SmartCentres Real Estate Investment Trust Releases Fourth Quarter and Full Year Results for 2022

SmartCentres Real Estate Investment Trust

Operational

• Shopping centre leasing activity remains strong, with industry-leading occupancy levels of 98% in Q4 2022, representing a 40 basis point increase as compared to the same period 2021

• Same Properties NOI⁽¹⁾ for the quarter increased by $5.1 million or 4.0% as compared to Q4 2021, and for the full year increased by $16.5 million or 3.3% as compared to 2021

• Net rental income and other for the quarter increased by $2.2 million or 1.7% as compared to Q4 2021, and for the full year increased by $16.8 million or 3.5% as compared to 2021
  

Mixed-use Development

• In excess of three million square feet of construction activity is currently underway, principally high rise residential on existing shopping centre sites in Toronto, Montreal, and Ottawa

• Construction of the Transit City 4 & 5 condominium towers is in the final stages of completion with closings scheduled to commence in March 2023. All 1,026 units have been pre-sold and construction costs are on budget

• Construction of the Millway, a 458-unit purpose-built rental apartment building, is also in the final stages of completion, with initial tenants taking occupancy and rent commencement later this month
  

Financial

• FFO⁽¹⁾ with adjustments excluding the impact of the TRS for the quarter increased by $1.0 million or 1.1% as compared to Q4 2021, and for the full year increased by $9.6 million or 2.7% as compared to 2021

• Payout Ratio to ACFO⁽¹⁾ with adjustments excluding the impact of the TRS and other for the year ended December 31, 2022 improved by 3.9% to 92.6% as compared to 2021 and for the quarter improved by 5.7% to 94.1% as compared to Q4 2021

• Payout Ratio to cash flows provided by operating activities for the year ended December 31, 2022 increased by 3.1% to 88.9% as compared to 2021 and for the quarter increased by 1.6% to 61.2% as compared to Q4 2021

• As a result of fair value adjustments to property valuations and condo and townhouse closings that occurred in 2021, net income and comprehensive income for the quarter decreased by $551.8 million or 84.6% as compared to Q4 2021, and for the year decreased by $351.7 million or 35.6% as compared to 2021

TORONTO, Feb. 08, 2023 (GLOBE NEWSWIRE) -- SmartCentres Real Estate Investment Trust (“SmartCentres”, the “Trust” or the “REIT”) (TSX: SRU.UN) is pleased to report its financial and operating results for the quarter and year ended December 31, 2022.

“Walmart is a very strong anchor tenant in good times, and an even stronger one in tough times. Hence, customer traffic to our Walmart-anchored shopping centre portfolio continues to gain momentum which, in turn, is generating steadily increasing levels of leasing activity that began earlier in 2022.” said Mitchell Goldhar, Executive Chairman and CEO of SmartCentres.

“We anticipate this trend will continue into 2023 and that it will have a positive impact on both our occupancy and earnings levels. We are pleased with the noticeable increase in leasing activity in the fourth quarter and the associated improvement in cash collections.”

“We are particularly proud of our progress on the eleven mixed-used development initiatives that are currently under construction. These projects have expected completion dates in 2023 and 2024, upon which they are expected to begin contributing FFO⁽¹⁾. The development initiatives span multiple asset classes, including condos, rental apartments, seniors’ apartments, townhouses, self-storage, industrial, and retirement residences. As at December 31, 2022, the total cumulative amount of capital deployed on these projects was $755.2 million ($304.1 million at the Trust’s share), with approximately $487.8 million remaining until completion ($234.9 million at the Trust’s share),” noted Mr. Goldhar.

“Among these developments are significant projects at our flagship Vaughan Metropolitan Centre. These include two 45-storey and 50-storey condominium towers at Transit City nearing completion after 36 months. These units are sold out and the final stages of construction are rapidly nearing the finish line, on time and on budget. Closings are expected to commence in March 2023. In addition, The Millway, a 458-unit, 36-storey rental apartment tower, is also proceeding on time and on budget with initial occupancy and rent commencement expected to begin later this month. The first phase of our Artwalk condominium project is also sold out and construction is expected to commence in the second half of 2023.”

“We are also pleased to note that, as promised, we published our inaugural ESG report during the fourth quarter of 2022. Our business remains strong and well-positioned for growth in the coming years. Nevertheless, with changing economic conditions, we plan on applying prudent discipline when assessing development and other initiatives. Our focus remains on the long term, including the development of mixed-use projects on our strategically located real estate, which we are confident will extract deeply embedded value for many years to come,” added Mr. Goldhar.

(1)   Represents a non-GAAP measure. The Trust’s method of calculating non-GAAP measures may differ from other reporting issuers’ methods and, accordingly, may not be comparable. For additional information, please see “Non-GAAP Measures” in this Press Release.

