21 real estate joint ventures
(a) General
In 2013, we partnered, as equals, with two arm’s-length parties in a residential, retail and commercial real estate redevelopment project, TELUS Sky, in Calgary, Alberta. The new-build tower, scheduled for completion in 2019, is to be built to the LEED Platinum standard.
In 2011, we partnered, as equals, with an arm’s-length party in a residential condominium, retail and commercial real estate redevelopment project, TELUS Garden, in Vancouver, British Columbia. TELUS is a tenant in TELUS Garden, which is now our global headquarters. During the year ended December 31, 2018, the real estate joint venture sold the income-producing properties and the related net assets.
(b) Real estate joint ventures – summarized financial information
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June 30,
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December 31,
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As at (millions)
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2019
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2018
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ASSETS
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Current assets
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Cash and temporary investments, net
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$
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5
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$
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11
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Escrowed deposits
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—
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4
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Other
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5
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2
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10
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17
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Non-current assets
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Investment property under development
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306
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256
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$
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316
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$
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273
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LIABILITIES AND OWNERS’ EQUITY
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Current liabilities
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Accounts payable and accrued liabilities
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$
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12
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$
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19
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Construction holdback liabilities
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14
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15
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Construction credit facilities
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258
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—
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284
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34
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Non-current liabilities
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Construction credit facilities
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—
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207
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—
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241
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Owners’ equity
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TELUS 1
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13
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13
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Other partners
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19
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19
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32
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32
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$
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316
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$
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273
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(1)
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The equity amounts recorded by the real estate joint venture differ from those recorded by us by the amount of the deferred gains on our real estate contributed and the valuation provision we have recorded in excess of that recorded by the real estate joint venture. |
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Three months
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Six months
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Periods ended June 30 (millions)
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2019
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2018
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2019
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2018
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Revenue-from investment property
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$
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—
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$
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8
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$
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—
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$
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16
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Depreciation and amortization
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$
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—
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$
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2
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$
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—
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$
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4
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Interest expense 1
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$
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—
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$
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2
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$
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—
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$
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4
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Net income and comprehensive income 2
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$
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—
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$
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(3)
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$
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(1)
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$
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(2)
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(1)
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During the three-month and six-month periods ended June 30, 2019, the real estate joint ventures capitalized $3 (2018 – $2) and $6 (2018 – $4), respectively, of financing costs. |
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(2)
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As the real estate joint ventures are partnerships, no provision for income taxes of the partners is made in determining the real estate joint ventures’ net income and comprehensive income. |
(c) Our real estate joint ventures activity
Our real estate joint ventures investment activity is set out in the following table.
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2019
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2018
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Loans and
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Loans and
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Three-month periods ended June 30 (millions)
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receivables 1
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Equity 2
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Total
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receivables 1
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Equity 2
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Total
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Related to real estate joint ventures’ statements
of income and other comprehensive income
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Comprehensive income attributable to us
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$
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—
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$
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—
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$
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—
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$
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—
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$
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(1)
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$
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(1)
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Related to real estate joint ventures’ statements of financial position
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Items not affecting currently reported cash flows
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Construction credit facilities financing costs charged by us and other (Note 7)
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1
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—
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1
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—
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—
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—
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Cash flows in the current reporting period
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Construction credit facilities
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Amounts advanced
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9
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—
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9
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7
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—
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7
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Financing costs paid to us
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(1)
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—
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(1)
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—
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—
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—
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Funds repaid to us and earnings distributed
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—
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—
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—
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—
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(1)
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(1)
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Net increase
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9
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—
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9
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7
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(2)
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5
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Real estate joint ventures carrying amounts
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Balance, beginning of period
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77
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5
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82
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53
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15
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68
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Balance, end of period
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$
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86
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$
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5
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$
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91
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$
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60
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$
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13
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$
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73
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2019
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2018
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Loans and
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Loans and
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Six-month periods ended June 30 (millions)
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receivables 1
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Equity 2
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Total
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receivables 1
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Equity 2
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Total
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Related to real estate joint ventures’ statements of income and other comprehensive income
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Comprehensive income attributable to us
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$
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—
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$
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—
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$
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—
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$
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—
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$
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(1)
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$
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(1)
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Related to real estate joint ventures’ statements of financial position
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Items not affecting currently reported cash flows
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Construction credit facilities financing costs charged by us and other (Note 7)
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2
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—
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2
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1
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—
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1
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Cash flows in the current reporting period
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Construction credit facilities
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Amounts advanced
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17
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—
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17
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13
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—
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13
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Financing costs paid to us
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(2)
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—
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(2)
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(1)
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—
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(1)
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Funds repaid to us and earnings distributed
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—
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—
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—
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—
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(1)
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(1)
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Net increase
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17
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—
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17
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13
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(2)
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11
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Real estate joint ventures carrying amounts
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Balance, beginning of period
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69
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5
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74
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47
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15
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62
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Balance, end of period
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$
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86
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$
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5
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$
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91
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$
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60
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$
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13
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$
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73
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(1)
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Loans and receivables are included in our Consolidated statements of financial position as Real estate joint venture advances and are comprised of advances under construction credit facilities (see (d)). |
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(2)
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We account for our interests in the real estate joint ventures using the equity method of accounting. |
Prior to the sale of the TELUS Garden income-producing properties, during the three-month and six-month periods ended June 30, 2018, the TELUS Garden real estate joint venture recognized $3 million and $6 million, respectively, of revenue from our TELUS Garden office tenancy; of this amount, one-half was due to our economic interest in the real estate joint venture and one-half was due to our partner’s economic interest in the real estate joint venture. We have entered into a lease agreement with the TELUS Sky real estate joint venture; for lease accounting purposes, the lease commenced during the three-month period ended March 31, 2019.
(d) Commitments and contingent liabilities
Construction commitments
The TELUS Sky real estate joint venture is expected to spend a total of approximately $450 million (December 31, 2018 – $400 million) on the construction of a mixed-use tower. As at June 30, 2019, the real estate joint venture’s construction-related contractual commitments were approximately $25 million through to 2020 (December 31, 2018 – $35 million through to 2019).
Construction credit facilities
The TELUS Sky real estate joint venture has a credit agreement , maturing August 31, 2019, with three Canadian financial institutions (as 66‑2/3% lender) and TELUS Corporation (as 33‑1/3% lender) to provide $342 million of construction financing for the project; the credit agreement is expected to be extended in August 2019 for an amount not materially more than that currently advanced. The construction credit facilities contain customary real estate construction financing representations, warranties and covenants and are secured by demand debentures constituting first fixed and floating charge mortgages over the underlying real estate assets. The construction credit facilities are available by way of bankers’ acceptance or prime loan and bear interest at rates in line with similar construction financing facilities.
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June 30,
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December 31,
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As at (millions)
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Note
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2019
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2018
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Construction credit facilities commitment – TELUS Corporation
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Undrawn
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4(b )
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$
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28
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$
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45
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Advances
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86
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69
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114
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114
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Construction credit facilities commitment – other
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228
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228
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$
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342
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$
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342
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