SmartCentres Real Estate Investment Trust Releases Fourth

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.

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)

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	(1,960	)	—		(1,960	)	N/R⁽⁷⁾
Salaries and related costs attributed to leasing activities⁽³⁾	7,508		5,196		2,312		44.5
Acquisition-related costs	298		2,791		(2,493	)	(89.3	)
Adjustments relating to equity accounted investments:
Rental revenue adjustment – tenant improvement amortization	387		360		27		7.5
Indirect interest with respect to the development portion⁽⁴⁾	7,747		7,050		697		9.9
Adjustment to capitalized interest with respect to Transit City condo closings⁽⁴⁾	—		(675	)	675		N/R⁽⁷⁾
Fair value adjustment on revaluation of investment properties	(624	)	(187,728	)	187,104		(99.7	)
Loss on sale of investment properties	241		—		241		N/R⁽⁷⁾
Adjustment for supplemental costs	4,648		2,618		2,030		77.5
FFO⁽⁵⁾	371,572		380,070		(8,498	)	(2.2	)
Other non-recurring adjustments⁽⁶⁾	656		3,226		(2,570	)	(79.7	)
FFO with adjustments⁽⁵⁾	372,228		383,296		(11,068	)	(2.9	)
Transactional FFO – gain on sale of land to co-owners	7,662		1,923		5,739		N/R⁽⁷⁾
FFO with adjustments and Transactional FFO⁽⁵⁾	379,890		385,219		(5,329	)	(1.4	)

(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, DUP, EIP, 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 $7.5 million were incurred in the year ended December 31, 2022 (year ended December 31, 2021 – $5.2 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 $0.7 million of costs associated with COVID-19 vaccination centres (year ended December 31, 2021 – $0.9 million of compensation costs relating to previous CEO and $2.3 million of costs associated with COVID-19 vaccination centres).
(7)   N/R – Not representative.

The following table presents FFO excluding anomalous transactions for the years ended December 31, 2022:

	Three Months Ended December 31	Year Ended December 31
(in thousands of dollars)	2022		2021		Variance ($)	2022		2021		Variance ($)
FFO with adjustments⁽¹⁾	100,561		98,112		2,449		372,228		383,296		(11,068	)
Adjusted for:
ECL	(710	)	(1,545	)	835		(3,257	)	3,706		(6,963	)
Loss (gain) on derivative – TRS	(6,221	)	(4,180	)	(2,041	)	4,918		(5,642	)	10,560
FFO sourced from condominium and townhome closings	180		66		114		(680	)	(18,747	)	18,067
FFO sourced from SmartVMC West acquisition	(371	)	—		(371	)	(984	)	—		(984	)
FFO with adjustments excluding impact of ECL, TRS, condominium and townhome closings, and SmartVMC West acquisition (“FFO with adjustments excluding the impact of the TRS and other”)⁽¹⁾	93,439		92,453		986		372,225		362,613		9,612

The following table reconciles cash flows provided by operating activities to ACFO and ACFO with adjustments:

Quarterly Comparison to Prior Year

(in thousands of dollars)	Three Months Ended December 31, 2022	Three Months Ended December 31, 2021	Variance ($)/(%)
Cash flows provided by operating activities	134,668		133,674		994
Adjustments to working capital items that are not indicative of sustainable cash available for distribution⁽¹⁾	(35,451	)	(48,678	)	13,227
Distributions on Units classified as liabilities recorded as interest expense	1,083		1,008		75
Distributions on vested deferred units recorded as interest expense	724		1,045		(321	)
Expenditures on direct leasing costs and tenant incentives	3,108		2,050		1,058
Expenditures on tenant incentives for properties under development	(646	)	—		(646	)
Actual sustaining capital expenditures	(11,434	)	(10,323	)	(1,111	)
Actual sustaining leasing commissions	(800	)	(742	)	(58	)
Actual sustaining tenant improvements	(2,587	)	(1,217	)	(1,370	)
Non-cash interest expense, net of other financing costs	10,238		9,594		644
Non-cash interest income	(29,571	)	(7,110	)	(22,461	)
Acquisition-related costs, net	—		2,791		(2,791	)
Gain on sale of land to co-owners	7,662		336		7,326
Distributions from equity accounted investments	12,406		(732	)	13,138
Adjustments relating to equity accounted investments:
Cash flows from operating activities including working capital adjustments	1,658		(236	)	1,894
Notional interest capitalization⁽²⁾	1,935		1,926		9
Actual sustaining capital and leasing expenditures	1		(103	)	104
Non-cash interest expense	(3	)	30		(33	)
ACFO⁽³⁾	92,991		83,313		9,678
Other non-recurring adjustments⁽⁴⁾	(1,910	)	660		(2,570	)
ACFO with adjustments⁽³⁾	91,081		83,973		7,108