Key Business Development, Financial and Operational Highlights for the Year Ended December 31, 2022

Mixed-Use Development and New Growth at SmartVMC

• Park Place condo pre-development is underway on the 53.0 acre SmartVMC West lands strategically acquired in December 2021. Pre-sales for this development have commenced. The Trust’s acquisition in December 2021 of a two-thirds interest in the SmartVMC West lands more than doubled the Trust’s holdings in the 105 acre SmartVMC city centre development.
  

• Construction nears completion on the 100% pre-sold Transit City 4 (45 storeys) and 5 (50 storeys) condo towers, representing 1,026 residential units. Concrete, formwork and building envelope have been completed for both towers, with interior finishes ongoing. First closings are expected to commence in March 2023.
  

• Construction of the purpose-built rental project, The Millway (36 storeys), nears completion at SmartVMC. Formwork, concrete and building envelope have been completed, with interior finishes underway. Initial occupancy is expected to commence in February 2023.
  

• ArtWalk condominium sales of 320 released units in Phase 1 are sold out with construction expected to begin in the second half of 2023.
  

Other Business Development

• Occupancy in the completed first phase of the two-phase, purpose-built residential rental project in Laval, Quebec, ended the year with 98% of the 171 units leased. Pre-leasing has commenced on the next phase and construction continues, with a target completion date of Q2 2023.
  

• Initial occupancy in the two purpose-built residential rental towers (238 units) in Mascouche, Quebec began in July 2022, with the final floor opened in November. More than 147 units have been leased and current lease-up activity is in line with initial expectations.
  

• All of the five developed and operating self-storage facilities (Toronto (Leaside), Vaughan NW, Brampton, Oshawa South and Scarborough East) have been very well-received by their local communities, with current occupancy levels ahead of expectations. A sixth facility, Aurora, opened in December 2022.
  

• Three self-storage facilities in Whitby, Markham and Brampton (Kingspoint) are currently under construction, with Brampton (Kingspoint) expected to be completed in early 2023. Additional self-storage facilities have been approved by the Board of Trustees and the Trust is in the process of obtaining municipal approvals in Stoney Creek and two locations in Toronto (Gilbert Ave. and Jane St.). In addition, the municipal approval process is underway in New Westminster and Burnaby, British Columbia.
  

• Construction continues on a new retirement residence and a seniors’ apartment project, totalling 402 units, at the Trust's Laurentian Place in Ottawa, with completion expected in Q1 2024.
  

• By way of a Minister’s Zoning Order, the Trust has permissions that would allow for the redevelopment of the 73-acre Cambridge retail property (which is subject to a leasehold interest with Penguin) including various forms of residential, retail, office, institutional and commercial uses providing for the creation of a vibrant urban community with the potential for over 12 million square feet of development.
  

• The Trust, together with its partner, Penguin, has also commenced preliminary siteworks for the 215,000 square foot retail project on Laird Drive in Toronto, that is expected to feature a flagship 190,000 square foot Canadian Tire store together with 25,000 square feet of additional retail space. Canadian Tire is expected to take possession in 2024.
  

Financial

• Net income and comprehensive income⁽¹⁾ was $636.0 million in 2022 compared to $987.7 million in 2021, representing a decrease of $351.7 million. This decrease was primarily attributed to: i) $476.8 million decrease in fair value adjustment on revaluation of investment properties; and ii) $20.2 million decrease in net profit on condo and townhome unit closings; and was partially offset by i) $125.5 million increase in fair value adjustments on financial instruments; and ii) $20.6 million increase in net rental income and other mainly due to higher base rent in 2022.
  

• Net income and comprehensive income per Unit⁽¹⁾ in 2022 decreased by $2.14 or 37.7% to $3.54 as compared to the same period in 2021, primarily due to the reasons as noted above.
  

• As at December 31, 2022, the Trust increased its unsecured/secured debt ratio⁽²⁾⁽³⁾ to 74%/26% (December 31, 2021 – 71%/29%).
  

• The Trust continues to add to its unencumbered pool of high-quality assets. As at December 31, 2022, this unencumbered portfolio consisted of investment properties was valued at $8.4 billion (December 31, 2021 – $6.6 billion).
  

• The Trust’s fixed rate/variable rate debt ratio⁽²⁾⁽³⁾ was 82%/18% as at December 31, 2022 (December 31, 2021 – 89%/11%).
  

• FFO per Unit with adjustments excluding the impact of ECL, TRS, condominium and townhome closings, and SmartVMC West acquisition⁽²⁾ was $2.14 (year ended December 31, 2021 – $2.09).
  

• During the quarter, 693,900 additional notional TRS Units were added at a weighted average price of $26.37 per Unit.
  

• For the year ended December 31, 2022, there was a surplus of cash flows provided by operating activities⁽¹⁾ over distributions declared of $41.2 million (year ended December 31, 2021 – surplus of $52.9 million).
  

• The Payout Ratio relating to cash flows provided by operating activities for the year ended December 31, 2022 was 88.9%, as compared to 85.8% for the year ended December 31, 2021.
  

• For the year ended December 31, 2022, there was a surplus of ACFO⁽²⁾ over distributions declared of $10.5 million (year ended December 31, 2021 – surplus of $34.3 million).
  

