent for the corresponding period one year ago. At the same time, we have further improved on the inexpensive cost of our mortgage debt capital, now at a blended 6.25 percent, and continue to extend maturities in order to insulate against interest rate fluctuations.

During the first quarter, we improved our overall vacancy situation, reducing the rate from 7.0% at the start of the quarter to 3.0% effective October 1, 2000. Our administration costs have stabilized, notwithstanding our continued advancement in our telecom and e-commerce ventures, which should begin bearing fruit shortly. We have been very active at Boardwalk, and continue to make new strides in redefining our vision of carefree living.

The more meaningful financial results for the three month period ending August 31, 2000 include:

Rental revenues of $46.7 million, up 15 percent from 1999’s $40.5 million.
Due to the temporary absence of any bulk property sales this quarter, total revenues are off $4.7 million at $46.7 million. We have effected a bulk sale of assets for the second quarter of this year, which has now closed and yields a pre-tax profit of approximately $12 million or 24 cents per share cash flow that will appear in our next quarter results, and will add $36.3 million of gross revenues for the second quarter.
Net rental income of $15 million, up 9 percent from the $13.8 million reported in Q1 2000.
Net operating income of $31.1 million, up 14 percent from 1999’s $27.2 million.
Cash Flow from operations of $.21 per share. As outlined, while rental revenues are up, in the absence of any bulk property sales in the quarter, cash flow was off $9.0 million or 49 percent.

In addition to these financially oriented highlights, we would like to point out the following operational activities recently undertaken or completed by Boardwalk.

The issuance and delivery of rental adjustments that are positively affecting the second and third quarter rental revenue, and will recover some of the additional costs associated with former steep utility and property tax increases.
The Provincial government has announced it will issue cash credits to apartment owners to ease some of the pressure from steep utility increases we have realized. We are awaiting more details.
The completion of our new ISP and “head end” that now provides digital television services to our preferred customers and high speed 100 Mbs. instant access to the internet. The near completion of our “central office” in Calgary, basically providing us the utility of a full television broadcasting and telephone company on a pure digital basis. This facility has adequate capacity for all of Western Canada.
Purchasers of the real estate assets recently sold have agreed to allow us to use these assets in the initial, exclusive rollout of our telecom/ e-commerce strategy.
The initiation of trial digital television programming and high speed internet service in one of our buildings to a select group of residents.
The automation of rental payments to automatic bank withdrawal, where approximately 20 percent of our customers subscribed in the first month it was offered.
The preparation, filing and public hearing of our CRTC Broadcast Distribution Undertaking (BDU) license, completed September 18, 2000, for which we are now awaiting final approval.
The issuance of a preliminary CRTC Competing Local Exchange Carrier (CLEC) license.
Creation of a formidable Telecom team, with over 150 years combined experience in telephone and television broadcast distribution with recognized incumbents.

From the preceding, it is evident we are well on our way to delivering additional goods and services to our customers. Moreover, we are also exploring ways in which we can provide these services to other property owners and residents throughout the country. Our innovations in the technology sector are at the forefront of new development, and are acclaimed as revolutionary by such firms as Nortel and Microsoft. We aim to be at the leading edge of the changes currently taking place in the North American telecommunications industry.

Boardwalk continues to operate with a strong economic backdrop in all our markets. The Alberta economy in particular, fuelled by high energy prices, leads the country in job growth and low levels of unemployment. Still, in the wake of lowering vacancy rates and rising rents, economic justification for new construction is absent. There should be continued strong demand for rental housing for the foreseeable future, underscoring our vast, untapped potential.

Operational Review