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Boardwalk Real Estate Investment Trust

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Boardwalk REIT Reports Second Quarter Funds from Operation Per Unit Growth of 13.3% and Increases 2019 Financial Guidance

SUMMARY HIGHLIGHTS FOR THE THREE AND SIX-MONTH PERIODS ENDED JUNE 30, 2019

  • SOLID PERFORMANCE
    • FOR THE 3 MONTH PERIOD ENDED JUNE 30, 2019
      • FFO of $0.68 per trust unit, an increase of 13.3% and fifth consecutive quarter of FFO growth
      • 3.8% same-property revenue growth
      • 5.0% same-property net operating income growth
    • FOR THE 6 MONTH PERIOD ENDED JUNE 30, 2019
      • FFO of $1.24 per trust unit, an increase of 14.8%
      • 3.7% same-property revenue growth
      • 5.2% same-property net operating income growth
  • INCREASES 2019 FINANCIAL GUIDANCE
    • Revised FFO range of $2.45 to $2.52 per Trust Unit
  • DELIVERING OPERATIONAL RESULTS
    • Sixth consecutive quarterly sequential revenue growth
    • Maintained 96.6% occupancy in the second quarter of 2019
    • Primary focus remains on the execution of multi-year organic growth opportunity
  • LAYERING ON LONG-TERM STRATEGY
    • Announces sale of Chancellor Gate, a 138-unit non-core asset in Saskatoon for $20.7 million or $150,000 per door, a premium to IFRS fair value
    • Proceeds from sale recycled towards a new landmark development in Mississauga, Ontario in partnership with RioCan REIT
    • The sale of non-core assets at a premium to the Trust's IFRS value and recycling towards higher-quality assets and/or geographic diversification are consistent with the Trust's long-term strategy and provide excellent sources of equity capital for the Trust to high-grade its portfolio
  • STRONG FINANCIAL POSITION
    • Approximately $234 million of liquidity
    • Forward locked and/or renewed the interest rate on $442.7 million or 84% of 2019 mortgage maturities
    • Net Asset Value of $63.30 per trust unit, equating to approximately $181,000 per door
  • DISTRIBUTION OF $1.00 PER TRUST UNIT ON AN ANNUALIZED BASIS CONFIRMED FOR THE MONTHS OF AUGUST, SEPTEMBER AND OCTOBER 2019

CALGARY, Aug. 14, 2019 /PRNewswire/ - Boardwalk Real Estate Investment Trust ("BEI.UN" - TSX)

Boardwalk Real Estate Investment Trust (CNW Group/Boardwalk Real Estate Investment Trust)

Boardwalk Real Estate Investment Trust ("Boardwalk", the "REIT" or the "Trust") today announced its financial results for the second quarter and first six months of 2019.

"We are pleased to report and deliver on a solid second quarter and first half of 2019 with growth in Funds From Operation ("FFO") per unit of 13.3% and 14.8% respectively.   This performance is a result of our team's commitment to the best product quality, service and experience, and has allowed the Trust to maintain high occupancy while decreasing incentives and for the first half of the year has resulted in a 4.6% increase in total revenue.  Boardwalk's Resident-Friendly approach to sustainable incentive reductions and rental rate adjustments has resulted in a continued positive trend and, for six consecutive quarters, has delivered a sequential and compounding improvement in revenue.  We believe this approach will best allow the Trust to deliver multi-year organic revenue growth from the recovery of our Alberta portfolio." said Sam Kolias; Chairman and Chief Executive Officer of Boardwalk REIT.

Rob Geremia; President of Boardwalk REIT added: "The rental market in Alberta through the seasonally more active summer turnover season continues to trend toward a level of balance with vacancy in our core Alberta markets continuing to further improve.   A positive indicator, and an example we have seen through this summer turnover season, is an increase in the number of back-to-back suite turnovers, where suites that are being vacated on the last day of the month have been re-leased for the first day of the following month.  This increased demand, coupled with moderating supply in the rental market, has positioned the Trust to execute on our organic revenue growth strategy where we remain in the early stages of recovery." 