• The Payout Ratio to ACFO⁽²⁾ for the year ended December 31, 2022 was 96.9%, as compared to 90.3% for the year ended December 31, 2021. Excluding the impact of TRS, condominium and townhome closings, and SmartVMC West acquisition, the Payout Ratio to ACFO⁽²⁾ for the year ended December 31, 2022 was 92.6%, as compared to 96.5% for the year ended December 31, 2021.
  

Operational

• Rentals from investment properties and other⁽¹⁾ was $804.6 million, as compared to $780.8 million in 2021, representing an increase of $23.8 million or 3.0%, primarily due to: (i) the acquisition of an additional interest in investment properties in Q1 2022; (ii) higher rental income from Premium Outlets locations in both Toronto and Montreal; and (iii) additional self-storage facility and parking rental revenue.
  

• Same Properties NOI inclusive of ECL⁽²⁾ increased by $16.5 million or 3.3% in 2022 as compared to 2021. Same Properties NOI excluding ECL⁽²⁾ increased by $9.5 million or 1.9% in 2022 as compared to the prior year.
  

• In-place occupancy rate and occupancy rate with committed deals were 97.6% and 98.0%, respectively, as at December 31, 2022 (December 31, 2021 – 97.4% and 97.6%, respectively).
  

Subsequent Event

• The Trust together with an entity, PCVP, which is classified as investment in associates, entered into an agreement to dispose approximately 6.4 acres of land located in Vaughan, Ontario (VMC) to an unrelated party, which closed in February 2023, for gross proceeds of $95.6 million that was satisfied with cash. The Trust’s share of such proceeds was $58.4 million, comprised of $42.3 million relating to the Trust’s two-thirds share of the 4.3 acres of land on western part of SmartVMC which were previously consolidated in the Trust’s consolidated financial statements and presented as assets held for sale at December 31, 2022, and $16.1 million relating to the Trust’s 50% share of 2.1 acres of land on eastern part of SmartVMC which were previously recorded in equity accounted investments. Proceeds from the sale were primarily used by the Trust to reduce indebtedness.
  

(1)   Represents a GAAP measure.
(2)   Represents a non-GAAP measure. The Trust’s method of calculating non-GAAP measures may differ from other reporting issuers’ methods and, accordingly, may not be comparable. For additional information, please see “Non-GAAP Measures” in this Press Release.
(3)   Net of cash-on-hand of $33.4 million as at December 31, 2022   for the purposes of calculating the applicable ratios.

Selected Consolidated Operational, Mixed-Use Development and Financial Information

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

(in thousands of dollars, except per Unit and other non-financial data)	December 31, 2022	December 31, 2021	December 31, 2020
Portfolio Information
Number of retail properties	155	155	156
Number of office properties	4	4	4
Number of self-storage properties	6	6	4
Number of residential properties	1	1	1
Number of properties under development	19	17	14
Total number of properties with an ownership interest	185	183	179
Leasing and Operational Information(1)
Gross leasable retail and office area (in thousands of sq. ft.)	34,750	34,119	34,056
Occupied retail and office area (in thousands of sq. ft.)	33,925	33,219	33,039
Vacant retail and office area (in thousands of sq. ft.)	826	900	1,017
In-place occupancy rate (%)	97.6	97.4	97.0
In-place and committed occupancy rate (%)	98.0	97.6	97.3
Average lease term to maturity (in years)	4.2	4.4	4.6
Net annualized retail rental rate (per occupied sq. ft.) ($)	15.53	15.44	15.37
Net annualized retail rental rate excluding Anchors (per occupied sq. ft.) ($)	22.20	22.07	21.89
Mixed-Use Development Information
Trust’s share of future development area (in thousands of sq. ft.)	41,200	40,600	32,500
Trust’s share of estimated costs of future projects currently under construction, or for which construction is expected to commence within the next five years (in millions of dollars)	10,000	9,800	7,900
Total number of residential rental projects	110	104	96
Total number of seniors’ housing projects	25	27	40
Total number of self-storage projects	33	36	50
Total number of office buildings / industrial projects	8	8	7
Total number of hotel projects	3	3	4
Total number of condominium developments	88	95	72
Total number of townhome developments	7	10	15
Total number of estimated future projects currently in development planning stage	274	283	284
Financial Information
Total assets – GAAP(2)	11,702,153	11,293,248	10,724,492
Total assets – non-GAAP(3)(4)	12,083,941	11,494,377	10,874,900
Investment properties – GAAP(2)	10,250,392	9,847,078	8,850,390
Investment properties – non-GAAP(3)(4)	11,223,796	10,684,529	9,400,584
Total unencumbered assets(3)	8,415,900	6,640,600	5,835,600
Debt – GAAP(2)	4,983,265	4,854,527	5,210,123
Debt – non-GAAP(3)(4)	5,260,053	4,983,078	5,261,360
Debt to Aggregate Assets (%)(3)(4)(5)	43.6	42.9	44.6
Debt to Gross Book Value (%)(3)(4)(5)	52.0	50.8	50.1
Unsecured to Secured Debt Ratio(3)(4)(5)	74%/26%	71%/29%	68%/32%
Unencumbered assets to unsecured debt(3)(4)(5)	2.2X	1.9X	1.9X
Weighted average interest rate (%)(3)(4)	3.86	3.11	3.28
Weighted average term of debt (in years)	4.0	4.8	5.0
Interest coverage ratio(3)(4)(5)	3.1X	3.4X	3.2X
Equity (book value)(2)	6,163,101	5,841,315	5,166,975
Weighted average number of units outstanding – diluted	179,657,455	173,748,819	172,971,603

