SmartCentres Real Estate Investment Trust : 2023 Q3 Quarterly Report

(in thousands of dollars, except per Unit and other non-financial data)

September 30, 2023

December 31, 2022

September 30, 2022

Portfolio Information (Number of properties)

Retail properties

155

155

155

Office properties

4

4

4

Self-storage properties

9

6

6

Residential properties

2

2

2

Industrial properties

1

-

-

Properties under development

20

19

19

Total number of properties with an ownership interest

191

186

186

Leasing and Operational Information(1)

Gross leasable retail and office area (in thousands of sq. ft.)

35,033

34,750

34,685

In-place and committed occupancy rate

98.5 %

98.0 %

98.1 %

Average lease term to maturity (in years)

4.3

4.2

4.3

Net annualized retail rental rate excluding Anchors (per occupied sq. ft.)

$22.43

$22.20

$22.40

Mixed-Use Development Information

Trust's share of future development area (in thousands of sq. ft.)

40,325

41,200

39,500

Trust's share of estimated costs of future projects currently under

construction, or for which construction is expected to commence within

10,875

10,000

9,800

the next five years (in millions of dollars)

Total number of estimated future projects currently in development planning

272

274

275

stage

SMARTCENTRES REAL ESTATE INVESTMENT TRUST 2023 THIRD QUARTER REPORT

1

(in thousands of dollars, except per Unit and other non-financial data)

September 30, 2023

December 31, 2022

September 30, 2022

Financial Information

Total assets(2)

12,013,103

11,702,153

11,862,633

Investment properties(2)

10,433,183

10,250,392

10,211,384

Total unencumbered assets(3)

9,067,121

8,415,900

8,383,900

Debt(2)

5,052,722

4,983,265

5,159,860

Debt to Aggregate Assets(3)(4)(5)

43.0 %

43.6 %

43.7 %

Adjusted Debt to Adjusted EBITDA(3)(4)(5)

9.7X

10.3X

10.0X

Weighted average interest rate(3)(4)

4.13 %

3.86 %

3.67 %

Weighted average term of debt (in years)

3.7

4.0

4.2

Interest coverage ratio(3)(4)

2.8X

3.1X

3.3X

Three Months Ended

Nine Months Ended

(in thousands of dollars, except per Unit information)

September 30, 2023

September 30, 2022

September 30, 2023

September 30, 2022

Financial Information

Rentals from investment properties and other(1)

206,016

196,962

623,560

598,375

Net income and comprehensive income(1)

215,175

3,548

495,938

535,655

Cash flows provided by operating activities(1)

93,855

97,011

237,108

243,800

Net rental income and other(1)

130,402

127,481

385,110

373,453

NOI(2)(3)

143,834

130,986

424,407

384,888

NOI from condominium and townhome closings and

7,186

(244)

22,496

496

other adjustments(2)(3)

SPNOI(2)(3)

136,686

134,117

397,992

385,715

Change in net rental income and other(2)

2.3 %

2.9 %

3.1 %

3.8 %

Change in SPNOI(2)

1.9 %

3.1 %

3.2 %

3.3 %

FFO(2)(3)(4)(5)

98,405

88,403

294,072

269,102

FFO with adjustments(2)(3)(4)

96,969

93,519

285,229

279,380

AFFO(2)(3)(4)(5)

85,788

81,093

262,237

248,230

AFFO with adjustments(2)(3)(4)

84,352

86,209

253,394

258,508

Distributions declared

82,411

82,382

247,226

247,145

Units outstanding(6)

178,188,148

178,126,285

178,188,148

178,126,285

Weighted average - basic

178,184,795

178,123,918

178,174,700

178,118,504

Weighted average - diluted(7)

180,069,508

179,678,009

180,002,762

179,644,083

Per Unit Information (Basic/Diluted)

Net income and comprehensive income(1)

$1.21/$1.19

$0.02/$0.02

$2.78/$2.76

$3.01/$2.98

FFO(2)(3)(4)(5)

