BOARDWALK REAL ESTATE INVESTMENT TRUST
RENEWAL ANNUAL INFORMATION FORM
DATE
February 19, 2015
-1BOARDWALK REAL ESTATE INVESTMENT TRUST
ANNUAL INFORMATION FORM
TABLE OF CONTENTS
NOTE REGARDING FORWARD LOOKING STATEMENTS ........................................................... 4
CORPORATE STRUCTURE .................................................................................................................... 5
OVERVIEW OF THE ACQUISITION AND THE ARRANGEMENT REPLACING THE
CORPORATION AS A PUBLIC ENTITY WITH BOARDWALK REIT ........................................... 5
PRE-ARRANGEMENT REORGANIZATION ................................................................................................... 6
ANCILLARY AGREEMENTS IN CONNECTION WITH THE ACQUISITION AND THE ARRANGEMENT ............. 7
ARRANGEMENTS WITH BPCL ................................................................................................................... 8
SUBSIDIARIES ........................................................................................................................................... 9
OVERVIEW .............................................................................................................................................. 12
OBJECTIVES OF BOARDWALK REIT .............................................................................................. 12
MANAGEMENT OF BOARDWALK REIT.......................................................................................... 12
BOARD OF TRUSTEES .............................................................................................................................. 12
COMMITTEES ........................................................................................................................................... 16
AUDIT AND RISK MANAGEMENT COMMITTEE ............................................................................................ 16
COMPENSATION, GOVERNANCE & NOMINATIONS COMMITTEE ................................................................. 18
SENIOR MANAGEMENT ........................................................................................................................... 18
BOARDWALK REIT ADMINISTRATIVE SERVICES AGREEMENT .............................................................. 19
BUSINESS AND PROPERTIES OF BOARDWALK REIT ................................................................ 20
STRATEGY FOR GROWTH .................................................................................................................. 26
MAXIMIZING CUSTOMER SATISFACTION ................................................................................................ 26
ACQUIRING SELECTED MULTI-FAMILY RESIDENTIAL PROPERTIES ....................................................... 27
SALE OF PROPERTIES............................................................................................................................... 28
INVESTMENT PHILOSOPHY ...................................................................................................................... 28
COST OF CAPITAL .................................................................................................................................... 29
LIQUIDITY................................................................................................................................................ 30
ENHANCING PROPERTY VALUES ............................................................................................................. 31
NET OPERATING INCOME OPTIMIZATION STRATEGY ............................................................................. 31
PORTFOLIO OCCUPANCY RATES ............................................................................................................. 32
NEW APARTMENT DEVELOPMENT .......................................................................................................... 32
NORMAL COURSE ISSUER BID................................................................................................................. 33
MANAGING CAPITAL ............................................................................................................................... 34
BOARDWALK REIT'S DEBT MATURITY CHART ...................................................................................... 35
INVESTMENT GUIDELINES AND OPERATING POLICIES OF BOARDWALK REIT ............ 36
INVESTMENT GUIDELINES ....................................................................................................................... 36
OPERATING POLICIES .............................................................................................................................. 39
DECLARATION OF TRUST AND DESCRIPTION OF REIT UNITS ............................................. 40
REIT UNITS ............................................................................................................................................. 40
SPECIAL VOTING UNITS .......................................................................................................................... 41
ISSUANCE OF REIT UNITS ....................................................................................................................... 41
PURCHASE OF REIT UNITS...................................................................................................................... 42
-2REIT UNIT REDEMPTION RIGHT ............................................................................................................. 42
MEETINGS OF UNITHOLDERS .................................................................................................................. 43
LIMITATION ON NON-RESIDENT OWNERSHIP ......................................................................................... 44
AMENDMENTS TO THE DECLARATION OF TRUST AND OTHER DOCUMENTS .......................................... 45
STOCK EXCHANGE LISTINGS, PRICE RANGE AND TRADING VOLUME OF REIT UNITS .......................... 46
CHALLENGES AND RISKS ................................................................................................................... 47
RISKS DUE TO INVESTMENT IN REAL ESTATE ........................................................................................ 47
MULTI-FAMILY RESIDENTIAL SECTOR RISK .......................................................................................... 49
ENVIRONMENTAL RISKS ......................................................................................................................... 49
GROUND LEASE RISK .............................................................................................................................. 50
COMPETITION RISK ................................................................................................................................. 50
GENERAL UNINSURED LOSSES ................................................................................................................ 50
CREDIT RISK ............................................................................................................................................ 51
MARKET RISK ......................................................................................................................................... 51
SUPPLY RISK ........................................................................................................................................... 51
REFINANCING RISK ................................................................................................................................. 52
DEVELOPMENT RISK ............................................................................................................................... 53
STRUCTURAL SUBORDINATION ............................................................................................................... 53
RENT CONTROL RISK .............................................................................................................................. 53
UTILITY AND PROPERTY TAX RISK ......................................................................................................... 55
RISKS DUE TO REAL ESTATE FINANCING ............................................................................................... 55
OUTSTANDING INDEBTEDNESS ............................................................................................................... 56
ACQUISITION PERFORMANCE RISK ......................................................................................................... 57
OPERATIONAL RISK................................................................................................................................. 57
DEPENDENCE ON THE OPERATING TRUST AND THE PARTNERSHIP ........................................................ 57
FLUCTUATIONS OF CASH DISTRIBUTIONS............................................................................................... 58
WORKFORCE AVAILABILITY ................................................................................................................... 58
MARKET PRICE OF REIT UNITS .............................................................................................................. 58
LEGAL RIGHTS NORMALLY ASSOCIATED WITH THE OWNERSHIP OF SHARES OF A CORPORATION ....... 58
ABILITY OF UNITHOLDERS TO REDEEM REIT UNITS ............................................................................. 59
REGULATORY APPROVALS MAY BE REQUIRED IN CONNECTION WITH A DISTRIBUTION OF SECURITIES
ON A REDEMPTION OF REIT UNITS OR THE TERMINATION OF BOARDWALK REIT ............................... 59
AN INVESTMENT IN REIT UNITS IS SUBJECT TO CERTAIN TAX RISKS ................................................... 59
RISKS ASSOCIATED WITH DISCLOSURE CONTROLS AND PROCEDURES ON INTERNAL CONTROL OVER
FINANCIAL REPORTING ........................................................................................................................... 62
CYBERSECURITY RISK............................................................................................................................. 62
DISTRIBUTION POLICY ....................................................................................................................... 63
GENERAL ................................................................................................................................................. 63
SPECIAL DISTRIBUTION ........................................................................................................................... 64
DISTRIBUTION REINVESTMENT PLAN (“DRIP”) ..................................................................................... 65
SUSPENSION OF DISTRIBUTION REINVESTMENT PLAN ............................................................................... 65
INFORMATION CONCERNING THE OPERATING TRUST .......................................................... 65
GENERAL ................................................................................................................................................. 66
TRUSTEES AND OFFICERS........................................................................................................................ 66
OPERATING TRUST UNITS ....................................................................................................................... 66
AMENDMENTS TO OPERATING TRUST DECLARATION OF TRUST ........................................................... 67
REDEMPTION RIGHT ................................................................................................................................ 67
CASH DISTRIBUTIONS ............................................................................................................................. 68
OPERATING TRUST NOTES ...................................................................................................................... 68
-3REGISTRATION AND TRANSFERS OF OPERATING TRUST UNITS ............................................................. 70
INFORMATION CONCERNING THE PARTNERSHIP .................................................................... 70
GENERAL ................................................................................................................................................. 70
THE GENERAL PARTNER ......................................................................................................................... 70
LP UNITS ................................................................................................................................................. 70
INVESTMENT GUIDELINES AND OPERATING POLICIES............................................................................ 72
AMENDMENTS TO LIMITED PARTNERSHIP AGREEMENT ......................................................................... 73
DISTRIBUTIONS ....................................................................................................................................... 73
ALLOCATION OF PARTNERSHIP INCOME AND PARTNERSHIP LOSSES ..................................................... 74
ALLOCATION OF PARTNERSHIP TAX INCOME AND PARTNERSHIP TAX LOSS ......................................... 76
FUNCTIONS AND POWERS OF THE GENERAL PARTNER ........................................................................... 76
RESTRICTIONS ON THE AUTHORITY OF THE GENERAL PARTNER ........................................................... 77
REIMBURSEMENT OF THE GENERAL PARTNER ....................................................................................... 77
LIMITED LIABILITY ................................................................................................................................. 77
MANAGEMENT ........................................................................................................................................ 77
INFORMATION CONCERNING THE CORPORATION .................................................................. 79
HISTORY .................................................................................................................................................. 79
BUSINESS OF THE CORPORATION FOLLOWING THE ACQUISITION AND THE ARRANGEMENT................. 79
LEGAL PROCEEDINGS ......................................................................................................................... 80
AUDITORS, TRANSFER AGENT AND REGISTRAR ....................................................................... 80
INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS ................... 80
INTERESTS OF EXPERTS ..................................................................................................................... 80
MATERIAL CONTRACTS ..................................................................................................................... 80
ADDITIONAL INFORMATION ............................................................................................................ 81
AUDIT AND RISK MANAGEMENT COMMITTEE CHARTER ..................................................... 82
-4BOARDWALK REAL ESTATE INVESTMENT TRUST
RENEWAL ANNUAL INFORMATION FORM
NOTE REGARDING FORWARD LOOKING STATEMENTS
Certain information included in this Annual Information Form (“AIF”) of Boardwalk Real Estate
Investment Trust (“Boardwalk REIT”, “Boardwalk” or the “Trust”) contains forward-looking statements
within the meaning of applicable securities laws. These statements include, but are not limited to, statements
made in sections named “Boardwalk REIT’s Debt Maturity Chart”, “Portfolio Occupancy Rates”, “Business and
Properties of Boardwalk REIT”, “New Apartment Development” and “Challenges and Risks”, as well as other
statements concerning Boardwalk’s 2015 objectives, its strategies to achieve those objectives, as well as
statements with respect to management’s beliefs, plans, estimates, and intentions, and similar statements
concerning anticipated future events, results, circumstances, performance or expectations that are not historical
facts. Forward-looking statements generally can be identified by the use of forward-looking terminology such as
“outlook”, “objective”, “may”, “will”, “expect”, “intend”, “estimate”, “anticipate”, “believe”, “should”,
“plan”, “continue”, or similar expressions suggesting future outcomes or events. Such forward-looking
statements reflect management’s current beliefs and are based on information currently available to management.
All forward-looking statements in this AIF are qualified by these cautionary statements. These statements are not
guarantees of future events or performance and, by their nature, are based on Boardwalk’s estimates and
assumptions, which are subject to risks and uncertainties, including those described under “Challenges and Risks”
in this AIF, which could cause events or results to differ materially from the forward-looking statements
contained in this AIF. Those risks and uncertainties include, but are not limited to, those related to: liquidity in
the global marketplace associated with current economic conditions, tenant rental rate concessions, occupancy
levels, access to debt and equity capital, changes to Canada Mortgage and Housing Corporation rules regarding
mortgage insurance, interest rates, joint ventures/partnerships, the relative illiquidity of real property, unexpected
costs or liabilities related to acquisitions, construction, environmental matters, uninsured perils, legal matters,
reliance on key personnel, unitholder liability, income taxes and changes to income tax rates that impair the
Trust’s ability to qualify for the REIT Exemption (as defined below). Material factors or assumptions that were
applied in drawing a conclusion or making an estimate set out in the forward-looking information may include: a
less robust rental environment than has been seen for the last few years; relatively stable interest costs; and access
to equity and debt capital markets to fund, at acceptable costs, the future growth program and to enable the Trust
to refinance debts as they mature and the availability of acquisition opportunities for growth in Canada. Although
the forward-looking information contained in this AIF is based upon what management believes are reasonable
assumptions, there can be no assurance that actual results will be consistent with these forward-looking
statements. Certain statements included in this AIF may be considered “financial outlook” for purposes of
applicable securities laws, and such financial outlook may not be appropriate for purposes other than this AIF.
The Income Tax Act (Canada) (the “Tax Act”) contains legislation affecting the tax treatment of publicly
traded trusts (the “SIFT Legislation”). The SIFT Legislation generally does not impose tax on a trust which
qualifies under such legislation as a real estate investment trust (the “REIT Exemption”) provided all of the
Trust’s income each year is paid or made payable to the Unitholders. Boardwalk intends to qualify for the REIT
Exemption on an ongoing basis, which may require certain statements contained in this AIF to be modified.
Except as required by applicable law, neither Boardwalk nor the Corporation (as defined herein)
undertake any obligation to publicly update or revise any forward-looking statement, whether as a result of new
information, future events or otherwise.
The following should also be read in conjunction with Boardwalk REIT's December 31, 2014 Financial
Statements and the Notes thereto, along with other posted information concerning the Corporation (defined
below) and Boardwalk REIT, including Management's Discussion and Analysis for the year ended December
31, 2014. All of these documents are available in written and electronic versions either from the Trust on
request, or at www.sedar.com or www.boardwalkreit.com.
-5CORPORATE STRUCTURE
In this Annual Information Form, unless the context indicates otherwise, a reference to "Boardwalk
REIT", “Boardwalk” or the "Trust" means Boardwalk Real Estate Investment Trust. A reference to the
"Corporation" means BPCL Holdings Inc. (formerly called Boardwalk Equities Inc.). Boardwalk REIT is an
unincorporated, open ended real estate investment trust created by a declaration of trust, dated January 9, 2004, as
amended and restated on May 3, 2004, May 10, 2006, May 10, 2007, May 13, 2008, May 12, 2009, May 18,
2010, May 12, 2011, May 15, 2012 and May 15, 2014 (the "Declaration of Trust"), and governed by the laws of
Alberta.
The Trust's principal office is located at Suite 200, 1501 - First Street SW, Calgary, Alberta T2R 0W1.
Its registered office is located at Suite 1400, 700 – 2nd Street S.W., Calgary, Alberta T2P 4V5.
All financial information presented in this AIF and in the documents incorporated by reference thereto,
including the Trust’s audited consolidated financial statements, has been prepared in accordance with
International Financial Reporting Standards (“IFRS”), which have been adopted in Canada to be Canadian
generally accepted accounting principles ("GAAP") for all Publicly Accountable Enterprises effective January 1,
2011.
In this AIF, unless the context indicates otherwise, a reference to "business day" means a day, other than
a Saturday or Sunday, on which Schedule 1 Canadian chartered banks are open for business in Calgary, Alberta
and Toronto, Ontario; and a reference to "person" means an individual, partnership, limited partnership,
corporation, unlimited liability company, trust, unincorporated organization, association, government or any
department or agency thereof and the successors and assigns thereof or the heirs, executors, administrators or
other legal representatives of an individual thereof, or any other entity recognized by law.
OVERVIEW OF THE ACQUISITION AND THE ARRANGEMENT REPLACING THE
CORPORATION AS A PUBLIC ENTITY WITH BOARDWALK REIT
On May 3, 2004, the effective date of the Acquisition and Arrangement (the "Effective Date") Boardwalk
REIT acquired substantially all of the assets of the Corporation (the "Assets") pursuant to a plan of arrangement
under section 193 of the Business Corporations Act (Alberta) (the "Acquisition and the Arrangement"). The
Acquisition and the Arrangement were multi-step transactions that resulted in: (i) the indirect acquisition by
Boardwalk REIT of all of the Assets; (ii) the indirect acquisition of the Corporation by Boardwalk Properties
Company Limited ("BPCL"), a corporation incorporated in 1984 pursuant to the laws of Alberta and indirectly
controlled by Sam Kolias and Van Kolias, itself a control block holder of trust units of Boardwalk REIT ("REIT
Units" or “Units”), by the acquisition of all of the outstanding common shares of the Corporation ("Common
Shares"); and (iii) after taking into account the preferred partnership distribution and other entitlements of the
units of interest in Boardwalk REIT Limited Partnership (the "Partnership") designated as "LP Class C Units"
held indirectly by BPCL through the Corporation, the indirect interest of the public holders of Common Shares
("Public Shareholders") in approximately 73% of the Assets through the ownership of the outstanding REIT
Units and the indirect interest of BPCL in approximately 27% of the Assets.
After giving effect to the Acquisition and the Arrangement:
(a) BPCL acquired the Corporation and the Corporation is now an indirect, wholly-owned subsidiary of
BPCL;
(b) the former holders of Common Shares ("Shareholders") were the initial owners of all of the
outstanding REIT Units, which are listed for trading on the Toronto Stock Exchange (the “TSX”);
(c) Boardwalk REIT indirectly holds, through its indirect interest in the units of the Partnership
designated as "LP Class A Units", an approximately 92% interest in the Partnership (after the
preferred partnership distribution and other entitlements of the LP Class C Units; see "Information
-6Concerning the Partnership — Distributions"), which holds, directly or indirectly, all of the Assets
previously comprising the business of the Corporation; and
(d) the remaining approximately 8% interest in the Partnership (after the preferred partnership
distribution and other entitlements of the LP Class C Units indirectly held by BPCL) is indirectly held
by BPCL through its indirect interest in units of the Partnership designated as "LP Class B Units."
The LP Class B Units have equivalent voting and distribution entitlements to the REIT Units into which
they are exchangeable.
Pre-Arrangement Reorganization
Immediately prior to the effective time of the Acquisition and the Arrangement (the "Effective Time"),
the Corporation and certain of its BEI Subsidiaries effected a series of transactions to facilitate the transfer of the
Assets to the Partnership. References in this AIF to "Common Shares" refer to the common shares of the
Corporation.
Prior to the transfer of the Assets, the Corporation subscribed for 4,475,000 LP Class B Units and
334,168,959 LP Class C Units, both for nominal consideration. Following this subscription and immediately
prior to the commencement of the Plan of Arrangement1 on the Effective Date, the Corporation caused the Assets
to be transferred to the Partnership at fair market value for an aggregate purchase price of approximately $2.3
billion, all pursuant to the Master Asset Contribution Agreement2.
The consideration paid by the Partnership for the Assets consisted of the assumption of approximately
$1.1 billion in mortgage financing and other indebtedness of the Corporation, the issuance by the Partnership of
the LP Note in the principal amount of $777,375,470, and an addition to the capital accounts in respect of the LP
Class B Units and LP Class C Units of $71,376,250 and $334,168,959, respectively.
Pursuant to the Master Asset Contribution Agreement, beneficial ownership of all of the Assets was
transferred to the Partnership, including in respect of Assets to which the Retained Debt3 relates. The Retained
Debt was not assumed by the Partnership and remains as indebtedness of the Corporation and the Corporation is
obligated to make interest payments and principal repayments on a periodic basis in respect of the Retained Debt.
Partnership distributions on the LP Class C Units held by the Corporation will, if paid, be in amounts at least
sufficient to make such payments. The Partnership has provided the Corporation's creditors with a guarantee in
respect of the Retained Debt to ensure the lenders are not prejudiced in their ability to collect from the
Corporation in the event that payments in respect of the Retained Debt are not made by BPCL as expected and
Boardwalk REIT has provided a guarantee of the Partnership's obligations. The Corporation has indemnified the
Partnership for any losses suffered by the Partnership in the event payments on the Retained Debt are not made as
required, provided such losses are not attributable to any action or failure to act on the part of the Partnership.
Also, as the Partnership acquired the Assets, which comprise all of the historic business of the Corporation, the
1
''Plan of Arrangement'' means the plan of arrangement under the provisions of Section 193 of the Business Corporations
Act (Alberta) (the "ABCA") in connection with the Acquisition and the Arrangement.
2
''Master Asset Contribution Agreement'' means the agreement made between the Corporation and the Partnership on the
Effective Date setting out the terms and conditions upon which the Corporation caused to be transferred, assigned, conveyed
and set over to the Partnership the Assets, in consideration for the assumption of certain liabilities of the Corporation by the
Partnership, the issuance by the Partnership to the Corporation of the “LP Note” and a credit by the Partnership to the capital
account in respect of each of the Corporation’s LP Class B Units and LP Class C Units. “LP Note” means the interest
bearing note issued by the Partnership to the Corporation under the Master Asset Contribution Agreement.
3
''Retained Debt'' means the indebtedness of the Corporation that relates to and is secured by a charge of certain real
property of the Corporation beneficially transferred, assigned, conveyed and set over by the Corporation to the Partnership
pursuant to the Master Asset Contribution Agreement, which indebtedness was not assumed by the Partnership on such
transfer, assignment, conveyance and set over and remains indebtedness of the Corporation in respect of which the
Corporation is and will remain the primary obligor to make principal, interest and other payments in respect of such
indebtedness as such amounts become due and payable.
-7Partnership indemnified the Corporation for all claims and losses relating to the Assets except if the claim or loss
is a result of gross negligence or wilful misconduct of the Corporation after the Effective Date. See "Overview of
the Acquisition and the Arrangement Replacing the Corporation as a Public Entity with Boardwalk REIT—
Ancillary Agreements in Connection with the Acquisition and the Arrangement — Master Asset Contribution
Agreement".
Ancillary Agreements in Connection with the Acquisition and the Arrangement
Exchange and Support Agreement
On the Effective Date, Boardwalk REIT, Top Hat Operating Trust4 (the "Operating Trust), the
Partnership, the Corporation and 1103891 Alberta Ltd.5 ("BEI Subco") entered into an exchange and support
agreement (the "Exchange and Support Agreement") to create certain support obligations with respect to the LP
Class B Units.
Under the Exchange and Support Agreement, Boardwalk REIT and/or Boardwalk Real Estate
Management Ltd.6 (the "General Partner"), as applicable, agreed to take such actions as are reasonably
necessary to ensure that the distributions on the LP Class B Units will be of the same nature and amount, on a per
unit basis, as the corresponding distributions on the REIT Units (except to the extent that the holder of the LP
Class B Units has elected to receive distributions in the form of LP Class B Units and/or REIT Units pursuant to
the Limited Partnership Agreement7).
The Exchange and Support Agreement also provides that Boardwalk REIT will not, subject to certain
exceptions, issue or distribute REIT Units (or securities exchangeable for or convertible into or carrying rights to
acquire REIT Units) to the holders of all or substantially all of the then outstanding REIT Units; issue or distribute
rights, options or warrants to the holders of all or substantially all of the then outstanding REIT Units entitling
them to subscribe for or to purchase REIT Units (or securities exchangeable for or convertible into or carrying
rights to acquire REIT Units); or issue or distribute to the holders of all or substantially all of the then outstanding
REIT Units evidences of indebtedness of Boardwalk REIT or assets of Boardwalk REIT except in accordance
with the provisions of the REIT Units; unless the economic equivalent on a per unit basis of such rights, options,
securities, units, evidences of indebtedness or other assets is issued or distributed simultaneously to the holders of
LP Class B Units. In addition, Boardwalk REIT will not, subject to certain exceptions, subdivide, re-divide or
change the then outstanding REIT Units into a greater number of REIT Units; reduce, combine, consolidate or
change the then outstanding REIT Units into a lesser number of REIT Units; or reclassify, amend the terms of, or
otherwise change the REIT Units or effect an amalgamation, merger, reorganization or other transaction affecting
the REIT Units; unless the same or an economically equivalent change is made simultaneously to, or in the rights
of the holders of LP Class B Units.
Pursuant to the Exchange and Support Agreement, upon notice from the Partnership that a holder of LP
Class B Units has (i) surrendered LP Class B Units for withdrawal in accordance with the terms of the LP Class B
Units, or (ii) elected pursuant to the Limited Partnership Agreement to receive REIT Units from the Partnership in
lieu of cash distributions from the Partnership to which such holder is entitled, Boardwalk REIT will issue and
deliver or cause to be issued and delivered to the Partnership the requisite number of REIT Units to be received
by, and issued to or to the order of, the holder of LP Class B Units.
4
An open-ended unit trust formed under the laws of the Province of British Columbia, all of the units of which are owned by
Boardwalk REIT.
5
A corporation incorporated immediately prior to the Effective Date pursuant to the laws of Alberta as a wholly-owned
subsidiary of the Corporation.
6
A corporation incorporated pursuant to the laws of Alberta and the general partner of the Partnership.
7
''Limited Partnership Agreement'' means the limited partnership agreement dated January 9, 2004, as amended and
restated on May 3, 2004, creating the Partnership.
-8Master Asset Contribution Agreement
On the Effective Date, the Corporation and the Partnership entered into the Master Asset Contribution
Agreement pursuant to which the Corporation caused the Assets to be transferred to the Partnership. The Assets
included the revenue producing properties of the Corporation, some of which were pledged to lenders in
connection with the Retained Debt. In the case of properties which secure the Retained Debt, the entire beneficial
interest was sold to the Partnership but legal title remained with the Corporation. Following the Effective Date,
the Partnership registered a caveat against each of such properties disclosing its beneficial interest.
In the case of other revenue producing properties, legal title to such properties was transferred into the
name of a nominee holding company.
Money received by the Corporation from the historic operation of its business was delivered to the
Partnership in accordance with the Master Asset Contribution Agreement. Similarly, the Partnership, as part of
the Master Asset Contribution Agreement, indemnified the Corporation for any losses, claims or demands
associated with the Corporation's operation and transfer of the Assets. As of the date of this AIF, management of
Boardwalk REIT is not aware of any material claims related to the Assets. See "Overview of the Acquisition and
the Arrangement Replacing the Corporation as a Public Entity with Boardwalk REIT— Arrangements with
BPCL".
In order to effect the Acquisition and the Arrangement for the benefit of all Shareholders, the Corporation
remains liable, as principal obligor, for the Retained Debt. The Partnership is, however, the beneficial owner of
the Assets associated with the Retained Debt and accordingly could suffer impairment of these assets if the
Corporation fails to discharge its obligations pursuant to the Retained Debt. Accordingly, the Corporation has
indemnified the Partnership for losses caused by the Corporation's failure to discharge obligations pursuant to the
Retained Debt. Certain obligations under the Retained Debt such as adequate insurance and repairs and
maintenance are the responsibility of the Partnership and as a result, such indemnification does not extend to
defaults outside the scope of responsibility of the Corporation.
Arrangements with BPCL
As part of the Acquisition and the Arrangement, BPCL agreed to take certain steps in order to effect the
transactions. Specifically, BPCL: (i) acquired control of the Corporation; (ii) indirectly holds unlisted LP Class B
Units and LP Class C Units; (iii) indirectly retains the Retained Debt as its indebtedness; and (iv) entered into
certain agreements providing for ongoing arrangements with Boardwalk REIT and the Partnership in order to
facilitate the foregoing.
These steps were, in part, intended to ensure that Boardwalk REIT be put in a commercially advantageous
position with respect to its peer group following completion of the Acquisition and the Arrangement. As a
consequence of these steps, however, various commercial arrangements between the Partnership, the Corporation
and BPCL were necessary. Among these arrangements are the following:
(a) pursuant to the Master Asset Contribution Agreement, although the Partnership acquired the beneficial
interest in the Assets associated with the Retained Debt, the Retained Debt was not assumed by the
Partnership and remains indebtedness of the Corporation. As such, the Corporation continues to be liable
as principal obligor to pay all principal, interest and other amounts under the Retained Debt as such
amounts become due and payable and the Corporation has indemnified the Partnership for any losses as a
result of the Corporation's failure to meet its obligations, provided such losses are not attributable to any
action or failure to act on the part of the Partnership;
(b) since the Master Asset Contribution Agreement represented a transfer of the existing business of the
Corporation, the Partnership indemnified the Corporation for all claims and losses relating to the Assets
except if the claim or loss is a result of gross negligence or wilful misconduct of the Corporation after the
Effective Date;
-9(c) as the beneficial owner of the Assets associated with the Retained Debt, the Partnership indemnified the
Corporation for losses resulting from the Partnership's failure to manage such Assets in a safe and prudent
manner where such failure results in a claim against the Corporation; and
(d) since the legal title to the Assets associated with the Retained Debt remains with the Corporation but all
beneficial interest in such Assets as well as all other Assets was transferred to the Partnership, the
Partnership has provided guarantees of the Corporation's obligations under the Retained Debt in favour of
the lenders of such indebtedness and Boardwalk REIT has provided a guarantee of the Partnership's
obligations.
These arrangements are designed to protect the respective interests of the Partnership, Boardwalk REIT,
BPCL and the Corporation. These arrangements are, in the opinion of management of Boardwalk REIT,
appropriate in light of the significant benefits realized by the Public Shareholders as a result of the Acquisition
and the Arrangement and the transfer of the Assets pursuant to the Master Asset Contribution Agreement
(collectively, the "Transaction").
See "Overview of the Acquisition and the Arrangement Replacing the Corporation as a Public Entity with
Boardwalk REIT— Ancillary Agreements in Connection with the Acquisition and the Arrangement" and
"Information Concerning the Corporation — Business of the Corporation Following the Acquisition and the
Arrangement".
SUBSIDIARIES
The following sets forth the principal subsidiaries of the Trust and their jurisdictions of incorporation or
formation, as applicable. All of such subsidiaries are directly or indirectly owned by the Trust:
- 10 -
- 11 -
- 12 OVERVIEW
Boardwalk REIT is a customer-oriented real estate investment trust focused exclusively on and
specializing in the acquisition, refurbishment, management and ownership, and where deemed appropriate the
development, of multi-family residential communities within Canada. As of December 31, 2014, the Trust owned
34,626 (December 31, 2013 – 35,277) residential units within the Provinces of Alberta, Saskatchewan, Ontario
and Quebec, representing over 29 million (December 31, 2013 – 30 million) net rentable square feet. During the
year ended December 31, 2014, Boardwalk REIT did not acquire any apartment units, but did sell its entire
British Columbia portfolio of 633 apartment units as well as 102 apartment units in Edmonton, Alberta.
Boardwalk REIT currently has in excess of 1,500 employees working in 14 different cities across Canada.
Boardwalk REIT focuses on maximizing internal growth combined with a focused and disciplined acquisition
program. In recent years, due to the compression on capitalization rates, Boardwalk REIT has also begun
exploring development opportunities on excess land density the Trust currently owns. The Trust looks to acquire,
own and manage quality rental communities concentrated in attractive markets characterized by high barriers to
new supply. Due to Boardwalk REIT's size and relationship with various commercial lenders and Canada
Mortgage and Housing Corporation ("CMHC"), financing for such acquisitions can often be negotiated on
favourable terms. The Management of Boardwalk REIT has over 30 years’ experience in the ownership and
management of multi-family residential communities. This experience, coupled with Management’s significant
ownership of Trust Units and Boardwalk’s advanced and unique information systems platform, allows Boardwalk
REIT to be the industry leader in Canada's multi-family rental industry and has allowed Boardwalk to grow its
operations into a truly national platform.
Boardwalk REIT only owns the beneficial interest in, and notes of, the Operating Trust, and the Operating
Trust owns LP Class A Units. As a result, the activities described below will be those of the Partnership and its
subsidiaries.
OBJECTIVES OF BOARDWALK REIT
The objectives of Boardwalk REIT are to: (i) provide its residents with the best quality communities and
superior customer service; (ii) provide Unitholders with stable and growing monthly cash distributions, partially
on a Canadian income tax-deferred basis, from investments in the Assets and any additional revenue producing
multi-family residential properties or interests acquired or developed by Boardwalk REIT; and (iii) increase REIT
Unit value through the effective management of its residential, multi-family revenue producing properties and the
acquisition and/or developing of additional, accretive properties or interests therein. The REIT has increased its
regular monthly distribution from $0.103 per Trust Unit in June 2004 to $0.17 per Unit as of December 31, 2014.
MANAGEMENT OF BOARDWALK REIT
The overall operations and affairs of Boardwalk REIT are subject to the control of the trustees of
Boardwalk REIT (the "Trustees"), while the day-to-day activities of Boardwalk REIT are under the direction of
Boardwalk REIT's senior Management team.
Board of Trustees
The Declaration of Trust provides that the assets and operations of Boardwalk REIT are subject to the
control and authority of a board of a minimum of five (5) Trustees and a maximum of 12 Trustees, a majority of
whom shall be "independent trustees", as such term is defined in National Policy 58-201, entitled "Corporate
Governance Guidelines" ("Independent Trustees"). Currently, there are seven (7) Trustees. Pursuant to the
Declaration of Trust, BPCL is entitled to appoint one (1) Trustee to serve on the board provided that BPCL and its
affiliates continue to beneficially own, in the aggregate, a number of REIT Units and/or LP Class B Units that,
upon surrender or exchange of the LP Class B Units would equal at least five percent (5%) of the outstanding
REIT Units (on a fully-diluted basis). The remaining Trustees will be elected by holders of REIT Units
("Unitholders") in the manner provided below. Any Trustee appointed by BPCL may be changed by BPCL at
- 13 any time. BPCL has not exercised this right since the Effective Date. The number of Trustees may be changed
by the Unitholders or, if authorized by the Unitholders, by the Trustees, provided that the Trustees may not,
between meetings of Unitholders, unless otherwise approved by a majority of the Independent Trustees, appoint
an additional Trustee if, after such appointment, the total number of Trustees would increase by more than onethird (1/3) the number of Trustees in office immediately following the last annual meeting of Unitholders. A
vacancy occurring among the Trustees, other than the appointee of BPCL, may be filled by resolution of the
remaining Trustees, so long as they constitute a quorum, or by the Unitholders at a meeting of the Unitholders. A
vacancy occurring among the Trustees resulting from the resignation or removal of the appointee of BPCL may
be filled only by an appointment by BPCL.