ACFO⁽³⁾	92,991		83,313		9,678
Distributions declared	82,386		79,725		2,661
Surplus of ACFO over distributions declared	10,605		3,588		7,017

Payout Ratio Information:
Payout Ratio to ACFO⁽³⁾	88.6	%	95.7	%	(7.1)%
Payout Ratio to ACFO with adjustments⁽³⁾	90.5	%	94.9	%	(4.4)%
Payout Ratio to ACFO with adjustments excluding impact of TRS, condominium and townhome closings, and SmartVMC West acquisition (Payout Ratio to ACFO with adjustments excluding the impact of the TRS and other)⁽³⁾⁽⁵⁾	94.1	%	99.8	%	(5.7)%

(1)   Adjustments to working capital items include, but are not limited to, changes in prepaid expenses and deposits, accounts receivables, accounts payables and other working capital items that are not indicative of sustainable cash available for distribution.
(2)   See the “Indirect interest with respect to the development portion” as presented in the “Funds From Operations” subsection in the Trust’s MD&A.
(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)   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).
(5)   For the three months ended December 31, 2022, excludes $2.7 million of distributions declared in connection with SmartVMC West LP Class D Units (three months ended December 31, 2021 – $0.04 million).

Year-to-Date Comparison to Prior Year

(in thousands of dollars)	Year Ended December 31, 2022	Year Ended December 31, 2021	Variance ($)/(%)
Cash flows provided by operating activities	370,762		371,624		(862	)
Adjustments to working capital items that are not indicative of sustainable cash available for distribution⁽¹⁾	(2,293	)	(40,796	)	38,503
Distributions on Units classified as liabilities recorded as interest expense	4,293		3,919		374
Distributions on vested deferred units recorded as interest expense	2,847		2,424		423
Expenditures on direct leasing costs and tenant incentives	9,860		5,927		3,933
Expenditures on tenant incentives for properties under development	1,897		730		1,167
Actual sustaining capital expenditures	(19,111	)	(17,331	)	(1,780	)
Actual sustaining leasing commissions	(2,389	)	(3,071	)	682
Actual sustaining tenant improvements	(7,796	)	(2,903	)	(4,893	)
Non-cash interest expense, net of other financing costs	(9,156	)	7,160		(16,316	)
Non-cash interest income	(26,083	)	(5,307	)	(20,776	)
Acquisition-related costs, net	298		2,791		(2,493	)
Gain on sale of land to co-owners	7,662		1,923		5,739
Distributions from equity accounted investments	(4,784	)	(4,072	)	(712	)
Adjustments relating to equity accounted investments:
Cash flows from operating activities including working capital adjustments	6,662		23,819		(17,157	)
Notional interest capitalization⁽²⁾	7,747		7,050		697
Adjustment to capitalized interest with respect to Transit City condo closings⁽²⁾	—		(675	)	675
Actual sustaining capital and leasing expenditures	(329	)	(207	)	(122	)
Non-cash interest expense	(12	)	50		(62	)
ACFO⁽³⁾	340,075		353,055		(12,980	)
Other non-recurring adjustments⁽⁴⁾	656		3,226		(2,570	)
ACFO with adjustments⁽³⁾	340,731		356,281		(15,550	)

ACFO⁽³⁾	340,075		353,055		(12,980	)
Distributions declared	329,531		318,753		10,778
Surplus of ACFO over distributions declared	10,544		34,302		(23,758	)

Payout Ratio Information:
Payout Ratio to ACFO⁽³⁾	96.9	%	90.3	%	6.6	%
Payout Ratio to ACFO with adjustments⁽³⁾	96.7	%	89.5	%	7.2	%
Payout Ratio to ACFO with adjustments excluding impact of TRS, condominium and townhome closings, and SmartVMC West acquisition⁽³⁾⁽⁵⁾	92.6	%	96.5	%	(3.9)%

