BOARDWALK REIT REPORTS STRONG THIRD QUARTER RESULTS WITH CONTINUED OPERATING MARGIN IMPROVEMENT

CALGARY, AB, Nov. 7, 2023 /PRNewswire/ - Boardwalk Real Estate Investment Trust (TSX: BEI.UN)

SUMMARY HIGHLIGHTS FOR THE THREE AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2023

STRONG FINANCIAL PERFORMANCE

FOR THE 3 MONTH PERIOD ENDED SEPTEMBER 30, 2023

• Profit of $39.4 million
• Funds From Operations ("FFO") of $0.96 per Unit⁽¹⁾⁽²⁾; an increase of 12.9% from Q3 2022
• Net Operating Income ("NOI") of $86.6 million; an increase of 13.5% from Q3 2022
• Same Property⁽³⁾ Net Operating Income ("Same Property NOI") of $85.7 million; an increase of 12.1% from Q3 2022
• Operating margin of 62.9%; 210 basis point (bps) improvement from Q3 2022

FOR THE 9 MONTH PERIOD ENDED SEPTEMBER 30, 2023

• Profit of $493.0 million
• FFO per Unit⁽¹⁾⁽²⁾ of $2.64; an increase of 13.3% from the same period a year ago
• NOI of $245.0 million; an increase of 14.6% from the same period a year ago
• Operating margin of 60.9%; 250 bps improvement from the same period a year ago
• Same Property NOI of $242.9 million; an increase of 12.7% from the same period a year ago

SAME PROPERTY RENTAL REVENUE GROWTH IN Q3 2023

• Q3 2023 same property sequential quarterly rental revenue growth of 2.6% from the prior quarter
• Occupied rent increased to $1,357 in September of 2023, a $31 improvement from June 2023
• Q3 2023 same property rental revenue growth of 8.9% from a year ago
• Occupancy of 98.5% in Q3 2023; an increase of 122 basis points from Q3 2022

CONTINUED LEASING STRENGTH

• November 2023 preliminary occupancy of 98.9%, an increase of 100 basis points from November 2022
• New leasing spreads of 12.1% in Alberta in October 2023
• Renewal leasing spreads of 7.8% in Alberta in October 2023
• Rents in Alberta remain some of the most affordable in Canada, at well below 30% of median renter household income, and remain well below inflation adjusted levels since 2014

STRONG AND FLEXIBLE FINANCIAL POSITION

• Approximately $252.7 million of total available liquidity at the end of the quarter
• 96% of Boardwalk's mortgages carry CMHC-insurance
• Unitholders' Equity of $3.9 billion
• Fair value capitalization rate of 5.05%, an increase of 13 bps from Q4 2022
• Net Asset Value increase to $82.07 per Unit⁽¹⁾⁽²⁾, primarily a result of higher market rental rates partially offset by increased cap rates

UPDATE TO 2023 FINANCIAL GUIDANCE

• Tightened and increased FFO per Unit⁽¹⁾⁽²⁾ estimate to revised range of $3.52 to $3.60
• Tightened and increased Same Property NOI growth range to +12.5% to +14.0%

DISTRIBUTION OF $1.17 PER TRUST UNIT ON AN ANNUALIZED BASIS CONFIRMED FOR THE MONTHS OF DECEMBER 2023, JANUARY 2024, AND FEBRUARY 2024

Boardwalk Real Estate Investment Trust ("Boardwalk", the "REIT" or the "Trust") today announced its financial results for the third quarter of 2023.

Sam Kolias; Chairman and Chief Executive Officer of Boardwalk REIT commented:

"We are pleased to report on another strong quarter with continued growth in Net Operating Income and Funds from Operations per unit. Profit decreased on a year-over-year basis, mainly as a result of fair value losses in the quarter relative to the same period in the prior year. Our Operating Margin continues to improve, as our team takes a flexible, Resident Member focused approach to rent adjustments within a challenging inflationary environment, paired with essential strong execution on our cost containment initiatives to ensure we provide the best rental market value. Our largest markets of Edmonton and Calgary continue to see large net inflows from international and interprovincial migration from new Residents seeking exceptional affordability, lifestyle and economic opportunities.

As of the beginning of November, same property portfolio occupancy has reached 98.9%, including 98.4% in Edmonton. Demand fundamentals remain strong across all of the Trust's markets. Elimination of rental discounts (incentives) and positive sustainable market rent adjustments continue to be implemented in all of our communities. We remain focused on ensuring a win-win outcome with our Resident Members and for our stakeholders through increased retention, reduced turnover and costs, increased Associate efficiency, and increased margins and financial performance. Our ongoing strategic, Resident Member centric, self-regulation of leasing spreads on both new leases and lease renewals continues to be a key differentiator for our Resident Members, preserving essential affordability while providing a steady, less volatile, long-term revenue growth profile for our unitholders.