The Trustees, other than the appointee of BPCL, hold office for a term expiring at the next annual
meeting of the Unitholders or until their respective successors are elected or appointed and are eligible for reelection. BPCL will, if it exercises its right to, appoint its Trustee at each annual meeting of Boardwalk REIT for
a term expiring at the next annual meeting unless removed prior to such meeting at the direction of BPCL. A
Trustee appointed by the Trustees between meetings of Unitholders or to fill a vacancy will be appointed for a
term expiring at the conclusion of the next annual meeting of Boardwalk REIT or until his or her successor is
elected or appointed and will be eligible for election or re-election.
The Declaration of Trust provides that a Trustee may resign at any time upon written notice delivered to
the Chair or, if there is no Chair, the President of Boardwalk REIT. A Trustee (other than an appointee of BPCL)
may be removed with or without cause by a majority of the votes cast at a meeting of Unitholders or with cause
by two-thirds (2/3) of the remaining Trustees.
Each Trustee is required to exercise the powers and discharge the duties of his or her office honestly and
in good faith with a view to the best interests of Boardwalk REIT and the Unitholders and, in connection
therewith, to exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable
circumstances.
The following table sets forth the name, province or state and country of residence, office held with
Boardwalk REIT and principal occupation of each of the Trustees of Boardwalk REIT:
Name, Position and
Municipality of Residence
Position Held
Principal Occupation
Dr. James R. Dewald (2)
Independent Trustee Dean and Associate Professor of Strategy
Alberta, Canada
and Global Management, Haskayne School
of Business, University of Calgary (2013 to
present), and Managing Partner, PetersDewald Land Company Inc. (2001 to
present).
Prior thereto, Interim Dean,
Haskayne School of Business (2012 2013), Director of Real Estate and
Entrepreneurship Studies (2012), Associate
Dean (2009 - 2012), Assistant Professor
(2006 - 2009), Principal, Stormpilots Inc.
(2001 - 2004), President & CEO of
Stonecreek
Properties
Inc.
(2004),
President, Director & COO, 411HomeNet
Group Inc. (1999 - 2000), and President &
CEO of Hopewell Residential Communities
Inc. (1996 - 2000).
Gary Goodman(1)
Ontario, Canada
Independent Trustee Executive Vice-President of Reichmann
International Development Corporation and
International
Property
Corporation
(December 2007 - June 2010). Previously,
CFO (December 2001 - November 2006)
Director of
Corporation or
Trustee Since
May 10, 2005
May 13, 2009
- 14 -
Name, Position and
Municipality of Residence
Director of
Corporation or
Trustee Since
Position Held
Principal Occupation
and President & CEO (December 2006 December 2007) of IPC US REIT, a TSX
listed Real Estate Investment Trust which
was sold to Behringer Harvard in December
2007.
Arthur L. Havener, Jr.(1)(2)
Missouri, USA
Independent Lead
Trustee
Principal, Stampede Capital, LLC, (April
2007 to present).
Prior thereto, Mr.
Havener was a Vice President of A.G.
Edwards and Sons Inc. (June 1989 to March
2007) and Head of Real Estate research
(2002 - 2007). Mr. Havener was an
Alderman and Chair of the Finance
Committee of the Municipality of Sunset
Hills, Missouri (2012 - 2014). Effective
January 2015, Mr. Havener was elected to
the Board of Sovran Self Storage, Inc. (SSS
– NYSE).
May 10, 2007
Sam Kolias
Alberta, Canada
Chairman of the
Board, Chief
Executive Officer
and Trustee
Executive of the Trust since the Effective
Date; prior thereto, from August 1993 until
the Effective Date, President of the
Corporation.
Incorporation
(July 1993)
Al W. Mawani(2)
Ontario, Canada
Independent Trustee President & CEO of Calloway REIT (May
1, 2011 - March 31, 2013); President,
Exponent Capital Partners Inc. (February
2002 – April 30, 2011); prior thereto (June
2001 - January 2002), Vice President, IPS,
an affiliate of Aga Khan Fund for Economic
Development; and prior thereto (1995 –
February 2001), a Senior Executive and
CFO of Oxford Properties Group Inc.
April 30, 2002
Andrea M. Stephen(1)
Ontario, Canada
Independent Trustee Senior and then Executive Vice President,
Investments for The Cadillac Fairview
Corporation (May 2000 - December 2011).
Prior thereto, Ms. Stephen held several
positions with the Ontario Teachers'
Pension Plan Board (September 1995 - May
2000), including Assistant Portfolio
Manager for Finance, Asset Management
and North American Investments, as well as
Director, Real Estate. Prior thereto, Ms.
Stephen was Director of Financial
Reporting with Bramalea Centres (July
1993 - May 1995), and Audit Manager at
KPMG (September 1986 - July 1993).
May 15, 2012
Samantha Kolias
Trustee
May 15, 2013
Controller of BPCL since September 2012
and head of ownership succession plan for
BPCL. Prior thereto, Senior Accountant at
KPMG LLP (September 2009 - August
2012).
Mrs. Kolias is a Chartered
Accountant and has a Bachelor of
Commerce from Queen’s University.
- 15 Notes:
(1) Member of the Audit and Risk Management Committee.
(2) Member of the Compensation, Governance and Nominations Committee.
As of December 31, 2014, the Trustees and senior officers of Boardwalk REIT as a group beneficially
own, directly or indirectly, or exercise control or direction over, REIT Units, representing approximately 18.89%
of the outstanding REIT Units. BPCL, indirectly wholly-owned by Sam Kolias, Chairman, Chief Executive
Officer and a Trustee of Boardwalk REIT, and Van Kolias, Senior Vice President, Quality Control of the General
Partner, owns a further 4,475,000 LP Class B Units, which, if exchanged into REIT Units, would give them an
additional 6.98% of the outstanding REIT Units.
Conflict of Interest Restrictions and Provisions
The Declaration of Trust contains "conflict of interest" provisions similar to those applicable to
corporations under Section 120 of the ABCA, which serves to protect Unitholders without creating undue
limitations on Boardwalk REIT. Given that the Trustees and the officers of Boardwalk REIT are engaged in a
wide range of real estate and other business activities, the Declaration of Trust requires each Trustee or officer of
Boardwalk REIT to disclose to Boardwalk REIT if he or she is a party to a material contract or transaction or
proposed material contract or transaction with Boardwalk REIT or its subsidiaries or the fact that such person is a
director or officer of or otherwise has a material interest in any person who is a party to a material contract or
transaction or proposed material contract or transaction with Boardwalk REIT or its subsidiaries. Such disclosure
is required to be made by a Trustee at the first meeting at which a proposed contract or transaction is considered,
at the first meeting after a Trustee becomes interested in a proposed or pending contract or transaction or at the
first meeting after an interested party becomes a Trustee.
Disclosure is required to be made by an officer of Boardwalk REIT as soon as the officer becomes aware
that a contract or transaction or proposed contract or transaction is to be, or has been, considered by the Trustees,
as soon as the officer becomes aware of his or her interest in a contract or transaction or, if not currently an officer
of Boardwalk REIT, as soon as such person becomes an officer of Boardwalk REIT. In the event that a material
contract or transaction or proposed material contract or transaction is one that in the ordinary course would not
require approval by the Trustees, a Trustee or officer of Boardwalk REIT is required to disclose in writing to
Boardwalk REIT or request to have entered into the minutes of the meeting of the Trustees the nature and extent
of his or her interest forthwith after the Trustee or officer of Boardwalk REIT becomes aware of the contract or
transaction or proposed contract or transaction. In any case, a Trustee who has made disclosure to the foregoing
effect is not entitled to vote on any resolution to approve the contract or transaction unless the contract or
transaction is one relating primarily to his or her remuneration as a Trustee, officer, employee or agent of
Boardwalk REIT or one for indemnity under the indemnity provisions of the Declaration of Trust or the purchase
of liability insurance.
The Declaration of Trust contains provisions to address potential conflicts of interest arising between
Boardwalk REIT and any "Related Party" (as such term is defined in Ontario Securities Commission Rule 61101 - Protection of Minority Security Holders in Special Transactions).
In particular, Boardwalk REIT will obtain a valuation in respect of any real property that the Partnership
intends to purchase from or sell to a Related Party prepared by a valuator engaged by, and prepared under the
supervision of, a committee of two (2) or more Independent Trustees who have no interest in such transaction. In
addition, Boardwalk REIT will not permit the Partnership to effect a transaction with a Related Party unless the
transaction is determined to be on commercially reasonable terms by, and is approved by, a majority of
Boardwalk REIT's Independent Trustees who have no interest in such transaction.
Independent Trustee Matters
In addition to requiring the approval of a majority of the Trustees, the following matters require the
approval of at least a majority of disinterested Independent Trustees to become effective:
- 16 (a) entering into any agreement or transaction in which any Related Party has a material interest or
making a material change to any such agreement or transaction;
(b) any matter relating to a claim by or against any Related Party;
(c) any matter relating to a claim in which the interests of a Related Party differ from the interests of
Boardwalk REIT;
(d) permitting the Partnership to acquire any real or other property in which a Related Party has an
interest or to sell any interest in any real or other property to a Related Party;
(e) granting REIT Units under any unit incentive or unit compensation plan approved by the Trustees
and, if required, by the Unitholders or awarding any right to acquire or other right or interest in REIT
Units or securities convertible into or exchangeable for REIT Units under any plan approved by the
Trustees and, if required, by the Unitholders;
(f) approving or enforcing any agreement entered into by Boardwalk REIT or its subsidiaries with a
Trustee who is not an Independent Trustee or an associate thereof, with a Related Party;
(g) recommending to the holders of REIT Units to increase the number of Trustees serving on the board
of Trustees or authorizing the Trustees to change the number of Trustees from time to time; and
(h) changing the compensation of any officer of Boardwalk REIT.
Committees
The Board of Trustees has established two (2) committees: the Audit and Risk Management Committee
and the Compensation, Governance and Nominations Committee.
Audit and Risk Management Committee
The Trustees have appointed an Audit and Risk Management Committee (the "Audit Committee")
consisting of three (3) Trustees, all of whom are Independent Trustees. The Chair of the Audit Committee, Gary
Goodman, was selected from the group of Independent Trustees appointed to serve on such Committee. The
Audit Committee is required to: (i) review Boardwalk REIT's procedures for internal control with the Auditors
and Chief Financial Officer of Boardwalk REIT; (ii) review the engagement and approve the fees of the Auditors
and other professional advisors; (iii) review and recommend to the Trustees for their approval annual and
quarterly financial statements, as well as management's discussion and analysis of financial condition and results
of operation; (iv) assess Boardwalk REIT's financial and accounting personnel; (v) review and approve the public
disclosure documents of Boardwalk REIT, including press releases; (vi) review the principal business risks of the
REIT on behalf of the Board; and (vii) review any significant transactions outside Boardwalk REIT's ordinary
activities and all pending litigation involving Boardwalk REIT.
The Audit Committee meets a minimum of five (5) times per year and with each of the external auditors
and management in separate sessions. Each member of the Audit Committee is required to be financially literate,
meaning that the member has the ability to read and understand a set of financial statements that present a breadth
and level of complexity of the issues that can be expected to be raised by the Trust's financial statements, and at
least one (1) member of the committee is required to have accounting or related financial experience, meaning
that such member has the ability to analyze and interpret a full set of financial statements, including the notes
attached thereto, in accordance with Canadian generally accepted accounting principles.
The Audit Committee currently has three (3) members, Gary Goodman, Andrea M. Stephen and Arthur L.
Havener, Jr., none of whom has a direct or indirect material relationship with the Trust and each of whom is
financially literate (as defined above). The following is a brief summary of the education and experience of each
member of the Audit Committee that is relevant to the performance of his or her responsibilities as a member of
the Audit Committee, including any education or experience that has provided the member with an understanding
of the accounting principles used by the Trust to prepare its annual and interim financial statements:
- 17 Name of Audit
Committee Member
Relevant Education and Experience
Gary Goodman
Mr. Goodman has been a Trustee since May 13, 2009. He was formerly Executive VicPresident of Reichmann International Development Corporation and International
Property Corporation, positions held between December 2007 and June 2010.
Previously, he was the CFO (December 2001 - November 2006) and President and CEO
(December 2006 - December 2007) of IPC US REIT, a TSX listed Real Estate
Investment Trust which was sold to Behringer Harvard in December 2007 for an
aggregate value of US $1.4 billion. Mr. Goodman has also served as a Director and
Senior Vice-President of Olympia & York Developments Limited, a Director of
Campeau Corporation, Trilon Financial Corporation, Catellus Corporation, Huntingdon
Capital Corporation and Brinco Mining. Mr. Goodman is a Director of Brightpath Early
Learning Inc.; and a member of the Advisory Board of Vision Opportunity Fund, a
limited partnership which invests in real estate securities. Mr. Goodman is a Chartered
Accountant (Gold Medalist) and has a Bachelor of Commerce degree from the
University of Toronto.
Arthur L. Havener, Jr.
Mr. Havener has been a Trustee since May 10, 2007. He is currently Principal of
Stampede Capital LLC, a firm designed to provide real estate consulting support to
publicly traded real estate investment trusts and institutional investors, as well as certain
private equity investment opportunities, from April 2007 to the present. Mr. Havener
was a Vice President of A.G. Edwards and Sons Inc. from June, 1988 until March, 2007
and Head of Real Estate research from 2002 - 2007. Mr. Havener obtained a Masters of
Business Administration from Webster University in St. Louis, Missouri in 1992 and a
Bachelor of Science from University of Missouri – Columbia in 1989. Mr. Havener is a
graduate of the Directors Education Program, which is jointly developed by the Institute
of Corporate Directors and the Rotman School of Management, University of Toronto.
Mr. Havener was an Alderman and Chair of the Finance Committee of the Municipality
of Sunset Hills, Missouri from 2012 - 2014. Effective January 2015, Mr. Havener was
elected to the Board of Sovran Self Storage, Inc. (SSS – NYSE).
Andrea M. Stephen
Ms. Stephen has been a Trustee since May 15, 2012. Ms. Stephen was formerly Senior
and then Executive Vice President, Investments for The Cadillac Fairview Corporation
from May 2000 - December 2011. Prior thereto, Ms. Stephen held several positions
with the Ontario Teachers' Pension Plan Board from September 1995 - May 2000,
including Assistant Portfolio Manager for Finance, Asset Management and North
American Investments, as well as Director, Real Estate. Prior thereto, Ms. Stephen was
Director of Financial Reporting with Bramalea Centres from July 1993 - May 1995, and
Audit Manager at KPMG from September 1986 - July 1993. Ms. Stephen served on
Multiplan’s Board of Directors for six (6) years, from 2006 - 2012. She was also a
member of the Pension Real Estate Association Board of Directors (PREA), as the sole
Canadian representative from March 2009 - March 2012. Ms. Stephen was formerly on
the Board of Timbercreek Corporation and was previously a member of NAREIT’s
Investor Committee. She obtained an undergraduate degree in business from St. Francis
Xavier University in 1986 and became a Chartered Accountant in 1990. Ms. Stephen
has also been a director of First Capital Realty Inc. since January 9, 2012, and a director
of the Macerich Company in the United States since January 13, 2013.
A text of the Audit Committee's charter is attached to this AIF as Schedule "A".
- 18 Auditors' Fees
The table below provides disclosure of the services provided by the Trust's external auditors in fiscal
2014 and fiscal 2013, dividing the services into the categories of work performed.
Type of Work
2014 Fees ($)
2014 (%)
2013 Fees ($)
2013 (%)
Audit Fees(1)
Audit of annual financial
statements
Review of interim financial
statements and MD&A
Review of Alberta Securities
Commission Correspondence
Translation of Financial
Statements & MD&A
$591,410
88%
$628,599
91%
$493,217
73%
$474,117
69%
$95,385
14%
$92,689
14%
$2,809
0%
-
-
0%
$61,793
8%
Audit Related Fees
Internal Controls Review
$64,848
$36,514
10%
5%
$48,002
$33,705
7%
5%
Specified auditing procedures on
Statement of Capital Costs
CPAB Fee
$16,853
$11,482
2%
2%
$14,297
2%
$18,088
3%
$11,179
2%
Tax Fees(1)
Tax compliance services for the
Trust and partnerships
$18,088
3%
$11,179
2%
(1)
Nil
0%
Nil
0%
(1)$
$674,347
100%
$687,780
100%
Other
Total
Note: (1) Includes GST.
Compensation, Governance & Nominations Committee
The Trustees have appointed a compensation, governance and nominations committee (the
"Compensation Committee") consisting of three (3) Trustees, all of whom are Independent Trustees. The Chair
of the Compensation Committee, Mr. Al Mawani, was selected from the group of Independent Trustees appointed
to serve on such Committee. Dr, James Dewald and Mr. Arthur Havener, Jr. are also members of the
Compensation Committee. The duties of the Compensation Committee are to review the compensation of the
Trustees and the officers of Boardwalk REIT. The Compensation Committee is generally responsible for
Boardwalk REIT's human resources, compensation and governance policies and has primary responsibility for: (i)
administering Boardwalk REIT's unit incentive plans; (ii) assessing the performance of the Chief Executive
Officer; (iii) reviewing and approving the compensation of senior management and consultants of Boardwalk
REIT; (iv) reviewing and making recommendations to the Trustees concerning the level and nature of
compensation payable to the Trustees; and (v) reviewing the governance policies of Boardwalk REIT, including
being responsible for: (a) assessing the effectiveness of the Board of Trustees and each of its committees; (b)
assessing the performance of the chair and/or lead Trustee of the Board of Trustees; (c) considering questions of
management succession; (d) the recruitment and selection of candidates for Trustees; and (e) considering and
approving proposals by the Trustees to engage outside advisors on behalf of the Board of Trustees as a whole or
on behalf of the Independent Trustees.
Senior Management
The executive officers of Boardwalk REIT consist of Sam Kolias, Chairman and Chief Executive Officer;
Roberto A. Geremia, President; William Wong, Chief Financial Officer and Dean Burns, Vice President, General
Counsel & Secretary. These individuals also serve as officers of the General Partner. The senior officers have
extensive experience in acquiring, refurbishing and profitably managing multi-family residential properties.
Additional officers or personnel may be employed by Boardwalk REIT to support management in fulfilling its
- 19 duties. Boardwalk REIT may also outsource other services necessary to its operations to third parties, subject to
approval of the Trustees as necessary. See "Information Concerning the Partnership — Management" for further
information on such officers.
Boardwalk REIT Administrative Services Agreement
Management and General Administrative Services
Boardwalk REIT, the General Partner and the Operating Trust have entered into an administrative
services agreement, dated the Effective Date (the "Boardwalk REIT Administrative Services Agreement").
The Boardwalk REIT Administrative Services Agreement sets out the terms and conditions pursuant to
which the General Partner or its subsidiaries provide certain management and general administrative services to
Boardwalk REIT and the Operating Trust, including: (i) undertaking any matters required to be performed by the
Trustees and the Operating Trust not otherwise delegated under the respective declarations of trust or the
Boardwalk REIT Administrative Services Agreement; (ii) keeping and maintaining books and records; (iii)
preparing returns, filings and documents and making determinations necessary for the discharge of the obligations
of the trustees of Boardwalk REIT and the Operating Trust; (iv) providing Unitholders with annual audited and
interim financial statements and relevant tax information; (v) preparing and filing income tax returns and filings;
(vi) ensuring compliance by Boardwalk REIT with all applicable securities legislation and stock exchange
requirements including, without limitation, continuous disclosure obligations; (vii) preparing and approving on
behalf of Boardwalk REIT any circular or other disclosure document required under applicable securities
legislation in response to an offer to purchase REIT Units; (viii) providing investor relations services to
Boardwalk REIT; (ix) calling and holding annual and/or special meetings in respect of Boardwalk REIT and the
Operating Trust and preparing, approving and arranging for the distribution of meeting materials; (x) preparing
and providing to Unitholders information such as monthly and annual reports, notices, financial reports and tax
information relating to Boardwalk REIT; (xi) attending to administrative and other matters arising in connection
with redemptions of REIT Units; (xii) ensuring that Boardwalk REIT elects to be a "mutual fund trust" from the
date it is established and a "registered investment" within the meaning of the Income Tax Act (Canada) (the
"Tax Act"); as well as ensuring that Boardwalk REIT qualifies as a “real estate investment trust”, as defined in
subsection 122.1(1) of the Tax Act, if as a consequence of the Trust not so qualifying, the Trust would be subject
to tax on its “taxable SIFT trust distributions”, and monitoring Boardwalk REIT's status as such; (xiii)
determining the amount of the Trust’s income, including net realized capital gains and net realized income
(“Distributions”) of Boardwalk REIT and the Operating Trust and arranging for Distributions to be paid to
Unitholders; (xiv) promptly notifying Boardwalk REIT and the Operating Trust of any event that might
reasonably be expected to have a material adverse effect on their respective affairs; and (xvi) generally providing
all other services as may be necessary or requested by Boardwalk REIT and the Operating Trust.
Administrative and Support Services
Pursuant to the Boardwalk REIT Administrative Services Agreement, the General Partner has also agreed
to provide or cause its subsidiaries to provide certain administrative and support services to Boardwalk REIT and
the Operating Trust. The administrative and support services provided by the General Partner will include
providing office space, office equipment, communications services, computer systems, providing secretarial
support personnel, reception, telephone answering services, installing and maintaining signage, promotional
materials and providing such other administrative and secretarial support services as may be reasonably required
from time to time.
The Boardwalk REIT Administrative Services Agreement provides for the payment to the General
Partner or its subsidiaries by the Operating Trust or its subsidiaries of an amount sufficient to reimburse the
General Partner or its subsidiaries for the expenses incurred by it in providing services under the Boardwalk REIT
Administrative Services Agreement as long as the expenses are identified in the current annual budget for
Boardwalk REIT or are otherwise approved in writing by Boardwalk REIT and the Operating Trust prior to being
incurred by the General Partner. The General Partner and its subsidiaries are only reimbursed for expenses
- 20 incurred by them in providing services under the Boardwalk REIT Administrative Services Agreement and are
not paid a separate management fee or any other compensation under such agreement. Each of Boardwalk REIT
and the Operating Trust will fund its payments to the General Partner or its subsidiaries through their direct or
indirect receipt of the "LP Class A Preferred Distribution" on the LP Class A Units owned by the Operating
Trust. See "Information Concerning the Partnership — Distributions".
BUSINESS AND PROPERTIES OF BOARDWALK REIT
Boardwalk REIT indirectly owns, through the Partnership, an interest in the Assets. As at December 31,
2014, the Assets consisted of direct and indirect interests in 34,626 residential units in Alberta, Saskatchewan,
Ontario and Quebec, representing over 29 million net rentable square feet of revenue producing multi-family
residential apartment units. During the year ended December 31, 2014, Boardwalk REIT did not acquire any
apartment units, but did complete the sale of its entire British Columbia portfolio of 633 apartment units, as well
as 102 apartment units in Edmonton Alberta. The Assets represent a well-balanced portfolio of residential real
estate, both from the standpoint of geographic diversification and mix of asset type, which consists of mid-sized
suburban and downtown apartment buildings, and regional, mid-sized community and neighbourhood residential
centres located in urban markets. The Assets represent a diversified portfolio of multi-family rental properties.
As at December 31, 2014, the Assets had an occupancy rate of approximately 98%.
Boardwalk REIT has a 100% undivided interest in the Assets. All of the residential properties in the
portfolio are located in Canada. The residential properties in the portfolio are currently located in Montreal and
Quebec City, Quebec; London, Kitchener and Windsor, Ontario; Saskatoon and Regina, Saskatchewan; and
Edmonton, Fort McMurray, Grande Prairie, Banff, Red Deer and Calgary, Alberta.
The following tables detail the city and property summaries of Boardwalk REIT's residential portfolio at
December 31, 2014. As stated above, attention should be drawn to the fact that the Trust has a 100% undivided
interest in all of the noted properties:
By City
Core Cities
Calgary, AB
Edmonton, AB*
Spruce Grove, AB
Fort McMurray, AB
Grande Prairie, AB
Red Deer, AB
Other, AB
Regina, SK
Saskatoon, SK
Montreal, QC
Quebec City, QC
Kitchener, ON
London, ON
Windsor, ON
Total (as at Dec 31, 2014)
Number of Units
5,180
11,956
160
352
645
939
519
2,622
1,988
4,681
1,319
329
2,256
% of
Units
15.0%
34.5%
0.5%
1.0%
1.9%
2.7%
1.5%
7.6%
5.7%
13.5%
3.8%
1.0%
6.5%
Net Rentable
Square Footage
4,161,200
10,499,334
122,640
281,954
539,052
775,615
469,213
2,149,113
1,692,643
4,272,444
1,092,278
263,020
1,867,146
% of
Square
Footage
Average
Unit Size
14.1%
35.6%
0.4%
1.0%
1.8%
2.6%
1.6%
7.3%
5.7%
14.5%
3.7%
0.9%
6.3%
803
878
767
801
836
826
904
820
851
913
828
799
828
1,680
4.9%
1,280,485
4.3%
762
34,626
100.0%
29,466,136
100.0%
851
- 21 -
Unit Breakdown by City
Windsor, ON
4.9%
London, ON
6.5%
Calgary, AB
15.0%
Kitchener, ON
1.0%
Quebec City, QC
3.8%
Montreal, QC
13.5%
Saskatoon, SK
5.7%
Edmonton, AB
34.5%
Spruce Grove, AB
0.5%
Regina, SK
7.6%
Other, AB
1.5%
Red Deer, AB
2.7%
Fort McMurray, AB
1.0%
Grande Prairie, AB
1.9%
Boardwalk Portfolio
City/
Province Property Name
Calgary, AB
Beltline Towers
Boardwalk Heights
Brentview Towers
Centre Pointe West
Chateau Apartments
Elbow Towers
Flintridge Place
Glamorgan Manor
Hillside Estates
Lakeside Estates
Lakeview Apartments
McKinnon Court Apartments
McKinnon Manor Apartments
Northwest Pointe
Oakhill Estates
O'Neil Towers
Patrician Village
Pineridge Apartments
Prominence Place Apartments
Radisson I
Radisson II
Radisson III
Ridgeview Gardens
Royal Park Plaza
Russet Court
Sarcee Trail Place
Skygate Tower
Spruce Ridge Estates
Spruce Ridge Gardens
Travois Apartments
Varsity Place Apartments
Varsity Square Apartments
Building Type
Highrise
Highrise
Highrise
Highrise
Highrise
Highrise
Highrise
Garden
Garden
Garden
Walk-up
Garden
Garden
Garden
Townhouse
Highrise
Garden
Garden
Garden
Townhouse
Townhouse
Townhouse
Townhouse
Highrise
Townhouse
Highrise/Midrise
Highrise
Garden
Garden
Garden
Walk-up
Midrise/Lowrise
# of
Units
115
202
239
123
145
158
68
86
76
89
120
48
60
150
240
187
392
76
75
124
124
118
160
86
206
376
142
284
109
89
70
297
Net Rentable
Square
Footage
Average
Unit Size
80,424
160,894
151,440
110,611
110,545
108,280
55,023
63,510
58,900
77,732
107,680
36,540
43,740
102,750
236,040
131,281
295,600
52,275
55,920
108,269
108,015
124,379
151,080
66,137
213,264
301,720
113,350
196,464
86,351
61,350
47,090
241,128
699
797
634
899
762
685
809
738
775
873
897
761
729
685
984
702
754
688
746
873
871
1,054
944
769
1,035
802
798
692
792
689
673
812
- 22 -
City/
Province
Property Name
Vista Gardens
Westwinds Village
Willow Park Gardens
Edmonton, AB
Alexander Plaza
Aspen Court
Boardwalk Arms A & B
Boardwalk Centre
Boardwalk Village I II & III
Breton Manor
Briarwynd Court
Brookside Terrace
Cambrian Place
Camelot
Capital View Towers
Carmen
Castle Court
Castleridge Estates
Cedarville Apartments
Christopher Arms
Corian Apartments
Deville Apartments
Ermineskin Place
Fairmont Village
Fontana Place
Fort Garry House
Galbraith House
Garden Oaks
Granville Square
Greentree Village
Habitat Village
Imperial Tower
Kew Place
Lansdowne Park
Leewood Village
Lord Byron I II & III
Lord Byron Townhouses
Lorelei House
Maple Gardens
Marlborough Manor
Maureen Manor
Meadowside Estates
Meadowview Manor
Monterey Pointe
Morningside Estates
Northridge Estates
Oak Tower
Parkside Towers
Parkview Estates
Pembroke Estates
Pinetree Village
Pointe West Townhouses
Primrose Lane Apartments
Building Type
Garden
Garden
Garden
Garden
Garden
Garden
Highrise
Townhouse
Garden
Townhouse
Garden
Garden
Garden
Highrise
Garden
Garden
Townhouse
Garden
Garden
Garden
Highrise
Highrise
Garden
Highrise
Highrise
Highrise
Garden
Townhouse
Garden
Townhouse
Highrise
Townhouse
Highrise
Garden
Highrise
Townhouse
Garden
Garden
Garden
Highrise
Garden
Garden
Garden
Garden
Garden
Highrise
Highrise
Townhouse
Garden
Garden
Townhouse
Garden
# of
Units
100
180
66
5,180
Net Rentable
Square
Footage
121,040
137,815
44,563
4,161,200
Average
Unit Size
1,210
766
675
803
252
80
78
597
255
66
172
131
105
64
115
64
89
108
144
45
153
66
226
424
62
93
163
56
48
192
151
138
108
62
142
158
147
78
181
56
91
148
348
104
221
180
70
179
104
198
142
69
153
203,740
68,680
64,340
471,871
258,150
57,760
144,896
196,779
105,008
54,625
71,281
54,625
93,950
124,524
122,120
29,900
167,400
47,700
181,788
362,184
40,820
70,950
110,400
47,250
53,376
156,000
129,256
112,050
105,776
48,473
129,375
133,994
172,369
65,870
163,840
49,582
64,918
104,036
284,490
83,548
166,315
103,270
51,852
162,049
88,432
198,360
106,740
72,810
151,310
808
859
825
790
1,012
875
842
1,502
1,000
854
620
854
1,056
1,153
848
664
1,094
723
804
854
658
763
677
844
1,112
813
856
812
979
782
911
848
1,173
844
905
885
713
703
818
803
753
574
741
905
850
1,002
752
1,055
989
- 23 -
City/
Province
Property Name
Prominence Place
Redwood Court
Riverview Manor
Royal Heights
Sandstone Pointe
Sir William Place
Solano House
Southgate Tower
Summerlea Place
Suncourt Place
Tamarack East and West
Terrace Garden Estates
Terrace Tower
The Palisades
The Westmount
Tower Hill
Tower on the Hill
Valley Ridge Tower
Victorian Arms
Viking Arms
Village Plaza
Warwick Apartments
West Edmonton Court
West Edmonton Village
Westborough Court
Westbrook Estates
Westmoreland Apartments
Westridge Estates B
Westridge Estates C
Westridge Manor
Westwinds of Summerlea
Whitehall Square
Wimbledon
Fort McMurray, AB
Birchwood Manor
Chanteclair Apartments
Edelweiss Terrace
Heatherton Apartments
Hillside Manor
Mallard Arms
McMurray Manor
The Granada
The Valencia
London, ON
Abbey Estates
Castlegrove Estates
Forest City Estates
Heritage Square
Landmark Towers
Maple Ridge On The Parc
Meadow Crest Apartments
Noel Meadows
# of
Units
91
116
81
74
81
220
91
170
39
62
132
114
84
94
133
82
100
49
96
240
68
60
82
1,176
60
172
56
91
90
64
48
598
165
11,956
Net Rentable
Square
Footage
73,310
107,680
62,092
41,550
83,800
126,940
79,325
153,385
43,297
55,144
212,486
101,980
66,000
77,200
124,825
46,360
85,008
30,546
91,524
257,410
65,280
49,092
73,209
1,138,368
50,250
148,616
45,865
56,950
56,950
69,038
53,872
545,934
117,216
10,499,334
Average
Unit Size
806
928
767
561
1,035
577
872
902
1,110
889
1,610
895
786
821
939
565
850
623
953
1,073
960
818
893
968
838
864
819
626
633
1,079
1,122
913
710
878
Garden
Garden
Garden
Garden
Garden
Garden
Garden
Garden
Garden
24
79
32
23
30
36
44
44
40
352
18,120
68,138
27,226
16,750
21,248
30,497
30,350
35,775
33,850
281,954
755
863
851
728
708
847
690
813
846
801
Townhouse
Highrise
Highrise
Garden/Highrise
Highrise
Highrise
Garden
Garden
53
144
272
359
213
257
162
105
59,794
126,420
221,000
270,828
173,400
247,166
110,835
72,600
1,128
878
813
754
814
962
684
691
Building Type
Highrise
Garden
Garden
Highrise
Garden
Garden
Highrise
Highrise
Garden
Garden
Townhouse
Garden
Highrise
Highrise
Highrise
Highrise
Highrise
Highrise
Garden
Highrise
Townhouse
Garden
Garden
Various
Garden
Garden
Garden
Garden
Garden
Townhouse
Garden
Highrise/Walkup
Highrise
- 24 -
City/
Province
Property Name
Ridgewood Estates
Sandford Apartments
The Bristol
Topping Lane Terrace
Villages of Hyde Park
Westmount Ridge
Montreal, QC
Domaine d’Iberville Apts. (Longueuil, QC)
Le Bienville (Brossard, QC)
Les Jardins Viva (Longueuil, QC)
Nuns' Island Portfolio
Complexe Deguire (St. Laurent, QC)
Residence le Quatre Cent (Laval, QC)
Building Type
Townhouse
Highrise
Highrise
Highrise
Townhouse
Highrise
Highrise
Walk-up
Walk-up/Garden/
Highrise
Townhouse
Highrise
Highrise
# of
Units
29
96
138
189
60
179
2,256
Net Rentable
Square
Footage
31,020
77,594
109,059
177,880
57,850
131,700
1,867,146
Average
Unit Size
1,070
808
790
941
964
736
828
720
168
112
560,880
115,600
91,000
779
688
813
3,100
322
259
4,681
3,075,140
276,324
153,500
4,272,444
992
858
593
913
Quebec City, QC
Complexe Laudance (Sainte-Foy, QC)
Les Appartements Du Verdier (Sainte-Foy, QC)
Les Jardins de Merici
Place Charlesbourg
Place du Parc
Place Samuel de Champlain
Place Chamonix
Midrise
Garden
Highrise
Midrise
Highrise
Highrise
Townhouse
183
195
346
108
111
130
246
1,319
134,480
152,645
300,000
82,624
81,746
104,153
236,630
1,092,278
735
783
867
765
736
801
962
828
Red Deer, AB
Canyon Pointe Apartments
Cloverhill Terrace
Inglewood Terrace Apartments
Parke Avenue Square
Riverbend Village Apartments
Saratoga Tower
Taylor Heights Apartments
Watson Tower
Westridge Estates
Garden
Highrise
Garden
Walk-up
Garden
Highrise
Garden
Highrise
Townhouse
163
120
68
88
150
48
140
50
112
939
114,039
102,225
42,407
87,268
114,750
53,762
103,512
43,988
113,664
775,615
700
852
624
992
765
1,120
739
880
1,015
826
Garden
Garden
Garden
Townhouse
Garden
Townhouse
Garden
Townhouse
Garden
Garden
Townhouse
Garden
Garden
Highrise
Townhouse
140
665
72
170
60
150
150
72
72
96
133
154
180
140
52
81,098
467,696
60,360
129,080
46,032
167,550
125,660
69,120
57,600
69,000
115,973
133,200
144,160
117,560
57,824
579
703
838
759
767
1,117
838
960
800
719
872
865
801
840
1,112
Regina, SK
Ashok Portfolio
Boardwalk Estates
Boardwalk Manor
Centennial South
Centennial West
Eastside Estates
Evergreen Estates
Grace Manor
Greenbriar Apts.