$0.55/$0.55

$0.50/$0.49

$1.65/$1.64

$1.51/$1.50

FFO with adjustments(2)(3)(4)

$0.54/$0.54

$0.53/$0.52

$1.60/$1.59

$1.57/$1.56

AFFO(2)(3)(4)(5)

$0.48/$0.48

$0.46/$0.45

$1.47/$1.46

$1.39/$1.38

AFFO with adjustments(2)(3)(4)

$0.47/$0.47

$0.48/$0.48

$1.42/$1.41

$1.45/$1.44

Distributions declared

$0.463

$0.463

$1.388

$1.388

Payout Ratio Information

Payout Ratio to cash flows provided by operating

87.8 %

84.9 %

104.3 %

101.4 %

activities

Payout Ratio to AFFO(2)(3)(4)(5)

96.1 %

101.6 %

94.3 %

99.6 %

Payout Ratio to AFFO with adjustments(2)(3)(4)

97.7 %

95.6 %

97.6 %

95.6 %

SMARTCENTRES REAL ESTATE INVESTMENT TRUST 2023 THIRD QUARTER REPORT

3

Measure

Definition and Intended Use

Reference to

Reconciliation

and/or Additional

Information

Adjusted Debt

Adjusted Debt is defined as Debt, inclusive of the Trust's share of debt in equity

Section VII -

and

accounted investments, net of loans receivable and cash-on-hand. Net Debt is

Financing and

defined as Debt, inclusive of the Trust's share of debt in equity accounted

Capital Resources,

Net Debt

investments, net of cash-on-hand.

"Debt", "Financial

Adjusted Debt and Net Debt are intended to be used by investors as measures

Covenants"

of the level of indebtedness of the Trust and its ability to meet its obligations, as

liquid assets are used to reduce outstanding liabilities. Management uses

Adjusted Debt and Net Debt to calculate certain covenant ratios, and to assess

the Trust's level of indebtedness.

Adjusted Debt to

Adjusted Debt to Adjusted EBITDA is defined as Adjusted Debt divided by

Section VII -

Adjusted EBITDA

Adjusted EBITDA.

Financing and

The ratio is intended to be used by investors as a measure of the level of the

Capital Resources,

"Financial

Trust's debt versus the Trust's ability to service that debt. Management uses the

Covenants"

ratio to assess the Trust's level of leverage and its capacity to borrow.

Adjusted Earnings

Adjusted EBITDA is defined as the Trust's net income and comprehensive

Section IV -

Before Interest,

income adjusted by income taxes, interest expense, amortization expense and

Business

Taxes,

depreciation expense, as well as adjustments for gains and losses on disposal of

Operations and

Depreciation and

investment properties including transactional gains and losses on the sale of

Performance,

Amortization

investment properties to a joint venture that are expected to be recurring, and the

"Results of

Expense

fair value changes associated with investment properties and financial

Operations"

("Adjusted

instruments, and excludes extraordinary items such as, but not limited to, yield

EBITDA")

maintenance on redemption of unsecured debentures and Transactional FFO -

gain (loss) on sale of land to co-owners.

The measure is intended to be used by investors to help determine the Trust's

ability to service its debt, finance capital expenditures and provide for

distributions to its unitholders ("Unitholders"). Management uses this measure to

assess the Trust's profitability, as it removes the non-cash impact of the fair value

changes and gains and losses on investment property dispositions.

SMARTCENTRES REAL ESTATE INVESTMENT TRUST 2023 THIRD QUARTER REPORT

5

Measure

Definition and Intended Use

Reference to

Reconciliation

and/or Additional

Information

Adjusted

Adjusted Interest Expense including Capitalized Interest is defined as the Trust's

Section VII -

Interest Expense

total proportionate share of interest expense, less distributions on vested

Financing and

including

deferred units and Units classified as liabilities and interest income from

Capital Resources,

Capitalized Interest

mortgages and loans receivable, plus capitalized interest. Debt Service Expense

"Financial

and

is defined as the Trust's total proportionate share of interest expense, less

Covenants"

distributions on vested deferred units and Units classified as liabilities and

Debt Service

interest income from mortgages and loans receivable, plus capitalized interest

and mortgage principal amortization payments.

