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Depicted is an image of Canadian Lands branching outwards in all directions,
representing the essential asset of Canada Lands. The reactivation of Canada
Lands in 1995 was supported by the launch of our new corporate identity
(shown here), symbolically illustrating lands, sky, rising sun (as maple
leaf), a rainbow and horizon leading to future prosperity.
Table of Contents
Looking Forward - A Statement from the President and CEO
Canada Lands Company Limited - A Corporate Overview.
New Business Activities of Canada Lands Company CLC Limited
CN Tower Limited - Corporate Profile
Management's Discussion and Analysis
Management Responsibility for Financial Reporting
Consolidated Statement of Income and Retained Earnings
Consolidated Statement of Changes in Financial Position
Notes to Consolidated Financial Statements
Property Portfolio and Corporate Directory
Canada Lands Company Limited ("Canada Lands") was reactivated in 1995 out of a conviction that Federal surplus lands could be better managed to the benefit of the Canadian people.
Acting on this belief, the Government of Canada transferred land and human resources from Canadian National Railway Company ("CN") to Canada Lands, as part of the commercialization of CN.
The focus of Canada Lands is to sell a large real estate portfolio on behalf of our Shareholder, the Government of Canada. The Corporation starts with a five-year mandate to generate as much value as possible for the Shareholder from the management and disposition of surplus properties located across the country.
Armed with the people, experience and market knowledge to get the job done, Canada Lands, a non-agent Federal Crown corporation, is moving aggressively to fulfill its goal of producing a substantial cash flow over its initial five-year term.
As we meet our mandate, Canada Lands will play an important role in supporting and promoting the Government of Canada's debt and deficit reduction program. At the same time, the Corporation will respect Federal environmental, heritage, and First Nations policies and priorities.
It is our firm commitment to conduct the business of Canada Lands in
a way which is open and accessible. We will also aim to support the goals
and aspirations Canadians have for themselves and for their communities.
Jon K. Grant
Chairman
Having rebounded somewhat since the early 1990's, the Canadian real estate market continues to present both challenges and opportunities. We have set clear objectives for the newly-mandated Corporation, with accompanying strategies for achieving these objectives and performance measures to evaluate the success of each.
Firstly, Canada Lands will create and implement a broad
based and effective marketing process for the disposal of surplus Federal
Government real properties. The goal is to stimulate maximum competitive
bidding, and to encourage public/private partnerships to expedite the productive
use of assets.
Next, it is our intention to maximize profitability
and cash flow from disposal and management of real properties for the Shareholder.
Canada Lands has an important contribution to make as part of the Federal
Government's deficit reduction efforts, and this role will increase as time
goes by. A good start has been made during our first seven months of operations,
and we will be distributing $10.9 million to the Shareholder.
Canada Lands will assist in the development and implementation
of an efficient process for the transfer of properties from the Federal
Government to the Corporation.
For the CN Tower, our objective is to enhance the profitability
and value of this important asset by establishing it as the premier tourist
and entertainment facility in Canada.
We have a strong management team located across Canada, focused on the
planning and marketing activities necessary for the enhancement in value
and ultimate disposal of our real property holdings. The employees of Canada
Lands look forward to attaining these objectives, building on the successful
results already achieved.
Erhard Buchholz
President and CEO
Canada Lands is a reactivated non-agent Crown corporation which is mandated to operate in a commercially viable manner and at arm's length from the Government. Its business is to carry out, either directly, or indirectly through its subsidiaries, the commercially-oriented and orderly disposal program of surplus Federal real properties in order to maximize value to the Canadian taxpayer. Canada Lands is also charged with managing certain select properties, such as the CN Tower in Toronto.
The primary financial goal of Canada Lands is to generate maximum cash flow for the Shareholder, while carrying out its mandate in a self-financing manner, without any reliance on Government appropriations. The Corporation reports to Parliament through the Minister of Public Works and Government Services.
The Corporation operates on a regional basis with Vice Presidents in charge of Eastern and Western Canada. Corporate functions include accounting, finance, human resources, management information systems, public and government affairs and corporate secretarial.
Canada Lands has an inventory of approximately 150 properties located across the country. The Corporation maintains five regional offices located in Vancouver, Edmonton, Toronto, Montréal and Moncton, with the administrative Head Office being located in Toronto.
Canada Lands' business activities are carried out
principally through two wholly-owned subsidiaries:
Canada Lands Company CLC Limited ("CLC"),
the core real estate business of the parent company, which owns approximately
2,700 acres in 57 different municipalities across Canada and employs 70
people.
CN Tower Limited, a world-class tourist, entertainment
and communications facility in downtown Toronto which attracts nearly 1.7
million visitors annually and employs from 280 to more than 500 people in
the peak summer months.
The other active subsidiary is:
Old Port of Montréal Corporation Inc.,
which operates to enhance Montréal tourism and recreational facilities
in the old section of the City. The Corporation reports directly to Parliament
as if it were a parent Crown Corporation.