Lockwood Arms Apartments
Pines of Normanview
Qu'appelle Village I & II
Qu'appelle Village III
Southpointe Plaza
The Meadows
- 25 -
City/
Province
Property Name
Wascana Park Estates
Building Type
Townhouse
# of
Units
320
2,622
Net Rentable
Square
Footage
307,200
2,149,113
Average
Unit Size
960
820
Saskatoon, SK
Carleton Tower
Chancellor Gate
Dorchester Towers
Heritage Pointe Estates
Lawson Village
Meadow Park Estates
Palace Gates
Penthouse Apartments
Regal Tower I & II
Reid Park Estates
St. Charles Place
St. James Place
Stonebridge Apartments
Stonebridge Townhomes I & II
Wildwood Ways B
Highrise
Garden
Highrise
Townhouse
Garden
Townhouse
Garden
Highrise
Highrise
Garden
Garden
Garden
Garden
Townhouse
Garden
158
138
52
104
96
200
206
82
161
179
156
140
162
100
54
1,988
155,138
126,396
48,608
99,840
75,441
192,000
142,525
61,550
122,384
128,700
123,000
105,750
131,864
135,486
43,961
1,692,643
982
916
935
960
786
960
692
751
760
719
788
755
814
1,355
814
851
Windsor, ON
Anchorage Apartments
Anchorage on the Park
Askin Tower
Buckingham Tower
Caron Tower
Empress Court Apartments
Frances Tower
Glenwood Apartments
Janisse Tower
Karita Tower
Lauzon Towers
Marine Court
Randal Court
Regency Colonade
Riverdale Manor
Rivershore Tower Apts.
Sandilands Tower
Sandwich Tower
Seaway Tower
Sun Crest Tower
Sun Ray Manor
Tecumseh Eastview Apts. (Tecumseh, ON)
University Tower
Highrise
Townhouse
Highrise
Highrise
Highrise
Garden
Highrise
Highrise
Highrise
Highrise
Highrise
Highrise
Garden
Highrise
Townhouse
Highrise
Highrise
Highrise
Highrise
Highrise
Highrise
Highrise
Highrise
135
31
60
34
47
40
53
33
75
41
178
68
47
133
97
96
47
66
152
58
41
98
50
1,680
110,245
38,750
39,675
30,805
36,947
8,250
43,906
25,619
45,000
28,950
137,784
49,206
38,775
113,205
77,850
63,300
38,775
40,650
112,037
43,100
29,950
71,606
36,100
1,280,485
817
1,250
661
906
786
706
828
776
600
706
774
724
825
851
803
659
825
616
737
743
730
731
722
762
Townhouse/
Walk-up
Townhouse
Walk-up/
Highrise
Garden
Garden
Low Rise
Walk-up
369
306,850
832
32
244
30,210
201,992
944
828
76
163
160
280
53,340
130,920
122,640
284,953
702
803
767
1,018
Other
Boardwalk Park Estates I (Grande Prairie, AB)
Boardwalk Park Estates II (Grande Prairie, AB)
Prairie Sunrise Portfolio (Grande Prairie, AB)
Elk Valley Estates (Banff, AB)
Tower Lane I & II (Airdrie, AB)
Springwood Place Apts. (Spruce Grove, AB)
Sturgeon Point Villas (St. Albert, AB)
- 26 -
City/
Province
Property Name
Kings Tower (Kitchener, ON)
Westheights Place (Kitchener, ON)
Building Type
Highrise
Highrise
Total - As at December 31, 2014:
# of
Units
226
103
1,653
34,626
Net Rentable
Square
Footage
171,100
91,920
1,393,925
29,466,136
Average
Unit Size
757
892
843
851
Notes:
1
Highrise – A multi-storey (usually ten (10) or more) residential building, typically with an elevator
2
Midrise – A multi-storey (usually six (6) to nine (9)) residential building, typically with an elevator
3
Townhouse – One (1) of several single family homes (sometimes called rowhouses) joined by common walls
4
Garden – A walk-up or lowrise (usually between three (3) and five (5) storey) apartment building, typically without an elevator
None of the residential properties in the Assets' portfolio accounts for 10% or more of the combined
reportable revenue of Boardwalk REIT.
STRATEGY FOR GROWTH
The strategy of Boardwalk REIT is to provide Unitholders with a stable and growing return on their
investment through participation in distributions of cash flow from a revenue-producing real property portfolio
that is diversified by geographic location. Boardwalk REIT can best achieve its goal by strategically:
1.
Maximizing customer satisfaction by providing an above-average level of service and product;
2.
Acquiring selected multi-family residential properties;
3.
Highgrading its portfolio through the sale of properties with lower future growth prospects or, on a
limited basis, condominium converting properties for sale, and the reinvesting of these funds back
into other accretive opportunities;
4.
Purchasing Trust Units on the open market;
5.
Enhancing property values, operating returns and cash flows through pro-active management,
stabilization and capital improvements;
6.
Review and consideration of the development of new selective multi-family projects, if the risk
adjusted return warrants it;
7.
Managing capital prudently while maintaining a conservative financial structure;
8.
Managing revenue as well as lowering turnover and other operating costs to optimize net reporting
income (“NOI”);
9.
Pursuing opportunities to form selective partnerships or joint ventures, or an exchange of assets; and
10. Reinvestment of released equity from asset sales back into the Trust's portfolio to create additional
value added opportunities.
Maximizing Customer Satisfaction
Boardwalk REIT feels the best way to increase long-term Unitholder value is to provide its customers
with an above average level of service and a high quality product and, in return, to receive a competitive market
rent. Boardwalk REIT offers its tenants 24-hour on call maintenance service as well as on-site managers, in
addition to a 24-hour, seven (7) day a week toll-free call centre. Boardwalk REIT's properties are of high quality
and, in most cases, recently renovated. During the 12 months ended December 31, 2014, Boardwalk REIT spent
an aggregate of approximately $89.4 million (during the fiscal year ended December 31, 2013 - $81.0 million) for
renovations to its existing building portfolio and investing in new property, plant and equipment. Boardwalk
REIT continues to review its existing portfolio and, where appropriate, reviews and budgets the required funds for
selective value added upgrades. Boardwalk REIT has also begun the process of developing strategic partnerships
with key vendors designed to provide additional value added services to Boardwalk REIT customers.
- 27 Acquiring Selected Multi-Family Residential Properties
Boardwalk REIT seeks to expand its property portfolio by acquiring multi-family residential properties
within Canada. Future real property acquisitions will be subject to specific investment guidelines and the
operation of Boardwalk REIT and its subsidiaries is subject to specific operating policies, as described elsewhere
in this AIF. The Trustees are responsible for the general control, direction and management of Boardwalk REIT
and have determined that in evaluating a potential acquisition the Trust’s investment priorities should be based on
the following:
1. the target asset must be located in Canada;
2. the target asset must be an Apartment;
3. the overall anticipated return from the target asset must be Risk Adjusted;
4. the target asset must be located in a Major Market;
5. the Apartment must be Well Located; and
6. the Apartment must be of a Better Quality.
To further assist in the interpretation of the above noted investment criteria the following enhanced
interpretations are provided.
Apartment - a structure that has a roof and walls that stands permanently in one place;
Risk Adjusted – a focus on investments where anticipated returns are justified given the risk associated
with the investment. The Risk Adjusted rate is adjusted internally on an ongoing basis.
Major Centres – Markets that have a solid growth economy and have sufficient apartment stock to
develop economies of scale of a minimum of 1000 apartment units.
Well Located – in areas of Major Centres that command higher than average rents.
Better Quality Assets – The asset has no functional obsolescence, (i.e. a good unit mix, good common
areas, strong construction specifications).
In reviewing potential apartment acquisitions, Management always keeps in mind the short and long term
accretiveness of the transaction under review. As a bench mark, the Trust will look to the underlying
capitalization rate that its Trust Units are being valued at on the Toronto Stock Exchange. On occasion, an
apartment building may come up for sale that potentially may transact at a capitalization rate that is lower than the
Trust’s implied cap rate. However, further examination may find underlying economics, such as current rental
rates are well below market rates and, once these are stabilized, the asset itself will be accretive.
In a competitive acquisition market like the one the Trust currently finds itself, the focus of management
is on growing the value, quality and service of our existing portfolio through our most valuable asset, our team of
Associates. The Trust’s most significant returns come from growing the expertise of our Associates. By way of
example, Boardwalk’s program over the last five (5) years to reduce the contracting out of repairs and
maintenance and to increase the internalization of those functions has led to higher productivity among the Trust’s
employees (“Associates”). Acquisitions in a competitive market can be dilutive because of high deferred capital
expenditures and vacancy. Accordingly, in the current competitive acquisition market, the Trust has and will
continue to focus on improving the quality, value and service of its existing portfolio, which, management is
confident, will lead to higher revenues and funds from operations (“FFO”).
During the 12 months ended December 31, 2014, the Trust did not acquire any apartment units, but did
dispose of 735 apartment units.
- 28 Sale of Properties
A part of the Trust's operations consists of the sale of selective properties. To that end, the Trust has
begun the process of marketing select non-core properties with the intent of re-deploying the equity from these
assets towards value enhancing transactions for the Trust’s stakeholders, including development, capital
improvements, potential special Distributions to Unitholders, and the repurchase and cancellation of Trust Units
under the Trust’s Normal Course Issuer Bid. However, any potential sale of such select non-core properties will
be subject to “standard” purchaser’s conditions and may be subject to “non-standard” purchaser’s conditions.
“Standard” purchaser’s conditions include such things as satisfactory due diligence and successful financing,
which are usually satisfied by a purchaser over the course of an agreed upon amount of time. Any other
purchaser’s conditions, other than satisfactory due diligence or successful sources of financing, are usually
deemed “non-standard” and include such things as engineering reports, variances from certain zoning
requirements or corrections of title defects. “Non-standard” and “non-customary” purchaser’s conditions are
not usually satisfied over the course of an agreed upon time, but usually require positives steps by the purchaser
and/or vendor, and decrease the probability of a successful sale. Accordingly, as of December 31, 2014, none of
such select non-core properties were-classified by the Trust as “properties held for resale”. The number and
type of property sales will be driven by a number of sale criteria that include but are not limited to:

The property or a market is determined to be “mature” with continued limited upside as
compared to other investment opportunities.

Market forces, in some economic environments, which create an opportunity to sell assets at
values in excess of the existing value of the Trusts overall implied market value.

On a selective basis, the Trust may determine that, rather than the outright sale of a selective
property, it may be in its best interest to convert an existing property, subject to the requirements
of applicable law, including applicable tax law governing income trusts, to individual
condominium units and, subsequently, sell these units on an individual basis.

Joint Venture opportunities where the Trust contributes management services and selected assets
in exchange for cash and a reduced ownership.
As part of this strategy, equity released by these sales would be channelled to more accretive
opportunities such as, but not limited to, the acquisition of other apartment units, the continued capital upgrade of
the remaining property portfolio, the payment of special distributions to Unitholders, or the acquisition of the
Trust’s REIT Units or other securities trading in the public market. As of December 31, 2014, the Trust did not
acquire any apartment units but did dispose of 735 apartment units.
Investment Philosophy
Throughout Boardwalk’s history, the Trust has constantly looked for opportunities to continue to create value for
its Trust Unitholders. This is achieved by investing managerial resources and capital in activities that increase
funds from operations and adjusted funds from operations (“AFFO”) per Trust Unit on a sustained basis and/or
increase net asset value (“NAV”) per Trust Unit. Prior to 2008, the Trust focused a large part of this opportunity
on investment opportunities, both in capital improvements to the Trust’s existing portfolio and in the acquisition
of additional properties. However, the Trust’s investment strategy is not simply one by which it is constantly
looking to expand its existing footprint, but rather one by which it is constantly looking to create value for
Unitholders. Starting in 2008, but more pronounced during 2009 and 2010, it was evident that the Trust’s
investment opportunity was not in the acquisition of additional apartment units, but rather in the sale of non-core
properties and the deployment of capital to acquire additional Trust Units on the public market through its
published Normal Course Issuer Bid (“NCIB”), the details of which will be further discussed later in this AIF
under the heading “Normal Course Issuer Bid”. As part of its capital allocation program, there have been times in
the past where Management and the Board determined that, based on the trading price of Boardwalk REIT’s Trust
Units, an allocation was warranted to the purchase of the Trust Units in the public market for cancellation.
Cumulatively, between 2007 and 2012, Boardwalk REIT has purchased and cancelled approximately 4.5 million
- 29 Trust Units for a total purchase price of $170.5 million, at an average cost of $37.53 per Trust Unit. For the year
ended December 31, 2014, the Trust purchased and cancelled an additional 432,100 Units at an average purchase
cost of $66.89 per Trust Unit. To fund these acquisitions, the Trust used a combination of the net proceeds from
the sale of non-core properties (which were sold at prices well in excess of the current trading value of its
remaining real estate assets based on the trading price of the Trust Units on the TSX), as well as National Housing
Act (Canada) (“NHA”) insured debt capital issued at historically low interest rates.
In 2014, non-core properties, consisting of 735 apartment units, were disposed of for a total selling price
of $153.5 million. The implied capitalization rate on these past sales was at a valuation below the implied value
of the Trust Units at the time, which, in management’s opinion, demonstrated a continued arbitrage between
“Main Street” and “Bay Street” apartment pricing. Boardwalk REIT, therefore, believed that the focused sale of
these non-core properties was the best investment of its capital at that time.
As previously noted under the heading “Sale of Properties”, the Trust has an on-going program of selling
non-core properties in its portfolio and re-deploying the released capital to acquiring additional properties,
development and building of new apartments on the Trust’s excess lands, potentially paying special Distributions
to its Unitholders, and investing it back in its existing properties and/or buying back its Trust Units to achieve
superior returns. The Trust continues to review all available options that management believes will provide the
greatest return to Unitholders and looks at all potential investment opportunities with this guiding principle in
mind. Accordingly, in addition to the above noted investment alternatives, the Trust will, on a selective basis,
invest its capital in apartment assets at capitalization rates below the implied capitalization rate of the Trust’s
existing portfolio if, in the opinion of Management and the Board, such acquisitions are of higher quality than the
average quality of the REIT’s apartment portfolio and will create long-term value for Unitholders.
Cost of Capital
In understanding Boardwalk REIT’s investment strategy, it is also necessary to review its cost of capital.
The Trust’s cost of capital is generally defined as the weighted average cost to the Trust of raising incremental
capital and, accordingly, its hurdle rate for evaluating incremental investment opportunities. It can also be
thought of as the rate of return that the Trust would otherwise be able to earn at the same level of risk. As with
most real estate entities, the Trust’s cost of capital is the combination of its cost of debt and the cost of equity. As
will be discussed in later sections of this AIF entitled “Managing Capital” and “Liquidity”, the Trust currently has
access to a low cost of debt through its access to the NHA-insured market. But even this market has different
levels of risk that are mainly priced through the term selected on the related mortgage. That is, the longer the
mortgage finance term, the longer the borrower is removing the interest rate risk from the investment. It is
management’s view that with respect to those investments where one does not have the benefit of hindsight, for
example, with the actual purchase, ownership and management of a particular building, there is an increased level
of performance risk. To moderate this risk, it is necessary to hedge the interest rate risk, by taking a longer-term
mortgage to allow for time to better understand the performance risk of the specific property investment. The
other major component in the cost of capital relates to the cost of equity required for the investment. The
determination of this amount has a number of different models and definitions. However, for simplicity purposes,
Boardwalk determines its current cost of equity as the amount of AFFO reported compared to its current market
capitalization. For 2014, the Trust reported AFFO per Trust Unit of $3.05. When compared to the simple
average Trust Unit market price of $62.37 for the month of December 2014, this equates to a cost of equity of
approximately 4.89%.
Once the Trust has determined its cost of capital, management then analyzes and evaluates the
opportunities available to the Trust against a base case scenario. The base case will be determined by answering
two distinct questions: 1) is the investment accretive to the Trust’s implied capitalization rate (“Cap Rate”) after
adjusting for related risk, and 2) given the existing leverage of the Trust, is the investment accretive on an FFO
and AFFO basis given its existing portfolio’s internal growth profile? The investment is also evaluated on a
stabilized basis, that is, after considering the impact of funding deferred capital expenditures and leasing up the
property. The base case of the Cap Rate test focuses on the implied Cap Rate of the Trust’s underlying portfolio
as the Trust best understands the operations and risk profile of its own apartment units, and its ability to purchase
- 30 its own real estate through the use of its NCIBs. Generally speaking, for an investment to be accretive it not only
has to generate a return at or above this level, it must also be of equivalent (or better) quality and location. The
amount of expectation above this base rate is the anticipated risk premium adjustment. Each investment is looked
at in isolation and evaluated accordingly. In response to the second question, it is necessary to understand that
multi-family rental real estate has historically been an investment based on leverage. As such, it is necessary for
management to analyze the underlying ability to obtain debt and the cost of that debt. Boardwalk currently does
have access to NHA insurance from the Government of Canada, the details of which are discussed later in this
AIF under the heading “Managing Capital” and “Liquidity”. As with other debt, in most instances the longer the
proposed term maturity, the higher the price for the debt. This difference is the adjustment the market puts on the
risk that the interest rates will be higher during the term of the loan. Accordingly, the investment consideration
for the Trust also adjusts for this risk by building into its current cost of debt a balanced strategy of mortgage
maturities in terms ranging from five (5) and ten (10) years.
It is management’s belief that the Trust’s investment strategy addresses the key components in
determining whether an investment is accretive for the Trust as a whole. When comparing the external
investment opportunity to the Trust’s internal opportunity of improving its own portfolio with capital
improvements, management felt that, on a risk adjusted basis, the better investment was in the Trust’s own real
estate through such capital expenditures.
Liquidity
Liquidity refers to the Trust’s ability to generate, and have available, sufficient cash to fund its ongoing
operations and capital commitments as well as its distributions to Unitholders. Generally, distributions are funded
from FFO. However, in common with the majority of real estate entities, Boardwalk relies on lending institutions
for a significant portion of capital required to fund mortgage principal payments, capital expenditures,
acquisitions, Trust Unit buybacks, and repayment of maturing debt. Over the past number of years, Boardwalk
has observed a significant increase in borrowing standards of many of our key lending partners as a result of
heightened sensitivity to possible weaknesses in the economy. These more stringent standards have not
materially affected Boardwalk’s borrowing capability, but have had a positive effect of reducing the number of
investor-owned condominium units competing in the apartment rental market. Although the overall economy
appears to be improving, Boardwalk has yet to see a significant change in these more stringent standards.
To mitigate the risk of renewal, the Trust utilizes NHA mortgage insurance, the benefits of which are
discussed later in this AIF under the heading “Managing Capital”. In volatile times, the ability to access this
product was very beneficial to the Trust as a whole.
The Trust’s current liquidity position remains strong. As of December 31, 2014, the Trust increased its
cash position to $139.6 million from the $131.7 million reported as of December 31, 2013. The difference in cash
was largely due to the refinancing of existing maturing NHA insured mortgages at rates below the maturing rates
in 2014. This cash balance was reduced to $66.8 million on January 15, 2015 by the payment of the special
distribution to Unitholders of record on December 31, 2014 in the amount of $1.40 per Trust Unit or $72.8
million in aggregate (the “Special Distribution”) and disbursements related to the 79-unit development at Pines
of Normanview in Regina, which was commenced in October 2014. For more information on the Special
Distribution, please see “Distribution Policy - Special Distribution” below. For more information on the new
development at Pines of Normanview, please see “New Apartment Development” below.
In addition to this, the Trust currently has 3,160 rental apartment units of unencumbered assets, and an
additional 855 units pledged against the Trust’s committed revolving credit facility. It is estimated that the Trust
could obtain an additional $189.38 million of new proceeds from the financing of its current unencumbered
assets. If the security against the 855 units pledged against the Trust’s credit facility were removed, the Trust
could obtain an additional $90.82 million of new proceeds from the financing of those assets, for an aggregate
total of $280.2 million in additional financing of its current unencumbered assets and the apartment units
currently pledged against the Trust’s credit facility.
- 31 Approximately 99% of Boardwalk REIT’s secured mortgages carry NHA insurance. Maturing mortgages
already have commitments at interest rates lower than their maturing interest rates.
The reader should also be aware that of the $415.26 million of secured mortgages coming due in 2015, all
have NHA insurance, and represent, in aggregate, approximately 47% of current estimated “underwriting”
values on those individual secured assets. Currently, interest rates on NHA insured mortgages are slightly below
the weighted average interest rate of the $415.26 million maturing mortgages of 3.73%. The reader, however, is
cautioned that these rates do fluctuate and, by the time these maturing mortgages are set for renewal, with or
without additional financing, interest rates may have changed materially.
Even with the NHA insurance program attached to its secured mortgages, however, the Trust is still
susceptible to changes in market interest rates.
Enhancing Property Values
Boardwalk REIT enhances the value of its properties through effective leasing and property management,
sustainable rent increases and by strictly controlling operating expenses and capital expenditures, all in an effort
to optimize net operating income. This combination of factors results in lower vacancy levels and the
maximization of effective rental rates as expiring leases are renewed or new leases are signed. Average
occupancy rate for the year ended December 31, 2014 of the Trust's existing rentable properties was 98.2%
(December 31, 2013 – 98.44%). Boardwalk REIT's strategic innovations are designed to maximize cash flow and
include portfolio-wide centralization of purchasing of materials and services to take advantage of economies of
scale as well as a retail specialization leasing program.
Boardwalk’s current strategy is to focus on net operating income. This focus requires us to manage not
only revenues but also related operating costs and take these both into consideration when determining a service
and pricing model. Lowering overall turnover while maintaining reasonable increase in lease rates, while
continuing to focus on a high quality level of service continues to be the model that to date has delivered the most
stable and growing income source. This strategy is very much regional specific and these variables are in constant
flux. In a more competitive market, the Trust locks in rentals on selective suites for future months, but does not
collect revenues for certain months in the immediate future. For example, the Trust may decide to rent a suite in
December with the customer not moving in until the following year. Although the suite is rented and not
available for rent, it will not generate revenue until the customer actually moves in, for example, in January,
which corresponds to the next fiscal period. The percentages reported as occupancy levels (see table below)
represent those occupied units generating revenue for the period noted. The Trust closely monitors ‘apartment
availability’, which represents unoccupied units not generating revenue for the period, after taking into account
forward-committed leases. Although occupancy rates provide a good indication of current revenue, apartment
availability provides the reader a more relevant indication of future potential revenue.
Net Operating Income Optimization Strategy
Boardwalk’s current strategy is to focus on optimizing net operating income. This focus requires the
Trust to manage not only revenues, but also related operating costs, and take these both into consideration when
determining a service and pricing model. Lowering overall turnover while maintaining reasonable increases in
lease rates while continuing to focus on a high quality level of service continues to be the model that to date has
delivered the most stable and growing income source. This strategy is regional specific and these variables are in
constant flux.
In a more competitive market, the Trust locks in rentals on selective suites for future months, but does not
collect revenues for certain months in the immediate future. This means the Trust may decide to rent a suite in
December with the Customer not moving in until the following year. Although the suite is rented, it will not
generate revenue until the Customer actually moves in, for example, in January, which corresponds to the next
fiscal period. The percentages reported as occupancy levels (see table below under subheading “Portfolio
Occupancy Rates”) represent those occupied units generating revenue for the period noted. The Trust closely
monitors “apartment availability”, which represents unoccupied units not generating revenue for the period,
- 32 after taking into account forward-committed leases. Although occupancy rates provide a good indication of
current revenue, apartment availability provides the reader a more relevant indication of future potential revenue.
Portfolio Occupancy Rates
Annual Comparative
2015
Jan
Q4
Q3
Calgary
98.8%
99.2%
99.3%
Edmonton
97.7%
98.4%
98.0%
Fort McMurray
90.1%
91.4%
Grande Prairie
98.6%
Red Deer
2014
Q2
Q1
Total
Q4
Q3
2013
Q2
Q1
Total
99.0%
98.2%
98.9%
98.1%
99.4%
99.5%
99.5%
99.1%
98.7%
98.6%
98.5%
98.5%
98.3%
98.7%
98.5%
98.5%
91.8%
95.5%
98.1%
94.2%
98.5%
97.7%
97.6%
95.7%
97.4%
98.5%
97.9%
98.2%
98.8%
98.4%
97.9%
97.2%
98.0%
98.2%
97.8%
99.4%
99.5%
99.0%
98.9%
99.3%
99.2%
99.4%
98.7%
99.1%
99.5%
99.2%
Regina
95.6%
96.4%
96.3%
97.5%
97.7%
97.0%
97.5%
97.7%
98.2%
98.3%
97.9%
Saskatoon
96.5%
96.9%
97.5%
98.0%
98.4%
97.7%
98.1%
98.6%
97.6%
98.1%
98.1%
Kitchener
99.1%
98.7%
97.5%
98.9%
98.4%
98.4%
98.3%
97.9%
98.9%
99.0%
98.5%
London
98.4%
97.4%
97.2%
98.1%
97.9%
97.6%
97.6%
97.5%
98.0%
98.2%
97.8%
Windsor
98.0%
99.0%
98.4%
98.1%
98.3%
98.5%
98.3%
98.1%
98.0%
97.6%
98.0%
Montreal
96.0%
96.6%
96.6%
97.7%
98.0%
97.2%
98.2%
97.4%
97.0%
95.7%
97.1%
Quebec City
95.3%
95.7%
95.9%
96.6%
96.6%
96.2%
96.6%
97.5%
98.7%
97.9%
97.7%
Verdun
98.0%
98.3%
98.8%
99.6%
98.7%
98.9%
98.6%
98.9%
99.2%
98.3%
98.7%
Vancouver
-
-
-
98.9%
98.4%
98.6%
99.0%
98.1%
99.2%
99.3%
98.9%
Victoria
-
-
-
100%
95.9%
96.9%
96.9%
98.6%
99.0%
98.6%
98.2%
97.6%
98.0%
98.0%
98.5%
98.3%
98.2%
98.2%
98.4%
98.6%
98.4%
98.4%
Total
Boardwalk REIT strives to acquire, develop or retain assets in those markets that demonstrate positive
economic prospects. Boardwalk REIT continues to focus on markets that are typified by strong economic outlook
and relatively low vacancy rates.
In the multi-family residential sector, the markets in which Boardwalk REIT operates have experienced
little new rental specific construction in recent years. With aggressive leasing efforts and a diversified portfolio,
management believes that Boardwalk REIT is well-positioned to continue to expand to other Canadian regions in
the future. A significant portion of the Trust's rentable portfolio is located in the Province of Alberta, with 57% of
its total units as at December 31, 2014. Alberta has led Canada's economic and job growth over the past five (5)
years, and economists are projecting that Alberta, along with Saskatchewan, will continue to show one of the
highest GDP and population growth rates over the next several years. The Conference Board of Canada is
projecting that Calgary and Edmonton, Boardwalk REIT's two (2) largest markets, along with Saskatoon and
Regina, other important markets for Boardwalk REIT, will continue to rank among the top cities for economic
growth in the country through 2015. These positive developments bode well for the Western Canadian economy
and, as a result, Boardwalk REIT views these and other markets as providing long-term strategic opportunities.
New Apartment Development
In the past, the development of multi-family apartment units by the Trust was not a significant part of its
overall business strategy. The main reason was due to management’s opinion that the anticipated return on
development was far below other available risk adjusted capital allocation alternatives, such as the acquisition of
existing apartment units in the Trust’s target markets and/or the buyback of Trust Units for cancellation. Over the
last number of years there has been a change in the multi-family apartment environment in Canada. Over this
period there has been a significant increase in the market value of rental apartments. This increase, although
somewhat helped by a steady increase in reported market rental rates, has been mainly driven by a significant
compression in market capitalization rates, which, in turn, has been the result of a prolonged low interest rate
environment in Canada.
- 33 With this increase in the market value of apartments, there has been a significant decrease in the expected
returns from the above noted allocation alternatives to a level that warrants a measured allocation of capital to the
area of new apartment development on some excess land the Trust currently owns. Accordingly, the Trust has
recently pursued new apartment development on some of its excess density. To that end, as of November 7, 2013,
the Trust completed its first development project, Spruce Ridge Gardens, a 109-unit, wood frame, four-story,
elevatored asset on existing excess land the Trust owns in Calgary, Alberta. The project was completed on time
and on its original budget of approximately $19 million. Boardwalk received an occupancy permit from the City
of Calgary, and Boardwalk completed the lease-up phase of this project in 2014. Prior to construction, the Trust
applied for a rent subsidy grant from the Province of Alberta’s “Housing Capital Initiatives” to receive a
maximum of $7.5 million to assist in the development of this property. As of December 31, 2014, all of the $7.5
million amount was received by the Trust. In return for the grant, the Trust agreed to classify 54 of the 109 units
as “affordable”, with rental rates set at 10% below average Calgary market rents for 20 years. The remaining
$11.5 million required to complete the project came from Boardwalk’s cash on hand. The Trust estimated the
stabilized capitalization rate of this project to be between 6.5% and 7.0%, including, as estimated, $4.25 million
($39,000 per apartment unit) for the excess land allocated to this project. In accordance with IAS 20 – Accounting
for Government Grants and Disclosure of Government Assistance under International Financial Reporting
Standards (“IFRS”), this grant will be recognized in profit or loss on a systematic basis over the periods in which
the Trust recognizes revenue from the 54 units classified as affordable units, resulting in achievable rents being
much closer to market rents. For the year ended December 31, 2014, $378,000 was recognized in profit under
rental revenue for this grant (December 31, 2014 - $32,000).
The Trust defines “Stabilized Properties” as properties that have been owned by Boardwalk for a 24month period or greater. As such, Spruce Ridge Gardens is not a stabilized property, and any reference to
stabilized properties or same store properties in this AIF does not include Spruce Ridge Gardens.
In October of 2014, the Trust commenced the first phase of construction for a 79-unit building on excess
land on our property known as Pines of Normanview in Regina, Saskatchewan. The Trust executed a fixed-price
construction contract with an estimated cost to complete of approximately $14.4 million, or $178,000 per door.
The four-story, wood frame building will consist of 13 one-bedroom and 66 two-bedroom units. Stabilized
capitalization rate is estimated to be between 6.0% and 6.5%, excluding land while surfacing land value of
approximately $12,000 per door. The building is estimated to be completed in Q1 2016.It is the Trust’s intention
to continue to investigate further development opportunities, particularly in Alberta and Saskatchewan; however,
each future opportunity will require a separate case by case analysis of the merits of each individual project and,
depending on such analysis and general economic conditions, Boardwalk REIT will determine if additional
development projects are warranted. Historically, one of the biggest risks to real estate valuations is the building
of oversupply in a particular market, which results in significant corrections of property values market wide. The
Trust currently mitigates this risk by avoiding leverage and using cash on hand for new development and
undertaking development as a small part of Boardwalk’s overall business strategy.
For the year ended December 31, 2014, the Trust expended $2 million on total development costs
compared to $15.5 million for the prior year.