(1)   Adjustments to working capital items include, but are not limited to, changes in prepaid expenses and deposits, accounts receivables, accounts payables and other working capital items that are not indicative of sustainable cash available for distribution.
(2)   See the “Indirect interest with respect to the development portion” as presented in the “Funds From Operations” subsection in the Trust’s MD&A.
(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)   Represents adjustments relating to $0.7 million of costs associated with COVID-19 vaccination centres (year ended December 31, 2021 – $0.9 million of compensation costs relating to previous CEO, and $2.3 million of costs associated with COVID-19 vaccination centres).
(5)   For the year ended December 31, 2022, excludes $10.7 million of distributions declared in connection with SmartVMC West LP Class D Units (year ended December 31, 2021 – $0.04 million).
The following table presents ACFO excluding anomalous transactions for the years ended December 31, 2022:

	Three Months Ended December 31	Year Ended December 31
(in thousands of dollars)	2022		2021		Variance ($)	2022		2021		Variance ($)
ACFO with adjustments⁽¹⁾	91,081		83,973		7,108		340,731		356,281		(15,550	)
Adjusted for:
Loss (gain) on derivative – TRS	(6,221	)	(4,180	)	(2,041	)	4,918		(5,642	)	10,560
ACFO sourced from condominium and townhome closings	191		67		124		(305	)	(20,471	)	20,166
ACFO sourced from SmartVMC West acquisition	(371	)	—		(371	)	(984	)	—		(984	)
ACFO with adjustments excluding impact of TRS, condominium and townhome closings, and SmartVMC West acquisition⁽¹⁾	84,680		79,860		4,820		344,360		330,168		14,192

The following tables summarize NOI, related ratios and recovery ratios, provide additional information, and reflect the Trust’s proportionate share of equity accounted investments, the sum of which represent a non-GAAP measure:

Quarterly Comparison to Prior Year

(in thousands of dollars)	Three Months Ended December 31, 2022	Three Months Ended December 31, 2021
	Trust portion excluding EAI	Equity Accounted Investments	Total Proportionate Share⁽¹⁾	Trust portion excluding EAI	Equity Accounted Investments	Total Proportionate Share⁽¹⁾	Variance of Total Proportionate Share⁽¹⁾
			(A)			(B)	(A–B)
Net base rent	127,941	5,260	133,201	125,037	3,534	128,571	4,630
Property tax and insurance recoveries	42,833	807	43,640	35,020	507	35,527	8,113
Property operating cost recoveries	25,552	1,574	27,126	21,670	960	22,630	4,496
Miscellaneous revenue	4,979	1,171	6,150	7,479	973	8,452	(2,302)
Rentals from investment properties	201,305	8,812	210,117	189,206	5,974	195,180	14,937
Service and other revenues	4,547	—	4,547	3,606	—	3,606	941
Earnings from other	371	(371)	—	38	—	38	(38)
Rentals from investment properties and other⁽²⁾	206,223	8,441	214,664	192,850	5,974	198,824	15,840
Recoverable tax and insurance costs	(43,818)	(755)	(44,573)	(36,015)	(547)	(36,562)	(8,011)
Recoverable CAM costs	(28,662)	(1,311)	(29,973)	(25,165)	(1,051)	(26,216)	(3,757)
Property management fees and costs	(1,090)	(314)	(1,404)	(586)	(215)	(801)	(603)
Non-recoverable operating costs	266	(1,317)	(1,051)	(2,094)	(1,273)	(3,367)	2,316
ECL	792	(82)	710	1,603	(58)	1,545	(835)
Property operating costs	(72,512)	(3,779)	(76,291)	(62,257)	(3,144)	(65,401)	(10,890)
Other expenses	(4,550)	—	(4,550)	(3,639)	—	(3,639)	(911)
Property operating costs and other⁽²⁾	(77,062)	(3,779)	(80,841)	(65,896)	(3,144)	(69,040)	(11,801)
Net rental income and other	129,161	4,662	133,823	126,954	2,830	129,784	4,039
Condo and townhome closings revenue	—	—	—	—	—	—	—
Condo and townhome cost of sales	—	(181)	(181)	—	—	—	(181)
Marketing and selling costs	(10)	—	(10)	—	(67)	(67)	57
Net profit on condo and townhome closings	(10)	(181)	(191)	—	(67)	(67)	(124)
NOI⁽³⁾	129,151	4,481	133,632	126,954	2,763	129,717	3,915
Net rental income and other as a percentage of net base rent (%)	101.0	88.6	100.5	101.5	80.1	100.9	(0.4)
Net rental income and other as a percentage of rentals from investment properties (%)	64.2	52.9	63.7	67.1	47.4	66.5	(2.8)
Net rental income and other as a percentage of rentals from investment properties and other (%)	62.6	55.2	62.3	65.8	47.4	65.3	(3.0)
Recovery Ratio (including prior year adjustments) (%)	94.4	115.2	94.9	92.7	91.8	92.6	2.3
Recovery Ratio (excluding prior year adjustments) (%)	91.5	132.8	92.7	92.6	114.9	93.0	(0.3)