Canada Lands Environmental Policy
The operations of Canada Lands will be conducted in compliance with applicable legal requirements, environmental laws and regulations as set out by all authorities having jurisdiction over environmental matters. Public safety will be of primary concern at all times.
In order to meet its obligations, Canada Lands will work proactively to identify and resolve environmental issues by developing uniform operating and reporting procedures, and by working in close cooperation with appropriate regulatory bodies. In order to protect the rights of future generations who will live and work on its lands, the Corporation will maintain the highest standards of environmental stewardship.
The Environmental Policy Statement of the Corporation,
approved by the Board of Directors, is as follows:
"Canada Lands Company Limited, as a holding company, will operate in accordance with applicable legal requirements, environmental laws and regulations and will ensure that its operating subsidiaries will undertake to meet the relevant applicable environmental standards, as amended from time to time, in accordance with their business objectives and adopt the environmental principles of this policy as appropriate to their operational status."
In December 1995, CLC assumed responsibility on behalf of the owners, the Department of National Defence, for planning, redeveloping and managing the 600-acre Downsview decommissioned military base in the City of North York. CLC has now established a site office with a dedicated project team and has invited the private sector to submit specific proposals for the redevelopment of the property. It is the Federal Government's intention that a feature of this property will be a unique urban park and that a significant portion of the property will be held in perpetuity by a Special Trust. It is anticipated that private sector involvement will be mainly on a leasehold basis.
CLC has also been appointed to manage the decommissioning of the 300-acre Canadian Forces Base in Saint-Hubert, Québec. A CLC project team is now on site, and will be working in close co-operation with the people of Saint-Hubert and the Province of Québec to achieve the early redevelopment of most of the property. It is CLC's goal to quickly reposition this property so as to create real economic benefits for the community and generate a fair market value for these lands.
It is anticipated that a number of additional decommissioned military bases will be transferred to CLC on an ongoing basis over the next few years.
The most significant concentration of CLC's current real property assets is in downtown Toronto. Zoned and serviced lands near the CN Tower and surrounding the SkyDome are now available for development for a variety of uses such as entertainment, retail, hotel, office and residential. In the summer of 1996, CLC will seek private sector participation in the development of these assets. We expect considerable interest from local, national and international business organizations. Our objective is to attract significant private sector investment to expedite productive utilization of the lands for the betterment of the community. Furthermore, the Corporation seeks to realize for the Government of Canada fair economic value for these assets.
In British Columbia, where real estate markets are relatively active, CLC
has just completed the first major development project in its 140-acre Glenlyon
Business Park in Burnaby. This project is the new 116,000 sq. ft. headquarters
building for Ballard Power Systems. Ballard is pioneering the development
and production of the hydrogen fuel cell, an alternative source of energy
to conventional fossil fuels.
CLC has also commenced construction of the 140,000 sq. ft. head office building for Future Shop, the electronics superstore noted for innovation in the marketing of technological products. Demand for other high tech suburban office design / build facilities in the Lower Mainland, and especially in strategically-located Burnaby, is consistently strong and provides CLC with significant potential for creating value not only in Glenlyon, but also in its adjacent 32-acre Riverfront Business Park.
Vacancies in the Vancouver downtown office market continue to decline, affording CLC with real increased potential for maximizing value for the 401 Burrard Street office site. This property has approvals in place for the development of 212,000 sq. ft. of triple "A" office space, on an outstanding site in downtown Vancouver.
In Kelowna, British Columbia, the first steps leading to the eventual redevelopment of the former CN railyards have been initiated. This involves the formulation of a strategy for Rezoning and Outline Plan approval that takes into account local market conditions. The Corporation will make every effort to accommodate community aspirations in terms of maximizing access to the lakeshore and contributing to the growing strength of the adjacent downtown core.
In both Alberta and British Columbia, CLC is preparing itself for a major proactive role in maximizing value from downsized military bases, such as CFB Calgary, CFB Chilliwack, Jericho and other facilities on Vancouver Island, as the Department of National Defence prepares to concentrate its Western Canadian military presence at Lancaster Park, just north of Edmonton.
Canada Lands Sales Policy
Canada Lands' sales policy is to achieve maximum value for its assets by carefully assessing market conditions and by exposing and offering the assets to the broadest possible range of potential purchasers.
As part of the sales process, the following requisites
must be met:
Independent property evaluations
Broad market exposure
Due diligence to identify specific site issues such
as environmental concerns, First Nations land claims, and heritage issues
Conveyable title
Offers to purchase will be assessed on the basis of price, terms and
benefits that may flow to the Corporation or the community as a result of
any sale.
The CN Tower (the "Tower") is the world's tallest building
(standing 553 metres) and is a premier tourist destination in Toronto, Ontario.
The CN Tower attracts nearly 1.7 million visitors annually. 
The Tower's primary business segments are Attractions, Food & Beverage and Telecommunications. Management strives to operate the business in a socially, environmentally and ethically responsible manner and to provide the broadest possible opportunity for personal and professional development of its employees.