Normal Course Issuer Bid
On a periodic basis, Boardwalk REIT will apply to the TSX for approval of Normal Course Issuer Bids
(the “Bids”). Pursuant to regulations of these Bids, Boardwalk REIT will receive approval to purchase and cancel
a specified number of Trust Units, representing 10% of the public float of its Trust Units at the time of the TSX
approval. The bids will terminate on the earlier of the termination date or at such time as the purchases under the
Bids are completed.
In the latest application, Boardwalk REIT filed and received TSX approval for a Normal Course Issuer
Bid (“NCIB”), which commenced on July 3, 2014, and terminates on the earlier of July 2, 2015 or when
purchases under the bid are completed. The NCIB allowed Boardwalk REIT to purchase and cancel up to
3,901,031 Trust Units.
- 34 For the year ended December 31, 2014, the Trust purchased and canceled 432,100 Trust Units at an
average purchase cost of $66.89 per Trust Unit.
Since the Trust began utilizing normal course issuer bids, Boardwalk REIT has purchased and cancelled
Trust Units as follows:
Year Ended
December 31
2007
2008
2009
2010
2011
2012
2013
2014
Total
Cumulative Number of Trust
Units Purchased and Cancelled
856,447
2,312,000
790,000
423,400
160,900
Nil
Nil
432,100
4,974,847
Cumulative
Purchase Cost $
38,577
85,412
22,756
17,024
6,740
Nil
Nil
28,903
$199,412
Average Cost
per Trust Unit ($)
$45.04
$36.94
$28.80
$40.21
$41.89
Nil
Nil
$66.89
$40.08
Managing Capital
Boardwalk REIT finances its real properties and activities with a combination of long-term fixed rate debt
financing, both secured and unsecured, cash flow generated from continuing operations, and the selective sale of
properties and drawings under lines of credit.
Boardwalk REIT's operating strategy must be complemented by a capital strategy designed to maximize
return on Unitholder's equity. Boardwalk REIT's objective is to ensure in advance that there are ample capital
resources to allow it to exploit opportunities quickly, rather than securing funding for each specific investment on
a case-by-case basis. Boardwalk REIT believes that this approach provides it with a competitive advantage in
negotiations for acquisitions and developments. Boardwalk REIT's capital strategy is:
(a)
to establish a working capital and acquisition line of capital to ensure liquidity to fund growth;
(b)
to employ an appropriate degree of leverage during the broad based recovery in the real estate
industry;
(c)
to actively manage its exposure to interest rate volatility through the use of fixed long-term rate
debt the majority of which is insured with NHA insurance managed by CMHC; and
(d)
to the extent that the Trustees determine to seek additional capital, to raise such capital through
public offerings of equity or debt.
To facilitate acquisitions, the Corporation arranged a demand facility with a major financial institution in
May of 1998. This committed revolving credit facility was in the form of an operating and acquisition line up to a
maximum of $100 million. Effective January 26, 2007, Boardwalk REIT completed negotiations to set up a new
committed revolving credit facility with the same financial institution on substantially similar terms to the one
arranged by the Corporation as described above, with the exception that such facility is an operating and
acquisition line for up to a maximum of $200 million. Under such facility, the Trust has pledged assets sufficient
to obtain an existing facility of $200 million. Security for this facility consists of first and second charges on a
pool of property assets. The facility carries two (2) levels of interest ranging from the lending institution's prime
rate of interest ("Prime"), to Prime plus 1.0% and all outstanding operating line amounts will have to be repaid on
or within three (3) years of the contractual term maturity date, which repayment date is July 27, 2017.
To assist in the managing of the Trust's exposure to interest rate volatility, Boardwalk REIT's
management is constantly reviewing its existing mortgage debt portfolio. The purpose of this review is to ensure
that Boardwalk REIT has varying maturity dates for its debts so as to lower the Trust's exposure to the interest
rate fluctuations in any particular period. In addition, the Trust is constantly monitoring existing market facilities
in order to determine whether existing demand facilities should be converted to longer-term fixed rate mortgages.
- 35 Since 2007, the Trust has been successful in taking advantage of the lower interest rate environment.
Since August 2007, the subprime crisis in the United States resulted in an extremely volatile borrowing
environment, with bond yields and interest rate spreads fluctuating dramatically. For the most part, however, the
Trust's cost of borrowing remained accretive during this period when compared to the existing maturing interest
rates. Due to the size and diversity of its existing debt portfolio, the Corporation had elected, prior to the
Acquisition and the Arrangement, to typically refinance maturing loans for terms of one (1) to five (5) years,
however, given the current environment, has chosen to focus on longer term maturities of five (5), seven (7) and
ten (10) year terms. These terms balance well with the maturity dates of the other mortgages, and as such lower
Boardwalk REIT's overall interest rate risk during any one particular year.
In 2008, the Trust entered into a bond forward transaction (the “Transaction”) with a major Canadian
financial institution. In total, the Transaction, which comprised of bond forward contracts on specific mortgages
that matured and was renewed in 2008, was for a total notional amount of $101.6 million with a weighted average
term and interest rate of 7.2 years and 3.63%, respectively. One of the bond forward contracts in the Transaction,
which was assessed to be an effective hedge, was settled for a loss of $284 thousand. This bond forward contract
continues to be assessed as "effective" under IFRS and this loss continues to be amortized over the term of the
new financing. As at December 31, 2014, the unamortized amount of this effective hedge was approximately $41
thousand.
In 2008, Boardwalk REIT entered into an interest rate swap agreement on the mortgages of specific
properties within its portfolio in an effort to hedge the variability in cash flows attributed to fluctuating interest
rates. These interest rate swap agreements were designated as cash flow hedges on March 11, 2008. The
effective date of the hedges was May 1, 2008, and will continue to be designated as such until the May 1, 2015
date of maturity. Hedge accounting has been applied to these agreements in accordance with International
Accounting Standard ("IAS") - 39: Financial Instruments: Recognition and Measurement ("IAS 39").
The effectiveness of the hedging relationship is reviewed on a quarterly basis and measured at fair value.
Any gains or losses, which arise as a result of the “effectiveness” of the hedge, will be recognized in Other
Comprehensive Income (“OCI”). The ineffective portion of the hedging gain or loss on the swap transaction will
be recognized immediately in profit. On recognition of the financial liability of the hedged item on the
consolidated statement of financial position, the associated gains or losses that were recognized in OCI would be
reclassified into income in the same period, or periods, during which the interest payments of the hedged item
affect profit. However, if all, or a portion, of the loss recognized in OCI will not be recovered in one or more
future periods, this amount will be immediately reclassified into income.
As at December 31, 2014, the interest rate swap agreement was assessed to be an effective hedge and,
consistent with the previous periods, any gains or losses on the interest rate swap agreement were recognized in
earnings in the periods during which the interest payments on the hedged items were recognized. For the year
ended December 31, 2014, a gain of $2.4 million was recognized in OCI (December 31, 2013 – gain of $2.1
million).
Boardwalk REIT's Debt Maturity Chart
Boardwalk REIT’s long-term debt consists mainly of low-rate fixed-term secured mortgage financing.
The maturity dates on the secured mortgages have been staggered to lower the overall interest rate risk on
renewal.
Total mortgages payable (net of unamortized transaction costs) on December 31, 2014 were $2.22 billion
($2.17 billion before net of unamortized transaction costs), compared to $2.26 billion reported on December 31,
2013.
Boardwalk REIT’s overall weighted average interest rate on its long-term debt has decreased from the
prior year. The weighted average interest rate on December 31, 2014 was 3.34%, compared to 3.46% on
December 31, 2013. To better maintain cost effectiveness and flexibility of capital, Boardwalk REIT
- 36 continuously monitors short and long-term interest rates. If the environment warrants, the Trust will convert
short-term, floating rate debt, if any, to longer-term, fixed-rate mortgages to reduce interest rate renewal risk.
Year of Term Maturity
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
Total Principal Outstanding
Principal Outstanding
as at Dec 31, 2014
427,356,526
264,455,306
309,019,058
176,823,446
410,292,369
84,160,025
55,462,874
221,638,909
185,015,877
93,650,670
15,755,489
2,243,630,549
Weighted Average Interest
Rate By Maturity
3.66%
3.89%
2.92%
3.27%
3.00%
3.86%
3.67%
3.37%
3.01%
3.37%
3.10%
3.34%
% of Total
19.0%
11.8%
13.8%
7.9%
18.3%
3.7%
2.5%
9.9%
8.2%
4.2%
0.7%
100.0%
Pursuing Partnerships or Joint Ventures
As part of the Trust's overall growth strategy, Boardwalk REIT is reviewing the possibility of forming
joint venture partnerships with a select group of investors, whereby Boardwalk REIT would manage the assets as
well as have an equity interest in any opportunity. Any joint venture partnerships of Boardwalk REIT are limited
by the investment guidelines in the Declaration of Trust. See "Investment Guidelines and Operating Policies of
Boardwalk REIT – Investment Guidelines" below.
INVESTMENT GUIDELINES AND OPERATING POLICIES OF BOARDWALK REIT
Investment Guidelines
Pursuant to the Declaration of Trust, and notwithstanding anything contained in the Declaration of Trust
to the contrary, the assets of Boardwalk REIT may be invested only, and Boardwalk REIT shall not permit the
assets of any subsidiary to be invested otherwise than in accordance with the following investment guidelines (the
"Investment Guidelines"):
(a) Boardwalk REIT will focus its activities primarily on the acquisition, holding, maintaining,
improving, leasing or managing of multi-unit residential revenue producing properties, and ancillary
real estate ventures, including, but not limited to, condominium conversions and sales of properties in
which the Trust has (or will have) an interest, as well as, subject to subparagraph (l) below, the
development of raw land (including the financing thereof) for the purpose of carrying out the above
noted activities ("focus activities");
(b) notwithstanding anything contained in the Declaration of Trust to the contrary, no investment will be
made that would result in:
(i) REIT Units being disqualified for investment by registered retirement savings plans, registered
retirement income funds, registered education savings plans, registered disability savings plans,
tax-free savings accounts or deferred profit-sharing plans;
(ii) Boardwalk REIT ceasing to qualify as a "mutual fund trust" or a "registered investment" for
purposes of the Tax Act; or
(iii) the Trust not qualifying as a "real estate investment trust", as defined in subsection 122.1(1) of
the Tax Act, if as a consequence of the Trust not so qualifying, the Trust would be subject to tax
on its “taxable SIFT trust distributions”;
(c) the Trust may, directly or indirectly, invest in a joint venture arrangement for the purposes of owning
interests or investments otherwise permitted to be held by the Trust, provided that such joint venture
arrangement contains terms and conditions which, in the opinion of the Trustees, are commercially
- 37 reasonable, including without limitation such terms and conditions relating to restrictions on transfer
and the acquisition and sale of the Trust's and any joint venturer's interest in the joint venture
arrangement, provisions to provide liquidity to the Trust, such as buy-sell mechanisms, provisions
that limit the liability of the Trust to third parties, and provisions that provide for the participation of
the Trust in the management of the joint venture arrangement. For purposes of this provision, a joint
venture arrangement is an arrangement between the Trust and one (1) or more other persons ("joint
venturers") pursuant to which the Trust, directly or indirectly, conducts an undertaking for one (1) or
more of the purposes set out above and in respect of which the Trust may hold its interest jointly or in
common or in another manner with others either directly or through the ownership of securities of a
corporation or other entity (a "joint venture entity"), including without limitation a general
partnership, limited partnership or limited liability company;
(d) unless otherwise permitted in the provisions of the Declaration of Trust setting out Boardwalk REIT's
Investment Guidelines and except for temporary investments held in cash, deposits with a Canadian
or U.S. chartered bank or trust company registered under the laws of a province of Canada, short-term
government debt securities or in money market instruments of, or guaranteed by, a Schedule I
Canadian chartered bank maturing prior to one (1) year from the date of issue, Boardwalk REIT,
directly or indirectly, may not hold securities other than (i) currency or interest rate futures contracts
for hedging purposes to the extent that such hedging activity complies with the Canadian Securities
Administrator's National Instrument 81-102 or any successor instrument or rule; (ii) securities of a
joint venture entity, or any entity formed and operated solely for the purpose of carrying on ancillary
activities to any real estate owned (or to be owned) or developed (or to be developed), directly or
indirectly, by Boardwalk REIT, or an entity wholly-owned (or to be wholly-owned), directly or
indirectly, by Boardwalk REIT formed and operated solely for the purpose of holding and/or
developing a particular real property or real properties; and (iii) securities of another issuer, including,
but not limited to, a real estate investment trust, provided either (A) such securities derive their value,
directly or indirectly, principally from real property, or (B) the principal business of the issuer of the
securities is the ownership, development or operation, directly or indirectly, of real property, and
provided in either case the entity whose securities are being acquired are engaged in a focus activity;
(e) no investment will be made in a real property located in the United States unless Boardwalk REIT has
obtained an opinion from legal counsel to the effect that the making of the investment should not
result in interest paid by any U.S. entity in which Boardwalk REIT, directly or indirectly, owns an
interest to any affiliate of Boardwalk REIT ceasing to be deductible for U.S. federal income tax
purposes or becoming subject to U.S. withholding tax;
(f) no investment will be made, directly or indirectly, in operating businesses unless such investment is
through a corporation, limited partnership or trust;
(g) notwithstanding any other provisions of the Declaration of Trust setting out Boardwalk REIT's
Investment Guidelines, the securities of a reporting issuer in Canada may be acquired provided that:
(i) the activities of the issuer are focused on focus activities; and
(ii) in the case of any proposed investment or acquisition which would result in the beneficial
ownership of more than 10% of the outstanding units of the securities issuer (the "acquired
issuer"), the investment is made for the purpose of subsequently effecting the merger or
combination of the business and assets of Boardwalk REIT and the acquired issuer or for
otherwise ensuring that Boardwalk REIT will control the business and operations of the acquired
issuer;
(h) no investments will be made in rights to or interests in mineral or other natural resources, including
oil or gas, except as incidental to an investment in real property;
- 38 (i) the Trust may not invest in mortgages, mortgage bonds, Notes8 (other than Operating Trust Notes9) or
debentures ("Debt Instruments") (including participating or convertible) unless the real property
which is security therefore is real property which otherwise meets the Investment Guidelines,
including, but not limited to, subparagraph (b) above, provided that, notwithstanding the foregoing,
an investment may be made in Debt Instruments if the primary intention is to use such investment as
a method of acquiring control of a revenue producing real property which would otherwise be a
permitted investment pursuant to the Investment Guidelines, including, but not limited to, subsection
subparagraph (b) above;
(j) notwithstanding paragraph (i) above, Boardwalk REIT may also invest in mortgages where:
(i) the mortgage is a "vendor take-back" mortgage granted to Boardwalk REIT in connection with
the sale by it of existing real property and as a means of financing the purchaser's acquisition of
such property from Boardwalk REIT;
(ii) the mortgage is interest bearing;
(iii) the mortgage is registered on title to the real property which is security therefore;
(iv) the mortgage has a maturity not exceeding five (5) years;
(v) the amount of the mortgage loan is not in excess of 85% of the selling price of the property
securing the mortgage; and
(vi) the aggregate value of these mortgages (including mortgages and mortgage bonds in which
Boardwalk REIT is permitted to invest by virtue of paragraph (i) above, (after giving effect to the
proposed investment, will not exceed 15% of Gross Book Value10) calculated at the time of such
investment);
(k) subject to subparagraph (b) above, the Trust may invest directly in raw land for development
provided such investment is through a corporation, limited partnership or trust established for the
purpose of (i) the renovation or expansion of existing facilities that are capital property of the Trust,
or (ii) the development of new facilities which will be capital property of the Trust; and
(l) notwithstanding any other provisions of the Declaration of Trust, investments may be made which do
not comply with the investment policy provisions of the Declaration of Trust provided (i) the
aggregate cost thereof (which, in the case of an amount invested to acquire real property, is the
purchase price less the amount of any indebtedness assumed or incurred in connection with the
acquisition and secured by a mortgage on such property) does not exceed 15% of the Adjusted
Unitholders' Equity11 and (ii) the making of such investment would not contravene subparagraph (b)
above.
8
"Notes" means the promissory notes, bonds, debentures, debt securities or similar evidence of indebtedness issued by a
person.
9
''Operating Trust Notes'' means the Series 1 Notes and the Series 2 Notes. ''Series 1 Notes'' means the Series 1 Notes
issued by the Operating Trust exclusively to Boardwalk REIT on May 3, 2004 in the principal amount of $640 million
''Series 2 Notes'' means the Series 2 Notes to be issued by the Operating Trust exclusively as full or partial payment of the
Series 1 Notes and Operating Trust Units.
10
''Gross Book Value'' means, at any time, the book value of the assets of Boardwalk REIT and its subsidiaries, shown on its
then most recent publicly-issued consolidated balance sheet prepared in accordance with IFRS as of January 1, 2011. ''IFRS''
means the International Financial Reporting Standards issued by the International Accounting Standards Board, and as
adopted by the Canadian Institute of Chartered Accountants, as amended from time to time.
11
"Adjusted Unitholder's Equity" of Boardwalk REIT, at any time, means the aggregate of: (i) the amount of unitholders’
equity of Boardwalk REIT; and (ii) the amount of accumulated depreciation and amortization recorded on the books and
records of each of Boardwalk REIT and its Subsidiaries in respect of its properties, in each case calculated in accordance with
GAAP, “Entity Value” means the amount determined by multiplying the total number of units issued and outstanding (on a
- 39 Pursuant to the Declaration of Trust, the investment guidelines set forth above may only be amended with
the approval of at least 66 and 2/3% of the votes cast at a meeting of Unitholders called for that purpose.
Operating Policies
The Declaration of Trust provides that the operations and affairs of Boardwalk REIT will be conducted in
accordance with the following policies and that Boardwalk REIT will not permit any subsidiary to conduct its
operations and affairs other than in accordance with the following policies:
(a) the construction and/or development of real property (including the financing thereof) may be
engaged in order to maintain its real properties in good repair or to enhance the revenue-producing
potential of real properties in which it has, or will have, an interest;
(b) except for properties encumbered by the Retained Debt, title to each real property shall be held by
and registered in the name of the Partnership, the General Partner or a corporation or other entity
wholly-owned indirectly by Boardwalk REIT or jointly owned indirectly by Boardwalk REIT with
joint venturers; provided, that where land tenure will not provide fee simple title, the Partnership, the
General Partner or a corporation or other entity wholly-owned, directly or indirectly by the
Partnership or jointly owned, directly or indirectly, by Boardwalk REIT with joint venturers shall
hold a land lease as appropriate under the land tenure system in the relevant jurisdiction;
(c) the Trust will maintain a ratio of Consolidated EBITDA to Consolidated Interest Expense of not less
than 1.50 to 1, calculated from time to time in respect of the most recently completed Reference
Period12;
fully diluted basis, including, without limitation, Units issuable on the exchange of units of interest in the Partnership
designated as “LP Class B Units”) by the 10 day weighted average trading price of the Units on the TSX for the 10 trading
days immediately following the effective date of the Acquisition and Arrangement, which was $15.95 per Unit for a total of
$149 million. “GAAP” means, as at any date of determination, generally accepted accounting principles in effect in Canada,
including, among other things, Recommended Accounting Practices for Real Estate and Development companies issued by
the Canadian Institute of Public and Private Real Estate Companies.
12
“Consolidated EBITDA” of the Trust for any period means Consolidated Profit increased by the sum of (i) Consolidated
Interest Expense, excluding interest that has been capitalized on projects that are under development or held for future
development for such period, (ii) tax expense of the Trust for such period (including both income tax and large corporations
tax other than income taxes, either positive or negative, attributable to extraordinary or non-recurring gains or losses)
determined on a consolidated basis in accordance with IFRS, (iii) amortization of income properties (including provisions
for diminution of income properties for such period, determined on a consolidated basis in accordance with IFRS, (iv)
amortization of deferred expenses of the Trust for such period, determined on a consolidated basis in accordance with IFRS,
and (v) other non-cash items reducing Consolidated Profit resulting from a change in accounting principles in determining
Consolidated Profit for such period.
“Consolidated Interest Expense” of the Trust for any period means the aggregate amount of interest expense of the Trust in
respect of indebtedness, capital lease obligations, the original issue discount of any indebtedness issued at a price less than
the face amount thereof paid, accrued or scheduled to be paid or accrued by the Trust during such period and, to the extent
interest has been capitalized on projects that are under development or held for future development during the period, the
amount of interest so capitalized, all as determined on a consolidated basis in accordance with IFRS (provided that,
notwithstanding its presentation under IFRS, all interest expense of the Trust in respect of convertible debt indebtedness will
be included (without duplication) and all amortized deferred financing charges will be excluded in determining Consolidated
Interest Expense). Consolidated Interest Expense shall not include Distributions or other distributions paid or payable on any
LP Partnership Units or other equity securities convertible or exchangeable into Units.
“Consolidated Profit” of the Trust for any period means the net income (loss) of the Trust for such period determined in
accordance with IFRS, excluding (i) any gain or loss (net of any tax impact) attributable to the sale or other disposition of any
asset of the Trust, or other than the sale or disposition of income properties specifically acquired and held for resale; (ii) any
extraordinary gains and losses of the Trust, determined on a consolidated basis in accordance with IFRS, (iii) any fair value
adjustment(s) of any asset(s) of the Trust required by IFRS; and (iv) other non-recurring items.
“Distribution” has the meaning set out under the heading “Distribution Policy” below.
- 40 (d) the Trust may, directly or indirectly, guarantee indebtedness or liabilities of a third party, provided
that such guarantee is related to the direct or indirect ownership or acquisition by the Trust of real
property that would otherwise comply with the investment restrictions and operating guidelines set
out in the Declaration of Trust;
(e) except for the Assets acquired pursuant to the Master Asset Contribution Agreement, an engineering
survey or physical review by an experienced third party consultant will be obtained for each real
property intended to be acquired with respect to the physical condition thereof;
(f) at all times insurance coverage will be obtained and maintained in respect of potential liabilities of
Boardwalk REIT and the accidental loss of value of the assets of Boardwalk REIT from risks, in
amounts and with such insurers, in each case as the Trustees consider appropriate, taking into account
all relevant factors including the practices of owners of comparable properties;
(g) except for the Assets acquired pursuant to the Master Asset Contribution Agreement, a Phase I
environmental audit shall be conducted for each real property to be acquired and, if the Phase I
environmental audit report recommends that further environmental audits be conducted, such further
environmental audits shall be conducted, in each case by an independent and experienced
environmental consultant; and
(h) at least 8.5% of gross consolidated annual rental revenues generated from properties where the
associated mortgage financing is insured by CMHC ("insured properties") as determined pursuant to
GAAP shall be expended annually on sustaining capital expenditures, repairs and maintenance, all
determined on a portfolio basis for all insured properties. For this purpose, capital expenditures and
repairs and maintenance include all onsite labour costs and other expenses and items associated with
such capital expenditures, repairs and maintenance.
Pursuant to the Declaration of Trust, the operating policies set forth above may only be amended with the
approval of a majority of the votes cast at a meeting of Unitholders called for that purpose.
DECLARATION OF TRUST AND DESCRIPTION OF REIT UNITS
Boardwalk REIT has been established under the Declaration of Trust for an indeterminate term. The
following is a summary, which does not purport to be complete, of certain terms of the Declaration of Trust and
the REIT Units. A copy of the Declaration of Trust may be accessed on SEDAR (www.sedar.com).
The Declaration of Trust authorizes the issuance of an unlimited number of two (2) classes of units of
Boardwalk REIT: REIT Units and Special Voting Units. The Special Voting Units may only be issued to holders
of, and are not transferable separately from, the LP Class B Units to which they relate.
REIT Units
Each REIT Unit represents an undivided beneficial interest in Boardwalk REIT and in distributions made
by Boardwalk REIT, whether of net income, net realized capital gains or other amounts and, in the event of
liquidation, winding-up or other termination of Boardwalk REIT, in the net assets of Boardwalk REIT remaining
after the satisfaction of all liabilities. No REIT Unit has preference or priority over any other.
The REIT Units are issued as fully paid and non-assessable and are freely transferable, subject to
applicable securities regulatory requirements. Each REIT Unit entitles the holder thereof to one (1) vote for each
whole REIT Unit held at all meetings of Unitholders.
Except as set out under the sub-headings "Issuance of REIT Units" and "REIT Unit Redemption Right"
below, the REIT Units have no conversion, retraction, redemption or pre-emptive rights. Issued and outstanding
“Reference Period” means the most recently completed four (4) fiscal quarters preceding the date of a calculation pursuant
to subsection (c) above for which consolidated financial statements of the Trust have been publically released.
- 41 REIT Units may be subdivided or consolidated from time to time by the Trustees with the approval of a majority
of the Unitholders. Unitholder approval will not be required for an automatic consolidation as described in the
section entitled "Distribution Policy" below.
No certificates will be issued for fractional REIT Units and fractional REIT Units will not entitle the
holders thereof to vote at, receive notice of or attend meetings of Unitholders, except to the extent such fractional
REIT Units represent in the aggregate one (1) or more whole REIT Units. The REIT Units are not "deposits"
within the meaning of the Deposit Insurance Corporation Act (Canada) and are not insured under the provisions
of such Act or any other legislation. Furthermore, Boardwalk REIT is not a trust company and, accordingly, is
not registered under any trust and loan company legislation as it does not carry on nor intend to carry on the
business of a trust company.
Special Voting Units13
The Declaration of Trust provides for the issuance of an unlimited number of Special Voting Units that
will be used to provide voting rights with respect to Boardwalk REIT to persons holding LP Class B Units or
other securities that are, directly or indirectly, exchangeable for REIT Units. BEI Subco is currently the owner,
through its direct ownership of all of the issued and outstanding LP Class B Units, of all of the issued and
outstanding Special Voting Units.
The Special Voting Units are not transferable separately from the LP Class B Units to which they relate.
The Special Voting Units will automatically be transferred upon a transfer of the corresponding LP Class
B Units. In addition, as LP Class B Units are surrendered for REIT Units and are no longer outstanding, the
corresponding Special Voting Units will be automatically redeemed by Boardwalk REIT for $0.0000001 per each
Special Voting Unit cancelled and shall no longer be outstanding.
Each Special Voting Unit entitles the registered holder thereof to the number of votes at any meeting of
Unitholders or in respect of any written resolution of Unitholders which is equal to the number of REIT Units
which may be obtained upon the surrender of the LP Class B Unit to which the Special Voting Unit relates. The
Special Voting Units do not entitle or give any rights to the holders thereof to receive distributions or any amount
upon liquidation, dissolution or winding-up of Boardwalk REIT. Holders of Special Voting Units are not entitled
to receive a certificate or other written instrument evidencing ownership of such units.
Issuance of REIT Units
The Trustees may allot and issue REIT Units at such time or times and in such manner (including
pursuant to any distribution reinvestment plan of Boardwalk REIT) and to such person, persons or class of
persons as the Trustees in their sole discretion shall determine. The price or the value of the consideration for
which REIT Units may be issued and the terms and conditions of issuance of the REIT Units shall be determined
by the Trustees in their sole discretion, generally (but not necessarily) in consultation with investment dealers or
brokers who may act as underwriters in connection with offerings of REIT Units. In the event that REIT Units
are issued in whole or in part for a consideration other than money, the resolution of the Trustees allotting and
issuing such REIT Units shall express the fair equivalent in money of the other consideration received.
Boardwalk REIT may create and issue rights, warrants or options to subscribe for fully-paid REIT Units
which rights, warrants or options may be exercisable at such subscription price or prices and at such time or times
as the Trustees may determine. The rights, warrants or options so created may be issued for such consideration or
for no consideration, all as the Trustees may determine. A right, warrant or option shall not be a REIT Unit and a
holder thereof shall not be a Unitholder.
13
''Special Voting Unit'' means a unit of interest in Boardwalk REIT to be issued to the holders of LP Class B Units
providing rights to vote as a Unitholder.
- 42 Purchase of REIT Units
Boardwalk REIT may at any time or from time to time purchase for cancellation all or part of the
outstanding REIT Units at a price per REIT Unit and on a basis determined by the Trustees in accordance with
applicable securities legislation and the applicable rules of the stock exchange(s) on which the REIT Units are
listed.
REIT Unit Redemption Right
REIT Units are redeemable at any time, in whole or in part, on demand by the holders thereof by sending
a notice to Boardwalk REIT at its head office in a form approved by the Trustees and completed and executed in a
manner satisfactory to the Trustees, who may require supporting documentation as to identity, capacity or
authority. A Unitholder not otherwise holding a fully registered REIT Unit certificate who wishes to exercise the
redemption right will be required to obtain a redemption notice from his or her investment dealer or other
intermediary who will be required to deliver the completed redemption form to Boardwalk REIT. Upon receipt
by Boardwalk REIT of a written redemption notice and other documents that may be required, all in a manner
satisfactory to the Trustees, a holder of REIT Units shall cease to have any rights with respect to the tendered
REIT Units (other than to receive the redemption payment therefor), including any right to receive any
distributions thereon which are declared payable to the Unitholders of record on a date which is subsequent to the
day of receipt of the redemption notice by Boardwalk REIT and the holder thereof shall be entitled to receive a
price per REIT Unit (the "Redemption Price") equal to the lesser of:
(a) 90% of the "market price" of the REIT Units on the principal market on which the REIT Units are
quoted for trading on the trading day prior to the day on which the REIT Units were surrendered to
Boardwalk REIT for redemption (the "Redemption Date"); and
(b) 100% of the "closing market price" of the REIT Units on the principal market on which the REIT
Units are quoted for trading on the Redemption Date.
For the purposes of this calculation, "market price" in respect of REIT Units will be an amount equal to
the 20-day daily volume weighted average of the closing price of the REIT Units for each of the trading days on
which there was a closing price; provided that if the applicable exchange or market does not provide a closing
price, but only provides the highest and lowest prices of the REIT Units traded on a particular day, the "market
price" shall be an amount equal to the average of the highest and lowest prices for each of the trading days on
which there was a trade; and provided further that if there was trading on the applicable exchange or market for
fewer than five (5) of the 20 trading days, the "market price" shall be the average of the following prices
established for each of the 20 trading days: (i) the average of the last bid and last asking prices of the REIT Units
for each day on which there was no trading; (ii) the closing price of the REIT Units for each day on which there
was trading if the exchange or market provides a closing price; and (iii) the average of the highest and lowest
prices of the REIT Units for each day that there was trading if the exchange or market does not provide a closing
price but provides only the highest and lowest prices of the REIT Units traded on a particular day.
The "closing market price" in respect of REIT Units shall be (i) an amount equal to the closing price of
the REIT Units if there was a trade on the date and the exchange or market provides a closing price; (ii) an
amount equal to the average of the highest and lowest prices of the REIT Units if there was trading and the
exchange or other market does not provide a closing price but provides only the highest and lowest trading prices
of the REIT Units traded on a particular day; or (iii) the average of the last bid and last asking prices of the REIT
Units if there was no trading on that date.
If a Unitholder is not entitled to receive cash upon redemption of REIT Units as a result of the limitations
in sub-paragraphs (b) and (c) below, the Redemption Price will be equal to the fair market value of the REIT
Units as determined by the Trustees.
The aggregate Redemption Price payable by Boardwalk REIT in respect of any REIT Units tendered for
redemption during any calendar month shall be satisfied by way of a cheque drawn on a Canadian chartered bank
- 43 or a trust company in Canadian funds, payable no later than the last day of the calendar month following the
month in which the REIT Units were tendered for redemption, provided that the entitlement of Unitholders to
receive cash upon the redemption of their REIT Units is subject to the limitations that:
(a) the total amount payable by Boardwalk REIT in respect of such REIT Units and all other REIT Units
tendered for redemption in the same calendar month shall not exceed $50,000, provided that the
Trustees may, in their sole discretion, waive such limitation in respect of all REIT Units tendered for
redemption in any particular calendar month;
(b) at the time such REIT Units are tendered for redemption, the outstanding REIT Units shall be listed
for trading or quoted on a stock exchange or market which the Trustees consider, in their sole
discretion, provides representative fair market value prices for the REIT Units; and
(c) the normal trading of outstanding REIT Units is not suspended or halted on any stock exchange on
which the REIT Units are listed for trading or, if not so listed, on any market on which the REIT
Units are quoted for trading, on the Redemption Date for the REIT Units or for more than five (5)
trading days during the ten (10) day trading period commencing immediately after the Redemption
Date for the REIT Units.
If a Unitholder is not entitled to receive cash upon the redemption of REIT Units as a result of the
foregoing limitations in sub-paragraphs (b) and (c) above, then each REIT Unit tendered for redemption shall,
subject to obtaining all applicable regulatory approvals, be redeemed by way of a distribution in specie of Series 2
Notes.
The aggregate principal amount of such Series 2 Notes would be equal to the product of (i) the
Redemption Price per unit of the REIT Units tendered for redemption; and (ii) the number of REIT Units tendered
by such Unitholder for redemption. No Series 2 Notes in a principal amount of less than $100 will be transferred
and, where the principal amount of Series 2 Notes to be received by the former Unitholder upon redemption, in
specie, would otherwise include a principal amount of less than a multiple of $100, such principal amount will be
rounded down to the next lowest multiple of $100 and the excess shall be paid in cash. The term of such notes
will be 10 years, less a day, subject to earlier repayment at the option of Boardwalk REIT, and they would bear
interest at a market rate determined by the trustees of the Operating Trust at the time of issuance thereof, payable
on the 30th day of each calendar month that such Series 2 Notes are outstanding. In such circumstances, Series 1
Notes and Operating Trust Units will be redeemed. The Series 2 Notes issued by the Operating Trust will then be
distributed in satisfaction of the Redemption Price of REIT Units.
