INTERRENT REAL ESTATE INVESTMENT TRUST InterRent Real Estate Investment Trust
Condensed Consolidated Interim Financial Statements
March 31, 2024 (unaudited)
InterRent Real Estate Investment Trust
Condensed Consolidated Interim Balance Sheets
Unaudited (Cdn $ Thousands)
March 31, | December 31, | ||||
Note | 2024 | 2023 | |||
Assets | |||||
Investment properties | $ | 4,249,426 | $ | 4,315,742 | |
Investment in joint ventures | 6 | 48,863 | 47,454 | ||
Prepaids and deposits | 9,133 | 2,403 | |||
Assets held for sale | 90,623 | 45,432 | |||
Receivables and other assets | 8 | 26,687 | 22,760 | ||
Cash | 7,176 | 2,547 | |||
Total assets | $ | 4,431,908 | $ | 4,436,338 | |
Liabilities | |||||
Mortgages payable | 9 | $ | 1,663,031 | $ | 1,650,035 |
Credit facilities | 10 | - | 40,847 | ||
Class B LP unit liability | 12 | 29,300 | 28,587 | ||
Unit-based compensation liabilities | 13 | 62,429 | 59,721 | ||
Lease liabilities | 1,604 | 1,672 | |||
Tenant rental deposits | 19,592 | 19,781 | |||
Liabilities associated with assets held for sale | 24,793 | 22,988 | |||
Accounts payable and accrued liabilities | 11 | 39,577 | 39,326 | ||
Total liabilities | 1,840,326 | 1,862,957 | |||
Unitholders' equity | |||||
Unit capital | 15 | 1,093,890 | 1,088,679 | ||
Retained earnings | 1,497,692 | 1,484,702 | |||
Total unitholders' equity | 2,591,582 | 2,573,381 | |||
Total liabilities and unitholders' equity | $ | 4,431,908 | $ | 4,436,338 |
Commitments and contingencies (note 25)
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
On behalf of the Trust | Ronald Leslie | Brad Cutsey | |
Trustee | Trustee |
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InterRent Real Estate Investment Trust
Condensed Consolidated Interim Statements of Income
For the three months ended March 31
Unaudited (Cdn $ Thousands)
Note | 2024 | 2023 | |||
Operating revenues | |||||
Revenue from investment properties | 16 | $ | 61,754 | $ | 57,709 |
Operating expenses | |||||
Property operating costs | 9,318 | 8,967 | |||
Property taxes | 6,713 | 6,229 | |||
Utilities | 5,546 | 6,215 | |||
Total operating expenses | 21,577 | 21,411 | |||
Net operating income | 40,177 | 36,298 | |||
Financing costs | 17 | 15,116 | 13,858 | ||
Administrative costs | 4,088 | 3,495 | |||
Income before other income and expenses | 20,973 | 18,945 | |||
Other income and expenses | |||||
Fair value adjustments on investment properties | 8,236 | 70,165 | |||
Other income and fees | 528 | 382 | |||
Income from investment in joint ventures | 6 | 241 | 18 | ||
Loss on sale of investment properties | (950) | - | |||
Other fair value losses | 18 | (1,632) | (6,007) | ||
Interest on units classified as financial liabilities | 19 | (697) | (742) | ||
Net income for the period | $ | 26,699 | $ | 82,761 |
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
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InterRent Real Estate Investment Trust
Condensed Consolidated Interim Statements of Changes in Unitholders' Equity For the three months ended March 31
Unaudited (Cdn $ Thousands)
Cumulative | Total | |||||||||
Trust units | Cumulative | distributions | Retained | Unitholders' | ||||||
profit | to Unitholders | earnings | equity | |||||||
Balance, January 1, 2023 | $ | 1,052,858 | $ | 1,724,720 | $ | (280,202) | $ | 1,444,518 | $ | 2,497,376 |
Units issued | 5,316 | - | - | - | 5,316 | |||||
Net income for the period | - | 82,761 | - | 82,761 | 82,761 | |||||
Distributions declared to Unitholders | - | - | (12,780) | (12,780) | (12,780) | |||||