The strategic direction of the Tower is focused on sourcing visitor volume from the local market, defined as the Greater Toronto Area, during the non-tourist season (October - May), while continuing to increase its share of the tourist market in the summer months. In addition, the Tower continues to invest in improved training programs for all staff. This initiative resulted in the Tower being awarded the 1995 Toronto Tourism Award as "Best Attraction". Also in 1995, the American Society of Civil Engineers voted the Tower as one of the Seven Wonders of the Modern World.
The primary financial goal of CNTower Limited is to maximize long-term cash flow to the Shareholder, while successfully fulfilling its mandate in a commercially viable and self-financing manner, without any reliance on Government appropriations.
The CN Tower has excellent future potential for tourism
and entertainment as a neighbour of:
Metro Toronto Convention Centre (currently expanding)
SkyDome
The future Toronto Raptors' NBA stadium
Toronto's growing theatre and entertainment district
Management is currently exploring opportunities for capitalizing on the
entertainment facilities in the Tower neighbourhood.
The following discussion should be read in conjunction with the consolidated financial statements included in this Annual Report.
The first consolidated financial statements subsequent to the reactivation of Canada Lands Company Limited ("Canada Lands") in August 1995 include results for the seven month period ended 31 March 1996.
The two principal types of business operations currently carried out
by the Corporation are:
a) real estate management, value enhancement and divestiture through
Canada Lands Company CLC Limited ("CLC"), and
b) entertainment and hospitality through CN Tower Limited ("CNTL").
Properties
Effective August 1995, Canada Lands acquired substantially all the non-operating real estate assets of Canadian National Railway Company ("CN") as a result of privatization, including the CN Tower in Toronto. These assets were purchased for a total price of $400 million, settled by the assumption of debt and other obligations of $150 million and the issuance of $250 million in shares by CLC and CNTL. Through a series of transactions consequent on the privatization of CN in November 1995, the shares of both CLC and CNTL were ultimately contributed to Canada Lands by the Minister of Transport.
The property holdings of the Corporation fall into three main categories, namely income producing properties including the CN Tower, properties under development and land held for development or sale.
The Corporation owns 20 income producing properties including the CN Tower in Toronto, and shopping centres, office, industrial and mixed-use properties in various locations across Canada. Commercial income producing properties include 15 properties managed internally by the Corporation, with an additional five properties owned and managed through joint venture arrangements.
Properties under development include two industrial office buildings under construction in Burnaby, B.C., land servicing activities taking place at the industrial business park in Burnaby, and a residential subdivision in Edmonton, Alberta.
Land held for development or sale consists of approximately 120 properties located across Canada, totalling some 2,650 acres. The Corporation commits considerable staff and financial resources to the preparation of these properties for sale, including dealing with legal, environmental, planning and marketing issues.
Results of Operations
For the seven month period ended 31 March 1996, Canada Lands had revenues of $78.8 million, net income of $1.4 million before tax and a closing cash balance of $8.5 million.
The real estate activities carried out by CLC generated revenues of $63.4 million, consisting of $36.3 million from property sales and a sales related management fee, together with $27.1 million from property rental and other income. There were 14 property sales during the period for a net profit of $3 million. Contracts for sale of an additional 20 properties have been entered into subsequent to March with closings scheduled for later this year. Since the properties acquired in 1995 were recorded at estimated fair market values, as discussed in the notes to the financial statements, the Corporation does not anticipate recording significant gains solely from resale of the properties unless there is a substantial improvement in market conditions. The sales related management fee was earned in connection with a special divestment program of properties owned by CN as part of privatization, and will not occur again in the future.
Net rental revenues after direct expenses, but before depreciation of $1.6 million, amounted to $7.3 million. At the end of March, the Corporation's wholly-owned income producing properties had an occupancy rate of 89%, the joint venture properties 82%, and an overall portfolio occupancy rate of 85%.
For the CN Tower, the seven month period covered by these financial statements include the five winter months of November to March, when the number of visitors to the CN Tower are substantially below the peak summer tourist months. The continuing popularity of the CN Tower facilities was evidenced by the fact that the total number of visitors to the Observation Level in 1995 reached approximately 1.4 million which exceeded the previous record set by the Tower in 1977, its first year of operations. On revenues of $15.3 million, CNTL incurred a net loss of $2.2 million before tax. Over a full financial year, CNTL expects to be profitable.
Interest and other financing costs includes interest payable on mortgages and bank indebtedness, together with the cost of obligations assumed by way of an income deficiency guarantee in respect of leasehold interests acquired from CN.
In 1995, the Corporation became a taxable entity, subject to both Federal and Provincial taxes. Income taxes for the seven months ended 31 March 1996 of $ 0.8 million represents an effective rate of 62% of income before tax. The effective rate is higher than the combined Federal and Provincial rates primarily due to income taxes including large corporations tax of $ 0.5 million.
Changes in Financial Position
Included in the assets acquired from CN was a total of $8.7 million in cash and short-term deposits held by CNTL and CLC.