If a Unitholder is not entitled to receive cash upon the redemption of REIT Units as a result of the
limitation in sub-paragraph (a) above, the holder will receive a combination of cash and subject to obtaining all
applicable regulatory approvals, Series 2 Notes, determined in accordance with the Declaration of Trust.
It is anticipated that the redemption right described above will not be the primary mechanism for holders
of REIT Units to dispose of their REIT Units. Operating Trust Notes which may be distributed to Unitholders in
specie in connection with a redemption will not be listed on any stock exchange, no market is expected to develop
and such securities may be subject to an indefinite "hold period" or other resale restrictions under applicable
securities laws. The Operating Trust Notes so distributed may not be qualified investments for registered
retirement savings plans ("RRSPs"), registered retirement income funds ("RRIFs"), registered education savings
plans ("RESPs"), deferred profit sharing plans ("DPSPs"), registered disability savings plans (“RDSPs”) or taxfree savings accounts (“TFSAs”) depending upon the circumstances at the time.
Special Voting Units will be cancelled for nominal consideration in the event of the surrender, exchange
or sale to Boardwalk REIT of the related LP Class B Units.
Meetings of Unitholders
The Declaration of Trust provides that annual meetings of Unitholders shall be called and held at any
place in Canada determined by the Trustees for the election of Trustees (other than the BPCL appointee), the
- 44 appointment or changing of the auditors of Boardwalk REIT, the Operating Trust and the Partnership, and
transacting such other business as the Trustees may determine or as may properly be brought before the meeting.
The Trustees shall call and hold special meetings for the approval of amendments to the Declaration of
Trust (except as described below under "Declaration of Trust and Description of REIT Units — Amendments to
the Declaration of Trust and other Documents"), the sale of the assets of Boardwalk REIT as an entirety or
substantially as an entirety (other than as part of an internal reorganization of the assets of Boardwalk REIT as
approved by the Trustees) or the termination of Boardwalk REIT. The Trustees may submit to a vote of
Unitholders any matter which they deem appropriate. Except with respect to the above-noted matters, or a vote to
terminate Boardwalk REIT or such other matters submitted to a vote of Unitholders by the Trustees, no vote of
the Unitholders will bind Boardwalk REIT or the Trustees in any way. Meetings of Unitholders will be called
and held annually within 180 days after the end of the fiscal year of Boardwalk REIT for the election of the
Trustees (except for the BPCL appointee) and appointment of auditors of Boardwalk REIT, the Operating Trust
and the Partnership. The first annual meeting of Unitholders was held on May 10, 2005. The last annual meeting
of Unitholders was on May 15, 2014.
The Trustees have the power at any time to call special meetings of Unitholders at such time and place in
Canada as the Trustees determine. Unitholders holding in the aggregate not less than five percent (5%) of the
votes attaching to all outstanding REIT Units (on a fully diluted basis) may requisition the Trustees in writing to
call a special meeting of Unitholders and the Trustees shall, subject to certain limitations, call a meeting of
Unitholders for the purposes stated in the Unitholder requisition. A requisition must state in reasonable detail the
business proposed to be transacted at the meeting. Unitholders have the right to obtain a list of Unitholders to the
same extent and upon the same conditions as those which apply to shareholders of a corporation governed by the
ABCA.
Unitholders may attend and vote at all meetings of the Unitholders either in person or by proxy and a
proxy holder need not be a Unitholder. Two (2) persons present in person or represented by proxy and
representing in the aggregate at least 10% of the votes attaching to all outstanding REIT Units (on a fully diluted
basis) shall constitute a quorum for the transaction of business at all such meetings, provided that if Boardwalk
REIT has only one (1) Unitholder, such Unitholder present in person or by proxy constitutes a meeting and a
quorum for such meeting. If no quorum is present at any meeting of Unitholders within 30 minutes after the time
fixed for holding the meeting, the meeting, if convened on the requisition of Unitholders, will be dissolved and
otherwise will be adjourned for not less than ten (10) days, and at the adjourned meeting, the Unitholders then
present in person or represented by proxy will form the necessary quorum.
The Declaration of Trust contains provisions as to the notice required and other procedures with respect to
the calling and holding of meetings of Unitholders.
Limitation on Non-Resident Ownership
In order for Boardwalk REIT to maintain its status as a mutual fund trust under the Tax Act, Boardwalk
REIT must not be established or maintained primarily for the benefit of non-residents of Canada within the
meaning of the Tax Act ("Non-Residents"). Accordingly, the Declaration of Trust provides that, notwithstanding
any provision of the Declaration of Trust to the contrary, at no time may Non-Residents be the beneficial owners
of more than 49% of the REIT Units or the Special Voting Units then outstanding. The Trustees may require
declarations as to the jurisdictions in which beneficial owners of REIT Units are resident or declarations from
Unitholders or holders of Special Voting Units as to whether such REIT Units or Special Voting Units, as the case
may be, are held for the benefit of Non-Residents.
If the Trustees become aware that the beneficial owners of more than 49% of the REIT Units or the
Special Voting Units then outstanding are, or may be, Non-Residents or that such a situation is imminent, the
Trustees may make a public announcement thereof and shall not accept a subscription for REIT Units or Special
Voting Units, as the case may be, from or issue or register a transfer of REIT Units or Special Voting Units, as the
case may be, to a person unless the person provides a declaration that he or she is not a Non-Resident and does
- 45 not hold his or her REIT Units or Special Voting Units, as the case may be, for the benefit of a Non-Resident. If,
notwithstanding the foregoing, the Trustees determine that more than 49% of the REIT Units or Special Voting
Units then outstanding are beneficially owned by Non-Residents, the Trustees may send a notice to Non-Resident
registered and beneficial holders of REIT Units or Special Voting Units, as the case may be, chosen in inverse
order to the order of acquisition or registration or in such other manner as the Trustees may consider equitable and
practicable, requiring them to sell or redeem their REIT Units or Special Voting Units, as the case may be, or a
portion thereof within a specified period of not more than 60 days (unless the Canada Revenue Agency (the
"CRA") has confirmed in writing that a longer period is acceptable). If the holders of REIT Units or Special
Voting Units, as the case may be, receiving such notice have not sold or redeemed the specified number of REIT
Units or Special Voting Units, as the case may be, or provided the Trustees with satisfactory evidence that they
are not Non-Residents and do not hold their REIT Units or Special Voting Units, as the case may be, for the
benefit of a Non-Resident within such period, the Trustees may sell or redeem such REIT Units or Special Voting
Units, as the case may be, on behalf of such Non-Resident holder of REIT Units or Special Voting Units, as the
case may be, (and the Trustees shall have the power of attorney of such holders to do so) and, in the interim, the
voting and distribution rights, if any, attached to such REIT Units or Special Voting Units, if any, as the case may
be shall be suspended. Upon such sale, the affected holders shall cease to be holders of the REIT Units or Special
Voting Units, as the case may be, and their rights shall be limited to receiving the net proceeds of sale upon
surrender of such REIT Units or Special Voting Units, as the case may be.
Amendments to the Declaration of Trust and Other Documents
The Declaration of Trust may be amended or altered from time to time. Certain amendments (including
the termination of Boardwalk REIT; an exchange, reclassification or cancellation of all or part of the REIT Units
or Special Voting Units; and the creation of new rights or privileges attaching to the REIT Units and Special
Voting Units) require approval by at least 66 and 2/3% of the votes cast at a meeting of Unitholders called for such
purpose.
Other amendments to the Declaration of Trust require approval by a majority of the votes cast at a
meeting of the Unitholders called for such purpose.
The following amendments require the approval of at least 66 and 2/3% of the votes cast by all
Unitholders entitled to vote thereon at a meeting called for that purpose:
(a) an exchange, reclassification or cancellation of all or part of the REIT Units;
(b) the addition, change or removal of the rights, privileges, restrictions or conditions attached to the
REIT Units, including, without limiting the generality of the foregoing;
(i) the removal or change of rights to distributions; or
(ii) the addition or removal of or change to conversion privileges, redemption privileges, voting,
transfer or pre-emptive rights;
(c) the creation of new rights or privileges attaching to certain of the REIT Units and Special Voting
Units; and
(d) any change to the existing constraints on the issue, transfer or ownership of the REIT Units and
Special Voting Units.
In addition, the Declaration of Trust provides that Boardwalk REIT will not agree to or approve any
material change to the Limited Partnership Agreement, the Operating Trust Declaration of Trust 14or the Exchange
and Support Agreement without the approval of at least 66 and 2/3% of the votes cast at a meeting of Unitholders
called for such purpose. However, no Unitholder approval is required to approve any change to the Limited
14
''Operating Trust Declaration of Trust'' means the declaration of trust dated January 9, 2004, as amended and restated on
May 3, 2004, establishing the Operating Trust.
- 46 Partnership Agreement for the purposes of providing a distribution reinvestment entitlement to holders of LP
Class B Units that is substantially equivalent to that provided by the distribution reinvestment plan that
Boardwalk REIT has adopted (but suspended) pursuant to which holders of REIT Units will be entitled to elect to
have cash Distributions in respect of such units automatically reinvested in additional REIT Units (the
"Distribution Reinvestment Plan" or "DRIP") to holders of REIT Units. For more information on the DRIP,
including, but not limited to, its suspension, please see the information under the sub-heading “Distribution Policy
– Distribution Reinvestment Plan”.
Furthermore, Boardwalk REIT may not agree to or approve any change to the provisions of the
Declaration of Trust governing distributions on the REIT Units or Special Voting Units, or the rights and
attributes of the LP Class A Units, LP Class B Units or LP Class C Units without the approval of at least 66 and
2
/3% of the votes cast at any meeting of holders of REIT Units or Special Voting Units, as the case may be, called
for that purpose.
A majority of all Trustees, including a majority of the Independent Trustees, may, without the approval of
the Unitholders, make certain amendments to the Declaration of Trust, including amendments:
(a) for the purpose of ensuring continuing compliance with applicable laws (including the Tax Act),
regulations, requirements or policies of any governmental authority having jurisdiction over (i) the
Trustees or Boardwalk REIT; (ii) the status of Boardwalk REIT as a "mutual fund trust",
"registered investment" and a “real estate investment trust” under the Tax Act; or (iii) the
distribution of REIT Units;
(b) which, in the opinion of the Trustees, acting reasonably, are necessary to maintain the rights of the
Unitholders set out in the Declaration of Trust;
(c) to remove any conflicts or inconsistencies in the Declaration of Trust or to make minor corrections
which are, in the opinion of the Trustees, necessary or desirable and not prejudicial to the
Unitholders;
(d) which, in the opinion of the Trustees, are necessary or desirable as a result of changes in taxation or
other laws, or accounting standards (including the implementation of IFRS) from time to time which
may affect Boardwalk REIT or its beneficiaries to ensure that the REIT Units qualify as equity for the
purposes of IFRS, or the administration or enforcement thereof;
(e) for any purpose (except one in respect of which a Unitholder vote is specifically otherwise required)
which, in the opinion of the Trustees, is not prejudicial to Unitholders and is necessary or desirable;
(f) deemed necessary or desirable to ensure that Boardwalk REIT has not been established nor
maintained primarily for the benefit of persons who are not resident Canadians; and
(g) to implement a distribution reinvestment plan or any amendments to such plan.
In no event may the Trustees amend the Declaration of Trust if such amendment would (i) amend the
provisions of the Declaration of Trust governing amendments to same; (ii) amend the Unitholders' voting rights;
or (iii) cause Boardwalk REIT to fail or cease to qualify as a "mutual fund trust", “real estate investment trust”
or "registered investment" under the Tax Act.
Stock Exchange Listings, Price Range and Trading Volume of REIT Units
As at December 31, 2014, there were 47,497,164 REIT Units outstanding and 4,475,000 LP Class B
Units issued and outstanding for a fully diluted REIT Unit capital of 51,972,164 REIT Units.
The principal market for the REIT Units is the TSX. The REIT Units are listed on the TSX under the
symbol "BEI.UN." The REIT Units are not listed on the NYSE or elsewhere in the United States and are not
registered under the United States Securities Exchange Act of 1934, as amended.
- 47 The market price range and trading volume of the REIT Units on the TSX for the periods indicated are set
forth in the following table:
Year ending December 31, 2014
January
February
March
April
May
June
July
August
September
October
November
December
Year ending December 31, 2015
January
February (through February 19)
TSX
Price Per REIT Unit
High ($)
Low ($)
Volume (000’s)
61.38
60.30
60.71
62.71
65.34
66.20
66.60
69.56
70.37
71.40
71.32
65.00
58.14
58.18
58.13
59.54
61.37
63.76
64.11
64.65
67.12
67.51
65.65
60.23
1,646
1,686
1,101
975
1,204
1,061
923
1,365
1,763
1,356
1,333
3,384
64.80
61.75
60.80
58.40
3,151
1,601
The closing price of the REIT Units on the TSX on February 19, 2015 was Cdn. $60.60.
CHALLENGES AND RISKS
This section includes an analysis of Boardwalk REIT's financial liquidity and identifies the risk factors
and the management of such risks relating to Boardwalk REIT and its business. There are other risk factors to an
investment in REIT Units not associated with investments in Common Shares that include, but are not limited to
the following:
Boardwalk REIT, like most real estate rental entities, is exposed to a variety of risk areas. These areas are
categorized between general and specific risks. General risks are the risks associated with general conditions in
the real estate sector, and consist mainly of commonly exposed risks that affect the real estate industry. Specific
risks focus more on risks uniquely identified with the Trust, such as credit, market, liquidity and operational risks.
The following will address each of these risks. In addition, this section should be read in conjunction with the
Trust's management discussion and analysis of financial condition and results of operations for the year ended
December 31, 2014. See "Additional Information".
Risks Due to Investment in Real Estate
Real property investments are generally subject to varying degrees of risk depending on the nature of the
property. These risks include changes in general economic conditions (such as the availability and cost of
mortgage funds), local conditions (such as an oversupply of space or a reduction in demand for real estate in the
area), government regulations (such as new or revised residential tenancy legislation), the attractiveness of the
properties to tenants, competition from others with available space and the ability of the owner to provide
adequate maintenance at an economic cost.
The yields available from investments in real estate depend upon the amount of revenue generated and
expenses incurred. If properties do not generate revenues sufficient to meet operating expenses, including debt
service and capital expenditures, Boardwalk REIT's results from operations and ability to make distributions to its
Unitholders will be adversely affected. The performance of the economy in each of the areas in which the
properties are located affects occupancy, market rental rates and expenses. These factors consequently can have
- 48 an impact on revenues from the properties and their underlying values. The financial results and labour decisions
of major local employers may also have an impact on the revenues from and value of certain properties.
Other factors may further adversely affect revenues from and values of our properties. These factors
include the general economic climate, local conditions in the areas in which properties are located, such as an
oversupply of apartment units or a reduction in the demand for apartment units, the attractiveness of the properties
to residents, competition from other multifamily communities and our ability to provide adequate facilities
maintenance, services and amenities. Our revenues would also be adversely affected if residents were unable to
pay rent or we were unable to rent apartments on favourable terms. If we were unable to promptly re-let or renew
the leases for a significant number of apartment units, or if the rental rates upon renewal or re-letting were
significantly lower than expected rates, then our funds from operations would, and our ability to make expected
distributions to our Unitholders and to pay amounts due on our debt may, be adversely affected. There is also a
risk that as leases on the properties expire, residents will vacate or enter into new leases on terms that are less
favourable to us. Operating costs, including real estate taxes, insurance and maintenance costs, and mortgage
payments, if any, do not, in general, decline when circumstances cause a reduction in income from a property.
We could sustain a loss as a result of foreclosure on the property, if a property is mortgaged to secure payment of
indebtedness and we were unable to meet our mortgage payments. In addition, applicable laws, including tax
laws, interest rate levels and the availability of financing also affect revenues from properties and real estate
values.
Currently, we operate in Canada, in the provinces of Alberta, Saskatchewan, Ontario and Quebec.
Neither of Alberta and Saskatchewan is subject to rent control legislation; however, under Alberta legislation a
landlord is only entitled to increase rents once every year. See "Challenges and Risks – Rent Control Risks".
Certain significant expenditures, including property taxes, maintenance costs, mortgage payments,
insurance costs and related charges, must be made regardless of whether or not a property is producing sufficient
income to service these expenses.
The Trust's properties are subject to mortgages, which require significant debt service payments. If the
Trust were unable or unwilling to meet mortgage payments on any property, losses could be sustained as a result
of the mortgagee's exercise of its rights of foreclosure or of sale. In addition, financial difficulties of other
property owners resulting in distressed sales may depress real estate values in the markets in which the Trust
operates.
Illiquidity of Real Estate and Reinvestment Risk may Reduce Economic Returns to Investors.
Real estate investments are relatively illiquid and, therefore, tend to limit our ability to adjust our
portfolio in response to changes in economic or other investment conditions. To affect our current operating
strategy, we have in the past raised, and will seek to continue to raise additional funds, both through outside
financing and through the orderly disposition of assets that no longer meet our investment criteria. Depending
upon interest rates, current development and acquisition opportunities and other factors, generally we will reinvest
the proceeds in additional multifamily properties, although such funds may be employed in other uses. In the
markets we have targeted for future acquisition of multifamily properties, there is considerable buying
competition from other real estate companies, some of which may have greater resources, experience or expertise
than we. In many cases, this competition for acquisition properties has resulted in an increase in property prices
and a decrease in property yields.
Adverse Changes in Laws may Affect our Potential Liability Relating to our Properties and our Operations.
Increases in real estate taxes and income, service and transfer taxes cannot always be passed through to
residents or users in the form of higher rents, and may adversely affect our cash available for distribution and our
ability to make distributions to our Unitholders and to pay amounts due on our debt. Similarly, changes or
interpretations of existing laws increasing the potential liability for environmental conditions existing on
properties or increasing the restrictions on discharges or other conditions, as well as changes in laws affecting
- 49 development, construction and safety requirements, may result in significant unanticipated expenditures, which
could have a material adverse effect on us and our ability to make distributions to our shareholders and pay
amounts due on our debt. In addition, future enactment of rent control or rent stabilization laws or other laws
regulating multifamily housing may reduce rental revenues or increase operating costs.
Multi-Family Residential Sector Risk
Income producing properties generate income through rent payments made by tenants of the properties.
Upon the expiry of any lease, there can be no assurance that the lease will be renewed or the tenant replaced. The
terms of any subsequent lease may be less favourable to the Trust than the existing lease. To mitigate this risk,
the Trust does not have any one or small group of significant tenants. Each operating lease signed is for a period
of 12 months or less. The Trust is dependent on leasing markets to ensure vacant residential space is leased,
expiring leases are renewed and new tenants are found to fill vacancies.
While it is not expected that markets will significantly change in the near future, a disruption in the
economy could have a significant impact on how much space tenants will lease and the rental rates paid by
tenants. This would affect the income produced by the Trust's properties as a result of downward pressure on
rents. Specifically, the dramatic decline in resource prices near the end of 2014 and the start of 2015, if sustained
over a long period, may result in a significant slowing of Alberta’s and Saskatchewan’s economic growth, and
have a corresponding longer-term impact on rental and vacancy rates. By way of illustration, a number of energy
producing companies have recently reduced or scaled back 2015 capital spending plans, with some even reducing
dividend payouts.
This potential slowing of Western Canada’s economic growth rate, if sustained over a long period, may
filter through to weaker employment prospects, a tempering of housing demand and a decline in net migration. In
contrast, oil-consuming provinces, like Ontario and Quebec, may see an increase to GDP growth forecasts as
lower crude oil prices and a lower Canadian dollar should provide a lift to manufacturing activity. This, coupled
with rising U.S. Demand, should provide a lift to economic growth in Ontario and Quebec, which should help
mitigate any slowdown in the Trust’s Western Canadian markets. While the apartment rental market still remains
one of the most affordable housing options in Canada, Boardwalk continues to monitor the volatility of resource
prices to see if adjustments will be needed to its rental revenue strategy, for example, by offering more incentives
for longer-term leases. Long-term Government of Canada benchmark yields remain low and stable, and have
continued to decline since March of 2014, despite previous forecasts that interest rates were headed higher.
Lower bond rates should reduce the Trust’s borrowing costs and help mitigate any negative impact on the Trust’s
rental and vacancy rates in Western Canada from lower oil prices. However, uncertainty still remains regarding
how interest rates will play out for the foreseeable future, especially given the downside risk to 2015 economic
growth brought on by the recent sharp decline in oil prices.
Environmental Risks
As an owner and manager of real property, the Trust is subject to various Canadian federal, provincial,
and municipal laws relating to environmental matters.
These laws could encumber the Trust with liability for the costs of removal and remediation of certain
hazardous substances or wastes released or deposited on or in its properties or disposed of at other locations. The
failure to remove or remediate such substances, if any, could adversely affect the Trust's ability to sell its real
estate, or to borrow using real estate as collateral, and could potentially also result in claims or other proceedings
against the Trust. Although the Trust is not aware of any material non-compliance with environmental laws at
any of its properties nor is it aware of any pending or threatened investigations or actions by environmental
regulatory authorities in connection with any of its properties or any material pending or threatened claims
relating to environmental conditions at its properties, no assurance can be given that environmental laws will not
result in significant liability to the Trust in the future or otherwise adversely affect the Trust's business, financial
condition or results of operations.
- 50 The Trust has formal policies and procedures to review and monitor environmental exposure. The Trust
has made, and will continue to make, the necessary capital expenditures for compliance with environmental laws
and regulations.
Environmental laws and regulations can change rapidly and may become more stringent in the future.
Compliance with more stringent environmental laws and regulations could have a material adverse effect on the
Trust's business, financial condition or results of operation.
Ground Lease Risk
Five (5) of the Trust's properties located in Calgary (1), Banff (1), Edmonton (1) and Montreal (2) are
subject to long-term ground (or land) leases and similar arrangements in which the underlying land is owned by a
third party and leased to the Trust. Under the terms of a typical ground lease, the lessee must pay rent for the use
of the land and is generally responsible for all costs and expenses associated with the building and improvements,
including taxes, utilities, insurance, maintenance, repairs and replacements. Unless the lease term is extended, the
land together with all improvements made will revert to the owner of the land upon the expiration of the lease
term. These leases are set to expire between 2028 and 2096. Approximately 10% of the Trust’s FFO derives
from the properties in its portfolio which are held as long-term ground leases. The Trust is and will actively seek
to either renew the terms of such leases or purchase the freehold interest in the lands forming the subject matter of
such leases prior to the expiry of their terms. However, if the Trust cannot or chooses not to renew such leases, or
buy the land of which they form the subject matter, as the case may be, the net operating income and cash flow
associated with such properties would no longer contribute to Boardwalk’s results of operations and could
adversely impact its ability to make distributions to Unitholders.
The ground lease for the largest Montreal property, the Nun's Island portfolio, is also subject to a rent
revision clause, which commenced on December 1, 2008 (with a valuation date of March 16, 2008). It is phased
in on a property-by-property basis through to December 19, 2014, and is based on 75% of the land value in its
current use. After that revision, the land rent will remain constant thereafter through to 2064. An event of default
by the Trust under the terms of a ground lease could also result in a loss of the property subject to such ground
lease should the default not be rectified in a reasonable period of time. The Trust is not aware of any default
under the terms of any of its ground leases.
Competition Risk
Each segment of the real estate business is competitive. Numerous other residential developers and
apartment owners compete in seeking tenants. Although the Trust's strategy is to own multi-family properties in
premier locations in each market in which it operates, some of the apartments of the Trust's competitors may be
newer, better located or better capitalized. The existence of alternative housing could have a material adverse
effect on the Trust's ability to lease space in its properties and on the rents charged or concessions granted, and
could adversely affect The Trust's revenues and its ability to meet its obligations.
General Uninsured Losses
The Trust carries comprehensive general liability, fire, flood, extended coverage and rental loss insurance
with policy specifications, limits and deductibles customarily carried for similar properties. There are, however,
certain types of risks (generally of a catastrophic nature such as war or environmental contamination), which are
either uninsurable or not economically insurable.
The Trust currently has insurance for earthquake risks, subject to certain policy limits, deductibles and
self-insurance arrangements, and will continue to carry such insurance if it is economical to do so. Should an
uninsured or underinsured loss occur, the Trust could lose its investment in, and anticipated profits and cash flows
from, one (1) or more of its properties, and would continue to be obligated to repay any recourse mortgage
indebtedness on such properties.
- 51 Credit Risk
Credit risk is the risk of loss due to failure of a contracted customer to fulfill the obligation of required
payments. One of the key credit risks to the Trust is the possibility that its customers will be unable or unwilling
to fulfill their lease term commitments. Due to the very nature of the business of renting multi – family
residential apartment units, credit risk is not deemed to be very high. The Trust currently has 35,386 rental
apartment units, each of which has a separate lease. Accordingly, the Trust is not reliant on any one (1) customer
or lease. To further mitigate this risk, the Trust has and continues to diversify its portfolio in various major
centers across Canada. Further, each of the Trust's rental units has its own individual lease agreement, thus the
Trust has no material financial exposure to any particular customer or group of customers.
The Trust continues to utilize extensive screening processes for all potential customers including, but not
limited to, detailed credit checks.
Market Risk
Market Risk is the risk that the Trust could be adversely affected due to market changes in product
supply, interest rates and regional rent controls. The Trust's principal exposures to market risk are in the areas of
new multi-family housing supply, changes to rent controls, utility price increases, property tax increases, higher
interest rates and mortgage renewal risk.
Supply Risk
Supply Risk is the risk that the Trust would be negatively affected by the new supply of, and demand for,
multi-family residential units in its major market areas. Key drivers of demand include employment levels,
population growth, demographic trends and consumer confidence. Any significant amount of new construction
will typically result in an imbalance in supply and cause downward price pressure on rents.
There are currently no signs of significant new rental construction in any of the Trust's existing markets.
Studies have shown that in order to economically justify new rental construction in Boardwalk REIT's major
markets, an increase in existing rental rates of hundreds of dollars will be necessary. However, in certain market
areas such as Calgary, Alberta there has been a significant increase in the number of new condominiums
constructed over the past few years. While these normally are earmarked as owner-occupied properties, a
significant number of these condominium units have been, or may be, converted to rental stock.
Our performance will always be affected by the supply and demand for multi-family rental real estate in
Canada. The potential for reduced rental revenue exists in the event that Boardwalk REIT is not able to maintain
its properties at a high level of occupancy, or in the event of a downturn in the economy, which could result in
lower rents or higher vacancy rates. Boardwalk REIT has minimized these risks by:

Increasing customer satisfaction;

Diversifying its portfolio across Canada, thus lowering its exposure to regional economic swings;

Acquiring properties only in desirable locations, where vacancy rates for properties are higher than citywide averages but can be reduced by repositioning the properties through better management and
selective upgrades;

Holding a balanced portfolio which includes a variety of multi-family building types including high-rise,
townhouse, garden and walk-ups, each with its own market niche;

Maintaining a wide variety of suite mix, including bachelor suites, one (1), two (2), three (3) and four (4)
bedroom units;

Building a broad and varied customer base, thereby avoiding economic dependence on larger-scale
tenants;

Focusing on affordable multi-family housing, which is considered a stable commodity;
- 52 
Developing a specific rental program characterized by rental adjustments that are the result of enhanced
service and superior product; and

Developing regional management teams with significant experience in the local marketplace, and
combining this experience with our existing operations and management expertise.
Refinancing Risk
Refinancing risk is the combined risk that the Trust would experience a loss as a result of its exposure to a
higher interest rate environment (“interest rate risk”) and the possibility that at the term end of a mortgage, the
Trust would be unable to renew the maturing debt with either the existing or an additional lender (“renewal
risk”)
Boardwalk did not see any increase in exposure to interest rate risk in 2014 as renewal rates were at their
lowest level. However, with the current world economic and financial volatility, there is a heightened risk that
not only will existing maturing mortgages be subject to increased interest rate charges, but the distinct possibility
also exists that maturing mortgages will themselves not be able to be renewed or, if they are, at significantly lower
loan to value ratios.
The Trust continues to manage its refinancing risk by maintaining a balanced maturing portfolio with no
significant amount coming due in any one particular period. In addition, the majority of the Trust's debt is insured
with NHA insurance. This insurance allows the Trust to increase the overall credit quality of the mortgage and, as
such, enable the Trust to obtain preferential interest rates as well as facilitating easier renewal on its due date.
The use of NHA insurance also assists the Trust in managing its renewal risk. Given the increased credit
quality of such debt, the probability of the Trust being unable to renew the maturing debt or transfer this debt to
another accredited lending institution is significantly reduced. However, there can be no assurance that the
renewal of debt will be on as favourable terms as the Trust's existing debt.
To date, the Trust has had no problem obtaining renewals on maturing mortgages and, in addition, where
requested, additional funds continue to be available to the Trust on its investment properties. Although the Trust
continues to see fluctuations in the quoted credit spread over the corresponding bench mark bonds, the all in
quoted rates, due to a general decline in interest rates, continue to be at levels well below the term maturing rate
and, as such, are accretive to the Trust as a whole.
In 2013, the Government of Canada announced it would be capping the total amount of NHA insurance
that CMHC can provide at an aggregate limit of $600 billion. This decision has primarily affected the amount of
portfolio or bulk insurance CMHC offers to banks and, in Management’s assessment, has had, to date, minimal
impact on the renewal of Boardwalk's mortgages or the cost of secured debt capital. However, there is no
assurance that the decision to cap the amount of CMHC insurance will not affect mortgages for multi-family
residential properties in future periods.
The Trust continues to monitor this situation and, depending on the changes, if any, the Government of
Canada places on the NHA insurance product, the impact on the Trust could vary. It is Management’s current
understanding that this cap would not affect any pre-existing insurance agreements. Over 99% of Boardwalk's
secured debt has NHA insurance on it with an average of 31years of amortization remaining. The larger risk may
be to the ability to issue new secured debt under this program at the corresponding lower cost associated with the
use of NHA insurance, the proceeds of which the Trust uses to assist in the execution of its overall business
strategy.
The Trust continues to monitor this situation on a daily basis and may adjust its strategy given the market
and political conditions.
The Trust also manages its interest rate risk by, on a selective basis, forward contracting with a major
financial institution to hedge the Trust's exposure to Canadian bond yield fluctuations. When the Trust finances
its secured mortgage portfolio, the new interest rate is based on the market yield of the corresponding
- 53 Government of Canada Bond plus what is referred to as a "spread". Although the market spread on these
transactions will vary, the one constant is the specific bond that the Trust will be using as the underlying basis.
In addition, the Trust also maintains a reasonable level of liquidity to assist in the implementation of its
strategy, as well as to provide a contingency for any unforeseen circumstances. At December 31, 2014 the Trust’s
liquidity position, defined as “Cash Available”, coupled with any unused revolving credit facilities, totaled over
$338 million. However, $72 million of that amount was dedicated to the Special Distribution (defined below).
For more information on the Special Distribution, please see the disclosure below under the heading “Distribution
Policy – Special Distribution”.
Development Risk
As previously noted under the heading "Strategy for Growth", the Trust is reviewing and considering
development of new selective multi-family or condominium projects on its excess density. Although this review
and consideration is in a very preliminary stage, any development commitments made by the Trust will be subject
to those risks usually attributable to development projects, which include:
(i)
construction or other unforeseeable delays;
(ii)
cost overruns;
(iii)
poor market for sales; and/or
(iv)
the failure of tenants to occupy and pay rent.
Such risks are minimized through the provisions of the Declaration of Trust, which have the effect of
limiting direct and indirect investments (net of related mortgage debt) in non-income producing properties to no
more than 15% of the Adjusted Unitholders' Equity. Such developments will also likely be undertaken with
established developers either on a co-ownership basis or, less likely, by providing them with mezzanine financing.
With some exceptions, from time to time, especially in high growth markets, generally we will not acquire or fund
significant expenditures for undeveloped land unless it is zoned and an acceptable level of space has been presold. An advantage of new format multi-family or condominiums is that they lend themselves to phased
construction keyed to vacancy rates and/or sales levels, respectively, which avoids the creation of meaningful
amounts of vacant space.
Structural Subordination
Liabilities of a parent entity with assets held by various subsidiaries may result in the structural
subordination of the lenders of the parent entity. The parent entity is entitled only to the residual equity of its
subsidiaries after all debt obligations of its subsidiaries are discharged. In the event of a bankruptcy, liquidation
or reorganization of the Trust, holders of indebtedness of the Trust may become subordinate to lenders to the
subsidiaries of the Trust.
Certain of the subsidiaries of the Trust will provide a form of guarantee pursuant to which the lender will
be entitled to seek redress from such subsidiaries for the guaranteed indebtedness. These guarantees are intended
to eliminate structural subordination, which arises as a consequence of the Trust’s assets being held in various
subsidiaries. Although all subsidiaries, which own material assets, will provide a guarantee, not all subsidiaries of
the Trust will provide such a guarantee. In addition, there can be no assurance that a lender will, or will be able
to, effectively enforce the guarantee.
Rent Control Risk
Rent Control Risk is the risk of the implementation or amendment of new or existing legislative rent
controls in the markets the Trust operates, which may have an adverse impact on the Trust's operations. Ontario
and Quebec, all of which currently have rent control legislation, are three (3) markets in which the Trust operates.