(1)   Excluding residential and self-storage area.
(2)   Represents a GAAP measure.
(3)   Represents a non-GAAP measure. The Trust’s method of calculating non-GAAP measures may differ from other reporting issuers’ methods and, accordingly, may not be comparable. For additional information, please see “Non-GAAP Measures” in this Press Release.
(4)   Includes the Trust’s assets held for sale and the Trust’s proportionate share of equity accounted investments.
(5)   As at December 31, 2022, cash-on-hand of $33.4 million was excluded for the purposes of calculating the applicable ratios (December 31, 2021 – $80.0 million, December 31, 2020 – $754.4 million).

Year-to-Date Comparison to Prior Year

The following table presents key financial, per Unit, and payout ratio information for the year ended December 31, 2022 and December 31, 2021:

(in thousands of dollars, except per Unit information)		2022		2021	Variance
	(A)		(B)		(A–B)
Financial Information
Rentals from investment properties and other(1)		804,598		780,796		23,802
Net base rent(1)		508,023		494,992		13,031
Total recoveries(1)		265,281		253,032		12,249
Miscellaneous revenue(1)		15,393		17,891		(2,498)
Service and other revenues(1)		14,652		14,843		(191)
Earnings from other(1)		1,249		38		1,211
Net income and comprehensive income(1)		635,965		987,676		(351,711)
Net income and comprehensive income excluding fair value adjustments(2)(3)		342,261		342,609		(348)
Cash flows provided by operating activities(1)		370,762		371,624		(862)
Net rental income and other(1)		502,604		485,840		16,764
NOI from condominium and townhome closings and other adjustments(2)		305		20,471		(20,166)
NOI(2)		518,520		518,122		398
Change in net rental income and other(2)		3.5%		5.4%	(1.9)%
Change in SPNOI(2)		3.3%		3.5%	(0.2)%
Change in SPNOI excluding ECL(2)		1.9%	(2.0)%			3.9%
FFO(2)(3)(4)(5)		371,572		380,070		(8,498)
Other adjustments		656		3,226		(2,570)
FFO with adjustments(2)(3)(4)		372,228		383,296		(11,068)
Adjusted for:
ECL		(3,257)		3,706		(6,963)
Loss (gain) on derivative – TRS		4,918		(5,642)		10,560
FFO sourced from condominium and townhome closings		(680)		(18,747)		18,067
FFO sourced from SmartVMC West acquisition		(984)		—		(984)
FFO with adjustments excluding impact of ECL, TRS, condominium and townhome closings, and SmartVMC West acquisition(2)(3)(4)		372,225		362,613		9,612
FFO with adjustments and Transactional FFO(2)(3)(4)		379,890		385,219		(5,329)
ACFO(2)(3)(4)(5)		340,075		353,055		(12,980)
Other adjustments		656		3,226		(2,570)
ACFO with adjustments(2)(3)(4)		340,731		356,281		(15,550)
Adjusted for:
Loss (gain) on derivative – TRS		4,918		(5,642)		10,560
ACFO sourced from condominium and townhome closings		(305)		(20,471)		20,166
ACFO sourced from SmartVMC West acquisition		(984)		—		(984)
ACFO with adjustments excluding impact of TRS, condominium and townhome closings, and SmartVMC West acquisition(2)(3)(4)		344,360		330,168		14,192
Distributions declared		329,531		318,753		10,778
Surplus of cash flows provided by operating activities over distributions declared(2)		41,231		52,871		(11,640)
Surplus of ACFO over distributions declared(2)		10,544		34,302		(23,758)
Surplus of ACFO with adjustments excluding impact of TRS, condominium and townhome closings, and SmartVMC West acquisition over distributions declared(2)		14,829		11,415		3,414
Units outstanding(6)		178,133,853		178,091,581		42,272
Weighted average – basic		178,121,149		172,447,334		5,673,815
Weighted average – diluted(7)		179,657,455		173,748,819		5,908,636
Per Unit Information (Basic/Diluted)
Net income and comprehensive income(1)	$3.57/$3.54		$5.73/$5.68		$-2.16/$-2.14
Net income and comprehensive income excluding fair value adjustments(2)(3)	$1.92/$1.91		$1.99/$1.97		$-0.07/$-0.06
FFO(2)(3)(4)(5)	$2.09/$2.07		$2.20/$2.19		$-0.11/$-0.12
Other non-recurring adjustments	$0.00/$0.00		$0.02/$0.02		$-0.02/$-0.02
FFO with adjustments(2)(3)(4)	$2.09/$2.07		$2.22/$2.21		$-0.13/$-0.14
FFO with adjustments excluding impact of ECL, TRS, condominium and townhome closings, and SmartVMC West acquisition(2)(3)(4)	$2.16/$2.14		$2.10/$2.09		$0.06/$0.05
FFO with adjustments and Transactional FFO(2)(3)(4)	$2.13/$2.11		$2.23/$2.22		$-0.10/$-0.11
Distributions declared	$1.850		$1.850		$—
Payout Ratio Information
Payout Ratio to cash flows provided by operating activities		88.9%		85.8%		3.1%
Payout Ratio to ACFO(2)(3)(4)(5)		96.9%		90.3%		6.6%
Payout Ratio to ACFO with adjustments(2)(3)(4)		96.7%		89.5%		7.2%
Payout Ratio to ACFO with adjustments excluding impact of TRS, condominium and townhome sales, and SmartVMC West acquisition(2)(3)(4)		92.6%		96.5%	(3.9)%