Balance, March 31, 2023 | $ | 1,058,174 | $ | 1,807,481 | $ | (292,982) | $ | 1,514,499 | $ | 2,572,673 |
Balance, January 1, 2024 | $ | 1,088,679 | $ | 1,816,960 | $ | (332,258) | $ | 1,484,702 | $ | 2,573,381 |
Units issued (note 15) | 5,211 | - | - | - | 5,211 | |||||
Net income for the period | - | 26,699 | - | 26,699 | 26,699 | |||||
Distributions declared to Unitholders | - | - | (13,709) | (13,709) | (13,709) | |||||
Balance, March 31, 2024 | $ | 1,093,890 | $ | 1,843,659 | $ | (345,967) | $ | 1,497,692 | $ | 2,591,582 |
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
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InterRent Real Estate Investment Trust
Condensed Consolidated Interim Statements of Cash Flows
For the three months ended March 31
Unaudited (Cdn $ Thousands)
Note | 2024 | 2023 | |||
Cash flows from (used in) operating activities | $ | 26,699 | |||
Net income for the period | $ | 82,761 | |||
Add items not affecting cash | (241) | ||||
Income from investment in joint ventures | 6 | (18) | |||
Amortization | 228 | 409 | |||
Loss on sale of investment properties (note 5) | 950 | - | |||
Fair value adjustments on investment properties | (8,236) | (70,165) | |||
Other fair value losses | 18 | 1,632 | 6,007 | ||
Unit-based compensation expense | 13 | 2,032 | 1,935 | ||
Financing costs | 17 | 15,116 | 13,858 | ||
Interest expense | 17 | (14,491) | (13,417) | ||
Tenant inducements | 685 | 547 | |||
24,374 | 21,917 | ||||
Net income items related to financing activities | 19 | 199 | 307 | ||
Changes in non-cash operating assets and liabilities | 20 | (6,080) | (10,760) | ||
Cash from operating activities | 18,493 | 11,464 | |||
Cash flows from (used in) investing activities | (1,169) | ||||
Investment in joint ventures | 6 | (9,771) | |||
Proceeds from sale of investment properties | 38,276 | - | |||
Additions to investment properties | (14,520) | (19,921) | |||
Cash from (used in) investing activities | 22,587 | (29,692) | |||
Cash flows from (used in) financing activities | (175,199) | ||||
Mortgage and loan repayments | 20 | (45,043) | |||
Mortgage advances | 20 | 193,793 | 25,193 | ||
Financing fees | (4,756) | (919) | |||
Credit facility advances/(repayments) | 20 | (40,847) | 44,792 | ||
Principal repayments on lease liabilities | (72) | (49) | |||
Trust units issued, net of issue costs | 13, 15 | 38 | 34 | ||
Deferred units purchased and cancelled | 13, 15 | (329) | (291) | ||
Interest paid on Class B LP unit liability | 19 | (199) | (307) | ||
Distributions paid | 20 | (8,880) | (7,607) | ||
Cash from (used in) financing activities | (36,451) | 15,803 | |||
Increase (decrease) in cash during the period | 4,629 | (2,425) | |||
Cash at the beginning of period | 2,547 | 4,267 | |||
Cash at end of period | $ | 7,176 | $ | 1,842 |
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
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InterRent Real Estate Investment Trust
Notes to Condensed Consolidated Interim Financial Statements
For the three months ended March 31, 2024 and 2023 and as at December 31, 2023 Unaudited (Cdn $ Thousands except unit amounts)
- ORGANIZATIONAL INFORMATION
InterRent Real Estate Investment Trust (the "Trust" or the "REIT") is an unincorporated, open-ended real estate investment trust created pursuant to a Declaration of Trust, dated October 10, 2006, and most recently amended and restated on May 21, 2019, under the laws of the Province of Ontario.