Expense

Adjusted Interest Expense including Capitalized Interest and Debt Service

Expense are intended to be used by investors as measures of the interest

expense on the Trust's debt. Management uses these to calculate certain

covenant ratios, and to assess the Trust's ability to service its debt.

Adjusted Funds

AFFO is a non-GAAP financial measure of operating performance widely used by

Section IV -

From Operations

the real estate industry in Canada. AFFO is calculated as FFO less straight-line

Business

("AFFO")

rent, normalized capital expenditures and leasing costs. The Trust calculates

Operations and

and

AFFO in accordance with the recommendations of the guidance set out in the

Performance,

REALpac White Paper. AFFO with adjustments is calculated as AFFO less non-

"Other Measures of

AFFO with

recurring items such as TRS gain (loss), FFO sourced from condominium and

Performance"

townhome closings, and gain (loss) on sale of land to co-owners.

adjustments

AFFO per Unit and AFFO with adjustments per Unit, are defined as AFFO and

and

AFFO with adjustments divided by weighted average number of Units.

AFFO per Unit

Management considers AFFO, AFFO with adjustments, AFFO per Unit, and

and

AFFO with adjustments per Unit as meaningful measures of recurring economic

earnings and relevant in understanding the Trust's ability to service its debt,

AFFO with

funding capital expenditures and determining an appropriate level of

distributions.

adjustments per

Management also considers these measures to be useful measures of operating

Unit

performance as they further adjust FFO for capital expenditures that sustain

income producing properties and eliminates the impact of straight-line rent.

Aggregate Assets

Aggregate Assets is defined as the Trust's total proportionate share of assets,

Section VII -

and

less cash-on-hand. Gross Book Value is defined as the total proportionate share

Financing and

of assets, less cash-on-hand and fair value adjustments on investment properties

Capital Resources,

Gross Book Value

net of accumulated amortization.

"Financial

Aggregate Assets and Gross Book Value, are intended to be used by investors

Covenants"

as measures of the total value of assets managed by the Trust. Management

uses Aggregate Assets, and Gross Book Value, to calculate certain covenant

ratios, and to assess the Trust's ability to continue to grow.

MANAGEMENT'S DISCUSSION AND ANALYSIS

Non-GAAP Measures (Continued)

Measure

Definition and Intended Use

Reference to

Reconciliation

and/or Additional

Information

Debt to Aggregate

Debt to Aggregate Assets is defined as Net Debt divided by Aggregate Assets.

Section VII -

Assets

Debt to Aggregate Assets (excluding TRS debt and receivable) is defined as Net

Financing and

and

Debt (excluding TRS debt) divided by Aggregate Assets (excluding TRS

Capital Resources,

receivable).

"Financial

Debt to Aggregate

The ratios are intended to be used by investors to assess the leverage of the

Covenants"

Assets (excluding

Trust on a consolidated basis. Management uses the ratios to assess an

TRS debt and

acceptable level of leverage for the Trust.

receivable)

Debt to Gross Book

Debt to Gross Book Value is defined as Net Debt divided by Gross Book Value.

Section VII -

Value

The ratio is intended to be used by investors to assess the leverage of the Trust

Financing and

Capital Resources,

on a consolidated basis, while using the Trust's cost basis for assets.

"Financial

Management uses this ratio to assess an acceptable level of leverage for the

Covenants"

Trust.

Fixed Charge

Fixed Charge Coverage Ratio is defined as Adjusted EBITDA divided by Debt

Section VII -

Coverage Ratio

Service Expense.