During the period under review, operating activities generated $35.2 million, mainly as a result of the recovery of $23.3 million of real estate costs on sale. Financing activities resulted in a reduction of $12.7 million in mortgages payable, primarily from the assumption of an $11.6 million mortgage by the purchaser on the sale of an income producing property. Investment activities include $22.7 million of expenditures on properties, comprising $9.4 million of construction costs on properties under development, $4.9 million on income producing properties, $2.7 million in preparing properties for sale and $5.7 million in capital improvements at the CN Tower,including preparatory work on two new elevators. As a result of these activities, cash decreased by a nominal $0.2 million during the period.
At the end of March, the Corporation had cash and short- term deposits of $11.8 million, of which $4.2 million was held in joint ventures and which, therefore, is not freely available. After deduction of the $3.3 million of bank indebtedness of CNTL, mainly created by its capital expenditure activities, Canada Lands had net cash funds of $8.5 million at the end of March.
Financial Condition and Liquidity
In addition to the net cash resources at 31 March 1996 of $8.5 million noted above, the Corporation has established a line of credit of $33 million with a chartered bank. In line with the Corporate Plan approved by the Ministry of Finance, the Minister has authorized the Corporation to increase this facility to $37 million.
The coming year should also see the repayment of the $23 million in variable rate financing included in mortgages payable, as the property secured by this debt is now under a contract of sale.
At 31 March 1996, the Corporation had properties with a carrying value of
$337 million and mortgages payable of $60.2 million. These mortgages are
secured by only three income producing properties owned by the Corporation,
thus the majority of the Corporation's properties are unencumbered.
It is anticipated that the Corporation will incur significant capital expenditures over the next year, in the $40 million to $50 million range. These expenditures will cover completion of construction projects, site servicing, environmental remediation and other costs associated in preparing the land inventory for sale, and Tower improvements including the two new elevators, commencing a connection to the Metropolitan Toronto Convention Centre expansion building, and car parking facilities.
The Corporation expects that it will be able to fund all of its regular capital expenditures and operating cash requirements during the next few years. Preliminary plans are in progress to provide additional entertainment facilities and to develop the land holdings around the base of the CN Tower. These projects, if approved, would require separate funding.
In summary, due to the high level of real estate disposal activities forecast for the next few years, the Corporation anticipates generating sufficient cash after normal capital expenditures to make significant dividend payments to its Shareholder, the Government of Canada.
Risks and Uncertainties
The Corporation intends to dispose of the majority of its properties in an orderly manner over a period of time with the objective of maximizing the return to the Federal Government. While there have been signs of some improvement in certain sectors and geographic areas, the Canadian real estate market continues to be generally weak. Proceeds of disposition of the properties will depend to a large degree on the real estate market at the time the properties are listed for sale.
The Corporation has a substantial land bank of 2,650 acres across Canada. Much of the land is undeveloped and for certain parcels, due to size or location, there may be no immediate market. In carrying out its mandate to maximize the return to the Government, the Corporation will continuously evaluate land use, whether further development is warranted, and the appropriate time for marketing.
Many of the Corporation's properties were previously railway lands and may be subject to environmental concerns. The Corporation will comply with laws and regulations relating to protection of the environment. The Corporation has estimated the costs associated with environmental compliance where the costs are determinable and reflected these estimates in the carrying value of its properties. These estimates, however, are subject to change as new information becomes available.
The Corporation's income producing properties have an average occupancy rate of 85%, but ongoing profitable rental operations and net proceeds on the ultimate disposition of the income producing properties are largely dependent upon the real estate market. As long-term leases come up for renewal, in the current market, the Corporation will experience reductions in rental revenue.
With respect to the CN Tower, the Tower's revenues and profits are dependent upon visitor attendance, with peak attendance months being May to September. The most significant factor determining attendance levels, and therefore profitability, is the weather.
Future Prospects
Even though the real estate market in general is struggling to recover from the recent recession, the Corporation is encouraged by the level of interest it continues to generate in certain of its properties. To an extent, this reflects the diverse nature of the property portfolio, being diverse as to size, value, location, and current and potential uses. Few of the Corporation's 150 property holdings are similar in nature.
It is anticipated that the property portfolio will be further supplemented by the proposed transfer of additional surplus Federal Government properties to the Corporation, in particular residential lands and decommissioned Defence Bases situated in strategic locations across Canada. Discussions are currently underway to agree the terms and conditions on which these properties will be transferred from the relevant Federal Government departments. The transfer price is expected to be the fair market value of the properties, to be satisfied by the issue of capital stock by the Corporation, thus maintaining the Corporation's favorable low leverage.
Coupled with the low level of debt carried by the Corporation is the fact that the majority of existing debt is at fixed interest rates, leaving little interest rate exposure. Similarly, the Corporation has virtually no foreign exchange risk as all debt is denominated in Canadian currency and all properties are located in Canada.
As for the future, the Corporation will continue to undertake its program
of asset management, marketing and, where warranted, development to achieve
its objective of asset value enhancement. In fiscal 1997 and 1998, the Corporation's
capital expenditure program at the CN Tower to improve elevating capacity,
enhance accessibility and provide appropriate parking, should sustain the
growth being experienced in visitor attendance. This growth will be further
supplemented as new attractions are added to encourage repeat visits by
local residents, with the aim of making the CN Tower a true year-round entertainment
centre. These activities should also increase the value of adjacent CityPlace
lands, which are currently undergoing an intensive planning and marketing
process. In its real estate operations, the Corporation has experienced
success in marketing its properties and expects that ongoing property dispositions
will enable it to both carry out activities to prepare the properties for
sale and to provide a return to the Federal Government.