The Trust was created to invest in income producing residential properties within Canada. InterRent REIT Trust Units are listed on the Toronto Stock Exchange under the symbol IIP.UN. The registered office of the Trust and its head office operations are located at 485 Bank Street, Suite 207, Ottawa, Ontario, K2P 1Z2.
These condensed consolidated interim financial statements for the period ended March 31, 2024 were authorized for issuance by the Trustees of the Trust on May 9, 2024. - BASIS OF PRESENTATION Statement of compliance
These condensed consolidated interim financial statements have been prepared in accordance with IAS 34, "Interim Financial Reporting" as issued by the International Accounting Standards Board ("IASB"). Accordingly, certain information and footnote disclosure normally included in the annual financial statements prepared in accordance with International Financial Reporting Standards ("IFRS"), as issued by the IASB, have been omitted or condensed.
The financial statements have been presented in Canadian dollars, which is the Trust's functional currency, rounded to the nearest thousand unless otherwise indicated.
These condensed consolidated interim financial statements should be read in conjunction with the Trust's annual consolidated financial statements for the year ended December 31, 2023.
Basis of presentation
The Trust presents its consolidated balance sheets based on the liquidity method, whereby all assets and liabilities are presented in increasing order of liquidity.
These condensed consolidated interim financial statements have been prepared on a historical cost basis except for: - Investment properties, which are measured at fair value (except for investment properties under development where fair value is not reliably determinable);
- Financial assets and financial liabilities classified as "fair value through profit and loss", which are measured at fair value; and
- Unit-basedcompensation liabilities and Class B LP Unit liability, which are measured at fair value.
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InterRent Real Estate Investment Trust
Notes to Condensed Consolidated Interim Financial Statements
For the three months ended March 31, 2024 and 2023 and as at December 31, 2023 Unaudited (Cdn $ Thousands except unit amounts)
- BASIS OF PRESENTATION (Continued) Material accounting policies
The condensed consolidated interim financial statements have been prepared using the same accounting policies and methods as those used in the consolidated financial statements for the year ended December 31, 2023.
Basis of consolidation
The condensed consolidated interim financial statements include the accounts of the Trust and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated upon consolidation. Subsidiaries are entities over which the Trust has control and are consolidated from the date control commences until control ceases. Control is achieved when the Trust has power over the investee; is exposed, or has rights, to variable returns from its involvement with the investee; and has the ability to use its power to affect its returns.
Critical accounting estimates and judgments in applying accounting policies
The preparation of financial statements in accordance with IAS 34 requires the use of certain critical accounting estimates. It also requires management to exercise judgment when applying the Trust's accounting policies. The critical accounting estimates and judgments have been set out in notes 2 and 3 to the Trust's consolidated financial statements for the year ended December 31, 2023.
Comparative information
Certain comparative figures have been reclassified to conform to the current year's presentation. - INVESTMENT PROPERTIES
Investment properties include income properties, properties under development and land held for development.
March 31, 2024 | December 31, 2023 | |||
Income properties | $ | 4,208,693 | $ | 4,276,295 |
Properties under development | 40,733 | 39,447 | ||
$ | 4,249,426 | $ | 4,315,742 | |
Income properties: | ||||
March 31, 2024 | December 31, 2023 | |||
Balance, beginning of year | $ | 4,321,663 | $ | 4,152,141 |
Dispositions (note 5) | (45,226) | (10,892) | ||
Transfers from properties under development | - | 70,173 | ||
Property capital investments | 14,403 | 98,287 | ||
Fair value adjustments(1) | 8,236 | 11,954 | ||
$ | 4,299,076 | $ | 4,321,663 | |
Reclassification to assets held for sale (note 4) | (90,383) | (45,368) | ||
$ | 4,208,693 | $ | 4,276,295 |
- Includes fair value adjustments on income properties and income properties held for sale
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InterRent Real Estate Investment Trust
Notes to Condensed Consolidated Interim Financial Statements
For the three months ended March 31, 2024 and 2023 and as at December 31, 2023 Unaudited (Cdn $ Thousands except unit amounts)
3. INVESTMENT PROPERTIES (Continued)
Properties under development:
Properties that are undergoing a significant amount of development work to prepare the property for use as income properties.