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

Operational Highlights
For the three months ended December 31, 2022, net income and comprehensive income (as noted in the table above) decreased by $551.8 million as compared to the same period in 2021. This decrease was primarily attributed to the following:

• $568.7 million decrease in fair value adjustments on revaluation of investment properties, including adjustments relating to assets held for sale, primarily due to increase in fair value of certain properties under development in Q4 2021 as a result of changes in the market and the progress made on planning entitlements (see details in the “Investment Property” section in the Trust’s MD&A); and

• $7.2 million increase in interest expense (see further details in the “Interest Income and Interest Expense” subsection in the Trust’s MD&A);

Partially offset by the following:

• $10.9 million increase in fair value adjustment on financial instruments primarily due to fluctuations in the Trust’s Unit price;

• $4.1 million increase in interest income mainly due to higher interest rates;

• $3.9 million increase in NOI (see further details in the “Net Operating Income” subsection in the Trust’s MD&A);

• $2.8 million decrease in acquisition-related costs related to the SmartVMC West acquisition in 2021; and

• $1.4 million decrease in general and administrative expenses (net) (see further details in the “General and Administrative Expense” section in the Trust’s MD&A).
  

For the year ended December 31, 2022, net income and comprehensive income (as noted in the table above) decreased by $351.7 million as compared to the same period in 2021. This decrease was primarily attributed to the following:

• $476.8 million decrease in fair value adjustments on revaluation of investment properties primarily due to increase in fair value of certain properties under development in Q4 2021 as a result of changes in the market and the progress made on planning entitlements (see details in the “Investment Property” section in the Trust’s MD&A);

• $6.5 million increase in interest expense (see further details in the “Interest Income and Interest Expense” section in the Trust’s MD&A); and

• $2.8 million increase in supplemental costs and in general and administrative expenses (net) (see further details in the “General and Administrative Expense” section in the Trust’s MD&A);
  

Partially offset by the following:

• $125.5 million increase in fair value adjustment on financial instruments primarily due to fluctuations in the Trust’s Unit price and increase in fair value adjustments pertaining to interest rate swap agreements due to fluctuation in the interest rate (see further details in the “Debt” subsection in the Trust’s MD&A);

• $6.1 million increase in interest income mainly due to higher interest rates; and

• $2.5 million decrease in acquisition-related costs related to the SmartVMC West acquisition in 2021.
  

Development and Intensification Summary
The following table summarizes the 274 identified mixed-use, recurring rental income and development income initiatives, which are included in the Trust’s large development pipeline:

Description	Under Construction	Construction expected to commence within next 2 years	Active (Construction expected to commence within next 3–5 years)	Future (Construction expected to commence after 5 years)	Total
Number of projects in which the Trust has an ownership interest
Residential Rental	3	22	24	61	110
Seniors’ Housing	1	3	7	14	25
Self-storage	3	7	8	15	33
Office Buildings / Industrial	1	—	1	6	8
Hotels	—	—	—	3	3
Subtotal – Recurring rental income initiatives	8	32	40	99	179
Condominium developments	2	15	25	46	88
Townhome developments	1	1	2	3	7
Subtotal – Development income initiatives	3	16	27	49	95
Total	11	48	67	148	274
Trust’s share of project area (in thousands of sq. ft.)
Recurring rental income initiatives	1,000	4,450	4,300	12,500	22,250
Development income initiatives	400	3,650	4,700	10,200	18,950
Total Trust’s share of project area (in thousands of sq. ft.)	1,400	8,100	9,000	22,700	41,200
Trust’s share of such estimated costs (in millions of dollars)	550	4,450	5,000	– (1)	10,000

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

The following table provides additional details on the Trust’s 11 development initiatives that are currently under construction (in order of estimated initial occupancy/closing date):