The financial statements of Canada Lands Company Limited have been prepared by management of the Corporation in accordance with generally accepted accounting principles.
Management maintains financial and management reporting systems which include appropriate controls to provide reasonable assurance that the Corporation's assets are safeguarded, to facilitate the preparation of relevant, reliable and timely financial information and to ensure that transactions are in accordance with Part X of the Financial Administration Act and regulations, the Canada Business Corporations Act and the articles and by-laws of the Corporation.
Where necessary, management uses judgement to make estimates required to ensure fair and consistent presentation of this information.
The Board of Directors is composed of four directors, none of whom are employees of the Corporation. The Board of Directors has the responsibility to review and approve the financial statements, as well as overseeing management's performance of its financial reporting responsibilities. An Audit Committee appointed by the Board of Directors of the Corporation has reviewed these statements with management and the auditor and has reported to the Board of Directors. The Board of Directors has approved the financial statements.
The auditor is responsible for auditing the financial statements and has issued a report thereon.
All other financial and operating data included in the Annual Report
are consistent, where appropriate, with information contained in the financial
statements.
E. Buchholz President and Chief Executive Officer
B.E. Richardson Vice President, Chief Financial Officer
3 June 1996
To the Minister of Public Works and Government Services:
I have audited the consolidated balance sheet of Canada Lands Company Limited as at 31 March 1996 and the consolidated statements of income and retained earnings and changes in financial position for the seven months then ended. These financial statements are the responsibility of the Corporation's management. My responsibility is to express an opinion on these financial statements based on my audit.
I conducted my audit in accordance with generally accepted auditing standards. Those standards require that I plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.
In my opinion, these consolidated financial statements present fairly, in all material respects, the financial position of the Corporation as at 31 March 1996 and the results of its operations and the changes in its financial position for the seven months then ended in accordance with generally accepted accounting principles.
Further, in my opinion, the transactions of the Corporation and of its
wholly-owned subsidiaries that have come to my notice during my audit of
the consolidated financial statements have, in all significant respects,
been in accordance with Part X of the Financial Administration Act
and regulations, the Canada Business Corporations Act and the articles
and by-laws of the Corporation and its wholly-owned subsidiaries.
Wm. F. Radburn, FCA
Assistant Auditor General for the Auditor General of Canada
Ottawa, Canada
3 June 1996
| For the seven months ended 31 March 1996 (note 1) | |||
| In thousands | Note | . | |
| REVENUES | |||
| $26,248 | |||
| 24,180 | |||
| 13 | 10,070 | ||
| 12,894 | |||
| 5,358 | |||
| 78,750 | |||
| EXPENSES | |||
| 23,297 | |||
| 16,897 | |||
| 13,335 | |||
| 7, 11, 13 | 10,757 | ||
| 9,442 | |||
| 3,671 | |||
| 77,399 | |||
| NET INCOME BEFORE TAX | 1,351 | ||
| 9 | 836 | ||
| NET INCOME | 515 | ||
| - | |||
| RETAINED EARNINGS, END OF PERIOD | $515 | ||
See accompanying notes to consolidated financial statements.
| As at 31 March 1996 (note 1) | ||
| In thousands | Note | |
| ASSETS | ||
| PROPERTIES | ||
| 4 | $186,668 | |
| 4 | 27,448 | |
| 123,009 | ||
| 337,125 | ||
| OTHER ASSETS | ||
| 5 | 11,798 | |
| 6 | 41,247 | |
| 4,729 | ||
| 57,774 | ||
| $394,899 | ||
| LIABILITIES AND SHAREHOLDER'S EQUITY | ||
| LIABILITIES | ||
| 7 | $60,191 | |
| 3,335 | ||
| 11 | 77,368 | |
| 1,799 | ||
| 2,074 | ||
| 144,767 | ||
| SHAREHOLDER'S EQUITY | ||
| 8 | - | |
| 3 | 249,617 | |
| 515 | ||
| 250,132 | ||
| 4, 11 | ||
| $394,899 | ||
See accompanying notes to consolidated financial statements.
On behalf of the Board:
Jon K. Grant
Charles Pelletier
| For the seven months ended 31 March 1996 (note 1) | ||
| In thousands | Note | |
| OPERATING ACTIVITIES | ||
| $515 | ||
| 3,671 | ||
| 23,297 | ||
| (1,508) | ||
| 25,975 | ||
| 9,292 | ||
| CASH PROVIDED BY OPERATING ACTIVITIES | 35,267 | |
| FINANCING ACTIVITIES | ||
| (12,749) | ||
| CASH APPLIED TO FINANCING ACTIVITIES | (12,749) | |
| INVESTMENT ACTIVITIES | ||
| 3 | (249,617) | |
| 3 | 249,617 | |
| (22,737) | ||
| CASH APPLIED TO INVESTMENT ACTIVITIES | (22,737) | |
| DECREASE IN CASH DURING THE PERIOD | (219) | |
| - | ||
| 3 | 8,682 | |
| CASH, END OF PERIOD | $8,463 | |
Cash includes cash and short-term depostits and is net of bank indebtedness.