- 54 Under Ontario's rent control legislation, commonly known as "rent de-control", a landlord is entitled to
increase the rent for existing tenants once every 12 months by no more than the "guideline amount" established
by regulation. For the calendar year 2015, the guideline amount has been established at 1.6% (0.8% for 2014).
Further
details
on
Ontario’s
annual
rent
increase
guidelines
can
be
found
at
http://www.landlordselfhelp.com/RentIncreaseGuideline.htm. This adjustment is meant to take into account
the income of the building and the municipal and school taxes, the insurance bills, the energy costs, maintenance
and service costs. Landlords may apply to the Ontario Rental Housing Tribunal for an increase above the
guideline amounts if annual costs for heat, hydro, water or municipal taxes have increased significantly or if
building security costs have increased. When a unit is vacated, however, the landlord is entitled to lease the unit
to a new tenant at any rental amount, after which annual increases are limited to the applicable guideline amount.
The landlord may also be entitled to a greater increase in rent for a unit under certain circumstances, including, for
example, where extra expenses have been incurred as a result of a renovation of that unit.
Under Quebec's rent control legislation, a landlord is entitled to increase the rent for existing tenants once
a year for the rent period starting after April 1st of the current year but before April 1st of the following year.
There is no fixed rate increase specified by regulation. Rent increases also take into account a return on capital
expenditures (for 2015 this return is 2.9% compared to 2.6% for 2014), if such expenditures were incurred, and an
indexing of the net income of the building. Average rent increase estimates for the period starting after April 1,
2015 and before April 2, 2015, before any consideration for increases to municipal and school taxes and capital
expenditures, are: 1.0% for electricity heated dwellings, 1.8% for gas heated dwellings, 1.4% for oil heated
dwellings and 0.6% for non-heated dwellings. None of the Trust’s Quebec Assets are oil heated.
To manage this risk, prior to entering a market where rent controls are in place, an extensive amount of
time is spent researching the existing rules and, where possible, the Trust will ensure it employs people who are
experienced in working in these controlled environments. In addition, the Trust adjusts forecast assumptions on
new acquisitions to ensure they are reasonable given the rent control environment.
Effective April 24, 2007, the Government of Alberta amended its residential tenancies legislation. The
most significant changes to the legislation focused on two (2) key areas, the first being the number of rental
increases that an owner could issue to a renter on an annual basis and the second being the notice period required
if an owner is contemplating a significant renovation or condominium conversion.
Rental increases limited to once per year – the legislation stipulates that an owner may increase existing
tenant rents not more than one time per year; previously, owners were able to increase rents once every
six (6) months, or twice per year. It should be noted that in this legislation, there is no limitation placed
on the amount rents can increase.
Notice for extensive renovations or condominium conversion - the legislation introduced limitations on an
owner that wishes to convert an existing rental property to a condominium. Under the legislation, an
owner is required to give the existing tenants a notice of one year and, during that one year notice period,
the owner will not be able to increase rents at any time. Previous legislation required only a notice period
of six (6) months and there was no limitation on the number of rental increases other than the twice (2 x)
per year limit referred to in the immediately preceding paragraph.
It should be emphasized that there have been no changes or limitations as to the market rents charged in
Alberta. Accordingly, there are no new limitations placed on the amount which can be charged to new renters by
Boardwalk REIT.
Impact on Boardwalk REIT - Boardwalk REIT currently has over 50% of its rental portfolio in Alberta
and, as such, any change to existing legislation needs to be reviewed, and any potential impact needs to be
considered, carefully. It is currently Boardwalk REIT's internal policy to limit increases to the rents of
existing customers over a one-year period; as noted above, the same limitation does not apply to new
customers, who will be charged market rents. The Trust's previous policy was to split the annual
maximum into two (2) equal instalments every six (6) months. The legislation now limits Boardwalk
REIT to one (1) increase per year and, accordingly, the Trust has amended its previous practice by
- 55 increasing the in-place rents by a maximum amount once per year. The Trust also now offers existing
customers a fixed 12-month lease with the maximum rental increase in place.
Presently, rent control legislation does not exist in, and, to the best of Management’s knowledge, is not
planned for Saskatchewan.
Utility and Property Tax Risk
Utility and Property Tax Risk relates to the potential loss the Trust may experience as a result of higher
resource prices as well as its exposure to significant increases in property taxes. Over the past few years, property
taxes have increased as a result of re-valuations of municipal properties and their adherent tax rates. For the
Trust, these re-valuations have resulted in significant increases in some property assessments due to
enhancements, which are not represented on the Trust's balance sheet (as such representations are contrary to
existing GAAP reporting standards). To address this risk, Boardwalk REIT has compiled a specialized team of
property reviewers who, with the assistance of outside authorities, constantly review property tax assessments
and, where warranted, appeal them.
Utility expenses, mainly consisting of natural gas and electricity service charges, have been subject to
considerable price fluctuations over the past several years. Any significant increase in these resource costs that
the Trust cannot pass on to the customer may have a negative material impact on the Trust. To mitigate this risk,
the Trust (and its predecessor in interest, the Corporation) has played a more active role in controlling the
fluctuation and predictability of this risk. Through the combined use of financial instruments and resource
contracts with varying maturity dates, exposure to these fluctuations has reduced. In addition, the Trust has
implemented the following steps:
(a) where possible, economical electrical sub-metering devices are being installed, passing on the
responsibility for electricity charges to the end customer, and
(b) in other cases, rents have been, or will be, adjusted upward to cover these increased costs.
Risks Due to Real Estate Financing
We anticipate that future acquisitions will be financed, in whole or in part, under various lines of credit,
and other forms of secured or unsecured financing or through the issuance of additional debt or equity by us. We
expect periodically to review our financing options regarding the appropriate mix of debt and equity financing.
Equity, rather than debt, financing of future developments or acquisitions could have a dilutive effect on the
interests of our existing Unitholders. Similarly, there are certain risks involved with financing future
developments and acquisitions with debt, including those described below. In addition, if new developments are
financed through construction loans, there is a risk that, upon completion of construction, permanent financing for
such properties may not be available or may be available only on disadvantageous terms, or that the cash flow
from new properties will be insufficient to cover debt service. If a newly developed or acquired property is
unsuccessful, our losses may exceed our investment in the property. Any of the foregoing could have a material
adverse effect on us and our ability to make distributions to our Unitholders and to pay amounts due on our debt.
The Trust may be Unable to Renew, Repay or Refinance our Outstanding Debt.
We are subject to the normal risks associated with debt financing, including the risk that our cash flow
will be insufficient to meet required payments of principal and interest, the risk that indebtedness on our
properties, or unsecured indebtedness, will not be able to be renewed, repaid or refinanced when due or that the
terms of any renewal or refinancing will not be as favourable as the existing terms of such indebtedness. If we
were unable to refinance our indebtedness on acceptable terms, or at all, we might be forced to dispose of one (1)
or more of the properties on disadvantageous terms, which might result in losses to us. Such losses could have a
material adverse effect on us and our ability to make distributions to our Unitholders and pay amounts due on our
debt. Furthermore, if a property is mortgaged to secure payment of indebtedness and we are unable to meet
mortgage payments, the mortgagee could foreclose upon the property, appoint a receiver and receive an
- 56 assignment of rents and leases or pursue other remedies, all with a consequent loss of our revenues and asset
value. Foreclosures could also create taxable income without accompanying cash proceeds, thereby hindering our
ability to meet the REIT distribution requirements of applicable tax legislation.
The Trust’s Degree of Leverage Could Limit its Ability to Obtain Additional Financing
Our Consolidated EBITDA to Consolidated Interest Expense was 3.32 to 1 as of December 31, 2014.
Our degree of leverage could have important consequences to Unitholders. For example, the degree of leverage
could affect our ability to obtain additional financing in the future for working capital, capital expenditures,
acquisitions, development or other general corporate purposes, making us more vulnerable to a downturn in
business or the economy in general. Under our current Declaration of Trust, the Trust must maintain a
Consolidated EBITDA to Consolidated Interest Expense of 1.50 to 1. For more information, please see the
disclosure under the heading “Internal Guidelines and Operating Policies of Boardwalk REIT – Operating
Policies”.
Insurance Policy Deductibles and Exclusions
In order to partially mitigate the substantial increase in insurance costs in recent years, management has
determined to gradually increase deductible and self-insured retention amounts. As of December 31, 2014, the
Trust's property insurance policy provides for a per occurrence deductible of $100,000 with any excess losses
being covered by insurance. As a result of the terrorist attacks of September 11, 2001, property insurance carriers
have created exclusions for losses from terrorism from the Trust’s "all risk" property insurance policies. While
separate terrorism insurance coverage is available in certain instances, premiums for such coverage are generally
very expensive and deductibles are very high and, in many cases, unavailable. Additionally, the terrorism
insurance coverage that is available typically excludes coverage for losses from nuclear, biological and chemical
attacks. At the present time, the Trust has determined that it is not economically prudent to obtain property
terrorism insurance for its entire portfolio to the extent otherwise available, especially given the significant risks
that are not covered by such insurance. As of December 31, 2014, the Trust carried a total liability insurance
policy of $95 million per occurrence.
Outstanding Indebtedness
The ability of Boardwalk REIT to make cash distributions to Unitholders or to make other payments are
subject to applicable law and contractual restrictions contained in instruments governing Boardwalk REIT's
indebtedness. Although Boardwalk REIT is not currently in default under any existing loan agreements or
guarantee agreements, any future default could have significant consequences for Unitholders. Further, the
amount of Boardwalk REIT's indebtedness could have significant consequences to holders of Units, including that
the ability of Boardwalk REIT to obtain additional financing for working capital, capital expenditures or future
acquisitions may be limited; and that a significant portion of Boardwalk REIT's cash flow from operations may be
dedicated to the payment of principal and interest on its indebtedness, thereby reducing funds available for future
operations and distributions. Additionally, some of Boardwalk REIT's debt may be at variable rates of interest or
may be renewed at higher rates of interest, which may affect cash flow from operations available for distributions.
Also, in the event of a significant economic downturn, there can be no assurance that Boardwalk REIT will
generate sufficient cash flow from operations to meet required interest and principal payments. Boardwalk REIT
is subject to the risk that it may not be able to refinance existing indebtedness upon maturity or that the terms of
such refinancing may be onerous. These factors may adversely affect Boardwalk REIT's cash distributions.
In addition to mortgages associated with the majority of the properties owned by Boardwalk REIT,
Boardwalk REIT, through the Partnership, has an outstanding credit facility of $200 million (the "Facility"). See
"Strategy for Growth – Managing Capital". Certain properties have a first or second charge registered against
them as security for the Facility. The interest rate charged under the Facility varies depending on the charged
properties but will be a blend of the prime rate established by the lender for Canadian dollar loans made in
Canada (the "Prime Rate") and Prime Rate plus one percent (1%). The Facility also has various other fees
- 57 including an arrangement fee, a commitment fee, an administration fee and a renewal fee which in the aggregate
are not material to Boardwalk REIT.
In addition to the charge on specific properties (the "Secured Properties"), the Facility provides for an
assignment of rents, an assignment of insurance proceeds in the event of loss of any of the Secured Properties and
guarantees from various subsidiary entities.
The Partnership and other entities which have guaranteed the Facility are prohibited from paying
distributions in the event that any mortgage on real property owned by or for the benefit of the REIT is in default
in payment, unless a specific reserve in respect of such mortgage is retained.
In the event that Boardwalk REIT defaults in payment of any mortgage and is unable or unwilling to
establish an appropriate reserve, distributions to Unitholders would be prohibited.
In addition, the Facility has certain operational covenants, including that the debt service coverage ratio is
to be maintained at not less than 1.20:1, the debt service coverage ratio specific to the Secured Properties is to be
maintained at not less than 115% and the total indebtedness of Boardwalk REIT will not exceed 75% of the Gross
Book Value of the properties owned by Boardwalk REIT calculated in accordance with the Declaration of Trust.
Boardwalk has entered into a large borrower agreement which was amended and restated on January 19,
2005 and April 25, 2006 (the "LBA") with CMHC. CMHC, under a program generally available to Canadian
homeowners, guarantees mortgage debt. Approximately 99% of Boardwalk REIT's mortgage debt is insured by
CMHC and, in accordance with CMHC's normal practice for large borrowers, Boardwalk REIT was required to
enter into the LBA. CMHC is not a lender to Boardwalk REIT but, under the LBA, Boardwalk REIT is required
to provide periodic operating and performance information to CMHC. The LBA also contains various financial
performance covenants. If Boardwalk REIT fails to meet such performance covenants for four (4) consecutive
fiscal quarters and is unable or unwilling to pay into a reserve account an amount sufficient to remedy such
performance covenants or to pay out the offending mortgages, then CMHC can prohibit Boardwalk REIT from
making cash distributions on the Units.
Acquisition Performance Risk
Boardwalk REIT's strategy includes, in part, the ability of the Trust to acquire additional rental properties.
The acquisitions of these properties are based on predetermined financial operational and financing strategies that,
once fully implemented, will result in an acceptable return for the Trust as a whole. It is possible that the actual
performance of these acquisitions may be materially different from the assumptions made in purchasing same,
resulting in a negative outcome for the Trust as a whole.
Operational Risk
Operational Risk is the risk that a direct or indirect loss may result from an inadequate or failed
technology, from a human process or from external events. The impact of this loss may be financial loss, loss of
reputation or legal and regulatory proceedings. The Trust endeavours to minimize losses in this area by ensuring
that effective infrastructure and controls exist. These controls are constantly reviewed and improvements are
implemented, if deemed necessary.
Dependence on the Operating Trust and the Partnership
Boardwalk REIT is entirely dependent on the business of the Partnership through its ownership of the
Operating Trust and, indirectly, LP Class A Units. The cash distributions to Unitholders are dependent on the
ability of the Operating Trust to pay distributions in respect of the Operating Trust Units and interest on the
Operating Trust Notes and the ability of the Partnership to pay distributions on the LP Class A Units, LP Class B
Units and LP Class C Units. The ability of the Partnership to pay distributions or make other payments or
advances to the Operating Trust may be subject to contractual restrictions contained in any instruments governing
the indebtedness of the Partnership. The ability of the Partnership to pay distributions or make other payments or
- 58 advances will also be dependent on the ability of the Partnership's subsidiaries to pay distributions or make other
payments or advances to the Partnership.
Fluctuations of Cash Distributions
Although Boardwalk REIT intends to make Distributions, the actual amount of Trust income distributed
in respect of the REIT Units will depend upon numerous factors, including, but not limited to, the amount of
principal repayments, tenant allowances, leasing commissions, capital expenditures and REIT Unit redemptions
and other factors that may be beyond the control of Boardwalk REIT.
The distribution policy of Boardwalk REIT is established by the Trustees and is subject to change at the
discretion of the Trustees. The recourse of Unitholders who disagree with any change in policy is limited and
could require such Unitholders to seek to replace the Trustees.
Distributions may exceed actual cash available to Boardwalk REIT from time to time because of items
such as principal repayments, tenant allowances, leasing commissions, capital expenditures and redemption of
REIT Units, if any. Boardwalk REIT may be required to use part of its debt capacity or to reduce Distributions in
order to accommodate such items. Boardwalk REIT may temporarily fund such items, if necessary, through an
operating line of credit in expectation of refinancing long-term debt on its maturity.
Workforce Availability
Boardwalk's ability to provide services to its existing customers is somewhat dependent on the
availability of well-trained employees and contractors to service its customers as well as to complete required
maintenance and capital upgrades on the Trust’s buildings. The Trust must also balance requirements to maintain
adequate staffing levels while balancing the overall cost to the Trust.
Within Boardwalk, our most experienced associates are employed full-time while supplementing these
with additional part time employees as well as contracting out specific services. The Trust is constantly
reviewing existing overall market factors to ensure that our existing compensation program is in-line with existing
levels of responsibilities and if warranted adjusting the program accordingly. The Trust also encourages associate
feedback in these areas to ensure the existing programs are meeting their personal needs.
Market Price of REIT Units
One of the factors that may influence the market price of the REIT Units is the annual yield thereon.
Accordingly, an increase in market interest rates may lead purchasers of REIT Units to expect a higher
annual yield which could adversely affect the market price of the REIT Units. In addition, the market price for
the REIT Units may be affected by changes in general market conditions, fluctuations in the markets for equity
securities, short-term supply and demand factors for real estate investment trusts and numerous other factors
beyond the control of Boardwalk REIT.
The Trust has no obligation to distribute to Unitholders any fixed amount, and reductions in, or
suspensions of, cash distributions may occur that would reduce yield based on the offering price.
Legal Rights Normally Associated with the Ownership of Shares of a Corporation
As holders of REIT Units, Unitholders do not have all of the statutory rights normally associated with
ownership of shares of a company including, for example, the right to bring "oppression" or "derivative" actions
against Boardwalk REIT. The REIT Units are not "deposits" within the meaning of the Canada Deposit
Insurance Corporation Act (Canada) and are not insured under the provisions of that Act or any other legislation.
Furthermore, Boardwalk REIT is not a trust company and, accordingly, is not registered under any trust
and loan company legislation as it does not carry on or intend to carry on the business of a trust company.
- 59 Ability of Unitholders to Redeem REIT Units
It is anticipated that the redemption right attached to the REIT Units will not be the primary mechanism
by which holders of such REIT Units liquidate their investments. The entitlement of holders of REIT Units to
receive cash upon the redemption of their REIT Units is subject to the limitations that: (i) the total amount
payable by Boardwalk REIT in respect of such REIT Units and all other REIT Units, other than Special Voting
Units, tendered for redemption in the same calendar month shall not exceed $50,000 (provided that such
limitation may be waived at the discretion of the Trustees); (ii) at the time such REIT Units are tendered for
redemption, the outstanding REIT Units shall be listed for trading on a stock exchange or traded or quoted on
another market which the Trustees consider, in their sole discretion, provides representative fair market value
prices for such REIT Units; and (iii) the normal trading of the REIT Units is not suspended or halted on any stock
exchange on which such REIT Units are listed (or, if not listed on a stock exchange, on any market on which such
REIT Units are quoted for trading) on the redemption date or for more than five (5) trading days during the 20day trading period commencing immediately after the redemption date.
Regulatory Approvals May be Required in Connection with a Distribution of Securities
on a Redemption of REIT Units or the Termination of Boardwalk REIT
Upon redemption of REIT Units or termination of Boardwalk REIT, the Trustees may distribute securities
directly to the Unitholders, subject to obtaining any required regulatory approvals. No established market may
exist for the securities so distributed at the time of the distribution and no market may ever develop.
In addition, the securities so distributed may not be qualified investments for RRSPs, RRIFs, DPSPs or
RESPs, depending upon the circumstances at the time.
An Investment in REIT Units is Subject to Certain Tax Risks
There can be no assurance that Canadian federal income tax laws respecting the treatment of mutual fund
trusts and real estate investment trusts will not be changed in a manner which adversely affects the holders of
REIT Units.
Boardwalk REIT currently qualifies as a "mutual fund trust" for income tax purposes. Boardwalk REIT
also qualifies as a “real estate investment trust”, which is exempted from income taxes imposed on specified
investment flow-through entities as discussed below. It is Boardwalk REIT’s intention to annually distribute all
of its taxable income to REIT Unitholders and thus generally not be subject to tax on such amount, unless the
Board of Trustees in its absolute discretion determines another amount. In order to maintain its current mutual
fund trust status, Boardwalk REIT is required to comply with specific restrictions regarding its activities and the
investments held by it. If Boardwalk REIT were to cease to qualify as a mutual fund trust or real estate
investment trust, the consequences could be adverse.
If Boardwalk REIT were to cease to qualify as a "mutual fund trust" and as a "registered investment"
under the Tax Act and the REIT Units were to cease to be listed on a “designated stock exchange” (which
includes the TSX), the REIT Units would cease to be qualified investments for trusts governed by registered
retirement savings plans, registered retirement income funds, registered education savings plans, deferred profit
sharing plans and registered disability savings plans, and for tax-free savings accounts (collectively, "Plans").
The Tax Act imposes penalties for the acquisition or holding by Plans of non-qualified investments. Boardwalk
REIT will endeavour to ensure that the REIT Units continue to be qualified investments for Plans; however, there
can be no assurance that this will be so. Other consequences of Boardwalk REIT ceasing to be a mutual fund
trust would be as follows:
(a) REIT Units held by non-resident Unitholders would immediately become taxable Canadian property.
Non-resident Unitholders would be subject to Canadian income tax and reporting requirements on
any gains realized on a disposition of REIT Units held by them;
- 60 (b) Boardwalk REIT would, aside from the SIFT Rules (as defined below), be taxed on certain types of
income distributed to Unitholders. Payment of this tax may have adverse consequences for some
Unitholders, particularly Unitholders that are not residents of Canada and residents of Canada that are
otherwise exempt from Canadian income tax;
(c) Boardwalk REIT would cease to be eligible for the capital gains refund mechanism available under
Canadian tax laws to mutual fund trusts; and
(d) Boardwalk REIT would no longer be exempt from the application of the alternative minimum tax
provisions of the Tax Act.
The Tax Act contains rules (hereinafter the “SIFT Rules”) relating to the federal income taxation of
certain publicly traded trusts and partnerships, and their unitholders. Under the SIFT Rules, a trust that is a "SIFT
trust" is subject to tax at the prevailing federal corporate income tax rate, plus an additional provincial tax factor,
on certain income that is distributed to its unitholders, and such distributions are treated as taxable dividends paid
by a taxable Canadian corporation.
The definition of a "SIFT trust" specifically excludes a trust that is a "real estate investment trust" for
the taxation year, which is currently defined under the SIFT Rules as a trust that is resident in Canada and that
satisfies all of the following criteria:
(a) at each time in the taxation year, the total fair market value at that time of all non-portfolio properties
that are qualified REIT properties held by the trust is at least 90% of the total fair market value at that
time of all non-portfolio properties held by the trust;
(b) not less than 90% of the trust's gross REIT revenue for the taxation year is from one (1) or more of
the following:
(i) rent from real or immovable properties;
(ii) interest;
(iii) dispositions of real or immovable properties that are capital properties;
(iv) dividends;
(v) royalties; and
(vi) dispositions of eligible resale properties;
(c) not less than 75% of the trust's gross REIT revenue for the taxation year is from one (1) or more of
the following:
(i) rent from real or immovable properties;
(ii) interest from mortgages, or hypothecs, on real or immovable properties; and
(iii) dispositions of real or immovable properties that are capital properties;
(d) at each time in the taxation year an amount, that is equal to 75% or more of the equity value of the
trust at that time, is the amount that is the total fair market value of all properties held by the trust,
each of which is a real or immovable property that is capital property, an eligible resale property or
indebtedness of a Canadian corporation represented by a bankers’ acceptance, a deposit with a credit
union, money, bank deposits, and debt of or guaranteed by the Government of Canada or a province
or other political subdivision; and
(e) investments in the trust are, at any time in the taxation year, listed or traded on a stock exchange or
other public market.
- 61 For this purpose:
“Qualified REIT property” of the Trust includes (a) real or immovable property that is capital property,
an eligible resale property, an indebtedness of a Canadian corporation represented by a banker’s acceptance, a
deposit with a credit union, money, bank deposits, and debt of or guaranteed by the Government of Canada or a
province or other political subdivision, (b) a security of another entity (corporation, trust or partnership) resident
in Canada if: (i) all or substantially all of that other entity’s gross REIT revenue is from maintaining, improving,
leasing or managing real or immovable properties that are capital properties of the Trust or of an entity of which
the Trust holds a share or an interest (including real or immovable properties that the Trust or any other entity of
which the Trust holds a share or an interest holds together with one or more other persons or partnerships), or (ii)
that other entity holds no property other than (A) legal title to real or immovable property of the Trust or of
another entity all of the securities of which are held by the Trust (including real or immovable properties that the
Trust or such other entity holds together with one or more other persons or partnerships) or (B) property ancillary
to the earning by the Trust of rent from real or immovable properties or amounts from dispositions of real or
immovable properties that are capital properties, and (C) property that is ancillary to the earning by the Trust of
rent from real or immovable properties or amounts from dispositions of real or immovable properties that are
capital properties;
“Real or immovable property” includes a security of any trust, corporation or partnership that itself
satisfies the criteria to be a “real estate investment trust” (or that would satisfy them if it were a trust), but does
not include any depreciable property other than property included in Classes 1, 3 or 31 (or property ancillary
thereto); and
“Rent from real or immovable property” includes payments for services ancillary to, and customarily
provided in connection with, the rental of real or immovable properties.
“Eligible resale property” of an entity (corporation, trust or partnership) means real or immovable
property (other than capital property) of an entity that is contiguous to a particular real or immovable property that
is capital property or eligible resale property held by the entity or an affiliated entity and the holding of which is
ancillary to the holding of the particular property.
If Boardwalk REIT, or any other trust, does not qualify under these rules as a real estate investment trust,
it will no longer be able to deduct for tax purposes its taxable distributions and, as such, will be required to pay
tax on this amount prior to distribution. Any amount distributed that is determined to be a return of capital would
not be subject to this tax.
The Declaration of Trust of Boardwalk REIT provides that a sufficient amount of Boardwalk REIT's net
income and net realized capital gains will be distributed each year to Unitholders, in cash or otherwise, in order to
eliminate Boardwalk REIT's liability for tax under Part I of the Tax Act. Where such amount of net income and
net realized capital gains of Boardwalk REIT in a taxation year exceeds the cash available for distribution in the
year, such excess net income and net realized capital gains will be distributed to Unitholders in the form of
additional REIT Units. Unitholders will generally be required to include an amount equal to the fair market value
of those REIT Units in their taxable income, in circumstances where they do not directly receive a cash
distribution.
Although Boardwalk REIT is of the view that all expenses to be claimed by Boardwalk REIT, the
Operating Trust and the Partnership will be reasonable and deductible, that the cost amount and capital cost
allowance claims of entities indirectly owned by Boardwalk REIT will have been correctly determined and that
the allocation of the Partnership's income for purposes of the Tax Act among its partners is reasonable, there can
be no assurance that the Tax Act or the interpretation of the Tax Act will not change, or that the CRA will agree.
If the CRA successfully challenges the deductibility of such expenses or the allocation of such income, the
Partnership's allocation of income to the Operating Trust, and indirectly the taxable income of Boardwalk REIT
and the Unitholders, may be adversely affected. The extent to which distributions will be tax-deferred in the
- 62 future will depend in part on the extent to which entities indirectly owned by Boardwalk REIT are able to deduct
capital cost allowance relating to the Assets held by them.
Since the Partnership acquired the relevant properties on a tax-deferred basis, its tax cost in certain
properties may be less than their fair market value. Accordingly, if one or more properties are disposed of, the
gain recognized by the Partnership may be in excess of that which it would have realized if it had acquired the
properties at their fair market values.
Immediately prior to the Plan of Arrangement becoming effective, the Corporation transferred the Assets
to the Partnership and received, as partial consideration therefor, a credit to the capital accounts in respect of the
LP Class C Units, all of which were owned at that time by the Corporation. See “Overview of the Acquisition and
the Arrangement Replacing the Corporation as a Public Entity with Boardwalk REIT — Pre-Arrangement
Reorganization”. The Corporation, based on the advice of legal counsel, is of the view that there is no income tax
payable by the Corporation in connection with the transfer and contribution of the Assets to the Partnership. In the
event that CRA takes a contrary view; however, the Corporation has been advised by counsel that the CRA would
not be successful. If, contrary to this, the CRA successfully challenges the tax consequences to the Corporation of
the transfer and contribution of the Assets to the Partnership, income tax may be payable by the Corporation in
connection therewith at the applicable tax rate. The Partnership has agreed to indemnify the Corporation for all
liabilities incurred by it in connection with the Acquisition and the Arrangement, including the transfer and
contribution of the Assets to the Partnership and any associated tax that might be payable by the Corporation in
respect thereof. See "Overview of the Acquisition and the Arrangement replacing the Corporation as a Public
Entity with Boardwalk REIT — Ancillary Agreements in Connection with the Arrangement". The amount of such
indemnification would be significant and have a material adverse effect on the amount of distributable cash of the
Partnership and, consequently, on the distributable income of Boardwalk REIT.
Risks Associated with Disclosure Controls and Procedures on Internal Control over Financial Reporting
The Trust’s business could be adversely impacted if it has deficiencies in its disclosure controls and
procedures or internal control over financial reporting.
The design and effectiveness of the Trust’s disclosure controls and procedures and internal control over
financial reporting may not prevent all errors, misstatements or misrepresentations. While management continues
to review the design and effectiveness of the Trust’s disclosure controls and procedures and internal control over
financial reporting, the Trust provides no assurance that its disclosure controls and procedures or internal control
over financial reporting will be effective in accomplishing all control objectives all of the time. Deficiencies,
particularly material weaknesses, in internal control over financial reporting which may occur in the future could
result in misstatements of the Trust’s results of operations, restatements of its financial statements, a decline in the
Trust Unit price, or otherwise materially adversely affect the Trust’s business, reputation, results of operation,
financial condition or liquidity.
The design of the Trust’s disclosure controls and procedures and internal control over financial reporting
has been limited to exclude controls, policies and procedures of: (i) a proportionately consolidated entity in which
the Trust has an interest; (ii) a variable interest entity in which the Trust has an interest; or (iii) a business that the
Trust has acquired not more than 365 days before its financial year end.
Cybersecurity Risk
A cyber incident is considered to be any adverse event that threatens the confidentiality, integrity or
availability of Boardwalk REIT's information resources. More specifically, a cyber-incident is an intentional
attack or an unintentional event that can include gaining unauthorized access to information systems to disrupt
operations, corrupt data or steal confidential information. As Boardwalk REIT's reliance on technology has
increased, so have the risks posed to its systems. Boardwalk REIT's primary risks that could directly result from
the occurrence of a cyber-incident include operational interruption, damage to its reputation, damage to
Boardwalk's business relationships with its tenants (“Resident Members”) and disclosure of confidential
- 63 information regarding its Resident Members and Associates. Boardwalk REIT has implemented processes,
procedures and controls to help mitigate these risks, but these measures, as well as its increased awareness of a
risk of a cyber-incident, do not guarantee that its financial results will not be negatively impacted by such an
incident.
DISTRIBUTION POLICY
The following outlines the distribution policy of Boardwalk REIT as contained in the Declaration of
Trust. The distribution policy may be amended only with the approval of a majority of the votes cast at a meeting
of Unitholders.
General
Boardwalk REIT may distribute to holders of REIT Units on or about each Distribution Date15
respectively such percentage of the income of the Trust for the calendar month then ended as the Trustees
determine in their discretion (each a “Distribution”), but, in no event, will Distributions for the year be less than
Boardwalk REIT's taxable income, unless the Trustees, in their absolute discretion, determine otherwise.
Holders of LP Class B Units may surrender such units in exchange for REIT Units in accordance with the
Limited Partnership Agreement. Prior to such surrender, holders of LP Class B Units will be entitled to receive
Distributions from the Partnership pro rata with Distributions made by Boardwalk REIT on REIT Units.
Boardwalk REIT cannot pay Distributions on REIT Units unless an equivalent Distribution per REIT
Unit is paid on the LP Class B Units. Distributions in respect of a month will be paid on or about each
Distribution Date to such Unitholders of record as at the close of business on each Distribution Record Date 16. In
addition, the Trustees may declare to be payable and make Distributions, from time to time, out of income of
Boardwalk REIT, net realized capital gains of Boardwalk REIT, the net recapture income of Boardwalk REIT, the
capital of Boardwalk REIT or otherwise, in any year, in such amount or amounts, and on such dates on or before
the last business day of that year as the Trustees may determine, to the extent such income, capital gains and
capital has not already been paid, allocated or distributed to the holders of REIT Units that are Unitholders at the
record date for such Distribution payable and make Distributions, from time to time, out of income of Boardwalk
REIT. The payment of such amounts shall be made on or before the following January 15 th. There will be no
Distributions in respect of the Special Voting Units.
Where the Trustees determine that Boardwalk REIT does not have available cash in an amount sufficient
to make payment of the full amount of any Distribution which has been declared to be payable pursuant to the
provisions of the Declaration of Trust on the due date for such payment, the payment may, at the option of the
Trustees, include the issuance of additional REIT Units, or fractions of such REIT Units, if necessary, having a
fair market value as determined by the Trustees equal to the difference between the amount of such Distribution
and the amount of cash which has been determined by the Trustees to be available for the payment of such
Distribution in the case of REIT Units.
Unless the Trustees determine otherwise, immediately after any pro rata Distribution of additional REIT
Units to all holders of REIT Units in the circumstances described in the immediately preceding paragraph, the
number of the outstanding REIT Units will automatically be consolidated such that each of such holders will hold
after the consolidation the same number of REIT Units as such holder held before the Distribution of additional
REIT Units. In this case, each REIT Unit certificate representing the number of units prior to the Distribution of
additional REIT Units will be deemed to represent the same number of REIT Units after the non-cash Distribution
of additional REIT Units and the consolidation.
15
''Distribution Date'' means with respect to a distribution by Boardwalk REIT, a business day determined by the Trustees
for any calendar month to be on or about the 15th day of the following month.
16
''Distribution Record Date'' means, until otherwise determined by the Trustees, the last business day of each month of
each year, except for the month of December where the Distribution Record Date shall be December 31.