(in thousands of dollars)	Year Ended December 31, 2022	Year Ended December 31, 2021
	Trust portion excluding EAI	Equity Accounted Investments	Total Proportionate Share⁽¹⁾	Trust portion excluding EAI	Equity Accounted Investments	Total Proportionate Share⁽¹⁾	Variance of Total Proportionate Share⁽¹⁾
			(A)			(B)	(A–B)
Net base rent	508,023	18,378	526,401	494,992	13,098	508,090	18,311
Property tax and insurance recoveries	171,874	3,029	174,903	169,180	2,354	171,534	3,369
Property operating cost recoveries	93,407	4,681	98,088	83,852	3,389	87,241	10,847
Miscellaneous revenue	15,393	3,804	19,197	17,891	2,689	20,580	(1,383)
Rentals from investment properties	788,697	29,892	818,589	765,915	21,530	787,445	31,144
Service and other revenues	14,652	—	14,652	14,843	—	14,843	(191)
Earnings from other	1,249	(1,249)	—	38	—	38	(38)
Rentals from investment properties and other⁽²⁾	804,598	28,643	833,241	780,796	21,530	802,326	30,915
Recoverable tax and insurance costs	(176,876)	(3,042)	(179,918)	(176,239)	(2,360)	(178,599)	(1,319)
Recoverable CAM costs	(102,721)	(4,535)	(107,256)	(91,468)	(3,364)	(94,832)	(12,424)
Property management fees and costs	(4,288)	(1,004)	(5,292)	(1,469)	(688)	(2,157)	(3,135)
Non-recoverable operating costs	(6,465)	(4,695)	(11,160)	(7,246)	(3,253)	(10,499)	(661)
ECL	3,448	(191)	3,257	(3,652)	(54)	(3,706)	6,963
Property operating costs	(286,902)	(13,467)	(300,369)	(280,074)	(9,719)	(289,793)	(10,576)
Other expenses	(14,657)	—	(14,657)	(14,882)	—	(14,882)	225
Property operating costs and other⁽²⁾	(301,559)	(13,467)	(315,026)	(294,956)	(9,719)	(304,675)	(10,351)
Net rental income and other	503,039	15,176	518,215	485,840	11,811	497,651	20,564
Condo and townhome closings revenue	—	4,524	4,524	—	76,837	76,837	(72,313)
Condo and townhome cost of sales	—	(3,295)	(3,295)	—	(56,102)	(56,102)	52,807
Marketing and selling costs	(435)	(489)	(924)	—	(264)	(264)	(660)
Net profit on condo and townhome closings	(435)	740	305	—	20,471	20,471	(20,166)
NOI⁽³⁾	502,604	15,916	518,520	485,840	32,282	518,122	398
Net rental income and other as a percentage of net base rent (%)	99.0	82.6	98.4	98.1	90.2	97.9	0.5
Net rental income and other as a percentage of rentals from investment properties (%)	63.8	50.8	63.3	63.4	54.9	63.2	0.1
Net rental income and other as a percentage of rentals from investment properties and other (%)	62.5	53.0	62.2	62.2	54.9	62.0	0.2
Recovery Ratio (including prior year adjustments) (%)	94.9	101.8	95.1	94.5	100.3	94.6	0.5
Recovery Ratio (excluding prior year adjustments) (%)	94.2	100.9	94.4	94.6	103.3	94.8	(0.4)

(1)   This column contains non-GAAP measures because it includes figures that are recorded in equity accounted investments – that are not explicitly disclosed and/or presented in the consolidated financial statements for the years ended December 31, 2022 and December 31, 2021. 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)   As reflected under the column “Trust portion excluding EAI” in the table above, this amount 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.