Higher interest rates remain a headwind for community providers so far in 2023. However, demand for affordable housing remains stronger than ever across the country and we are confident that our Resident friendly approach and peak performance culture will continue to deliver strong organic growth and free cash flow to fund our continued investment in our communities and new construction to add much needed new supply in our markets."

THIRD QUARTER FINANCIAL HIGHLIGHTS

In Q3 2023, same property operating margin increased compared to the same period in the prior year, as the Trust's same property rental revenue growth remained strong and the Trust's disciplined approach to cost improvement initiatives resulted in operating expense growth significantly below inflation. The Trust anticipates that as same property rental revenue remains strong throughout Q4 2023 and the Trust continues to optimize its operating platform, operating margins will continue to improve as compared to Q4 2022.

The Trust's fair value of its investment properties as at September 30, 2023 increased from the previous quarter and year end, primarily attributable to an increase in market rents driven by strong market conditions, low occupancy across the portfolio and a reduction in lease incentives. The Trust's stabilized capitalization rate ("cap rate") increased to 5.05% for Q3 2023 compared to 4.90% for the prior quarter, which primarily reflects the prolonged period of rising interest rates and limited transaction activity to-date in the apartment market. The cap rate ranges utilized continue to be in-line with recently published third party quarterly cap rate reports.

SOLID OPERATIONAL RESULTS

The Trust improved occupancy compared to the same period a year ago by focusing on gaining market share and retention. Market rents were adjusted in many communities where rental market fundamentals continue to improve. Turnover rates continued to decline as compared to the previous year across the Trust's portfolio. Average occupied rent increased sequentially, and when compared to the same period a year ago, as the Trust focuses on reducing or eliminating incentives on lease renewals, leasing at market rents for new leases and adjusting market rents in many of our communities.

For the third quarter of 2023, same property rental revenue increase of 8.9% combined with same property total rental expense increase of 3.6%, resulted in same property NOI growth of 12.1% in comparison to the same quarter prior year. Same property rental expenses increased for most regions due to the current economic environment leading to higher wages and salaries from inflation, higher utilities from increased rates, higher repairs and maintenance, and higher property taxes. The increase was partially offset by lower insurance premiums upon renewal in the third quarter of 2023.

During the third quarter of 2023, lower vacancy loss and incentives, along with positive market rent adjustments supported Boardwalk's Calgary portfolio increase in same property NOI of 14.8% in comparison to the same quarter prior year. The positive revenue growth was partially offset by increases in utilities and wages on a year-over-year basis. Calgary's increased utilities' costs were mainly attributable to increased prices for electricity as a result of a fixed price contract which expired in 2022 and was renewed at a higher rate. 

In Edmonton, lower vacancy loss and incentives were coupled with slightly higher operating expenses, as a result of higher repairs and maintenance costs and higher utilities costs, that were largely offset by lower advertising and bad debts as a result of the higher occupancy and lower turnover as well as lower insurance renewal costs, resulting in positive NOI growth of 16.3% for the third quarter of 2023 compared to the third quarter of 2022.

Saskatchewan's market remains strong with the Trust's portfolio realizing 12.0% same property NOI growth in the third quarter of 2023 versus the same period last year, as a result of strong same property revenue growth due to lower vacancy loss and incentives, as well as market rent increases, partially offset by inflationary pressures on wages and salaries and increased prices for most utilities in the third quarter.

In Ontario, the mark-to-market opportunity on turnover contributed to same property NOI growth of 4.8%, in the third quarter of 2023 compared to the third quarter of 2022. Same property rental revenue growth of 5.7% was partially offset by increases in wages and salaries and increased utilities costs for the third quarter of 2023, partially as a result of proceeds from the sale of excess gas that was received in the third quarter of 2022.

In Quebec, increases to in-place occupied rents along with higher occupancy rates resulted in same property revenue increase of 5.4% in comparison to the same quarter prior year. Revenue increases were partially offset by increased wages and salaries, and repairs and maintenance costs which resulted in same property NOI growth of 4.1%.

In British Columbia, a same property rental revenue increase of 5.1% was partially offset by total rental expense growth of 14.8%, due largely to increased security costs which were not incurred in the same quarter of the prior year, resulting in same property NOI growth of 2.8% in the third quarter of 2023 compared to the third quarter of 2022.