See accompanying notes to consolidated financial statements.
1. Authority and Activities of the Corporation
Canada Lands Company Limited, a non-agent Crown corporation, originally named Public Works Lands Company Limited, was incorporated under the Companies Act in 1956 and was continued under the Canada Business Corporations Act. It was added to Schedule C to the Financial Administration Act in 1979 and listed as a parent Crown corporation in 1984 in Part I of Schedule III to the Financial Administration Act.
The Corporation has full power to acquire, manage, improve, sell or otherwise deal in or dispose of real or personal property or any interest therein. Until 1995, the Corporation had been used to hold, in trust for Federal Government departments, certain leasehold interests in two properties in London, England, and two properties on First Nations' reserves in Canada. Funding for these leases is borne by the departments.
As a consequence of the CN Commercialization Act which came into effect in July 1995, the Corporation acquired effective 31 August 1995 all the shares of Canada Lands Company CLC Limited ("CLC") and CN Tower Limited ("CNTL") (note 3).
Prior to 31 August 1995, the Corporation was inactive and had only nominal assets and share capital. Accordingly, comparative figures as at and for the year ended 31 March 1995 have not been presented in the accompanying consolidated financial statements. In addition, the accompanying statements of income and retained earnings, and changes in financial position for the period ended 31 March 1996 reflect operations and changes in financial position only from the date of acquisition of CLC and CNTL, 31 August 1995.
CLC's objective is principally to carry out a commercially-oriented and orderly disposal program of surplus Federal Government real properties. In undertaking this objective, CLC may manage, develop and dispose of real properties, either in the capacity of owner or as agent for the Federal Government. It is anticipated that this disposal program will be completed over a number of years.
The primary business of CNTL is the operation of the CN Tower in Toronto,
Ontario. Its income is primarily derived from the operation of attractions,
food and beverage facilities.
2. Summary of Significant Accounting Policies
a) General
The consolidated financial statements are prepared in accordance with generally accepted accounting principles. With respect to real estate activities, the Corporation's accounting policies and standards of financial disclosure are also substantially in accordance with the recommendations of the Canadian Institute of Public Real Estate Companies, of which the Corporation is an associate member.
b) Consolidation
i) The Corporation consolidates the accounts of its two principal wholly-owned subsidiaries, CLC and CNTL.
ii) The consolidated financial statements also include the Corporation's proportionate share of all incorporated and unincorporated joint ventures in which the Corporation has an interest, to the extent of the Corporation's interest in their respective assets, liabilities, revenues, expenses and cash flows.
iii) The accounts of the Corporation's other non-principal subsidiaries are excluded from consolidation because the Corporation does not expect to obtain future economic benefits from the resources of these subsidiaries and is not exposed to the related risks. These non-consolidated subsidiaries are Canada Lands Company (Vieux-Port de Québec) Inc., Canada Museums Construction Corporation Inc. and Old Port of Montréal Corporation Inc.
The Corporation has one additional subsidiary, 3148131 Canada Limited, which is presently inactive.
c) Income Recognition
The Corporation recognizes income as follows:
i) Property sales
When the Corporation has fulfilled all material conditions and received a down payment that is appropriate in the circumstances having regard to the financial resources of the purchaser.
ii) Income producing properties under development
When break-even cash flow after debt service is achieved but not later than one year after substantial completion.
d) Properties
i) Income producing properties are carried at cost less accumulated depreciation and, if intended for disposition, at the lower of cost less accumulated depreciation and net realizable value.
ii) Properties under development and land held for development or sale are carried at the lower of cost and net realizable value.
iii) Prior to sale, the Corporation capitalizes all direct deferred selling costs related to the properties.
iv) When significant interest costs are incurred related to development activities, the Corporation capitalizes such costs to properties.
e) Depreciation
Depreciation is calculated on the straight-line method using rates based on the estimated remaining useful lives of the assets, which range from 5 to 40 years.
f) Asset Valuation
In determining estimates of net realizable values and fair market values (note 3) for its properties, the Corporation relies on assumptions regarding applicable industry performance and prospects, as well as general business and economic conditions that prevail and are expected to prevail. Assumptions underlying asset valuations are limited by the availability of reliable comparable data and the uncertainty of predictions concerning future events.
The Corporation's properties are subject to various government laws and regulations relating to the protection of the environment. The Corporation has made, and expects to make in the future, expenditures to comply with such laws and regulations. Where estimated costs are reasonably determinable, the Corporation considers such costs in arriving at estimates of fair market value of its properties, based on management's estimate of such costs. Such estimates are, however, subject to change based on agreements with regulatory authorities, changes in laws and regulations, the ultimate use of the property, and as new information becomes available.