Mr. Kolias concluded: "By focusing on maintaining high occupancy, reducing incentives, managing controllable operating expenses and enhancing the value of our portfolio, the Trust has been able to optimize and drive higher Net Operating Income and Funds from Operations.  As incentives are decreasing on lease renewals, and limited incentives are required to lease and fill vacant units, our Resident-Friendly approach of targeting half-month to one-month reductions in incentives has positioned the Trust well in retaining its Residents while our investment in team culture of caring, peak performers has benefited the Trust with improved operating expenses."

INCREASES 2019 FINANCIAL GUIDANCE

The Trust's performance in the first half of 2019 has exceeded its original expectations, with revenues forecasted to be near the top end of its original forecast and certain expense lines projected to fall below the original forecast range.  Many of the controllable expense savings can be attributed to the Boardwalk Team's ability to find savings and be more innovative and creative in the ways to deliver the Trust's product, service and experience to our Residents.

As a result, the Trust is revising the bottom end of its FFO per unit guidance from $2.35 per Trust Unit to $2.45 per Trust Unit.  Additionally, the Trust is increasing the top end of its FFO per unit guidance from $2.50 per Trust Unit to $2.52 per Trust Unit as follows:

Description

2019 Q2 Revised Guidance

2019 Original Guidance




Stabilized Building NOI Growth

4% to 9%

4% to 9%

FFO Per Unit

$2.45 to $2.52

$2.35 to $2.50

AFFO Per Unit

$1.98 to $2.05 ($717/door maintenance
capital)

$1.88 to $2.03 ($717/door
maintenance capital)

 

Capital Budget ($000's)

2019 6 Month
Actual

Per Suite

2019 Budget -
Low End

Per Suite

2019 Budget -
High End

Per Suite

Maintenance Capital

$

11,986

359

$

23,960

717

$

23,960

717

Value-added Capital (including suite upgrades and
property, plant & equipment)


43,156

1,291


71,572

2,142


98,645

2,952

Total Operational Capital

$

55,142

1,650

$

95,532

2,859

$

122,605

3,669

Development


18,130



55,000



55,000


Acquisitions


36,842








Total Capital Investment

$

110,114


$

150,532


$

177,605


 

The Trust has also increased its development budget from $44 million to $55 million to reflect the addition of its 50% interest in a new development in Mississauga, ON which closed subsequent to the end of the second quarter.

The reader is cautioned that this information is forward-looking and actual results may vary materially from those reported.  The Trust reviews these key assumptions quarterly and, based on this review, may change its outlook.

LAYERING ON LONG-TERM STRATEGY

Boardwalk is please to announce two transactions.  The Trust has agreed to the sale of Chancellor Gate, a 138-unit non-core low-rise asset in Saskatoon for an unconditional sale price of $20.7 million, equating to $150,000 per door and a premium to the IFRS value the Trust had recorded for the asset.  Closing is expected in mid-September of 2019.  The sale of non-core assets at a premium to the Trust's IFRS values and recycling towards higher quality assets with superior returns provide excellent sources of equity capital for the Trust to high-grade and geographically diversify its portfolio. 

Additionally, Boardwalk is excited to announce the continuation of our strategic partnership with RioCan to extend its partnership to maximize the potential of a well-located, transit oriented community in Mississauga, Ontario to develop a 25 and 16-storey mixed-use development with an estimated 470 residential units connected by a retail podium.  RioCan and Boardwalk are currently finalizing development plans and, subject to zoning approval and confirmation of total buildable area, the total purchase price for the Trust's 50% interest is estimated to be $14.9 million, or $80 per square foot buildable.  Zoning is anticipated in early 2020 and aligns with the completion of BRIO in Calgary, RioCan and Boardwalk's first joint-venture development. 