Projects under construction (Location/Project Name)	Type	Trust’s Share (%)	Estimated initial occupancy / closing date	% of completion	GFA(2) (sq. ft.)	No. of units
Vaughan / Transit City 4	Condo	25	Q1 2023	87%	—	1,026
Vaughan / Transit City 5
Vaughan / The Millway	Apartment	50	Q1 2023	73%	—	458
Brampton / Kingspoint Plaza	Self Storage	50	Q1 2023	91%	133,000	969
Pickering (Seaton Lands)	Industrial	100	Q1 2023	79%	241,000	—
Laval Centre	Apartment	50	Q2 2023	58%	—	211
Markham East / Boxgrove	Self Storage	50	Q1 2024	38%	133,332	910
Whitby	Self Storage	50	Q1 2024	16%	126,135	811
Ottawa SW (1)	Retirement Residence	50	Q1 2024	26%	—	402
Ottawa SW (1)	Senior Apartments
Vaughan NW	Townhouse	50	Q3 2024	14%	—	174
			In millions of dollars
Total Capital Spend To Date at 100% (3)				755.2
Estimated Cost to Complete at 100%				487.8
Total Expected Capital Spend by Completion at 100% (3)				1,243.0
Total Capital Spend To Date at Trust’s share (3)				304.1
Estimated Cost to Complete at Trust’s share				234.9
Total Expected Capital Spend by Completion at Trust’s share (3)				539.0

(1)   Figure represents capital spend of both retirement residence and senior apartments projects.
(2)   GFA represents Gross Floor Area.
(3)   Total capital spent to date and total expected capital spend by completion include land value.

Reconciliations of Non-GAAP Measures

The following tables reconcile the non-GAAP measures to the most comparable GAAP measures for the three months and year ended December 31, 2022 and the comparable periods in 2021. Such measures do not have a standardized meaning prescribed by IFRS and may not be comparable to similar measures disclosed by other issuers.

Proportionately Consolidated Balance Sheets (including the Trust’s interests in equity accounted investments)

The following table presents the proportionately consolidated balance sheets, which includes a reconciliation of the Trust’s proportionate share of equity accounted investments:

(in thousands of dollars)	Year Ended December 31, 2022				Year Ended December 31, 2021
	GAAP Basis	Proportionate Share Reconciliation (1)		Total Proportionate Share(2)	GAAP Basis	Proportionate Share Reconciliation (1)		Total Proportionate Share(2)
Assets
Non-current assets
Investment properties	10,208,071	957,354		11,165,425	9,847,078	837,451		10,684,529
Equity accounted investments	680,999	(680,999	)	—	654,442	(654,442	)	—
Mortgages, loans and notes receivable	238,099	(76,994	)	161,105	345,089	(69,576	)	275,513
Other financial assets	171,807	—		171,807	97,148	—		97,148
Other assets	83,230	8,977		92,207	80,940	7,465		88,405
Intangible assets	43,807	—		43,807	45,139	—		45,139
	11,426,013	208,338		11,634,351	11,069,836	120,898		11,190,734
Current assets
Assets held for sale	42,321	16,050		58,371	—	—		—
Residential development inventory	40,373	113,207		153,580	27,399	67,828		95,227
Current portion of mortgages, loans and notes receivable	86,593	—		86,593	71,947	—		71,947
Amounts receivable and other	57,124	(7,033	)	50,091	49,542	(8,637	)	40,905
Prepaid expenses, deposits and deferred financing costs	14,474	15,807		30,281	12,289	13,118		25,407
Cash and cash equivalents	35,255	35,419		70,674	62,235	7,922		70,157
	276,140	173,450		449,590	223,412	80,231		303,643
Total assets	11,702,153	381,788		12,083,941	11,293,248	201,129		11,494,377
Liabilities
Non-current liabilities
Debt	4,523,987	212,928		4,736,915	4,176,121	93,465		4,269,586
Other financial liabilities	277,400	—		277,400	326,085	—		326,085
Other payables	17,265	—		17,265	18,243	—		18,243
	4,818,652	212,928		5,031,580	4,520,449	93,465		4,613,914
Current liabilities
Current portion of debt	459,278	63,860		523,138	678,406	35,086		713,492
Accounts payable and current portion of other payables	261,122	105,000		366,122	253,078	72,578		325,656
	720,400	168,860		889,260	931,484	107,664		1,039,148
Total liabilities	5,539,052	381,788		5,920,840	5,451,933	201,129		5,653,062
Equity
Trust Unit equity	5,126,197	—		5,126,197	4,877,961	—		4,877,961
Non-controlling interests	1,036,904	—		1,036,904	963,354	—		963,354
	6,163,101	—		6,163,101	5,841,315	—		5,841,315
Total liabilities and equity	11,702,153	381,788		12,083,941	11,293,248	201,129		11,494,377

(1)  Represents the Trust’s proportionate share of assets and liabilities in equity accounted investments.
(2)  This column contains non-GAAP measures because it includes figures that are recorded in equity accounted investments. The Trust’s method of calculating non-GAAP measures may differ from other reporting issuers’ methods and, accordingly, may not be comparable. For additional information, please see “Non-GAAP Measures” in this Press Release.