Due to the assumptions which must be made in arriving at estimates of fair market value, by nature, such estimates are subjective and do not necessarily result in a precise determination of asset value.
g) Pre-opening Costs
Pre-opening costs for new attractions, food and beverage operations are expensed as incurred.
3. Acquisition of Assets from Canadian National Railway Company
Effective 31 August 1995, CLC and CNTL acquired from their then parent company, Canadian National Railway Company ("CN"), a portfolio of real estate properties and the CN Tower and related entertainment and hospitality facilities, respectively.
Through a series of subsequent transactions, also effective 31 August 1995, the Minister of Transport contributed to the Corporation all the shares of CLC and CNTL.
A summary of the net assets acquired is as follows:
| In thousands | CLC | CNTL | Total |
| ASSETS ACQUIRED | |||
| $255,590 | $85,798 | $341,388 | |
| 54,275 | 4,099 | 58,374 | |
| 309,865 | 89,897 | 399,762 | |
| Debt and other obligations assumed | 146,046 | 4,099 | 150,145 |
| NET ASSETS ACQUIRED | $163,819 | $85,798 | $249,617 |
The Corporation has recorded the $249,617,000 as contributed surplus.
Effective 31 August 1995, the Corporation established carrying values for the individual real estate assets acquired and the related debt and other obligations assumed based on estimates of fair market value and giving consideration to the portfolio of properties as a whole. The Corporation's interest in CNTL including its principal asset, the CN Tower, is recorded at a carrying value equivalent to historic net book value, which at the date of acquisition, approximated estimated fair market value.
4. Properties
a) Income Producing Properties
The Corporation's income producing properties consist of the CN Tower, shopping centres, office, industrial and mixed-use buildings.
| In thousands | |
| $46,800 | |
| 143,509 | |
| 190,309 | |
| 3,641 | |
| $186,668 | |
b) Properties Under Development
Properties under development consist of industrial office projects under construction and residential and industrial land currently being serviced.
| In thousands | |
| $9,865 | |
| 17,583 | |
| $27,448 | |
Capital commitments at 31 March 1996 total $5,369,000.
5. Cash and Short-Term Deposits
Included in cash and short-term deposits are amounts totalling $4,180,000 held in joint ventures, which can only be applied to specific liabilities or which will only become available to the Corporation in future periods.
6. Amounts Receivable
Amounts receivable are comprised as follows:
| In thousands | |
| $35,000 | |
| 2,333 | |
| 3,914 | |
| $41,247 | |
a) The Corporation has a receivable under an assignment agreement in respect of rents receivable, which entitles it to receive rental income during the period ending 2013. At 31 March 1996, the assignment of rents receivable in the amount of $35 million reflects the estimated payments to be received during the term of the agreement, less imputed interest, as follows:
Estimated payments under assignment of rents:
| In thousands | |
| Years ending 31 March | |
| $4,388 | |
| 4,485 | |
| 4,570 | |
| 4,615 | |
| 4,758 | |
| Subsequent years | 75,647 |
| 98,463 | |
| Less amounts representing imputed interest | 63,463 |
| $35,000 | |
b) Other long-term receivables bear interest primarily at bank prime
rate plus 2%, and are repayable as follows:
| In thousands | |
| Years ending 31 March | |
| $528 | |
| 528 | |
| 792 | |
| 485 | |
| $2,333 | |
7. Mortgages Payable
Mortgages payable are secured by certain of the Corporation's properties,
and have a maturity schedule as follows:
| In thousands | Fixed Rate |
Variable Rate |
Total |
| Years ending 31 March | |||
| $134 | $23,000 | $23,134 | |
| 145 | 145 | ||
| 157 | 157 | ||
| 170 | 170 | ||
| 184 | 184 | ||
| Subsequent years | 36,401 | 36,401 | |
| $37,191 | $23,000 | $60,191 | |
Interest is payable at a weighted annual average rate of 10.37% on the fixed rate mortgages and at bank prime rate plus 0.25% on the variable rate mortgage. Interest incurred on mortgages payable amounted to $3,502,000 for the period.
8. Capital Stock
The Corporation is authorized to issue three shares which shall not be transferred to any person other than a person approved by the Minister of Public Works and Government Services. The three authorized shares have been issued in consideration of services rendered and are held in trust for Her Majesty in right of Canada by the Minister of Public Works and Government Services. Nominal value has been ascribed to the three issued shares of the Corporation.
9. Income Tax
The Corporation is taxable under Federal and Provincial laws. The Corporation's income tax expense for the seven months ended 31 March 1996 includes large corporations tax in the amount of $519,000.
10. Pension Plans
The employees of CLC are members of a defined contribution pension plan whereby the Corporation and the employees make equal contributions to the particular investment fund selected by each employee.
The employees of CNTL are members of a defined benefit pension plan. The plan provides pensions based on the best average annual earnings during 60 consecutive months of pensionable service and length of service. The latest actuarial valuation of the plan was at 1 January 1994, when the actuarial assets and liabilities of the plan were $1,184,000 and $987,000 respectively. The estimated actuarial assets and liabilities at 31 December 1995 were $1,244,000 and $1,198,000 respectively, resulting in an estimated surplus of $46,000.