Same Properties NOI
NOI (a non-GAAP financial measure) from continuing operations represents: i) rentals from investment properties and other revenues less property operating costs and other expenses, and ii) net profit from condominium sales. Disclosing the NOI contribution from each of same properties, acquisitions, dispositions, Earnouts and Development activities highlights the impact each component has on aggregate NOI. Straight-line rent, lease terminations and other adjustments, and amortization of tenant incentives have been excluded from Same Properties NOI, as have NOI from acquisitions, dispositions, Earnouts and Development activities, and ECL. This has been done in order to more directly highlight the impact of changes in occupancy, rent uplift and productivity.

Quarterly Comparison to Prior Year

	Three Months Ended	Three Months Ended
(in thousands of dollars)	December 31, 2022	December 31, 2021	Variance ($)	Variance (%)
Net rental income	129,154		126,987		2,167		1.7
Service and other revenues	4,547		3,606		941		26.1
Other expenses	(4,550	)	(3,639	)	(911	)	25.0
NOI⁽¹⁾	129,151		126,954		2,197		1.7
NOI from equity accounted investments⁽¹⁾	4,481		2,763		1,718		62.2
Total portfolio NOI before adjustments⁽¹⁾	133,632		129,717		3,915		3.0
Adjustments:
Royalties	299		285		14		4.9
Straight-line rent	(34	)	(154	)	120		(77.9	)
Lease termination and other adjustments	(82	)	(3,476	)	3,394		N/R⁽²⁾
Net profit on condo and townhome closings⁽³⁾	190		108		82		75.9
Amortization of tenant incentives	2,026		1,725		301		17.4
Total portfolio NOI after adjustments⁽¹⁾	136,031		128,205		7,826		6.1
NOI sourced from:
Acquisitions	(2,161	)	451		(2,612	)	N/R⁽²⁾
Dispositions	3		(280	)	283		(101.1	)
Earnouts and Developments	(384	)	—		(384	)	N/R⁽²⁾
Same Properties NOI⁽¹⁾	133,489		128,376		5,113		4.0
Add back: ECL	(710	)	(1,545	)	835		(54.0	)
Same Properties NOI excluding ECL⁽¹⁾	132,779		126,831		5,948		4.7

(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.
(2)   N/R – Not representative.
(3)   Includes marketing costs.

Year-to-Date Comparison to Prior Year

	Year Ended	Year Ended
(in thousands of dollars)	December 31, 2022	December 31, 2021	Variance ($)	Variance (%)
Net rental income	502,609		485,879		16,730		3.4
Service and other revenues	14,652		14,843		(191	)	(1.3	)
Other expenses	(14,657	)	(14,882	)	225		1.5
NOI⁽¹⁾	502,604		485,840		16,764		3.5
NOI from equity accounted investments⁽¹⁾	15,916		32,282		(16,366	)	(50.7	)
Total portfolio NOI before adjustments⁽¹⁾	518,520		518,122		398		0.1
Adjustments:
Royalties	1,115		960		155		16.1
Straight-line rent	(437	)	(883	)	446		(50.5	)
Lease termination and other adjustments	(214	)	(5,240	)	5,026		(95.9	)
Net profit on condo and townhome closings⁽³⁾	(242	)	(20,425	)	20,183		(98.8	)
Amortization of tenant incentives	7,646		7,614		32		0.4
Total portfolio NOI after adjustments⁽¹⁾	526,388		500,148		26,240		5.2
Less NOI sourced from:
Acquisitions	(7,835	)	524		(8,359	)	N/R⁽²⁾
Dispositions	(9	)	(1,744	)	1,735		(99.5	)
Earnouts and Developments	(4,300	)	(1,142	)	(3,158	)	N/R⁽²⁾
Same Properties NOI⁽¹⁾	514,244		497,786		16,458		3.3
Add back: ECL	(3,257	)	3,706		(6,963	)	N/R⁽²⁾
Same Properties NOI excluding ECL⁽¹⁾	510,987		501,492		9,495		1.9

(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.
(2)   N/R – Not representative.
(3)   Includes marketing costs.