March 31, 2024 | December 31, 2023 | |||
Balance, beginning of year | $ | 39,447 | $ | 101,783 |
Transfer to income properties | - | (70,173) | ||
Property capital investments | 1,286 | 7,837 | ||
$ | 40,733 | $ | 39,447 |
The fair value of the income properties is determined internally by the Trust. The fair value methodology of the Trust's income properties is considered a level 3 valuation as significant unobservable inputs are required to determine fair value.
The Trust determined the fair value of each income property internally based upon the direct capitalization income approach method of valuation. The fair value was determined by applying a capitalization rate ("Cap Rate") to forecasted stabilized net operating income ("SNOI"), which incorporates turnover estimates, market rent adjustments, allowances for vacancy, management fees, labour and repairs and maintenance for the property. In order to substantiate management's valuation, the Trust engaged a leading independent national real estate appraisal firm to provide appraisals for substantially all of the portfolio at December 31, 2023. The Trust engaged the firm once again to review and advise of any significant changes in any of the key input assumptions in the model (such as Cap Rate, turnover estimate and market rent adjustments) as at March 31, 2024, in order for the Trust to complete its internal valuations.
The capitalization rate assumptions for the income properties, excluding assets held for sale, are included in the following table:
March 31, 2024 | December 31, 2023 | |||
Range | Weighted average | Range | Weighted | |
average | ||||
Capitalization rate | 3.25% - 6.25% | 4.17% | 3.25% - 6.25% | 4.21% |
The direct capitalization income approach method of valuation requires that SNOI be divided by a Cap Rate to determine a fair value. As such, changes in both SNOI and Cap Rate could significantly alter the fair value of the investment properties. The tables below summarize the impact of changes in both SNOI and Cap Rate on the Trust's fair value of the income properties, excluding assets held for sale:
As at March 31, 2024
Forecasted stabilized net | -3% | -1% | As estimated | +1% | +3% | ||||||
operating income | $ | 170,237 | $ | 173,747 | $ | 175,502 | $ | 177,257 | $ | 180,767 | |
Capitalization rate | |||||||||||
-0.25% | 3.92% | $ | 4,342,779 | $ | 4,432,321 | $ | 4,477,092 | $ | 4,521,863 | $ | 4,611,405 |
Cap rate used | 4.17% | $ | 4,082,421 | $ | 4,166,594 | $ | 4,208,693 | $ | 4,250,768 | $ | 4,334,941 |
+0.25% | 4.42% | $ | 3,851,514 | $ | 3,930,927 | $ | 3,970,633 | $ | 4,010,340 | $ | 4,089,752 |
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InterRent Real Estate Investment Trust
Notes to Condensed Consolidated Interim Financial Statements
For the three months ended March 31, 2024 and 2023 and as at December 31, 2023 Unaudited (Cdn $ Thousands except unit amounts)
3. INVESTMENT PROPERTIES (Continued)
As at December 31, 2023
Forecasted stabilized net | -3% | -1% | As estimated | +1% | +3% | ||||||
operating income | $ | 174,631 | $ | 178,232 | $ | 180,032 | $ | 181,832 | $ | 185,433 | |
Capitalization rate | |||||||||||
-0.25% | 3.96% | $ | 4,409,875 | $ | 4,500,800 | $ | 4,546,263 | $ | 4,591,725 | $ | 4,682,651 |
Cap rate used | 4.21% | $ | 4,148,006 | $ | 4,233,532 | $ | 4,276,295 | $ | 4,319,057 | $ | 4,404,583 |
+0.25% | 4.46% | $ | 3,915,494 | $ | 3,996,226 | $ | 4,036,592 | $ | 4,076,958 | $ | 4,157,690 |
The two (2023 - two) properties under development are valued at acquisition cost plus development costs. The direct capitalization income approach method of valuation is not a reliable measure as the properties are undergoing a significant amount of work which will affect multiple components of the estimated net operating income as well as the Cap Rate. The Trust expects the fair value of the properties to be reliably determinable when development is substantially complete, and will measure both investment properties under development at cost until either its fair value becomes reliably determinable or development is completed (whichever is earlier).