This development will be Boardwalk's second in the Greater Toronto Area (GTA), and is an exciting opportunity for Boardwalk to recycle capital.  With the Trust's minimum distribution/maximum re-investment policy, our growing free cash flow may then be re-invested in the Trust's long-term growth strategy of improving our existing communities, while high-grading and geographically diversifying our portfolio into other high-growth rental markets.

EXCEPTIONAL VALUE

The Trust believes that its current trading price continues to represent exceptional value.

Recent sales transactions of institutional sized apartment buildings in Calgary and Edmonton have averaged more than $200,000 per door.

Boardwalk's fair value of its assets are estimated to be approximately $181,000 per door.

Boardwalk's aforementioned sale of a non-core asset in Saskatoon is valued at $150,000 per door.

At a unit price of $42/Trust Unit, Boardwalk's implied value is approximately $149,000 per door.

Boardwalk's FFO per unit growth this quarter of 13.3% marks the fifth consecutive quarter of FFO growth, sixth quarter of sequential revenue growth, and continues to represent the early stages of a growth cycle for the Trust on a foundation of record affordability in rents.  

The Trust remains disciplined on its near-term objectives with our focus remaining on our operational performance, which will continue to drive FFO growth and, in turn, will lead to distribution, long-term geographic diversification, high-grading our existing portfolio and enhancing unit price growth.

SECOND QUARTER & FIRST SIX-MONTH HIGHLIGHTS


$ millions, except per unit amounts

Highlights of the Trust's Second Quarter 2019 Financial Results


 

3 Months
Jun 30, 2019

 

3 Months
Jun 30, 2018

% Change

 

6 Months
Jun 30, 2019

 

6 Months
Jun 30, 2018

% Change

Operational Highlights











Total Rental Revenue

$

113.4

$

108.4

4.6%

$

225.3

$

215.4

4.6%

Same Property Total Rental Revenue

$

111.7

$

107.6

3.8%

$

221.9

$

213.9

3.7%

Net Operating Income (NOI), as reported

$

66.2

$

59.4

11.5%

$

126.1

$

112.1

12.5%

Comparative NOI *

$

65.1

$

60.7

7.2%

$

123.5

$

114.8

7.6%

Same Property NOI **

$

65.6

$

62.5

5.0%

$

124.6

$

118.4

5.2%

Operating Margin (as reported)


58.4%


54.8%



56.0%


52.1%


Comparative Operating Margin *


57.4%


56.0%



54.8%


53.3%


Same Property Operating Margin **


58.8%


58.1%



56.2%


55.4%













Financial Highlights











Funds From Operations (FFO)

$

34.8

$

30.6

13.5%

$

63.0

$

55.0

14.7%

Adjusted Funds From Operations (AFFO)

$

28.8

$

24.9

15.7%

$

51.1

$

43.4

17.6%

Profit for the Period

$

71.6

$

56.8

26.1%

$

63.9

$

126.0

-49.3%

FFO per Unit

$

0.68

$

0.60

13.3%

$

1.24

$

1.08

14.8%

AFFO per Unit

$

0.57

$

0.49

16.3%

$

1.00

$

0.85

17.6%












Net Asset Value











IFRS Asset Value per Diluted Unit (Trust & LP B), period end






$

120.73

$

114.90


Debt Outstanding per Diluted Unit, period end






$

(57.81)

$

(54.28)


Net Asset Value (NAV) per Diluted Trust Unit (Trust & LP B), period end






$

62.92

$

60.62


Cash per Diluted Unit (Trust & LP B), period end






$

0.38

$

1.60


Total per Diluted Unit (Trust & LP B), period end






$

63.30

$

62.22













Liquidity, Debt and Distributions











Cash Position, period end






$

19,000




Subsequent Committed Financing






$

15,000




Line of Credit






$

200,000




Total Available Liquidity






$

234,000




Liqudity as a % of Period Total Debt







8%




Debt (net of cash) as a % of Reported Asset Value







48%















Principal Outstanding, period end

$

2,833,004

$

2,759,043


$

2,833,004

$

2,759,043


Interest Coverage Ratio (Rolling 4 quarters)