Adjusted EBITDA

The following table presents a reconciliation of net income and comprehensive income to Adjusted EBITDA:

	12 Months Ended	12 Months Ended
(in thousands of dollars)	December 31, 2022	December 31, 2021	Variance ($)
Net income and comprehensive income	635,965		987,676		(351,711	)
Add (deduct) the following items:
Interest expense	156,500		149,977		6,523
Interest income	(18,036	)	(12,341	)	(5,695	)
Amortization of equipment and intangible assets	3,604		3,778		(174	)
Amortization of tenant improvements	7,474		7,872		(398	)
Fair value adjustments on revaluation of investment properties	(202,458	)	(679,256	)	476,798
Fair value adjustments on revaluation of financial instruments	(91,246	)	34,227		(125,473	)
Fair value adjustment on TRS	(4,918	)	5,642		(10,560	)
Adjustment for supplemental costs	4,648		2,618		2,030
Gain on sale of investment properties	(74	)	(27	)	(47	)
Gain on sale of land to co-owners (Transactional FFO)	—		1,923		(1,923	)
Acquisition-related costs	298		2,791		(2,493	)
Adjusted EBITDA⁽¹⁾	491,757		504,880		(13,123	)
Less: Condo and townhome closings	(305	)	(20,471	)	20,166
Add: ECL	(3,257	)	3,706		(6,963	)
Adjusted EBITDA excluding condo and townhome closings and ECL⁽¹⁾	488,195		488,115		80

The non-GAAP measures used in this Press Release, including but not limited to, FFO per Unit, Unencumbered Assets, NOI, Debt to Aggregate Assets, Interest Coverage Ratio, Adjusted Debt to Adjusted EBITDA, Unsecured/Secured Debt Ratio, FFO, FFO with adjustments, FFO with adjustments excluding impact of ECL, TRS, condominium and townhome closings, and SmartVMC West acquisition, FFO per Unit with adjustments, Fixed Rate to Variable Rate Debt Ratio, Transactional FFO, ACFO, ACFO with adjustments excluding impact of TRS, condominium and townhome closings, and SmartVMC West acquisition, Payout Ratio to ACFO, Same Properties NOI, Total assets – non-GAAP, Investment properties – non-GAAP, Debt – non-GAAP, Debt to Gross Book Value, Unencumbered Assets to Unsecured Debt, Weighted Average Interest Rate, and Total Proportionate Share, do not have any standardized meaning prescribed by International Financial Reporting Standards (“IFRS”) and are therefore unlikely to be comparable to similar measures presented by other issuers. Additional information regarding these non-GAAP measures is available in the Management’s Discussion and Analysis of the Trust for the year ended December 31, 2022, dated February 8, 2023 (the “MD&A), and is incorporated by reference. The information is found in the “Presentation of Certain Terms Including Non-GAAP Measures” and “Non-GAAP Measures” sections of the MD&A, which is available on SEDAR at www.sedar.com. Reconciliations of non-GAAP financial measures to the most directly comparable IFRS measures are found in the following sections of this Press Release: “Proportionately Consolidated Balance Sheets (including the Trust’s interests in equity accounted investments)”, “Proportionately Consolidated Statements of Income and Comprehensive Income (including the Trust’s interests in equity accounted investments)”, “FFO, FFO with adjustments, and FFO with adjustments and Transactional FFO”, “ACFO and ACFO with adjustments”, “Net Operating Income”, “Same Properties NOI”, and “Adjusted EBITDA”.

Full reports of the financial results of the Trust for the year ended December 31, 2022 are outlined in the consolidated financial statements and the related MD&A of the Trust for the year ended December 31, 2022, which are available on SEDAR at www.sedar.com.

Conference Call

SmartCentres will hold a conference call on Thursday, February 9, 2023 at 3:00 p.m. (ET). Participating on the call will be members of SmartCentres’ senior management.

Investors are invited to access the call by dialing 1-855-353-9183 and then keying in the participant access code 14567#. You will be required to identify yourself and the organization on whose behalf you are participating.

A recording of this call will be made available Thursday, February 9, 2023 beginning at 8:30 p.m. (ET) through to 8:30 p.m. (ET) on Thursday, February 16, 2023. To access the recording, please call 1-855-201-2300, enter the conference access code 14567# and then key in the playback access code 0113004#.