11. Contingent Liabilities and Commitments
a) The Corporation has a commitment under an income guarantee agreement whereby the Corporation is obligated to fund up to a maximum of approximately $13 million annually, expiring 2083. The Corporation's estimate of this obligation is included in accounts payable and accrued liabilities, and the related amount expensed during the seven months ended 31 March 1996 is included in interest and other financing costs.
b) The Corporation has entered into commitments under operating leases
for land and office premises for terms up to 96 years, with minimum lease
payments as follows:
| In thousands | |
| Years ending 31 March | |
| $1,267 | |
| 851 | |
| 873 | |
| 889 | |
| 727 | |
| Subsequent years | 17,277 |
| $21,884 | |
c) Letters of credit totalling $7,183,000 were outstanding at 31 March 1996.
12. Joint Ventures
The following amounts included in the consolidated financial statements
represent the Corporation's proportionate share in joint ventures:
| In thousands | |
| $76,583 | |
| 63,958 | |
| 14,634 | |
| 12,959 | |
| 1,675 | |
| 15,845 | |
| (12,749) | |
| $(3,096) | |
The Corporation is contingently liable for obligations of its associates in such joint ventures. In each case, all of the assets of the joint venture are available for the purpose of satisfying such obligations.
13. Related Party Transactions
The Corporation is related in terms of common ownership to all Government of Canada departments, agencies and Crown corporations. The Corporation enters into transactions with these entities in the normal course of business.
In addition to those related party transactions disclosed elsewhere in
these financial statements, the significant transactions during the period
were:
a) The Corporation carried out a special divestment program of certain real estate assets owned by CN, a Crown corporation at that time, and was paid a management fee by way of participation in the net sales proceeds.
b) Included in accounts payable and accrued liabilities is an amount of $912,000 due to the Minister of Public Works and Government Services. This liability is due in 2002, bears interest at the rate of 7.24% per annum and interest incurred during the period totalled $39,000.
c) The Corporation receives audit services without charge from the Office of the Auditor General of Canada.
14. Segmented Information
The Corporation's major areas of business activities are the management, development and sale of real estate, and the entertainment and hospitality operations of the CN Tower.
Additional information on these activities is as follows:
| In thousands | Real Estate Activities |
Entertainment Hospitality |
Total |
| $63,425 | $15,325 | $78,750 | |
| 1,625 | 2,046 | 3,671 | |
| 3,580 | (2,229) | 1,351 | |
| 17,044 | 5,693 | 22,737 | |
| $302,886 | $92,013 | $394,899 | |
15. Information on Non-consolidated Subsidiary Companies
Canada Lands Company (Vieux-Port de Québec) Inc. ceased operations effective 31 March 1988. However, a decision has yet to be taken with respect to the formal dissolution of the corporation pending the resolution of certain legal matters. As at 31 March 1995, this corporation, in thousands of dollars, had assets of $494, liabilities of $291 and equity of Canada of $203.
Canada Museums Construction Corporation Inc. has transferred its responsibilities for residual matters pertaining to the construction of two museums to the Ministry of Public Works and Government Services. It is anticipated that this corporation will be dissolved within a year. As at 31 March 1995, this corporation, in thousands of dollars, had assets of $2,140, liabilities of $1,268 and equity of Canada of $872.
Old Port of Montréal Inc. promotes the development of the lands of the Old Port of Montréal and develops, administers, manages and maintains Crown property in that location. This corporation has been directed to report as a parent Crown corporation. As at 31 March 1995, this corporation, in thousands of dollars, had assets of $2,049, liabilities of $2,889 and equity (deficit) of Canada $(840) with revenue of $8,865 and excess of operating expenditures over revenue of $2,274 for the year then ended.
| Board of Directors Canada Lands Company Limited (1) Canada Lands Company CLC Limited (2) |
CN Tower Limited | Corporate Officers Canada Lands Company Limited (1) Canada Lands Company CLC Limited (2) |
CN Tower Limited | |
Jon K. Grant (1,2) Erhard Buchholz (2) Wendy D. Grant (1,2)* Robert J. Metcalfe (1,2)* Charles Pelletier (1,2)* |
Robert J. Metcalfe * Erhard Buchholz Jon K. Grant Reginald W. Lewis * Kevin M. Shea * John D. Tevlin |
E. Buchholz (1,2) G. K. McIvor (1,2) J. J. Morrison (1,2) B. E. Richardson (1, 2) S. P. Round (2) B. E. Way (1,2) G. W. Wicklund (1,2) W. R. Winnicki (2) |
J. D. Tevlin A. F. Matheson |
|
* Member of the Audit Committee
| Head Office | Regional Offices | |||
| Toronto 200 King Street West Suite 1500 Toronto, Ontario M5H 3T4 Tel.: (416) 974-9700 Fax: (416) 974-9661 Internet: http://www.clc.ca E-mail: clc@clc.ca |
Vancouver Edmonton |
Toronto Montréal Moncton |
||
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