As shown in our updated guidance further in this release, Boardwalk remains well positioned for both continued revenue growth and expense management to deliver strong NOI growth throughout the remainder of the year.

STRONG LIQUIDITY POSITION

In the third quarter of 2023, Boardwalk renewed $74.3 million of its maturing mortgages at a weighted average interest rate of 4.56% while extending the term of these mortgages by an average of 10.5 years.

Throughout the remainder of 2023, the Trust anticipates $135.6 million of mortgages payable maturing with an average in-place interest rate of 2.84% and will continue to renew these mortgages as they mature. Current market 5 and 10-year CMHC financing rates are estimated to be approximately 4.70%. To date, the Trust has renewed or forward-locked the interest rate on $327.2 million or 75% of its maturing mortgages in 2023 at an average interest rate of 4.50% and an average term of 6.7 years. While interest rates have increased significantly since the beginning of March 2022, the Trust remains positioned with a laddered maturity schedule within its mortgage program, a disciplined capital allocation program and continued use of CMHC funding, which decreases the renewal risk on its existing mortgages.

TIGHTENING AND UPWARD REVISION TO 2023 FINANCIAL GUIDANCE

With continued strength in leasing into early winter, ongoing savings from the Trust's platform optimization, lower non-controllable expenses in Q3 2023 than anticipated and higher interest earned on cash, the Trust is upwardly revising its 2023 Same Property NOI growth and FFO per Unit guidance as follows:

THIRD QUARTER REGULAR MONTHLY DISTRIBUTION ANNOUNCEMENT

The Trust has confirmed its monthly cash distribution for the months of December 2023, January 2024 and February 2024 as follows:

In line with Boardwalk's distribution policy of maximum re-investment, the Trust's payout ratio remains conservative at 30.4% of Q3 2023 FFO; and 33.0% of the last 12 months FFO. 

Boardwalk's regular monthly distribution provides a stable and attractive yield for the Trust's Unitholders. 

FOURTH ANNUAL ESG REPORT

The Trust is committed to environmental, social and governance ("ESG") objectives and initiatives, including working towards reducing greenhouse gas emissions and electricity and natural gas consumption, water conservation, waste minimization, and a continued focus on governance and oversight.  Boardwalk published its fourth annual ESG report in March. The ESG report, along with the Trust's Annual report, is available digitally on Boardwalk's website and under the Trust's profile at www.sedarplus.ca.

FINANCIAL INFORMATION

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

TELECONFERENCE ON THIRD QUARTER 2023 FINANCIAL RESULTS

Boardwalk invites you to participate in the teleconference that will be held to discuss these results tomorrow (November 8, 2023) at 1:00 pm Eastern Time (11:00 am Mountain 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: To join the conference call without operator assistance, you may register and enter your phone number at https://emportal.ink/3LI31CC to receive an instant automated call back.

Alternatively, you can also dial direct to be entered into the call by an operator using the traditional conference call instructions below.

The telephone numbers for the conference are 416-764-8650 (local/international callers) or toll-free 1-888-664-6383 (within North America).

Note: Please provide the operator with the below Conference Call ID or Topic when dialing in to the call.
Conference ID: 79907223
Topic: Boardwalk Real Estate Investment Trust, 2023 Third 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:

Boardwalk REIT Third Quarter Results Webcast Link

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 community provider and is a leading owner/operator of multi-family rental communities. Providing homes in more than 200 communities, with over 33,000 residential suites totaling over 29 million net rentable square feet, Boardwalk has a proven long-term track record of building better communities, where love always lives^™. Our three-tiered and distinct brands: Boardwalk Living, Boardwalk Communities, and Boardwalk Lifestyle, cater to a large diverse demographic and has evolved to capture the life cycle of all Resident Members. Boardwalk's disciplined approach to capital allocation, acquisition, development, purposeful re-positioning, and management of apartment communities allows the Trust to provide its brand of community across Canada creating exceptional Resident Member experiences. Differentiated by its peak performance culture, Boardwalk is committed to delivering exceptional service, product quality and experience to our Resident Members who reward us with high retention and market leading operating results, which in turn, lead to higher free cash flow and investment returns, stable monthly distributions, and value creation for all our stakeholders.

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.

PRESENTATION OF NON-GAAP MEASURES

Non-GAAP Financial Measures
Boardwalk believes non-GAAP financial measures are meaningful and useful measures of real estate organizations operating performance, however, are not measures defined by IFRS. As they do not have standardized meanings prescribed by IFRS, they therefore may not be comparable to similar measurements presented by other entities and should not be construed as an alternative to IFRS defined measures. Below are the non-GAAP financial measures referred to in this news release.