2.70


2.64



2.70


2.64













Regular Distributions Declared (Trust Units & LP B Units)

$

12.7

$

12.7

0.1%

$

25.5

$

25.4

0.1%

Regular Distributions Declared Per Unit (Trust Units & LP B
Units)

$

0.250

$

0.250

0.0%

$

0.500

$

0.500

0.0%

Regular Payout as a % FFO


36.6%


41.5%



40.4%


46.3%













Stabilized Apartment Units







32,907


32,761


Un-Stabilized Units







494


426


Total Apartment Units







33,401


33,187



*Comparative figures adjust for lease payments relating to IFRS 16 and is apples to apples for the Trust's new Asset Management Model

** Same Property figures exclude un-stabilized properties, sold assets, adjust for lease payments relating to IFRS 16 and is apples to apples for the Trust's new Asset Management Model


NOI, FFO and AFFO are widely accepted supplemental measures of the performance of a Canadian Real Estate entity; however, they are not measures defined by International Financial Reporting Standards ("IFRS").  The reconciliation of FFO and other financial performance measures can be found in the Management Discussion and Analysis ("MD&A") for the three and six months ended June 30, 2019, under the section titled, "Performance Measures".  Same property results exclude 124-units in Edmonton acquired April 2019, 299-units in Calgary acquired November 2018 AND 71-units from Pines Edge 3 completed July 2018.

 

PORTFOLIO HIGHLIGHTS


Portfolio Highlights for the Second Quarter of 2019


Jun-19

Dec-18

Jun-18

Average Occupancy (Period Average)

96.57%

95.77%

96.44%







Average Monthly Rent (Period Ended)

 

$

1,120

$

1,094

$

1,076

Average Market Rent (Period Ended)

$

1,315

$

1,281

$

1,263

Average Market Rent (Period Ended), including incentives

$

1,210

$

1,171

$

1,145

Average Occupied Rent (Period Ended)

$

1,157

$

1,138

$

1,109





Loss -to-Lease (Period Ended) ($ millions )

$

60.3

$

54.0

$

58.8

Loss -to-Lease (Period Ended) ($ millions ), including incentives

$

20.2

$

12.3

$

13.9

Loss -to-Lease Per Trust Unit (Period Ended)

$

1.19

$

1.06

$

1.16

Loss -to-Lease Per Trust Unit (Period Ended), including incentives

$

0.40

$

0.24

$

0.27

 

QUARTERLY SEQUENTIAL REVENUE GROWTH

Sequential Revenue Analysis












Stabilized Revenue Growth


# of Units

Q2 2019 vs Q1
2019

Q1 2019 vs Q4
2018

Q4 2018 vs Q3
2018

Q3 2018 vs Q2
2018

Edmonton


12,906

1.8%

0.2%

1.1%

0.2%

Calgary


5,657

1.4%

2.2%

0.7%

1.4%

Red Deer


939

2.2%

5.5%

2.8%

0.5%

Grande Prairie


645

2.3%

2.2%

3.5%

3.7%

Fort McMurray


352

0.7%

-0.7%

-2.0%

-3.4%

Quebec


6,000

0.2%

1.2%

1.4%

0.5%

Saskatchewan


3,823

0.9%

0.1%

0.8%

-1.4%

Ontario


2,585

1.9%

1.2%

1.1%

0.4%



32,907

1.3%

1.0%

1.1%

0.3%

 

Q2 REGULAR MONTHLY DISTRIBUTION

Month


Per Unit

Annualized

Record Date

Distribution Date

Aug-19


$ 0.0834

$

1.00

30-Aug-19

16-Sep-19

Sep-19


$ 0.0834

$

1.00

30-Sep-19

15-Oct-19

Oct-19


$ 0.0834

$

1.00

31-Oct-19

15-Nov-19

FINANCIAL AND SUPPLEMENTARY INFORMATION

Boardwalk produces quarterly financial statements, management discussion and analysis, and a supplemental information package that provides detailed information regarding the Trust's activities during the quarter.  Financial and supplementary information is available on Boardwalk's investor website at www.bwalk.com/investors.