About SmartCentres

SmartCentres Real Estate Investment Trust is one of Canada’s largest fully integrated REITs, with a best-in-class portfolio featuring 185 strategically located properties in communities across the country. SmartCentres has approximately $11.7 billion in assets and owns 34.8 million square feet of income producing value-oriented retail and first-class office space with 98.0% occupancy, on 3,500 acres of owned land across Canada.

SmartCentres continues to focus on enhancing the lives of Canadians by planning and developing complete, connected, mixed-use communities on its existing retail properties. The publicly announced $14.9 billion intensification program ($10.0 billion at SmartCentres' share) represents the REIT’s current major development focus on which construction is expected to commence within the next five years. This intensification program consists of rental apartments, condos, seniors’ residences and hotels, to be developed under the SmartLiving banner, and retail, office, and storage facilities, to be developed under the SmartCentres banner.

SmartCentres' intensification program is expected to produce an additional 56.1 million square feet (41.2 million square feet at SmartCentres’ share) of space, 27.2 million square feet (18.5 million square feet at SmartCentres’ share) of which has or will commence construction within the next five years. From shopping centres to city centres, SmartCentres is uniquely positioned to reshape the Canadian urban and urban-suburban landscape.

Included in this intensification program is the Trust’s share of SmartVMC which, when completed, is expected to include approximately 20.0 million square feet of mixed-use space in Vaughan, Ontario. Final closings of the first three phases of Transit City Condominiums began ahead of budget and ahead of schedule in August 2020 and all 1,741 units, in addition to the 22 townhomes that complete these phases, have now closed. The fourth and fifth sold-out phases representing 1,026 units are currently under construction and are expected to close in the first half of 2023.

Certain statements in this Press Release are 'forward-looking statements' that reflect management's expectations regarding the Trust's future growth, results of operations, performance and business prospects and opportunities. More specifically, certain statements including, but not limited to, statements related to SmartCentres’ expectations relating to cash collections, SmartCentres’ expected or planned development plans and joint venture projects, including the described type, scope, costs and other financial metrics and the expected timing of construction and condominium closings and statements that contain words such as 'could', 'should', 'can', 'anticipate', 'expect', 'believe', 'will', 'may' and similar expressions and statements relating to matters that are not historical facts, constitute 'forward-looking statements'. These forward-looking statements are presented for the purpose of assisting the Trust's Unitholders and financial analysts in understanding the Trust's operating environment and may not be appropriate for other purposes. Such forward-looking statements reflect management's current beliefs and are based on information currently available to management.

However, such forward-looking statements involve significant risks and uncertainties. A number of factors could cause actual results to differ materially from the results discussed in the forward-looking statements, including risks associated with potential acquisitions not being completed or not being completed on the contemplated terms, public health crises such as the COVID-19 pandemic, real property ownership and development, debt and equity financing for development, interest and financing costs, construction and development risks, and the ability to obtain commercial and municipal consents for development. These risks and others are more fully discussed under the heading “Risks and Uncertainties” and elsewhere in SmartCentres’ most recent Management’s Discussion and Analysis, as well as under the heading “Risk Factors” in SmartCentres’ most recent annual information form. Although the forward-looking statements contained in this Press Release are based on what management believes to be reasonable assumptions, SmartCentres cannot assure investors that actual results will be consistent with these forward-looking statements. The forward-looking statements contained herein are expressly qualified in their entirety by this cautionary statement. These forward-looking statements are made as at the date of this Press Release and SmartCentres assumes no obligation to update or revise them to reflect new events or circumstances unless otherwise required by applicable securities legislation.

Material factors or assumptions that were applied in drawing a conclusion or making an estimate set out in the forward-looking information may include, but are not limited to: a stable retail environment; a continuing trend toward land use intensification, including residential development in urban markets and continued growth along transportation nodes; access to equity and debt capital markets to fund, at acceptable costs, future capital requirements and to enable our refinancing of debts as they mature; that requisite consents for development will be obtained in the ordinary course, construction and permitting costs consistent with the past year and recent inflation trends.

For more information, please visit www.smartcentres.com or contact:

Mitchell Goldhar	Peter Slan
Executive Chairman and CEO	Chief Financial Officer
SmartCentres	SmartCentres
(905) 326-6400 ext. 7674	(905) 326-6400 ext. 7571
mgoldhar@smartcentres.com	pslan@smartcentres.com