Financing and

The ratio is intended to be used by investors to assess the Trust's ability to

Capital Resources,

"Financial

service its fixed charges. Management uses this ratio to manage the Trust's cash

Covenants"

flows and fixed obligations.

Fixed Rate to

Fixed Rate to Variable Rate Debt Ratio is defined as the percentage of Fixed

Section VII -

Variable Rate Debt

Rate Debt out of total Debt compared with the percentage of Variable Rate Debt

Financing and

Ratio

(excluding interest rate swap agreements with fixed interest rates) out of total

Capital Resources,

Debt.

"Debt"

The ratio is intended to be used by investors to assess the Trust's ability to

service its debt against the fluctuation of interest rate.

Forecasted

Forecasted Annualized NOI is defined as management's estimate of NOI for the

Section VII -

Annualized NOI

next fiscal year, based on the current period's NOI.

Financing and

The measure is intended to be used by investors to project the next year's

Capital Resources,

"Debt"

operating income of the Trust. Management uses this measure as a benchmark

of the Trust's future profitability.

SMARTCENTRES REAL ESTATE INVESTMENT TRUST 2023 THIRD QUARTER REPORT

7

Measure

Definition and Intended Use

Reference to

Reconciliation

and/or Additional

Information

Funds From

FFO is a measure of operating performance widely used by the Canadian real

Section IV -

Operations ("FFO")

estate industry based on the definition set forth by REALpac White Paper.

Business

and

It is the Trust's view that IFRS net income does not necessarily provide a complete

Operations and

Performance,

FFO with

measure of the Trust's economic earnings. This is primarily because IFRS net

"Other Measures of

income includes items such as fair value changes of investment property that are

Performance"

adjustments

subject to market conditions and capitalization rate fluctuations and gains and

and

losses on the disposal of investment properties, including associated transaction

costs and taxes, which are not representative of a company's economic earnings.

FFO per Unit

For these reasons, the Trust has adopted the REALpac White Paper's definition of

FFO, which was created by the real estate industry as a supplemental measure of

and

economic earnings.

FFO is defined as net income and comprehensive income attributable to

FFO with

Unitholders adjusted for items such as, but not limited to, unrealized changes in

adjustments per

the fair value of investment properties and financial instruments and transaction

Unit

gains and losses on the acquisition or disposal of investment properties. FFO with

adjustments is defined as FFO less TRS gain (loss), FFO sourced from

condominium and townhome closings, and gain (loss) on sale of land to co-

owners.

FFO per Unit and FFO with adjustments per Unit, are defined as FFO, and FFO

with adjustments, divided by weighted average number of Units.

These measures are intended to be used by investors to assess the operating

performance of the Trust. Management uses these measures to assess profitability

and performance of the Trust.

Interest Coverage

Interest Coverage Ratio is defined as Adjusted EBITDA divided by Adjusted

Section VII -

Ratio

Interest Expense including Capitalized Interest.

Financing and

The ratio is intended to be used by investors to measure the Trust's ability to make

Capital Resources,

"Financial

interest payments on its existing debt. Management uses this ratio to measure an

Covenants"

acceptable level of interest expense relative to available earnings.

Investment

Investment Properties - non-GAAP is defined as the Trust's total proportionate

Section VI - Asset

Properties - non-

share of investment properties, inclusive of the Trust's share of investment

Profile,

GAAP

properties in equity accounted investments.

"Investment

The measure is intended to be used by investors to measure the amount of the

Properties"

Trust's entire portfolio.

Net Operating

NOI from continuing operations is defined as: i) rentals from investment properties

Section IV -

Income ("NOI")

and other less property operating costs and other, and ii) net profit from

Business

condominium sales. In the consolidated statements of income and comprehensive

Operations and

income, NOI is presented as "net rental income and other".

Performance,

The measure is intended to be used by investors to assess the Trust's profitability.

"Results of

Operations"

Management uses NOI as a meaningful measure of economic performance and

profitability from continuing operations, as it excludes changes in fair value of

investment properties and financial instruments.