Proportionately Consolidated Statements of Income and Comprehensive Income (including the Trust’s Interests in Equity Accounted Investments)
The following tables present the proportionately consolidated statements of income and comprehensive income, which include a reconciliation of the Trust’s proportionate share of equity accounted investments:

Quarterly Comparison to Prior Year

	Three Months Ended			Three Months Ended
(in thousands of dollars)	December 31, 2022			December 31, 2021
	GAAP Basis	Proportionate Share Reconciliation	Total Proportionate Share(1)	GAAP Basis	Proportionate Share Reconciliation	Total Proportionate Share(1)	Variance of Total Proportionate Share(1)
Net rental income and other
Rentals from investment properties and other	206,223	8,441	214,664	192,850	5,974	198,824	15,840
Property operating costs and other	(77,062)	(3,779)	(80,841)	(65,896)	(3,144)	(69,040)	(11,801)
	129,161	4,662	133,823	126,954	2,830	129,784	4,039
Condo and townhome closings revenue and other(2)	—	—	—	—	—	—	—
Condo and townhome cost of sales and other	(10)	(181)	(191)	—	(67)	(67)	(124)
	(10)	(181)	(191)	—	(67)	(67)	(124)
NOI	129,151	4,481	133,632	126,954	2,763	129,717	3,915
Other income and expenses
General and administrative expense, net	(7,790)	—	(7,790)	(8,703)	(534)	(9,237)	1,447
Earnings from equity accounted investments	(113)	113	—	160,049	(160,049)	—	—
Fair value adjustment on revaluation of investment properties	13,377	(1,418)	11,959	420,418	160,289	580,707	(568,748)
Gain (loss) on sale of investment properties	531	—	531	(64)	—	(64)	595
Interest expense	(40,342)	(3,846)	(44,188)	(35,654)	(1,355)	(37,009)	(7,179)
Interest income	5,496	1,408	6,904	2,745	11	2,756	4,148
Supplemental costs	—	(738)	(738)	—	(1,125)	(1,125)	387
Fair value adjustment on financial instruments	—	—	—	(10,873)	—	(10,873)	10,873
Acquisition-related costs	—	—	—	(2,791)	—	(2,791)	2,791
Net income and comprehensive income	100,310	—	100,310	652,081	—	652,081	(551,771)

(1)   This column contains non-GAAP measures because it includes figures that are recorded in equity accounted investments. The Trust’s method of calculating non-GAAP measures may differ from other reporting issuers’ methods and, accordingly, may not be comparable. For additional information, please see “Non-GAAP Measures” in this Press Release.
(2)   Includes additional partnership profit and other revenues.

Year-to-Date Comparison to Prior Year

(in thousands of dollars)	Year Ended December 31, 2022			Year Ended December 31, 2021
	GAAP Basis	Proportionate Share Reconciliation	Total Proportionate Share(1)	GAAP Basis	Proportionate Share Reconciliation	Total Proportionate Share(1)	Variance of Total Proportionate Share(1)
Net rental income and other
Rentals from investment properties and other	804,598	28,643	833,241	780,796	21,530	802,326	30,915
Property operating costs and other	(301,559)	(13,467)	(315,026)	(294,956)	(9,719)	(304,675)	(10,351)
	503,039	15,176	518,215	485,840	11,811	497,651	20,564
Condo and townhome closings revenue and other(2)	—	4,524	4,524	—	76,837	76,837	(72,313)
Condo and townhome cost of sales and other	(435)	(3,784)	(4,219)	—	(56,366)	(56,366)	52,147
	(435)	740	305	—	20,471	20,471	(20,166)
NOI	502,604	15,916	518,520	485,840	32,282	518,122	398
Other income and expenses
General and administrative expense, net	(33,269)	(107)	(33,376)	(31,922)	(610)	(32,532)	(844)
Earnings from equity accounted investments	4,199	(4,199)	—	211,420	(211,420)	—	—
Fair value adjustment on revaluation of investment properties	201,834	624	202,458	491,528	187,728	679,256	(476,798)
Gain (loss) on sale of investment properties	315	(241)	74	27	—	27	47
Interest expense	(148,702)	(7,798)	(156,500)	(144,540)	(5,437)	(149,977)	(6,523)
Interest income	18,036	453	18,489	12,341	75	12,416	6,073
Supplemental costs	—	(4,648)	(4,648)	—	(2,618)	(2,618)	(2,030)
Fair value adjustment on financial instruments	91,246	—	91,246	(34,227)	—	(34,227)	125,473
Acquisition-related costs	(298)	—	(298)	(2,791)	—	(2,791)	2,493
Net income and comprehensive income	635,965	—	635,965	987,676	—	987,676	(351,711)

(1)   This column contains non-GAAP measures because it includes figures that are recorded in equity accounted investments. The Trust’s method of calculating non-GAAP measures may differ from other reporting issuers’ methods and, accordingly, may not be comparable. For additional information, please see “Non-GAAP Measures” in this Press Release.
(2)   Includes additional partnership profit and other revenues.