- 64 Notwithstanding the foregoing, where tax is required to be withheld from a Unitholder's share of the
Distribution, the consolidation will result in such Unitholder holding that number of REIT Units equal to (i) the
number of REIT Units held by such Unitholder prior to the Distribution plus the number of REIT Units received
by such Unitholder in connection with the Distribution (net of the number of whole and part REIT Units withheld
on account of withholding taxes) multiplied by (ii) the fraction obtained by dividing the aggregate number of
REIT Units outstanding prior to the Distribution by the aggregate number of REIT Units that would be
outstanding following the Distribution and before the consolidation if no withholding were required in respect of
any part of the Distribution payable to any Unitholder. Such Unitholder will be required to surrender the REIT
Unit certificates, if any, representing such Unitholder's original REIT Units, in exchange for a unit certificate
representing such Unitholder's post-consolidation Units.
Boardwalk REIT commenced monthly Distributions on June 15, 2004 to holders of REIT Units on May
31, 2004. The amount of the Distribution on that date was $0.103 for each REIT Unit and LP Class B Unit held,
or $1.24 per REIT Unit and LP Class B Unit on an annualized basis. Since May 31, 2004, Boardwalk REIT has
increased its monthly distributions per REIT Unit as follows:
Amount
Date
$0.105
$0.1233
December 2004
November 2006
$0.1333
$0.15
$0.155
June 2007
December 2007
February 2012
$0.16
$0.165
August 2012
February 2013
$0.17
February 2014
In addition, on September 15, 2010, Boardwalk REIT paid a special Distribution of $0.50 per REIT Unit
to Unitholders of record on August 31, 2010. This special Distribution was in addition to the regular monthly
Distribution of $0.15 per REIT Unit paid on September 15, 2010 to Unitholders of record on August 31, 2010.
Since the year ended December 31, 2014, Boardwalk REIT has paid the following monthly distributions
on its REIT Units:
Amount
$0.165
$0.17
$0.17
$0.17
$0.17
$0.17
$0.17
$0.17
$0.17
$0.17
$0.17
$0.17
Record Date
January 31, 2014
February 28, 2014
March 29, 2014
April 30, 2014
May 31, 2014
June 28, 2014
July 31, 2014
August 30, 2014
September 30, 2014
October 31, 2014
November 29, 2014
December 31, 2014
Payment Date
February 15, 2014
March 15, 2014
April 15, 2014
May 15, 2014
June 17, 2014
July 15, 2014
August 15, 2014
September 16, 2014
October 15, 2014
November 15, 2014
December 16, 2014
January 15, 2015
LP Class B Units are entitled to an equivalent distribution as REIT Units.
Special Distribution
As noted above under the heading “Business and Properties of Boardwalk REIT”, during 2014, the Trust
sold a selective number of non-core properties. To date, the net proceeds of the sale of certain non-core properties
have partially assisted in the purchase of Trust Units for cancelation on the open market. Although the Trust
continues to be committed to this strategy, consistent with its balanced approach, the sale of these non-core assets
resulted in a significant profit to the Trust for the 2014 fiscal year. The size of this profit, when combined with
the existing income generated from continued operations, resulted in a significant increase in the Trust’s reported
taxable income and, as a result a "Special Distribution" in the amount of $1.40 per outstanding Trust Unit to
- 65 Unitholders of record as of Dec 31, 2014 was declared. In accordance with the Declaration of Trust, the payment
date for this Special Distribution was January 15, 2015. The capital required for this distribution came directly
from the net proceeds on the sale of non-core properties in 2014.
Unlike many REITs and real estate companies, Boardwalk REIT does not include any gains reported on
the sale of its properties in its calculation of FFO. The Trust feels that such income is volatile and unpredictable,
and would significantly dilute the relevance of FFO as a measure of performance.
Distribution Reinvestment Plan (“DRIP”)
Suspension of Distribution Reinvestment Plan
The Trust suspended its DRIP effective February 29, 2008. Notification to that effect was mailed to
DRIP participants on February 22, 2008.
The DRIP provided efficient and cost-effective equity to support the Trust's financing strategy. However,
with its current liquidity and Normal Course Issuer Bid, the Trust no longer requires this source of funding. The
Trust may reinstate the DRIP in the future if required to fund new investing activities. For more information on
the Normal Course Issuer Bid, please see the information under the heading "Strategy for Growth-Normal Course
Issuer Bid".
The suspension of the DRIP does not affect regular Distributions and Unitholders will continue to receive
the regular Distribution as declared.
A
copy
of
the
DRIP
can
be
found
http://www.bwalk.com/Content/Investors/BREIT -DRIP.pdf.
on
the
Trust's
website
at
The Partnership has adopted a similar plan such that holders of LP Class B Units are entitled to elect to
have all cash Distributions on the LP Class B Units automatically reinvested in additional LP Class B Units on the
same basis as a Unitholder pursuant to the Distribution Reinvestment Plan.
Canadian Federal Tax considerations for DRIP participants
Electing distribution reinvestment option
Unitholders must consider the tax consequences of their past participation in the DRIP. Generally, where
Participants elected to accumulate additional Units under the distribution reinvestment plan, the Participants
reinvested their Distributions in additional Units at approximately 97% of the Average Market Price.
The Canada Revenue Agency (the "CRA") generally takes the position that under a DRIP where the fair
market value of the Units acquired exceeds the purchase price, the difference is a benefit and must be included in
the Participant's income for tax purposes. The cost of the Units acquired under the DRIP is the amount reinvested
plus the amount of the benefit. The cost of the Units acquired under the DRIP must be averaged with the cost of
all other Units the Participant holds for the purpose of determining the adjusted cost base of each of the
Participant's Units. Capital gains or losses arising on a disposition of the Participant's Units will be measured by
reference to the adjusted cost base of the Participant's Units that are disposed of, which will be calculated using
this averaging method. (A copy of the Unit cost of the DRIP can be found on the Trust’s website at
http://boardwalkreit.com/DRIP/.)
INFORMATION CONCERNING THE OPERATING TRUST
The Operating Trust has been established under the Operating Trust Declaration of Trust for an
indeterminate term. The following is a summary, which does not purport to be complete, of certain terms of the
Operating Trust Declaration of Trust.
- 66 General
The Operating Trust is an unincorporated open-ended trust established under the laws of the Province of
British Columbia pursuant to the Operating Trust Declaration of Trust. The Operating Trust qualifies as a "unit
trust" pursuant to the Tax Act on the basis that its units are redeemable on demand by the holder thereof.
The Operating Trust is a limited purpose trust and its activities are restricted to, among other things, (i)
investing in units and notes or other indebtedness of Boardwalk REIT and/or the Partnership and shares of the
General Partner, amounts receivable in respect of such units, notes and other indebtedness and shares and in cash
and similar deposits in a Canadian chartered bank or trust company; (ii) issuing Operating Trust Units; (iii)
issuing debt securities, including the Series 1 Notes and Series 2 Notes; (iv) redeeming Operating Trust Units; (v)
guaranteeing the obligations of any of its subsidiaries (for greater certainty the Operating Trust will not guarantee
the obligations of Boardwalk REIT) pursuant to any good faith debt for borrowed money incurred by such
subsidiary and pledging securities held by the Operating Trust as security for such guarantee; (vi) satisfying the
obligations, liabilities or other indebtedness of the Operating Trust; and (vii) fulfilling its obligations under the
Exchange and Support Agreement. The Operating Trust may also carry on such other activities as may be
reasonably incidental to the foregoing or necessary in connection with the performance by the trustees of the
Operating Trust of their obligations under any agreement to which they are or may become a party for such
purposes or in connection with such activities. It is the intention of the foregoing that the Operating Trust carry
on its business and activities only indirectly through the Partnership. The Operating Trust cannot engage, directly
or indirectly, in any activity other than those described above. The registered office of the Operating Trust is
located at Suite 1700, Park Place, 666 Burrard Street, Vancouver, British Columbia V6C 2X8 and the principal
office and centre of administration of the Operating Trust is at Suite 200, 1501 First Street S.W., Calgary, Alberta
T2R 0W1.Trustees and Officers
The Operating Trust Declaration of Trust provides that there shall be no fewer than one (1) and no more
than seven (7) trustees of the Operating Trust. The Operating Trust has two (2) trustees, Sam Kolias and Roberto
Geremia. A vacancy occurring among the trustees of the Operating Trust shall be filled by appointment by the
unitholder of the Operating Trust, Boardwalk REIT.
The registered office of the Operating Trust is located at Suite 1700 Park Place, 666 Burrard Street,
Vancouver, British Columbia V6C 2X8, and the principal office and centre of administration of the Operating
Trust is at suite 200, 1501 First Street S.W., Calgary, Alberta T2R 0W1.
Trustees and Officers
The trustees of the Operating Trust shall hold term until such time as removed by the unitholder of the
Operating Trust, Boardwalk REIT, or a trustee of the Operating Trust resigns in accordance with the Operating
Trust Declaration of Trust.
Operating Trust Units
The Operating Trust may issue an unlimited number of Operating Trust Units. The issued and
outstanding units of the Operating Trust may be subdivided or consolidated from time to time by the trustees of
the Operating Trust without unitholder approval. Boardwalk REIT is and will be the sole unitholder of the
Operating Trust at all times.
Each Operating Trust Unit represents an equal undivided beneficial interest in the Operating Trust and in
any distributions by the Operating Trust, whether of net income, net realized capital gains or other amounts, and,
in the event of termination or winding up of the Operating Trust, in the net assets of the Operating Trust
remaining after satisfaction of all liabilities, and no Operating Trust Unit shall have preference or priority over
any other.
Each Operating Trust Unit entitles the holder of record thereof to one (1) vote at all meetings of
unitholders of the Operating Trust or in respect of any written resolution of unitholders of the Operating Trust.
- 67 Amendments to Operating Trust Declaration of Trust
Pursuant to the Operating Trust Declaration of Trust, the trustees of the Operating Trust may, from time
to time, amend or alter the provisions of the Operating Trust Declaration of Trust as follows:
(a) to the extent deemed by the trustees of the Operating Trust in good faith to be necessary to remove
any conflicts or other inconsistencies which may exist between any of the terms of the Operating
Trust Declaration of Trust and the provisions of any applicable law;
(b) to the extent deemed by the trustees of the Operating Trust in good faith to be necessary to make any
change or correction in the Operating Trust Declaration of Trust which is a typographical change or
correction or which the trustees of the Operating Trust have been advised by legal counsel is required
for the purpose of curing any ambiguity or defect or inconsistent provision or clerical omission or
mistake or manifest error contained in the Operating Trust Declaration of Trust;
(c) to ensure continuing compliance with applicable laws (including the Tax Act), regulations,
requirements or policies of any governmental authority having jurisdiction over:
(i) the trustees of the Operating Trust or the Operating Trust itself; or
(ii) the distribution of Operating Trust Units;
(d) to ensure that the Operating Trust continues to qualify as a "unit trust" pursuant to paragraph
108(2)(a) of the Tax Act;
(e) which, in the opinion of the trustees of the Operating Trust, are necessary or desirable as a result of
changes, in taxation or other laws or the administration or enforcement thereof; and
(f) as otherwise deemed by the trustees of the Operating Trust in good faith to be necessary or desirable.
Other than as set forth above, the trustees of the Operating Trust may not amend the Operating Trust
Declaration of Trust without the approval of at least 66 and 2/3% of the unitholders of the Operating Trust.
Redemption Right
The Operating Trust Declaration of Trust provides that the Operating Trust Units are redeemable, in
whole or in part, at any time on demand by the holder thereof upon delivery to Operating Trust of a duly
completed and properly executed notice requiring the Operating Trust to redeem the Operating Trust Units, in
form, manner of completion or execution reasonably acceptable to the trustees of the Operating Trust, together
with the certificates representing the Operating Trust Units to be redeemed and written instructions as to the
number of Operating Trust Units to be redeemed, as well as any further evidence the trustees of the Operating
Trust may reasonably require with respect to the identity, capacity or authority of the Person giving such notice.
Upon tender of the Operating Trust Units by a holder thereof for redemption, the holder of the Operating
Trust Units tendered for redemption will no longer have any rights with respect to such tendered Operating Trust
Units (other than the right to receive the redemption price for such Operating Trust Units) including the right to
receive distributions thereon which are declared payable to unitholders of record on a date which is subsequent to
the day of receipt by the Operating Trust of the redemption notice. The redemption price for each of the
Operating Trust Units tendered for redemption will be equal to:
(A x B) – C
D
Where:
A = the redemption price per REIT Unit calculated as of the close of business on the date the Operating
Trust Units were so tendered for redemption by the holder thereof;
B = the aggregate number of REIT Units outstanding as of the close of business on the date the Operating
Trust Units were so tendered for redemption by the holder thereof;
- 68 C = (i) the aggregate unpaid principal amount and accrued interest thereon of the Operating Trust Notes
held by or owed to Boardwalk REIT and the fair market value of any other assets or investments held
by Boardwalk REIT (other than Operating Trust Units) as of the close of business on the date the
Operating Trust Units were so tendered for redemption by a holder thereof minus (ii) the aggregate
unpaid principal of any indebtedness and any accrued liabilities owed by Boardwalk REIT; and
D = the aggregate number of Operating Trust Units outstanding held by Boardwalk REIT as of the close
of business on the date the Operating Trust Units were so tendered for redemption by the holder
thereof.
The trustees of the Operating Trust are also entitled to call for redemption, at any time, all or part of the
outstanding Operating Trust Units registered in the name of Boardwalk REIT or any other holder of Operating
Trust Units at the same redemption price as described above for each Operating Trust Unit called for redemption,
calculated with reference to the date the trustees of the Operating Trust approved the redemption of the Operating
Trust Units.
Subject to certain exemptions contained in the Operating Trust Declaration of Trust, the aggregate
redemption price payable by the Operating Trust in respect of any Operating Trust Units tendered for redemption
by the holders thereof during any month will be satisfied, at the option of the trustees of the Operating Trust, in
immediately available funds by cheque or by such other manner of payment approved by the trustees of the
Operating Trust from time to time.
In certain circumstances, the Operating Trust may satisfy the redemption price in respect of the Operating
Trust Units by issuing Series 2 Notes with an aggregate value equal (as determined by the trustees of the
Operating Trust) to the aggregate redemption price of Operating Trust Units to be redeemed.
Cash Distributions
The Operating Trust will distribute to Boardwalk REIT, to the extent possible, and Boardwalk REIT will
have the right to receive, all of the distributable income of the Operating Trust. Such distributions will be made
on or about the tenth (10th) business day following each calendar month end and are intended to be received by
Boardwalk REIT prior to its related cash distribution to Unitholders. If the trustees of the Operating Trust
determine that it would be in the best interests of the Operating Trust, they may reduce for any period the
percentage of distributable income to be distributed to Boardwalk REIT and may choose to repay principal on the
Series 1 Notes in lieu of making distributions. In addition, on December 31 of each year, the Operating Trust will
make payable to its unitholder, and its unitholder will have an enforceable right to payment on such date of, a
distribution of sufficient net realized capital gains, net income, and net recapture income for the taxation year
ending on that date, net of any capital losses or non-capital losses recognized on or before the end of such year
such that the Operating Trust will not be liable for ordinary income taxes for such year, net of tax refunds. The
payment of such amounts shall be made on or before the following January 10th.
Notwithstanding the foregoing, if the trustees of the Operating Trust determine that the Operating Trust
does not have cash in an amount sufficient to make payment of the full amount of any distribution, the payment
may include the issuance of additional Operating Trust Units and/or Series 1 Notes if necessary, having a value
equal to the difference between the amount of such distribution and the amount of cash which has been
determined by the trustees of the Operating Trust to be available for the payment of such distribution. The value
of each Operating Trust Unit so issued will be the redemption price thereof such that the issuance will not result
in Boardwalk REIT being liable under the Tax Act to pay a tax imposed under Part XI of the Tax Act.
Any Operating Trust Units transferred to Unitholders pursuant to a distribution in specie may be subject
to resale and transfer restrictions under applicable securities laws.
Operating Trust Notes
The Operating Trust Notes issuable by the Operating Trust are issuable in series in Canadian currency.
- 69 The Operating Trust Notes are issuable in denominations of $100.00 and integral multiples of $100.00.
No fractional Operating Trust Notes will be issued and where the number of Operating Trust Notes to be
received by a noteholder includes a fraction, such number shall be rounded to the next lowest $100.00
denomination.
Series 1 Notes are issued to Boardwalk REIT in the principal amount of $640 million. Series 2 Notes are
reserved by the Operating Trust to be issued exclusively as full or partial payment of the redemption price of the
Series 1 Notes and the Operating Trust Units in the event of a redemption of REIT Units.
Interest and Maturity
Series 1 Notes were issued at the Effective Date in the aggregate amount of $640 million to Boardwalk
REIT and are payable on demand, but have a maximum term of ten (10) years, less a day. Such notes are noninterest bearing prior to demand, and bear interest after demand at a rate of 6% per annum. Each Series 2 Note
will have a term not to exceed 25 years from the date of its issue and will bear interest at a market rate to be
determined by the Operating Trust, at the time of issuance thereof, payable on the 30th day of each calendar month
that each Series 2 Note is outstanding.
Payment on Maturity
On maturity, the Operating Trust will repay its Series 2 Notes by paying to Computershare Trust
Company of Canada, as trustee of the Operating Trust Notes (the "Operating Trust Note Trustee") under the
trust indenture dated May 3, 2004 providing for the issuance of the Operating Trust Notes made between the
Operating Trust and Operating Trust Note Trustee (the "Operating Trust Note Indenture"), in cash, an amount
equal to the principal amount of the outstanding Series 2 Notes which have then matured, together with accrued
and unpaid interest thereon.
Redemption
The Operating Trust Notes are redeemable at the option of the Operating Trust prior to maturity.
Subordination/Security
Payment of the principal amount and interest on the Operating Trust Notes is subordinated in right of
payment to the prior payment in full of the principal of, and accrued and unpaid interest on, all other amounts
owing in respect of all senior indebtedness, which is defined as all indebtedness, liabilities and obligations of the
Operating Trust which, by the terms of the instrument creating or evidencing the same, will be expressed to rank
in right of payment in priority to the indebtedness evidenced by the Operating Trust Note Indenture. The
Operating Trust Note Indenture provides that upon any distribution of the assets of the Operating Trust in the
event of any dissolution, liquidation, reorganization or other similar proceedings relative to the Operating Trust,
the holders of all such senior indebtedness will be entitled to receive payment in full before the holders of the
Operating Trust Notes are entitled to receive any payment.
Default
The Operating Trust Note Indenture provides that any of the following shall constitute an event of default:
(a) default in payment of the principal of the Operating Trust Notes when the same becomes due and the
continuation of such default for a period of ten (10) business days;
(b) default in payment of any interest due on any Operating Trust Notes and continuation of such default
for a period of ten (10) business days;
(c) default in the observance or performance of any other covenant or condition of the Operating Trust
Note Indenture and continuance of such default for a period of 30 days after notice in writing has
- 70 been given by the Operating Trust Note Trustee specifying such default and requiring the Operating
Trust to rectify the same; and
(d) certain events of dissolution, liquidation, reorganization or other similar proceedings relative to the
Operating Trust. The provisions governing an event of default under the Operating Trust Note
Indenture and remedies available thereunder do not provide protection to the holders of Operating
Trust Notes which would be comparable to the provisions generally found in debt securities issued to
the public.
Subordination Agreements
Pursuant to the terms of the Operating Trust Note Indenture, the Operating Trust Note Trustee may enter
into subordination agreements with the holders of certain senior indebtedness under which the Operating Trust
Note Trustee, on behalf of the holders of Operating Trust Notes, may agree directly with a holder of senior
indebtedness in implementation of and/or in addition to the subordination terms described under the sub-heading
"Subordination/Security" above. The Operating Trust Note Trustee may give a holder of senior indebtedness a
power of attorney to be exercised in any creditor proceedings to enforce the terms thereof. The Operating Trust
Note Trustee may also agree to ensure any transferee of Operating Trust Notes (or other securities of the
Operating Trust) agrees to be bound by the provisions of the subordination agreements.
Registration and Transfers of Operating Trust Units
As the Operating Trust Units are not likely to be issued to or held by any person other than Boardwalk
REIT, registration of interests in, and transfers of, the Operating Trust Units will not be made through the book
entry only system administered by Canadian Depository for Securities Limited. Rather, holders of the Operating
Trust Units will be entitled to receive certificates therefor.
INFORMATION CONCERNING THE PARTNERSHIP
General
The Partnership is a limited partnership formed under the laws of the Province of British Columbia.
As a result of the Acquisition and the Arrangement, the Partnership holds all of the direct and indirect
interests in the Assets.
The registered office of the Partnership is located at Suite 1700, Park Place, 666 Burrard Street,
Vancouver, British Columbia V6C 2X8 and the principal place of business of the Partnership is located at Suite
200, 1501 - First Street S.W., Calgary, Alberta T2R 0W1.
The General Partner
Boardwalk Real Estate Management Ltd. (the "General Partner") is the general partner of the
Partnership. The General Partner is a wholly owned subsidiary of Boardwalk REIT.
LP Units
The Partnership is authorized to issue an unlimited number of LP Class A Units, an unlimited number of
LP Class B Units and an unlimited number of LP Class C Units (collectively, "LP Units"), and, subject to certain
restrictions, such other classes of partnership interests as the General Partner may decide from time to time. All
of the LP Class A Units are held by the Operating Trust, the LP Class C Units are held by the Corporation and the
LP Class B Units are held by BEI Subco.
The LP Class B Units, together with the accompanying Special Voting Units, except as otherwise noted,
have economic and voting rights equivalent in all material respects to the REIT Units. In particular, subject to
certain limitations contained in the Limited Partnership Agreement and the Exchange and Support Agreement,
- 71 each LP Class B Unit entitles the holder thereof to receive and, subject to applicable law, the Partnership will
declare, a Distribution on each LP Class B Unit equal to the amount of a Distribution declared by Boardwalk
REIT on each REIT Unit on the date of such Distribution's declaration. Additional principal terms of the LP
Class B Units are as follows: (i) the LP Class B Units may be surrendered, on a one-for-one basis (subject to
customary anti-dilution provisions) for REIT Units at the option of the holder, at any time unless this would
jeopardize Boardwalk REIT's status as a "unit trust", "mutual fund trust" or "registered investment" under the
Tax Act; (ii) each LP Class B Unit is accompanied by a Special Voting Unit which will entitle the holder thereof
to receive notice of, to attend and to vote at all meetings of Unitholders (except in respect of LP Class B Units
previously surrendered); and (iii) except as required by law and in certain specified circumstances where the
rights of a holder of LP Class B Units are affected, holders of the LP Class B Units are not entitled to vote at any
meeting of the limited partners of the Partnership.
The Partnership, the Operating Trust, Boardwalk REIT, the Corporation, BEI Subco and the holders of
LP Class B Units have and will enter into any agreements necessary to give effect to the foregoing terms of the
LP Class B Units, including the Exchange and Support Agreement.
Pursuant to a letter agreement, dated effective January 6, 2005, Messrs. Sam and Van Kolias, the sole
owners, indirectly through their 100 % ownership interest in the Corporation (following the Effective Date) and
its wholly-owned subsidiary, BEI Subco, of all of the issued and outstanding LP Class B Units, have agreed that,
as long as they control BEI Subco, they will ensure that the LP Class B Units are not sold to a third party without
the consent of Boardwalk REIT. Such agreement does not limit the right of the Koliases or any related or
controlled entity to use the LP Class B Units as collateral for any liability or obligation, corporate or otherwise.
The agreement also allows the Koliases the freedom to deal with the LP Class B Units in response to a business
combination proposal involving Boardwalk REIT without the consent of the Trust, whether in connection with a
lock-up agreement, voting agreement or commitment to tender, to sell or any other obligation. In addition, the
agreement provides that the Koliases are able, at any time during the course of the agreement, to exchange all or a
portion of the LP Class B Units for REIT Units, as well as sell any and/or all of the issued and outstanding
securities of the Corporation and/or BEI Subco, without restriction.
Pursuant to the Declaration of Trust and the Exchange and Support Agreement, if an offer, issuer bid
(other than an exempt issuer bid), take-over bid (other than an exempt take-over bid) or similar transaction with
respect to the REIT Units is proposed by Boardwalk REIT or is proposed to Boardwalk REIT or holders of REIT
Units, and is recommended by the Board of Trustees, or is otherwise effected or to be effected with or without the
consent or approval of the Trustees, and the LP Class B Units are not withdrawn in accordance with their terms or
surrendered for REIT Units in accordance with the Exchange and Support Agreement, Boardwalk REIT will, to
the extent possible in the circumstances, expeditiously and in good faith, take all such actions and do all such
things as are necessary or desirable to enable and permit holders of those LP Class B Units to participate in such
offer to the same extent and on an economically equivalent basis as the holders of REIT Units, without
discrimination. Without limiting the generality of the foregoing, Boardwalk REIT will, to the extent possible in
the circumstances, expeditiously and in good faith, use commercially reasonable efforts to ensure that holders of
LP Class B Units may participate in all such offers without being required to surrender such units for withdrawal
or exercise their right to exchange such units (or, if so required, to ensure that any such surrender or exchange will
be effective only upon, and will be conditional upon, the successful closing of the offer and only to the extent
necessary to tender to or deposit under the offer). In the event of the liquidation, dissolution or winding-up of the
Partnership or any other distribution of the assets of the Partnership among the holders of the units of the
Partnership for the purpose of winding up its affairs, a holder of LP Class B Units will be entitled, subject to
applicable law, to receive in respect of each LP Class B Unit held by such holder on the effective date of such
liquidation, dissolution or winding-up, one REIT Unit for each LP Class B Unit.
As long as any of the LP Class B Units are outstanding, the Partnership will not at any time without, but
may at any time with, the approval of the holders of the LP Class B Units: (a) pay any distribution on the LP
Class A Units unless Distributions payable on the LP Class B Units have been paid; (b) offer to redeem or
purchase or make any capital distribution in respect of the LP Class A Units, unless the Partnership makes a
- 72 contemporaneous offer to redeem or purchase a proportionate number of LP Class B Units on the same terms and
conditions and for identical consideration per unit of the Partnership or makes an equivalent capital distribution
per unit of the Partnership in respect of the LP Class B Units; or (c) issue any additional LP Class A Units unless
Boardwalk REIT has issued the same number of REIT Units.
The LP Class B Units may be issued in respect of other transactions involving the Partnership from time
to time.
The LP Class A Units, all of which are owned by the Operating Trust, have terms similar to those
attached to the LP Class B Units, except that the holders of LP Class A Units (i) are not entitled to receive REIT
Units in the event of a full or partial surrender of the LP Class A Units or upon the liquidation, dissolution or
winding up of the Partnership; (ii) are entitled to receive a distribution on the LP Class A Units in an amount
sufficient to allow Boardwalk REIT and the Operating Trust to pay their expenses but will not be entitled to
receive a distribution equal to the Distribution on REIT Units; and (iii) are entitled to receive notice of, to attend
and vote at all meetings of the partners of the Partnership, but will not be entitled to receive notice of, to attend or
vote at meetings of the Unitholders.
The LP Class C Units are entitled to preferred partnership distributions in amounts at least sufficient to
permit the Corporation, as the holder of such units, to meets its obligations to make all payments due and payable
by the Corporation on the Retained Debt. See "Information Concerning the Partnership — Distributions".
As long as any of the LP Class C Units are outstanding, the Partnership will not at any time without, but
may at any time with, the approval of the holders of the LP Class C Units: (a) pay any distribution on the LP
Class A Units or LP Class B Units unless distributions payable on the LP Class C Units have been paid; (b) offer
to accept the withdrawal of the LP Class A Units or LP Class B Units; or (c) issue any additional LP Class C
Units.
In the event of the liquidation, dissolution or winding-up of the Partnership or any other distribution of
the assets of the Partnership among the holders of the LP Units for the purpose of winding up its affairs, a holder
of LP Class C Units will be entitled, subject to applicable law, and in priority to any distribution to the holders of
LP Class A Units or LP Class B Units, to receive in respect of each LP Class C Unit held by such holder on the
effective date of such liquidation, dissolution or winding-up, an amount equal to the LP Class C Preferred
Liquidation Entitlement (defined below) divided by the outstanding LP Class C Units. For purposes hereof, the
"LP Class C Preferred Liquidation Entitlement" means the aggregate of each amount that is (i) the principal
amount of the Retained Debt that is outstanding on the liquidation date, all accrued and unpaid interest on such
principal amount up to and including the liquidation date and any other amount outstanding in respect of the
Retained Debt on the liquidation date, (ii) an amount of either tax that is due and payable under Part I.3 of the Tax
Act or capital tax that is due and payable under any relevant provincial or territorial legislation that is reasonably
attributable to the Retained Debt, and any interest or penalties thereon, and (iii) in respect of the amount of tax
that is due and payable under the Tax Act or any similar provincial or territorial statute that is reasonably
attributable to the foregoing distributions and any disposition whether by redemption or otherwise of any LP
Class C Unit, and any interest or penalties thereon, and for greater certainty each amount under (i), (ii) and (iii)
above shall be determined without duplication.
The holders of LP Class C Units are entitled to receive notice of, to attend and to vote (on the basis of one
vote for every 1,000 LP Class C Units held) at all meetings of holders of LP Units.
Investment Guidelines and Operating Policies
The operations and affairs of the Partnership are and will be conducted in accordance with the investment
guidelines and operating policies contained in the Declaration of Trust. See "Investment Guidelines and
Operating Policies of Boardwalk REIT."
- 73 Amendments to Limited Partnership Agreement
Pursuant to the Limited Partnership Agreement, the General Partner may amend the Limited Partnership
Agreement without notice to or consent of any other partners, to reflect the admission, resignation or withdrawal
of any partner, or the assignment by any partner of the whole or any part of such partner's interest in accordance
with the Limited Partnership Agreement. The General Partner will also be entitled to make any reasonable
decisions, designations or determinations not inconsistent with law or with the Limited Partnership Agreement
which it may determine are necessary or desirable in interpreting, applying or administering the Limited
Partnership Agreement or in administering, managing or operating the Partnership.
The Limited Partnership Agreement may also be amended by the General Partner with the approval of the
limited partners holding more than 66 and 2/3% of the limited partnership units provided that: (i) except as
contemplated in Article 11 and Article 12 of the Limited Partnership Agreement, any material change which
affects the rights or interests of the General Partner must be approved by the General Partner; (ii) any material
change which affects the rights or interests of the holders of the LP Class A Units, LP Class B Units or LP Class
C Units must have special approval of the holders of such partnership units, as applicable; and (iii) any material
change which affects any limited partner in a manner that is different from the effects on other limited partners
shall be valid only with the consent of such limited partner.
The Limited Partnership Agreement may not be amended if such amendment would change the
amendment section of the Limited Partnership Agreement or cause Boardwalk REIT to fail or cease to qualify as
a "mutual fund trust" or "registered investment" under the Tax Act.
Further, notwithstanding any other provision to the contrary in the Limited Partnership Agreement, no
amendments may be made which in any manner would allow any limited partner to take part in the management
or the administration of the business of the Partnership, reduce the interest in the Partnership of any limited
partner, allow any limited partner to exercise control over the business of the Partnership, change the right of a
limited partner to vote at any meeting or change the Partnership from a limited partnership to a general
partnership.
Distributions
The Partnership will distribute to the General Partner and to the limited partners holding LP Class A
Units, LP Class B Units and LP Class C Units their respective portions of distributable cash as set out below.
Distributions will be made forthwith after the General Partner determines the distributable cash of the
Partnership and determines the amount of all expenses incurred by it for acting as general partner (the
"Reimbursement Distribution Amount"), which shall take place no later than the 10th day of each month.
Distributable cash will represent, in general, all of the Partnership's cash on hand that is derived from any
source (other than amounts received in connection with the subscription for additional interests in the Partnership)
and that is determined by the General Partner not to be required in connection with the business of the
Partnership. Such amount will be determined by the General Partner in a manner analogous to the manner in
which Boardwalk REIT calculates its Distributions (without reference to the "LP Class A Preferred
Distribution", defined below, or the "LP Class C Preferred Distribution", defined below). Following such
determination, the distributable cash will be distributed to the limited partners of the Partnership as follows: (a) to
the Corporation, as holder of LP Class C Units of the amount of distributable cash of the Partnership that is equal
to the aggregate of (A) 0.5% of distributable cash, to a maximum of $100,000 in each fiscal year, and (B) each
amount due and payable by the Corporation (i) in respect of principal, interest or any other amount under the
Retained Debt; (ii) in respect of the amount of either tax that is due and payable under Part I.3 of the Tax Act or
capital tax that is due and payable under any provincial or territorial statute all of which is reasonably attributable
to the Retained Debt, and any interest or penalties thereon; and (iii) in respect of the amount of tax that is due and
payable under either the Tax Act or any similar provincial or territorial statute that is reasonably attributable to
any distributions on the LP Class C Units, including any disposition whether by redemption or otherwise of any
LP Class C Unit, and any interest or penalties thereon, and for greater certainty each amount under (i), (ii) and
- 74 (iii) above shall be determined without duplication; excluding, in each case, any amount arising from the default
by the holder of the LP Class C Units to satisfy its obligation under or in connection with the Retained Debt,
unless such default can reasonably be attributed to the conduct of the Partnership (the "LP Class C Preferred
Distribution"); (b) the Reimbursement Distribution Amount to the General Partner; (c) an amount to the holders
of LP Class A Units sufficient to allow Boardwalk REIT and the Operating Trust to pay their expenses (including,
without limitation, any fees or commissions payable to agents or underwriters in connection with the sale of
securities by Boardwalk REIT or the Operating Trust) on a timely basis (the "LP Class A Preferred
Distribution"); (d) an amount to the General Partner equal to 0.001% of the balance of the distributable cash of
the Partnership; and (e) an amount equal to the remaining balance of the distributable cash of the Partnership to
the holders of LP Class A Units and LP Class B Units in accordance with their entitlements as holders of LP Class
A Units and LP Class B Units, as the case may be. However, holders of LP Class B Units are entitled to receive
distributions on each such unit equal to the amount of the Distribution declared on each REIT Unit. The record
date and the payment date for any Distribution declared on the LP Class B Units will be the same as those for the
REIT Units.