Funds From Operations
The IFRS measurement most comparable to FFO is profit. Boardwalk REIT considers FFO to be an appropriate measurement of the performance of a publicly listed multi-family residential entity as it is the most widely used and reported measure of real estate investment trust performance. Profit includes items such as fair value changes of investment property that are subject to market conditions and capitalization rate fluctuations which are not representative of recurring operating performance. Consistent with REALPAC, we define FFO as adjustments to profit for fair value gains or losses, distributions on the LP Class B Units, gains or losses on the sale of the Trust's investment properties, depreciation, deferred income tax, and certain other non-cash adjustments, if any, but after deducting the principal repayment on lease liabilities and adding the principal repayment on lease receivable. The reconciliation from profit under IFRS to FFO can be found below. The Trust uses FFO to assess operating performance and its distribution paying capacity, determine the level of Associate incentive-based compensation, and decisions related to investment in capital assets. To facilitate a clear understanding of the combined historical operating results of Boardwalk REIT, management of the Trust believes FFO should be considered in conjunction with profit as presented in the condensed consolidated interim financial statements for the three and nine months ended September 30, 2023 and 2022.

Adjusted Funds From Operations
Similar to FFO, the IFRS measurement most comparable to AFFO is profit. Boardwalk REIT considers AFFO to be an appropriate measurement of a publicly listed multi-family residential entity as it measures the economic performance after deducting for maintenance capital expenditures to the existing portfolio of investment properties. AFFO is determined by taking the amounts reported as FFO and deducting what is commonly referred to as "Maintenance Capital Expenditures". Maintenance Capital Expenditures are referred to as expenditures that, by standard accounting definition, are accounted for as capital in that the expenditure itself has a useful life in excess of the current financial year and maintains the value of the related assets. The reconciliation of AFFO can be found below. The Trust uses AFFO to assess operating performance and its distribution paying capacity, and decisions related to investment in capital assets.

Adjusted Real Estate Assets
The IFRS measurement most comparable to Adjusted Real Estate Assets is investment properties. Adjusted Real Estate Assets is comprised of investment properties, equity accounted investment, and cash and cash equivalents. Adjusted Real Estate Assets is useful in summarizing the real estate assets owned by the Trust and it is used in the calculation of NAV, which management of the Trust believes is a useful measure in estimating the entity's value. The reconciliation from Investment Properties under IFRS to Adjusted Real Estate Assets can be found on the following page, under NAV.

Adjusted Real Estate Debt
The IFRS measurement most comparable to Adjusted Real Estate Debt is total mortgage principal outstanding. Adjusted Real Estate Debt is comprised of total mortgage principal outstanding, total lease liabilities attributable to land leases, and construction loan payable. It is useful in summarizing the Trust's debt which is attributable to its real estate assets and is used in the calculation of NAV, which management of the Trust believes is a useful measure in estimating the entity's value. The reconciliation from total mortgage principal outstanding under IFRS to Adjusted Real Estate Debt can be found below under NAV.

Net Asset Value
The IFRS measurement most comparable to NAV is Unitholders' Equity. With real estate entities, NAV is the total value of the entity's investment properties and cash minus the total value of the entity's debt. The Trust determines NAV by taking Adjusted Real Estate Assets and subtracting Adjusted Real Estate Debt, which management of the Trust believes is a useful measure in estimating the entity's value. The reconciliation from Unitholders' Equity under IFRS to Net Asset Value is below.

Non-GAAP Ratios

The discussion below outlines the non-GAAP ratios used by the Trust. Each non-GAAP ratio has a non-GAAP financial measure as one or more of its components, and, as a result, do not have standardized meanings prescribed by IFRS and therefore may not be comparable to similar financial measurements presented by other entities. Non-GAAP financial measures should not be construed as alternatives to IFRS defined measures.

FFO per Unit, AFFO per Unit, and NAV per Unit
FFO per Unit includes the non-GAAP financial measure FFO as a component in the calculation. The Trust uses FFO per Unit to assess operating performance on a per Unit basis, as well as determining the level of Associate incentive-based compensation.

AFFO per Unit includes the non-GAAP financial measure AFFO as a component in the calculation.  The Trust uses AFFO per Unit to assess operating performance on a per Unit basis and its distribution paying capacity.

NAV per Unit includes the non-GAAP financial measure NAV as a component in the calculation. Management of the Trust believes it is a useful measure in estimating the entity's value on a per Unit basis, which an investor can compare to the entity's Trust Unit price which is publicly traded to help with investment decisions.