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

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

Quarterly Comparison to Prior Year

	Three Months Ended		Three Months Ended
(in thousands of dollars, except per Unit amounts)	December 31, 2022		December 31, 2021		Variance ($)		Variance (%)
Net income and comprehensive income	100,310		652,081		(551,771	)	(84.6	)
Add (deduct):
Fair value adjustment on revaluation of investment properties(1)	(13,377	)	(420,418	)	407,041		(96.8	)
Fair value adjustment on financial instruments(2)	—		10,873		(10,873	)	N/R(7)
(Loss) gain on derivative – TRS	6,221		4,180		2,041		48.8
Loss (gain) on sale of investment properties	(531	)	64		(595	)	N/R(7)
Amortization of intangible assets	333		333		—		—
Amortization of tenant improvement allowance and other	2,005		1,608		397		24.7
Distributions on Units classified as liabilities recorded as interest expense	1,083		1,008		75		7.4
Distributions on vested deferred units recorded as interest expense	724		1,045		(321	)	(30.7	)
Salaries and related costs attributed to leasing activities(3)	1,514		1,063		451		42.4
Acquisition-related costs	—		2,791		(2,791	)	N/R(7)
Adjustments relating to equity accounted investments:
Rental revenue adjustment – tenant improvement amortization	98		62		36		58.1
Indirect interest with respect to the development portion(4)	1,935		1,926		9		0.5
Fair value adjustment on revaluation of investment properties	1,418		(160,289	)	161,707		N/R(7)
Adjustment for supplemental costs	738		1,125		(387	)	(34.4	)
FFO(5)	102,471		97,452		5,019		5.2
Other non-recurring adjustments(6)	(1,910	)	660		(2,570	)	N/R(7)
FFO with adjustments(5)	100,561		98,112		2,449		2.5
Transactional FFO – gain on sale of land to co-owners	7,662		336		7,326		N/R(7)
FFO with adjustments and Transactional FFO(5)	108,223		98,448		9,775		9.9

(1)   Fair value adjustment on revaluation of investment properties is described in “Investment Properties” in the Trust’s MD&A.
(2)   Fair value adjustment on financial instruments comprises the following financial instruments: units classified as liabilities, Earnout options, deferred unit plan (“DUP”), equity incentive plan (“EIP”), long term incentive plan (“LTIP”), TRS, interest rate swap agreement(s), and loans receivable and Earnout options recorded in the same period in 2021. The significant assumptions made in determining the fair value and fair value adjustments for these financial instruments are more thoroughly described in the Trust’s consolidated financial statements for the year ended December 31, 2022. For details, please see discussion in “Results of Operations” in the Trust’s MD&A.
(3)   Salaries and related costs attributed to leasing activities of $1.5 million were incurred in the three months ended December 31, 2022 (three months ended December 31, 2021 – $1.1 million) and were eligible to be added back to FFO based on the definition of FFO, in the REALpac White Paper published in January 2022, which provided for an adjustment to incremental leasing expenses for the cost of salaried staff. This adjustment to FFO results in more comparability between Canadian publicly traded real estate entities that expensed their internal leasing departments and those that capitalized external leasing expenses.
(4)   Indirect interest is not capitalized to properties under development and residential development inventory of equity accounted investments under IFRS but is a permitted adjustment under REALpac’s definition of FFO. The amount is based on the total cost incurred with respect to the development portion of equity accounted investments multiplied by the Trust’s weighted average cost of debt.
(5)   Represents a non-GAAP measure. The Trust’s method of calculating non-GAAP measures may differ from other reporting issuers’ methods and, accordingly, may not be comparable. For additional information, please see “Non-GAAP Measures” in this Press Release.
(6)  Represents adjustments relating to $1.9 million of reversal of costs associated with COVID-19 vaccination centres (three months ended December 31, 2021 – $0.7 million of costs associated with COVID-19 vaccination centres).
(7)   N/R – Not representative.

Year-to-Date Comparison to Prior Year

(in thousands of dollars, except per Unit amounts)	Year Ended December 31, 2022		Year Ended December 31, 2021		Variance ($)		Variance (%)
Net income and comprehensive income	635,965		987,676		(351,711	)	(35.6	)
Add (deduct):
Fair value adjustment on revaluation of investment properties(1)	(201,834	)	(491,528	)	289,694		(58.9	)
Fair value adjustment on financial instruments(2)	(91,246	)	34,227		(125,473	)	N/R(7)
(Loss) gain on derivative – TRS	(4,918	)	5,642		(10,560	)	N/R(7)
Loss (gain) on sale of investment properties	(315	)	(271	)	(44	)	16.2
Amortization of intangible assets	1,332		1,331		1		0.1
Amortization of tenant improvement allowance and other	7,203		7,038		165		2.3
Distributions on Units classified as liabilities recorded as interest expense	4,293		3,919		374		9.5
Distributions on vested deferred units recorded as interest expense	2,847		2,424		423		17.5
Adjustment on debt modification