The holder of any LP Unit will be entitled to elect to:
(a) reinvest all or any portion (the "Elected Amount") of any distribution declared by the Partnership to
be payable to such holder of such LP Unit provided that the election is in writing, specifies the
Elected Amount and whether such distribution shall be made by the issuance of further LP Units of
the same class, or in the case of LP Class B Units, REIT Units and is received by the Partnership
before the payment date for such distribution. Where the election is duly made by the holder, the
Elected Amount will be deemed for all purposes of the Limited Partnership Agreement (i) to be paid
to and received by such holder on the payment date for such distribution, and (ii) to be reinvested by
such holder as the subscription price of that number of LP units of the particular class calculated by
the formula:
A
B
Where:
A = the Elected Amount, and
B = the 20-day daily-volume weighted average trading price of REIT Units determined as of the
payment date for such distribution; or
(b) in lieu of receiving all or a portion (the "Selected Amount") of the distribution declared by the
Partnership, choose to be loaned an amount from the Partnership equal to the Selected Amount, and
to have the distribution of the Selected Amount made to it on the first business day following the end
of the fiscal year in which such distribution would otherwise have been made. Each such loan made
in a fiscal year will not bear interest and will be due and payable in full on the first business day
following the end of the fiscal year during which the loan was made.
Allocation of Partnership Income and Partnership Losses
The aggregate Partnership Income or Partnership Loss17 for a fiscal year will be allocated as follows at the
end of each fiscal year:
(a) the limited partners who held LP Class A or LP Class B Units will be allocated all Partnership
Income or Partnership Loss remaining after giving effect to the amounts of Partnership Income or
Partnership Loss allocated pursuant to sub-paragraphs (b), (c) and (d) below, and, subject to the
elections described above, such remaining Partnership Income or Partnership Loss allocated to the
17
''Partnership Income'' or ''Partnership Loss'' mean the net income or loss of the Partnership for a fiscal year determined
in accordance with the provisions of the Tax Act, subject to any adjustments in respect of such fiscal year that the General
Partner determines appropriate.
- 75 limited partners will be allocated to each person who was a limited partner at any time in such fiscal
year in an amount calculated by the formula:
AxC
B
Where:
A = the aggregate amount of the distributions of distributable cash paid or payable to such limited
partner with respect to such fiscal year as set forth below in sub-paragraph (e) under this subheading entitled "Allocation of Partnership Income and Partnership Losses";
B = the aggregate amount of the distributions of distributable cash paid or payable to all such limited
partners with respect to such fiscal year as set forth below in sub-paragraph (e) under this subheading entitled "Allocation of Partnership Income and Partnership Losses"; and
C = such remaining Partnership Income or Partnership Loss allocated to all such limited partners with
respect to such fiscal year; and
(b) the General Partner will be allocated Partnership Income equal to the aggregate of (i) all
Reimbursement Distribution Amounts that are paid to it (whether in such fiscal year or within 30 days
thereafter) in respect of expenses incurred by it in the fiscal year; and (ii) all amounts distributed to it
in such period as set forth below in sub-paragraph (d) under this sub-heading entitled "Allocation of
Partnership Income and Partnership Losses" to the extent not taken into account in the determination
of the allocation of Partnership Income;
(c) the holder of LP Class C Units will be allocated, in respect of such LP Class C Units, Partnership
Income or Partnership Loss (which Partnership Loss is not to exceed $1,000), as applicable, equal to
the amount that the General Partner determines is reasonable in respect of such fiscal year;
(d) the holder of LP Class A Units will be allocated Partnership Income equal to the aggregate amount of
LP Class A Preferred Distributions paid or payable to such holder with respect to such fiscal year;
(e) in respect of each fiscal year of the Partnership, the General Partner will credit (or debit) the current
account of each class of LP Units held by a partner by the amount of the Partnership Income (or
Partnership Loss) of such fiscal year that is allocated to the partner under any of the foregoing subparagraphs or the following sub-paragraph in respect of such class of LP Units; and
(f) in respect of each distribution that is made by the Partnership to a limited partner in respect of a class
of LP Units, whether a distribution of distributable cash or otherwise the General Partner will (i)
determine the portion of such distribution, if any, that is a distribution of the Partnership Income for
such fiscal year and will debit the current account of the limited partner in respect of such class of LP
Units by an amount equal to the amount of such portion, and (ii) determine the portion of such
distribution, if any, that is a distribution or return of the capital of the Partnership and will debit the
capital account of the limited partner in respect of such class of LP Units by an amount equal to the
amount of such portion.
If, with respect to a given fiscal year, no distribution of distributable cash is made to the partners, the
Partnership Income or Partnership Loss for such fiscal year (after deducting the amounts, if any, of the LP Class C
Preferred Distribution, the Reimbursement Distribution Amount and the LP Class A Preferred Distribution for
such fiscal year) will be allocated to each person who was a limited partner at any time in such fiscal year in the
proportion determined by the General Partner in its sole discretion.
- 76 Allocation of Partnership Tax Income and Partnership Tax Loss
The Partnership Tax Income or Partnership Tax Loss18 for a fiscal year will be allocated to the General
Partner and to each person who was a limited partner of the Partnership in that year in the manner provided
below. At the end of each fiscal year, the General Partner will be allocated Partnership Tax Income in an amount
equal to the aggregate of (i) all Reimbursement Distribution Amounts that are paid to the General Partner; and (ii)
all amounts distributed to the General Partner in accordance with subparagraph (d) under the above subheading
entitled “Allocation of Partnership Income and Partnership Losses”. The holder of the LP Class A Units will be
allocated Partnership Tax Income for a fiscal year equal to its LP Class A Preferred Distributions for such fiscal
year. The holder of LP Class C Units, and in respect of such LP Class C Units, will be allocated Partnership Tax
Income or Partnership Tax Loss (which Partnership Tax Loss is not to exceed $1,000), as applicable, equal to the
amount that the General Partner determines is reasonable for such fiscal year. After giving effect to such
allocations to the General Partner, the holder of LP Class C Units and the holder of LP Class A Units, each person
who was a holder of LP Class A Units or LP Class B Units of the Partnership at any point during that year will be
allocated all Partnership Tax Income or Partnership Tax Loss, as determined, calculated by the formula:
AxC
B
Where:
A = the aggregate amount of the cash distributions paid or payable to such limited partner with respect to
such fiscal year as set forth above in sub-paragraph (e) under the sub-heading entitled " Allocation of
Partnership Income and Partnership Losses ";
B = the aggregate amount of the cash distributions paid or payable to all such limited partners with
respect to such fiscal year as set forth above in sub-paragraph (e) under the sub-heading entitled
"Allocation of Partnership Income and Partnership Losses"; and
C = such Partnership Tax Income or Partnership Tax Loss allocated to all such limited partners with
respect to such fiscal year.
If, with respect to a given fiscal year, no cash distribution is made by the Partnership to its partners, the
Partnership Tax Income or Partnership Tax Loss, as the case may be, for that fiscal year, reduced by the amounts,
if any, of the LP Class C Preferred Distribution, the Reimbursement Distribution Amount and the LP Class A
Preferred Distribution for such fiscal year, will be allocated to each person who was a limited partner at any time
in such fiscal year in the proportion determined by the General Partner, in its sole discretion.
Functions and Powers of the General Partner
Subject to the provisions of the Limited Partnership Agreement, the General Partner has all the
obligations, rights or authority granted by applicable law. The Limited Partnership Agreement provides that the
General Partner is authorized to carry out the business of the Partnership with the full power and exclusive
authority to administer, manage, control and operate the operations and affairs of the Partnership and the business
of the Partnership and to bind the Partnership. In addition, the General Partner has, except as otherwise provided
in the Limited Partnership Agreement, all of the power and authority for and on behalf of, and in the name of, the
Partnership to do or cause to be done any act, take any proceeding, make any decision and execute and deliver or
cause to be delivered any instrument, deed, agreement or document on behalf of the Partnership permitted by the
Limited Partnership Agreement and involving matters or transactions which are necessary for or incidental to
carrying on the business of the Partnership. The General Partner is required to exercise its powers and discharge
its duties honestly, in good faith and in the best interests of the Partnership and to exercise the degree of care,
diligence and skill that a reasonably prudent person would exercise in comparable circumstances and as would the
18
''Partnership Tax Income'' or ''Partnership Tax Loss'' mean, in respect of any fiscal year, income or loss of the
Partnership for that fiscal year, including any taxable capital gain or allowable capital loss, determined in accordance with the
provisions of the Tax Act.
- 77 director of a corporation in comparable circumstances. The General Partner is not entitled to dissolve the
Partnership, wind up its affairs or effect a sale of all or substantially all of the Partnership's assets except in
accordance with the provisions of the Limited Partnership Agreement.
The Limited Partnership Agreement provides that all material transactions and agreements involving the
Partnership must be approved by the General Partner's board of directors.
Restrictions on the Authority of the General Partner
The authority of the General Partner is limited in certain respects by the Limited Partnership Agreement.
For example, the General Partner is prohibited, without the prior approval of the limited partners given by
special resolution, from selling or otherwise disposing of all or substantially all of the assets of the Partnership.
Reimbursement of the General Partner
The Partnership will reimburse the General Partner for all expenses incurred by the General Partner in the
performance of its duties as general partner under the Limited Partnership Agreement on behalf of the
Partnership.
Limited Liability
The General Partner will operate and carry on the business of the Partnership and conduct the affairs of
the Partnership in a manner so as to ensure to the greatest extent possible the limited liability of its limited
partners.
However, limited partners may lose their limited liability in certain circumstances. If a limited partner
loses its limited liability as a result of the negligence of the General Partner in performing its duties under the
Limited Partnership Agreement, such limited partner will be indemnified by the General Partner for any costs,
expenses, damages or liabilities incurred or suffered as a result of losing such limited liability.
Management
The executive officers of the General Partner consist of Sam Kolias, Chairman and Chief Executive
Officer; Van Kolias, Senior Vice President, Quality Control; Roberto A. Geremia, President; William Chidley,
Senior Vice President, Corporate Development; Michael Guyette, Vice President Operations, Southern Alberta
and Chief Information Officer; Helen Mix, Vice President, Human Resources; Ian Dingle, Vice President,
Purchasing; Lisa Russell, Vice President, Acquisitions, Western Canada; Kelly Mahajan, Vice President,
Customer Service and Process Design; Dean Burns, Vice President, General Counsel & Secretary; Bill
Zigomanis, Vice President, Investments; Jonathan Brimmell, Vice President, Operations – Ontario and Quebec;
and William Wong, Chief Financial Officer. The executive officers have extensive experience in acquiring,
refurbishing and profitably managing multi-family residential properties.
Additional officers or personnel may be employed by Boardwalk REIT or provided under the Boardwalk
REIT Administrative Services Agreement to support management in fulfilling its duties. In addition to the
services it obtains under the Boardwalk REIT Administrative Services Agreement, Boardwalk REIT may also
outsource other services necessary to its operations to third parties, subject to approval of the Trustees as
necessary.
The following table sets forth the name, province and country of residence, current office held with the
General Partner and the principal occupation during the last five (5) years of each of the executive officers of the
General Partner:
- 78 Name and Municipality of
Residence
(1)
Position Held
Principal Occupation
Sam Kolias
Alberta, Canada
Chief Executive Officer
Executive of General Partner since May 3, 2004 and,
prior thereto, Executive of the Corporation.
Van Kolias
Alberta, Canada
Senior Vice President,
Quality Control
Executive of General Partner since May 3, 2004 and,
prior thereto, Executive of the Corporation.
Roberto A. Geremia
Alberta, Canada
President
Executive of General Partner since May 3, 2004 and,
prior thereto, Executive of the Corporation.
William Chidley
Alberta, Canada
Senior Vice President,
Corporate Development
Executive of General Partner since May 3, 2004 and,
prior thereto, Executive of the Corporation.
Michael Guyette
Alberta, Canada
Chief Information Officer
and Vice President,
Operations – Southern
Alberta
Executive of General Partner since May 3, 2004 and,
prior thereto, Executive of the Corporation since
October 2000.
Helen Mix
Alberta, Canada
Vice President, Human
Resources
Executive of General Partner since May 3, 2004 and,
prior thereto, Executive of the Corporation since January
2003. Prior thereto, Ms. Mix held various human
resources and payroll positions with the Corporation
between July 1999 and December 2002.
Ian Dingle
Alberta, Canada
Vice President, Purchasing &
Contracts
Executive of General Partner since June 1, 2006 and,
prior thereto, Director of Purchasing and Contracts since
1999.
Lisa Russell
Alberta, Canada
Vice President, Acquisitions,
Western Canada
Executive of General Partner since May 3, 2004 and,
prior thereto, Executive of the Corporation since March
2003. Prior thereto, Ms. Russell held various operations
and acquisitions positions with the Corporation between
September 1995 and February 2003.
Kelly Mahajan
Alberta, Canada
Vice President, Customer
Service and Marketing
Executive of General Partner since May 3, 2004 and,
prior thereto, Executive of the Corporation since
December 2002.
William Wong
Alberta, Canada
Chief Financial Officer
Executive of General Partner since December 15, 2004
and prior thereto, Director of Taxation and Financial
Reporting of the Corporation since October 2002.
Dean Burns
Alberta, Canada
Vice President, General
Counsel and Secretary
Executive of the General Partner since November 1,
2004 and, prior thereto, Director of Legal Affairs of the
General Partner since May 25, 2004. Prior thereto, Mr.
Burns was a barrister and solicitor, and prior thereto, a
student-at-law, with the law firm of Stikeman Elliott
LLP in Calgary, Alberta, from August 1999 to May 15,
2004.
Jonathan Brimmell
Ontario, Canada
Vice President, Operations –
Ontario & Quebec
Executive of the General Partner since March 1, 2006
and, prior thereto, Regional Director, Operations,
Ontario, since March, 2001.
William Zigomanis
Ontario, Canada
Vice President, Investments
Executive of the General Partner since October 1, 2009.
Prior thereto, Mr. Zigomanis was Associate Vice
President and head of Multi-Unit Residential Mortgage
Lending at Toronto Dominion Bank from April 2002
until May 2009.
Note:
(1)
Also a director of the General Partner. The directors of the General Partner are the Trustees.
- 79 INFORMATION CONCERNING THE CORPORATION
History
The Corporation was incorporated under the ABCA on July 14, 1993. On August 15, 1994, the
Corporation filed Articles of Amendment under the ABCA to effect a two (2) for one (1) common share split. On
September 28, 1998, the Articles of the Corporation were amended and restated to create preferred shares
("Preferred Shares"), Series I and on March 2, 1999, the Articles of the Corporation were further amended and
restated to increase the number of Series I Preferred Shares from 4,624,997 to 5,604,956. On March 7, 2001, the
Articles of the Corporation were amended and restated to create Preferred Shares, Series II and to authorize the
issuance of up to 3,399,810 Series II Preferred Shares of the Corporation. The Preferred Shares of the
Corporation, Series I and II, were created in connection with certain property acquisitions made by the
Corporation in the fiscal years ended May 31, 1999 and December 31, 2001 respectively. Such Preferred Shares
were non-voting, not entitled to a dividend and redeemable at the option of the Corporation for a redemption price
of $1.00 per share. All of the issued and outstanding Preferred Shares were redeemed by the Corporation on
March 25, 2004. The Articles of the Corporation were further amended and restated on November 11, 2003 to
allow the Corporation to hold shareholder meetings outside of the Province of Alberta. Effective August 15,
1994, the Common Shares of the Corporation were split on a two (2) for one (1) basis. Effective December 1,
1997, the Corporation paid a stock dividend of one (1) common share for each common share held. Effective
December 30, 2004, the Corporation was amalgamated pursuant to the provisions of the ABCA with Newco to
form a corporation also known as "BPCL Holdings Inc." Such amalgamation was effected to increase the
adjusted cost base of the LP Class C Units by an amount equal to the principal amount of the Retained Debt.
References hereinafter to the "Corporation" include, where appropriate and required, the amalgamated successor
to the Corporation and Newco.
The Corporation's principal office is located at Suite 200, 1501 - First Street SW, Calgary, Alberta T2R
0W1. Its registered office is located at 908 Riverdale Avenue SW, Calgary, Alberta, T2S 0Y6.
The Corporation was incorporated in 1993 for the purpose of making a public offering pursuant to the
junior capital program on the Alberta Stock Exchange. The Corporation's major transaction pursuant to the
requirements of that program was the acquisition of seven (7) multi-family residential projects located in Calgary
and Edmonton from BPCL. The transaction closed effective April 15, 1994, although pursuant to a management
agreement, BPCL continued to manage the properties. The Corporation, since completing its major transaction
and prior to the Effective Date, continued to acquire new properties and sold selected properties. The
management agreement with BPCL was terminated effective May 31, 1996, at which time the Corporation took
over management of all its properties, until the transfer of such properties to the Partnership on the Effective Date.
Business of the Corporation Following the Acquisition and the Arrangement
On successful completion of the Acquisition and the Arrangement, the Corporation became owned by
BPCL and the Corporation retains an interest in the Partnership as a limited partner. The Corporation retains an
approximate 8% equity interest (after the preferred distribution and other entitlements of the LP Class C Units,
which it also holds) in the Partnership and thereby in the Assets transferred to the Partnership through its indirect
interest in the LP Class B Units.
In order to effect the Acquisition and the Arrangement for the benefit of all Shareholders, the Corporation
retained legal title to certain real properties that were beneficially transferred to the Partnership pursuant to the
Master Asset Contribution Agreement and the Corporation remains liable for the associated Retained Debt. The
LP Class C Units held by the Corporation will provide preferred distributions to the Corporation that, if paid, are
expected to be sufficient to permit the Corporation to meet its obligations under the Retained Debt as such
obligations become due and payable. In addition, the Corporation has and will enter into certain and necessary
arrangements with the Partnership in connection with the Corporation's continuing obligations with respect to
these properties and the associated Retained Debt.
- 80 The Corporation has three (3) directors, Messrs. Sam Kolias and Van Kolias, and Mrs. Samantha Kolias,
and three (3) officers, Mr. Sam Kolias as President, Mr. Van Kolias as Secretary and Mrs. Samantha Kolias as
Controller.
See "Overview of the Acquisition and the Arrangement Replacing the Corporation as a Public Entity with
Boardwalk REIT - Arrangements with BPCL".
LEGAL PROCEEDINGS
Neither the Corporation nor Boardwalk REIT are currently parties to any material legal proceedings, nor
are any legal proceedings currently being contemplated by the Corporation or the Trust which are material to their
business. Management of the Corporation and Boardwalk REIT are currently not aware of any legal proceedings
contemplated against the Corporation or the Trust, respectively.
AUDITORS, TRANSFER AGENT AND REGISTRAR
The auditors of the Trust are Deloitte LLP, chartered accountants, at its offices in Calgary, Alberta.
The transfer agent and registrar of the Trust Units is Computershare Trust Company of Canada at its
principal offices in Calgary, Alberta and Toronto, Ontario.
INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS
Except as otherwise disclosed in this AIF, no transaction has been entered into since January 1, 2002 or is
proposed to be entered into by the Trust or Corporation involving a senior officer or director of the Corporation, a
senior officer or trustee of Boardwalk REIT, the principal shareholder of the Corporation, the principal Unitholder
of the Trust, or any associate or affiliates of any of such persons or companies which has materially affected or
would materially affect the Corporation, Boardwalk REIT or any affiliates thereof.
INTERESTS OF EXPERTS
Deloitte LLP is the auditor of the Trust and is independent within the meaning of the Rules of
Professional Conduct of the Institute of Chartered Accountants of Alberta.
MATERIAL CONTRACTS
The Corporation, Boardwalk REIT, the Partnership, the Operating Trust and the General Partner, as
applicable, have entered into the following Material Contracts within the three (3) most recently completed
financial years or which contract is still in effect:
(a) the Acquisition and Arrangement Agreement. See "Overview of the Acquisition and the Arrangement
Replacing the Corporation as a Public Entity with Boardwalk REIT — The Acquisition and
Arrangement Agreement".
(b) the Limited Partnership Agreement. See "Information Concerning the Partnership";
(c) the Declaration of Trust. See "Declaration of Trust and Description of REIT Units";
(d) the Operating Trust Declaration of Trust. See "Information Concerning Operating Trust";
(e) the Exchange and Support Agreement.
See "Overview of the Acquisition and the Arrangement
Replacing the Corporation as a Public Entity with Boardwalk REIT — Ancillary Agreements in
Connection with the Acquisition and the Arrangement —Exchange and Support Agreement" and
"Information Concerning Operating Trust";
- 81 (f) the Master Asset Contribution Agreement and ancillary contracts entered into in connection
therewith. See "Overview of the Acquisition and the Arrangement Replacing the Corporation as a
Public Entity with Boardwalk REIT — Arrangements with BPCL" and "— Ancillary Agreements in
Connection with the Acquisition and the Arrangement";
(g) the Boardwalk REIT Administrative Services Agreement. See "Management of Boardwalk REIT —
Boardwalk REIT Administrative Services Agreement";
(h) the LBA. See "Challenges and Risks – Outstanding Indebtedness";
(i) the agreement between Toronto Dominion Bank and the Partnership establishing the Facility, dated
November 12, 2008, as amended on July 28, 2009, July 28, 2010, July 28, 2011, July 26, 2012, July
26, 2013 and July 26, 2014. See "Strategy for Growth – Managing Capital" and "Challenges and
Risks – Outstanding Indebtedness"; and
(j) forward interest rate lock agreements between Boardwalk REIT, the Corporation (for Retained Debt
properties only) and National Bank Financial Inc., dated January 23, 2008. See "Strategy for Growth
– Managing Capital".
A copy of these agreements is available on SEDAR (www.sedar.com).
ADDITIONAL INFORMATION
Additional information relating to Boardwalk REIT, including information as to directors' and officers'
remuneration and indebtedness, principal holders of Boardwalk REIT's securities and securities authorized for
issuance under equity compensation plans, where applicable, is set out in the Trust's Management Information and
Proxy Circular dated March 31, 2014 mailed to Unitholders in connection with the annual meeting of such
Unitholders (the "Annual Meeting"), held on May 15, 2014 (the "Management Information Circular").
Additional financial information is provided in Boardwalk REIT's financial statements and management's
discussion and analysis of financial condition and results of operations for the year ended December 31, 2014.
Additional information relating to Boardwalk REIT may also be found on SEDAR at www.sedar.com.
- 82 -
SCHEDULE "A"
AUDIT AND RISK MANAGEMENT COMMITTEE CHARTER
Policy Statement
It is the policy of Boardwalk Real Estate Investment Trust and its subsidiary entities (the "REIT") to
establish and maintain an audit and risk management committee (the "Audit Committee"), composed entirely of
independent trustees, to assist the Board of Trustees (the "Board") in carrying out its oversight responsibility for
the REIT's internal controls, financial reporting and risk management processes. The Audit Committee will be
provided with resources commensurate with the duties and responsibilities assigned to it by the Board including
administrative support. If determined necessary by the Audit Committee, it will have the discretion to institute
investigations of improprieties, or suspected improprieties within the scope of its responsibilities, including the
authority to retain independent advisors.
Composition of the Committee
1. The Audit Committee shall consist of at least three (3) trustees. The Board shall appoint the members of
the Audit Committee and the Chair of the Audit Committee.
2. Each trustee appointed to the Audit Committee by the Board shall be an independent trustee who is
unrelated. An unrelated trustee is a trustee who is independent of management and is free from any
interest, any business or other relationship which, in the view of the Board, could, or could reasonably be
perceived, to materially interfere with the trustee's ability to act with a view to the best interests of the
REIT. Although unitholding may be a factor in such determination, unitholding alone will not lead to a
conclusion that there is a lack of independence. In determining whether a trustee is independent of
management, the Board shall make reference to the then current legislation, rules, policies and
instruments of applicable regulatory authorities.
3. Each member of the Audit Committee shall be "financially literate". In order to be financially literate, a
trustee must be, at a minimum, able to read and understand financial statements of the complexity of
those of the REIT and the accounting principles used in their preparation, as well as an understanding of
internal controls and procedures for financial reporting.
4. A trustee appointed by the Board to the Audit Committee shall be a member of the Audit Committee until
replaced by the Board or until his or her resignation.
Meetings of the Committee
1. The Audit Committee shall convene a minimum of five (5) times each year at such times and places as
may be designated by the Chair of the Audit Committee and whenever a meeting is requested by the
Board, a member of the Audit Committee, the auditors, or a senior officer of the REIT. Meetings of the
Audit Committee shall correspond with the review of the quarterly and annual financial statements and
management discussion and analysis.
2. Notice of each meeting of the Audit Committee shall be given to each member of the Audit Committee.
3. Notice of a meeting of the Audit Committee shall:
(a) be in writing;
(b) state the nature of the business to be transacted at the meeting in reasonable detail;
(c) to the extent practicable, be accompanied by copies of documentation to be considered at the
meeting; and
- 83 (d) be given at least five (5) business days prior to the time stipulated for the meeting or such shorter
period as the members of the Audit Committee may permit.
4. A quorum for the transaction of business at a meeting of the Audit Committee shall consist of at least half
(1/2) of the members of the Audit Committee.
5. A member or members of the Audit Committee may participate in a meeting of the Audit Committee by
means of such telephonic, electronic or other communication facilities, as permits all persons
participating in the meeting to communicate adequately with each other. A member participating in such
a meeting by any such means is deemed to be present at the meeting.
6. In the absence of the Chair of the Audit Committee, the members of the Audit Committee shall choose
one (1) of the members present to be Chair of the meeting. In addition, the members of the Audit
Committee may invite the Secretary of the REIT or such other person, who need not be a member of the
Committee, as they may choose to be Secretary of the meeting.
7. Senior management of the REIT and other parties may attend meetings of the Audit Committee at the
Audit Committee's invitation; however, the Audit Committee: (i) shall meet with the external auditors
independent of management; and (ii) may meet separately with management.
8. Minutes shall be kept of all meetings of the Audit Committee and shall be signed by the Chair and the
Secretary of the meeting.
Duties and Responsibilities of the Committee
1. The Audit Committee's primary duties and responsibilities are to:
(a) identify and monitor the management of the principal risks that could impact the business of the
REIT;
(b) monitor the integrity of the REIT's financial reporting process and system of internal controls
regarding financial reporting and accounting compliance;
(c) monitor the independence and performance of the REIT's external auditors;
(d) deal directly with the external auditors to approve external audit plans, other services (if any) and
fees;
(e) directly oversee the external audit process and results (in addition to items described in Section 4
below);
(f) provide an avenue of communication among the external auditors, management and the Board;
and
(g) ensure that an effective anonymous "whistle blowing" procedure exists to permit employees to
express concerns regarding accounting or financial matters to the Chair of the Audit and Risk
Management Committee.
2. The Audit Committee shall have the authority to:
(a) inspect any and all of the books and records of the REIT, its subsidiaries and affiliates;
(b) discuss with the management of the REIT, its subsidiaries and affiliates and senior staff of the
REIT, any affected party and the external auditors, such accounts, records and other matters as
any member of the Audit Committee considers necessary and appropriate;
(c) engage independent counsel and other advisors as it determines necessary to carry out its duties;
and
(d) set and pay the compensation for any advisors employed by the Audit Committee.
- 84 3. The Audit Committee shall, at the earliest opportunity after each meeting, report to the Board the results
of its activities and any reviews undertaken and make recommendations to the Board as deemed
appropriate.
4. The Audit Committee shall:
(a) review the audit plan with the REIT's external auditors and with management;
(b) discuss with management and the external auditors any proposed changes in major accounting
policies or principles, the presentation and impact of significant risks and uncertainties and key
estimates and judgments of management that may be material to financial reporting;
(c) review with management and with the external auditors significant financial reporting issues
arising during the most recent fiscal period and the resolution or proposed resolution of such
issues;
(d) review any problems experienced or concerns expressed by the external auditors in performing an
audit, including any restrictions imposed by management or significant accounting issues on
which there was a disagreement with management;
(e) review with senior management the process of identifying, monitoring and reporting the principal
risks affecting the business of the REIT;
(f) review audited annual financial statements and related documents in conjunction with the report
of the external auditors and obtain an explanation from management of all significant variances
between comparative reporting periods;
(g) consider and review with management, the internal control memorandum or management letter
containing the recommendations of the external auditors and management's response, if any,
including an evaluation of the adequacy and effectiveness of the internal financial controls of the
REIT and subsequent follow-up to any identified weaknesses;
(h) review with financial management and the external auditors the quarterly unaudited financial
statements and management discussion and analysis, including the REIT’s annual results,
guidance and updates thereof, before release to the public;
(i) before release, review and if appropriate, recommend for approval by the Board, all public
disclosure documents containing audited or unaudited financial information, including any
prospectuses, annual reports, annual information forms, management discussion and analysis and
press releases; and
(j) quarterly review and recommend to the Board the distribution to Unitholders for the next three
(3) month period.
5. The Audit and Risk Management Committee shall:
(a) evaluate the independence and performance of the external auditors and annually recommend to
the Board for approval by the Unitholders at the next AGM the appointment or re-appointment of
the external auditor or the discharge of the external auditor when circumstances are warranted and
the compensation of the external auditor;
(b) pre-approve all non-audit services to be provided to the REIT or its subsidiary entities by the
REIT's external auditors;
(c) approve the engagement letter for non-audit services to be provided by the external auditors or
affiliates, together with estimated fees, considering the potential impact of such services on the
independence of the external auditors;
(d) when there is to be a change of external auditors, review all issues and provide documentation
related to the change, including the information to be included in the Notice of Change of
- 85 Auditors and documentation required pursuant to National Instrument 51-102 (or any successor
legislation) of the Canadian Securities Administrators and the planned steps for an orderly
transition period; and
(e) review all reportable events as determined on the advice of counsel, including disagreements,
unresolved issues and consultations, as defined by applicable securities policies, on a routine
basis, whether or not there is to be a change of external auditors.
6. The Audit and Risk Management Committee shall:
(a) evaluate the REIT's policies with respect to ensuring compliance with environmental regulations
applicable to the REIT's assets and shall periodically obtain assurance from management that
such policies have been applied;
(b) evaluate the REIT's policies with respect to derivative trading and hedge transactions and
periodically obtain assurance from management that such policies have been adhered to;
(c) evaluate the REIT's policies with respect to disaster recovery, including policies and programs for
computer systems and buildings;
(d) annually review the amount and terms of any insurance to be obtained or maintained by the REIT
with respect to risks inherent in its operations and potential liabilities incurred by the trustees or
officers in the discharge of their duties and responsibilities; and
(e) evaluate risks related to fraud in financial reporting and provide recommendations to management
of procedures to manage such risks.
7. The Audit Committee shall provide advice to the board regarding the appointments of the Chief Financial
Officer.
8. The Audit Committee shall enquire into and determine the appropriate resolution of any conflict of
interest in respect of audit or financial matters, which are directed to the Audit Committee by any member
of the Board, a unitholder of the REIT, the external auditors, or senior management.
9. The Audit Committee shall annually review with management the need for an internal audit function.
10. The Audit Committee shall establish and maintain procedures for:
(a) the receipt, retention and treatment of complaints received by the REIT regarding accounting
controls, or auditing matters; and
(b) the confidential, anonymous submission by employees of the REIT on concerns regarding
questionable accounting or auditing matters.
11. The Audit Committee shall review and approve the REIT's hiring policies regarding employees and
former employees of the present and former external auditors or auditing matters.
12. The Audit Committee shall review with the Trust's internal legal counsel as required but at least annually,
any legal or taxation matter that could have a significant impact on the REIT's business or financial
statements, and any enquiries received from regulators, or government agencies.
13. The Audit Committee shall assess, on an annual basis, the adequacy of this Charter and the performance
of the Audit Committee.
14. In contributing to the Audit Committee's discharging of its duties under this Charter, each Member shall
be entitled to rely in good faith upon:
(a) accounting information of the Trust represented to him by an officer of the Trust or in a written
report of the auditors; and
- 86 (b) any report of a lawyer, accountant, engineer, appraiser or other person whose profession lends
credibility to a statement made by any such person.
15. In contributing to the Audit Committee's discharging of its duties under this Charter, each Member shall
be obliged only to exercise the care, diligence and skill that a reasonably prudent person would exercise in
comparable circumstances. Nothing in this Charter is intended, or may be construed, to impose on any
Member a standard of care or diligence that is in any way more onerous or extensive than the standard to
which all Board Members are subject. The essence of the Audit Committee's duties is the monitoring and
reviewing to gain reasonable assurance (but not to ensure) that the Trust's business activities are being
conducted effectively and that the financial reporting objectives are being met and to enable the Audit
Committee to report thereon to the Board.