Canadian Apartment Properties Real Estate Investment Trust

Canadian Apartment Properties Real Estate Investment Trust

May 11, 2006 16:32 ET

CAP REIT Announces 2006 First Quarter Results

TORONTO, ONTARIO--(CCNMatthews - May 11, 2006) - Canadian Apartment Properties Real Estate Investment Trust ("CAP REIT") (TSX:CAR.UN) announced today results for the three months ended March 31, 2006.


- Increased revenues, cost efficiencies generate 8.9% increase in distributable income

- Stabilized portfolio net operating income increases 3.0%

- Market fundamentals continue to strengthen

Primarily due to acquisitions completed over the last twelve months, operating revenues in the first quarter of 2006 increased 9.6% to $69.3 million from $63.3 million last year. As a result of CAP REIT's effective sales and marketing programs and other initiatives, vacancies, bad debts and tenant allowances reduced to 3.8% of revenues from 4.2% in the first quarter of 2005.

As a result of the increase in revenues, net operating income ("NOI") for the first quarter of 2006 rose 11.8% to $32.6 million compared to $29.2 million last year. As a percentage of revenues, NOI increased to 47.0% from 46.1% last year as management's efforts to control costs proved effective. NOI for the stabilized portfolio increased 3.0% in the first quarter of 2006 due to a 1.1% increase in operating revenues and a 0.4% decrease in operating costs compared with last year's first quarter.

Operating expenses as a percentage of operating revenues were lower in the first quarter of 2006 primarily due to reduced property taxes resulting from the enhanced diversification of the portfolio and refunds received in the first quarter of 2006 from successful tax appeals, lower repair and maintenance expenses due to an increase in more cost-efficient sub-contracted projects, and stable utilities cost compared to the same period last year.

In the first quarter of 2006, average occupancies remained stable at 96.8% as compared to 96.9% for the same period last year. Average rents were $874 at the end of the first quarter of 2006 compared to $894 last year. The decline is mainly due to acquisitions made over the last twelve months in Montreal and Quebec City where rents are lower than the national averages.

"We were pleased with our performance in the first quarter of the new year as the many growth and value-enhancing initiatives undertaken during 2005 are now beginning to have a positive impact on our performance," commented Thomas Schwartz, President and CEO.

Distributable income ("DI") increased 8.9% in the quarter to $13.0 million or $0.233 per Unit, from $11.9 million or $0.233 per Unit last year. The payout ratio improved to 115.8% in the first quarter of 2006 from 116.1% last year. The effective payout ratio was 99.4% in the first quarter of 2006 compared to 98.8% last year after excluding from distributions the cash reinvested by investors in the Distribution Reinvestment Plan ("DRIP"). Ratios are traditionally at their seasonal high in the first quarter due to the significantly higher energy costs in the period.

The leverage ratios for mortgage indebtedness and total indebtedness (including borrowings on the operating and acquisition facilities) to gross book value were 58.16% and 63.56%, respectively as at March 31, 2006 compared to 59.01% and 64.44%, respectively last year. The weighted average interest rate on CAP REIT's total mortgage portfolio was 5.35% at March 31, 2006 compared to 5.43% as at March 31, 2005 and the weighted average term to maturity increased to 7.8 years from 7.2 years at the end of the first quarter of 2005 (including the impact of interest rate forward contracts). Management has arranged financings for approximately $35 million of incremental mortgage funding which will reduce the amount of floating rate debt during the second and third quarters of 2006.

Funds from operations ("FFO") for the first quarter of 2006 were $12.3 million or $0.220 per Unit compared to $11.4 million or $0.222 per Unit last year. FFO in the first quarter of 2006 includes approximately $750,000 in Long-Term Incentive Plan compensation cost compared to approximately $554,000 last year.

On May 3, 2006, the Ontario government released proposed new legislation, The Residential Tenancies Act, 2006, to reform the existing Tenant Protection Act. Under this proposed legislation, a landlord's ability to charge market rent on a vacated suite has been maintained. Proposed annual rent increases to existing tenants will be based on the Ontario Consumer Price Index ("CPI"), while above guideline increases for capital expenditures will be limited to 3% annually. Management believes the proposed legislation will be positive for its Ontario business. We are well positioned to take advantage of rent increases as we have invested significantly in improving our properties.

"Market fundamentals continue to improve in the majority of our markets, providing us with numerous opportunities to capitalize on our recently implemented yield management system and other initiatives to increase rents and occupancies in our properties. We also expect to realize improved results as we move aggressively to correct operating issues at a small number of underperforming properties," Mr. Schwartz concluded.

Financial Highlights:

Three Months Ended March 31,
($ Thousands, except per Unit amounts) 2006 2005
Operating Revenues $ 69,317 $ 63,269
Net Operating Income (NOI) (1) $ 32,600 $ 29,157
NOI Margin 47.0% 46.1%
Net Loss $ (3,426) $ (2,931)
Net Loss per Unit - Basic and Diluted $ (0.062) $ (0.057)
Distributable Income (DI) (2) $ 13,003 $ 11,937
Distributable Income per Unit - Basic $ 0.233 $ 0.233
Distributions Declared per Unit $ 0.270 $ 0.270
Payout Ratio 115.8% 116.1%
Effective Payout Ratio (3) 99.4% 98.8%
Funds from Operations (FFO) (4) $ 12,263 $ 11,403
Funds from Operation per Unit - Basic $ 0.220 $ 0.222
Number of Suites 25,716 24,132
Income Properties $1,944,997 $1,907,315
Weighted Average Number of Units (000s)
- Basic 55,672 51,280
(1) NOI is defined as operating revenues less operating expenses.
(2) DI is defined in CAP REIT's Declaration of Trust dated
May 26, 2005.
(3) Excludes cash reinvested through the DRIP.
(4) FFO is calculated in accordance with the recommendations of the
Real Property Association of Canada ("REALPAC) dated
November 30, 2004.

NOI, DI and FFO are not defined by generally accepted accounting
principles (GAAP), do not have standard meanings and may not be
comparable with other industries or companies. For a reconciliation
to net loss, see page 10 and 15 of the Management's Discussion and
Analysis dated May 11, 2006.

All statements in this press release that do not relate to historical facts constitute forward-looking statements. These statements represent CAP REIT's intentions, plans, expectations and beliefs and are subject to certain risks and uncertainties that could result in actual results differing materially from these forward-looking statements. These risks and uncertainties are more fully described in regulatory filings that can be obtained on SEDAR at

CAP REIT's First Quarter 2006 Consolidated Financial Statements, including Management's Discussion and Analysis and Supplemental Information, can be found on the investor relations page at

As one of Canada's largest residential landlords, CAP REIT (TSX - CAR.UN) is a growth-oriented investment trust owning interests in 25,716 residential suites located in major urban centres from coast to coast. Since its Initial Public Offering in May 1997, CAP REIT has grown monthly cash distributions per Unit by 51%. For more information about CAP REIT, its business and its investment highlights, please refer to our web site at

Contact Information

    Mr. Michael Stein
    (416) 861-5788
    Mr. Thomas Schwartz
    President & CEO
    (416) 861-9404
    Mr. Yazdi Bharucha
    CFO & Secretary
    (416) 861-5771