Cash outflow used for additions to investment properties for the three months ended March 31:
2024 | 2023 | |||
Property capital investments | $ | (15,689) | $ | (19,862) |
Changes in non-cash investing accounts payable and accrued liabilities | 1,169 | (59) | ||
$ | (14,520) | $ | (19,921) |
4. ASSETS HELD FOR SALE
As at March 31, 2024, the Trust classified four investment properties and one vacant parcel of land (497 suites) as assets held for sale as a result of the Trust initiating an active program to dispose of these properties. As of March 31, 2024, the Trust had committed to sell the properties and are expected to close in June 2024 for a total sale price of $92,000 (note 25).
As at December 31, 2023, the Trust classified five investment properties (224 suites) as assets held for sale as a result of the Trust initiating an active program to dispose of these properties. As of December 31, 2023, the Trust had committed to sell the properties and the sale closed in February 2024 for a sale price of $46,000 (note 5).
The following tables set forth the assets and liabilities associated with these properties.
March 31, 2024 | December 31, 2023 | |||
Properties | 4(1) | 5 | ||
Suites | 497 | 224 | ||
Investment properties (note 3) | $ | 90,383 | $ | 45,368 |
Prepaids and deposits | 62 | 25 | ||
Receivables and other assets (note 8) | 178 | 39 | ||
$ | 90,623 | $ | 45,432 | |
Mortgages and loan payables | 23,173 | 22,211 | ||
Accounts payable and accrued liabilities (note 11) | 1,373 | 689 | ||
Tenant rental deposits | 247 | 88 | ||
$ | 24,793 | $ | 22,988 |
- Includes four investment properties and one vacant parcel of land
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InterRent Real Estate Investment Trust
Notes to Condensed Consolidated Interim Financial Statements
For the three months ended March 31, 2024 and 2023 and as at December 31, 2023 Unaudited (Cdn $ Thousands except unit amounts)
5. INVESTMENT PROPERTY DISPOSITIONS
During the three months ended March 31, 2024, the Trust completed the following investment property disposition. This disposition does not meet the definition of discontinued operations under IFRS:
Suite | Ownership | Mortgage | ||||||||
Net Proceeds | Discharged | |||||||||
Disposition Date | Count | Interest | Sale Price | Closing Costs | ||||||
February 15, 2024 | 224 | 100% | $ | 46,000 | $ | 1,724 | $ | 44,276 | $ | 22,762 |
A loss of $950 was recognized for the three months ended March 31, 2024 in connection with this disposition. The loss represents the difference between the net proceeds (sale price less closing costs) and the carrying value of the properties at the date of disposition. Closing costs consist of commissions, legal fees, mortgage discharge penalties, and the write-off of deferred financing fees related to the discharged mortgage.
During the three months ended March 31, 2023 the trust did not dispose of any investment properties.
Calculation of loss on sale of investment properties for the three months ended March 31:
2024 | 2023 | |||
Sale price | $ | 46,000 | $ | - |
Closing costs | (1,724) | - | ||
Net proceeds | 44,276 | - | ||
Less: book value of investment properties (note 3) | (45,226) | |||
(Loss)/gain on sale of investment properties | $ | (950) | $ | - |
Cash inflow received from the sale of investment properties for the three months ended March 31:
2024 | 2023 | |||
Net proceeds | $ | 44,276 | $ | - |
Vendor take-back mortgage issued | (6,000) | - | ||
$ | 38,276 | $ | - |
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InterRent Real Estate Investment Trust published this content on 03 May 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 25 May 2024 16:55:06 UTC.