TELECONFERENCE ON FIRST QUARTER 2019 FINANCIAL RESULTS

Boardwalk invites you to participate in the teleconference that will be held to discuss these results tomorrow morning (August 15, 2019) at 11:00 am Eastern Time. Senior management will speak to the period's results and provide an update. Presentation materials will be made available on Boardwalk's investor website at www.bwalk.com/investors prior to the call.

Teleconference: The telephone numbers for the conference are 416-764-8688 (local/international callers) or toll-free 1-888-390-0546 (within North America).

Note: Please provide the operator with the below Conference Call ID or Topic when dialing in to the call.
Conference ID: 28863450
Topic: Boardwalk REIT Second Quarter Results

Webcast: Investors will be able to listen to the call and view Boardwalk's slide presentation by visiting www.bwalk.com/investors prior to the start of the call. 

An information page will be provided for any software needed and system requirements.  The webcast and slide presentation will also be available at:
https://event.on24.com/wcc/r/2041758/2894928304C72B495F88C82A05BD83F4

Replay: An audio recording of the teleconference will be available on the Trust's website:
www.bwalk.com/investors 

CORPORATE PROFILE

Boardwalk REIT strives to be Canada's friendliest communities and currently owns and operates more than 200 communities with over 33,000 residential units totaling over 28 million net rentable square feet.  Boardwalk's principal objectives are to provide its Residents with the best quality communities and superior customer service, while providing Unitholders with sustainable monthly cash distributions, and increase the value of its trust units through selective acquisitions, dispositions, development, and effective management of its residential multi-family communities.  Boardwalk REIT is vertically integrated and is Canada's leading owner/operator of multi-family communities bringing Residents home to properties located in Alberta, Saskatchewan, Ontario, and Quebec.

Boardwalk REIT's Trust units are listed on the Toronto Stock Exchange, trading under the symbol BEI.UN.  Additional information about Boardwalk REIT can be found on the Trust's website at www.bwalk.com/investors.

CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING STATEMENTS

Information in this news release that is not current or historical factual information may constitute forward-looking information within the meaning of securities laws.  Implicit in this information, particularly in respect of Boardwalk's objectives for 2019 and future periods, Boardwalk's strategies to achieve those objectives, as well as statements with respect to management's beliefs, plans, estimates and intentions, and similar statements concerning anticipated future events, results, circumstances, performance or expectations are estimates and assumptions subject to risks and uncertainties, including those described in the year-end Management's Discussion & Analysis of Boardwalk REIT under the heading "Risks and Risk Management", which could cause Boardwalk's actual results to differ materially from the forward-looking information contained in this news release.  Specifically, Boardwalk has assumed that the general economy remains stable, interest rates are relatively stable, acquisition capitalization rates are stable, competition for acquisition of residential apartments remains intense, and equity and debt markets continue to provide access to capital.  These assumptions, although considered reasonable by the Trust at the time of preparation, may prove to be incorrect.  For more exhaustive information on these risks and uncertainties you should refer to Boardwalk's most recently filed annual information form, which is available at www.sedar.com.  Forward-looking information contained in this news release is based on Boardwalk's current estimates, expectations and projections, which Boardwalk believes are reasonable as of the current date.  You should not place undue importance on forward-looking information and should not rely upon this information as of any other date.  While the Trust may elect to, Boardwalk is under no obligation and does not undertake to update this information at any particular time.

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SOURCE Boardwalk Real Estate Investment Trust

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