FFO per Unit and AFFO per Unit, are calculated by taking the non-GAAP ratio's corresponding non-GAAP financial measure and dividing by the weighted average Trust Units outstanding for the period on a fully diluted basis, which assumes conversion of the LP Class B Units and vested deferred units determined in the calculation of diluted per Trust Unit amounts in accordance with IFRS.

NAV per Unit is calculated as NAV divided by the Trust Units outstanding as at the reporting date on a fully diluted basis which assumes conversion of the LP Class B Units and vested deferred units outstanding.

FFO per Unit Future Financial Guidance
FFO per Unit Future Financial Guidance is calculated as FFO Future Financial Guidance divided by the estimated weighted average Trust Units and LP Class B Units outstanding throughout the year. Boardwalk REIT considers FFO per Unit Future Financial Guidance to be an appropriate measurement of the estimated future financial performance based on information currently available to management of the Trust at the date of this news release.

AFFO per Unit Future Financial Guidance
AFFO per Unit Future Financial Guidance is calculated as AFFO Future Financial Guidance divided by the estimated weighted average Trust Units and LP Class B Units outstanding throughout the year.  Boardwalk REIT considers AFFO per Unit Future Financial Guidance to be an appropriate measurement of the estimated future profitability based on information currently available to management of the Trust at the date of this news release.

FFO Payout Ratio
FFO Payout Ratio represents the REIT's ability to pay distributions. This non-GAAP ratio is computed by dividing regular distributions paid on the Trust Units and LP Class B Units by the non-GAAP financial measure of FFO.

CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING STATEMENTS
Information in this news release that is not current or historical factual information may constitute forward-looking statements and information (collectively, "forward-looking statements") within the meaning of securities laws. The use of any of the words "expect", "anticipate", "may", "will", "should", "believe", "intend" and similar expressions are intended to identify forward-looking statements. Forward-looking statements contained in this press release include Boardwalk's financial guidance for fiscal 2023, Boardwalk's ability to accelerate organic growth in 2023, expected distributions for December 2023, January 2024, and February 2024, expectations regarding mortgages payable maturing and its intention to renew these mortgages, Boardwalk's commitment to its capital allocation strategy, timing for completion of the Tower 2 construction at Boardwalk's 45 Railroad development, accretive capital recycling opportunities, strengthening its long-term development plan in Victoria, BC, and Boardwalk's commitment to ESG initiatives. Implicit in these forward-looking statements, particularly in respect of Boardwalk's objectives for its current and future periods, Boardwalk's strategies to achieve those objectives, as well as statements with respect to management's beliefs, plans, estimates, assumptions, 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 its Management's Discussion & Analysis of Boardwalk under the heading "Risks and Risk Management", which could cause Boardwalk's actual results to differ materially from the forward-looking statements contained in this news release. Specifically, Boardwalk has made assumptions surrounding the impact of economic conditions in Canada and globally, Boardwalk's future growth potential, prospects and opportunities, interest costs, access to equity and debt capital markets to fund (at acceptable costs), the future growth program to enable the Trust to refinance debts as they mature, the availability of purchase opportunities for growth in Canada, the impact of accounting principles under IFRS, general industry conditions and trends, changes in laws and regulations including, without limitation, changes in tax laws, increased competition, the availability of qualified personnel, fluctuations in foreign exchange or interest rates, and stock market volatility. These assumptions, although considered reasonable by the Trust at the time of preparation, may prove to be incorrect.

This news release also contains future-oriented financial information and financial outlook information (collectively "FOFI") about Boardwalk's same property NOI growth, FFO per Unit, and AFFO per Unit guidance for fiscal 2023. Boardwalk has included the FOFI for the purpose of providing further information about the Trust's anticipated future business operation.

For more exhaustive information on the risks and uncertainties in respect of forward-looking statements and FOFI you should refer to Boardwalk's Management's Discussion & Analysis and Annual Information Form for the year ended December 31, 2022 under the headings "Risks and Risk Management" and "Challenges and Risks", respectively, which are available at www.sedarplus.ca. Forward-looking statements and FOFI contained in this news release are made as of the date of this news release and are 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 statements or FOFI and should not rely upon forward-looking statements or FOFI as of any other date.  Except as required by applicable law, Boardwalk undertakes no obligation to publicly update or revise any forward-looking statement or FOFI, whether a result of new information, future events, or otherwise.

SOURCE Boardwalk Real Estate Investment Trust

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