Canadian Apartment Properties Real Estate Investment Trust

Canadian Apartment Properties Real Estate Investment Trust

March 03, 2005 16:52 ET

CAP REIT Announces 2004 Year-End Results


NEWS RELEASE TRANSMITTED BY CCNMatthews

FOR: CANADIAN APARTMENT PROPERTIES REAL ESTATE INVESTMENT TRUST

TSX SYMBOL: CAR.UN

MARCH 3, 2005 - 16:52 ET

CAP REIT Announces 2004 Year-End Results

TORONTO, ONTARIO--(CCNMatthews - March 3, 2005) - Canadian Apartment
Properties Real Estate Investment Trust (TSX:CAR.UN)("CAP REIT")
announced today results for the year ended December 31, 2004. The
results include the contribution from the acquisition of Residential
Equities Real Estate Investment Trust ("ResREIT") completed on June 1,
2004.

HIGHLIGHTS:

- ResREIT acquisition boosts 2004 revenues by 60.1%

- Distributable income rises 45.1% in 2004

- Residential rental market fundamentals weakened further in fourth
quarter

- Integration of ResREIT properties and people proceeding successfully.

Revenues for the fourth quarter nearly doubled to $65.3 million from
$33.3 million last year. For the year ended December 31, 2004, revenues
rose 60.1% to $207.7 million from $129.7 million in 2003. The revenue
increases in 2004 were mainly due to the acquisition of 10,890 suites
acquired from ResREIT on June 1, 2004. As a result of the increase in
revenues, net operating income ("NOI") for the fourth quarter rose 90.4%
to $33.7 million compared to $17.7 million last year. For the year ended
December 31, 2004, NOI increased 56.3% to $108.7 million compared to
$69.5 million in 2003.

Demand for rental accommodation has remained stable in 2004, resulting
in average occupancy in CAP REIT's portfolio being 96.6% as at December
31, 2004 compared to 97.6% last year. Operating costs have risen in 2004
due to the increased size of the portfolio, as well as higher repairs
and maintenance and advertising costs incurred to attract and retain
tenants. In addition, CAP REIT accelerated its suite renovation program
in 2004, completing work on 1,291 suites during the year compared to 485
suites in 2003. These suites were vacant during renovations for varying
periods up to 60 days. The acquisition of the ResREIT properties, which
included a large number of luxury properties, resulted in an overall
increase in average rents for CAP REIT's total portfolio to $889 per
suite as at December 31, 2004 from $875 at the prior year-end.

Primarily as a result of the cost increases and weak market conditions
in 2004, NOI as a percentage of revenues decreased to 51.6% and 52.3%
for the three months and year ended December 31, 2004 respectively,
compared to 53.0% and 53.6% respectively, last year.

On October 6, 2004, CAP REIT completed the sale of two mid-tier
townhouse properties in Kanata, Ontario totalling 196 suites. The sale
price of $16.75 million generated a gain on the disposition of
approximately $2.56 million or $0.061 per Unit in the fourth quarter.

Distributable Income ("DI") increased 69.5% in the fourth quarter to
$15.0 million or $0.295 per Unit from $8.9 million or $0.307 per Unit
last year. For the year ended December 31, 2004, DI rose 45.1% to $52.3
million or $1.250 per Unit from $36.0 million or $1.257 per Unit last
year. DI excludes gain on discontinued operations of $2.56 million
($0.061 per Unit) in 2004 and gain on property disposition of $2.11
million ($0.074 per Unit) in 2003.

"While we achieved our 2004 targeted general and administrative cost
savings from the ResREIT acquisition and met our mortgage refinancing
objectives, revenue erosion from the ongoing weakness in our markets and
higher operating costs were incurred. As a result, we did not meet our
distributable income target of $1.28 per Unit," commented Thomas
Schwartz, President and CEO.

"The acquisition of the ResREIT properties will bring considerable
benefits to our Unitholders over time. The transaction broadened the
geographic diversification of our portfolio, and significantly enhanced
its composition and quality. CAP REIT is now one of Canada's largest
residential landlords with properties from coast to coast. Looking
ahead, we are confident we will achieve the expected economies of scale
and cost synergies arising from our increased size over the next two
years, and we are more strongly positioned than ever before to grow
distributable income as market fundamentals improve."

Cash distributions paid to Unitholders were higher in 2004 due to the
increase in monthly cash distributions implemented in October 2003 and
the issuance of 21.964 million Units related to the ResREIT acquisition.
The payout ratio in the fourth quarter was 91.6% and 86.3% for the year
ended December 31, 2004. Not including the cash reinvested from the
Distribution Reinvestment Plan (DRIP), the effective payout ratio was
77.4% for 2004. The payout ratio calculation also does not include gains
on property dispositions.

Net income for the three months ended December 31, 2004 was $2.8 million
or $0.056 per Unit compared to $6.3 million or $0.218 per Unit last
year. For the year ended December 31, 2004, net income was $10.2 million
or $0.244 per Unit compared to $28.7 million or $1.001 per Unit last
year. Net income in 2004 has been primarily impacted by an increase of
$16.9 million in depreciation expense resulting from a required change
in accounting policy, increased amortization costs of $5.7 million and
higher interest costs of $21.1 million due to the completion of the
ResREIT acquisition.

The leverage ratios for mortgage indebtedness and overall indebtedness
(including borrowings on the operating and acquisition facilities) to
gross book value were 59.0% and 63.6% respectively as at December 31,
2004, as compared to 58.0% and 62.6% respectively as at December 31,
2003. As at December 31, 2004, the weighted average interest rate on CAP
REIT's total mortgage portfolio was 5.42% compared to 6.04% as at
December 31, 2003, and had additional capacity to raise $19.1 million
before reaching its maximum 60% indebtedness limit. The weighted average
term to maturity was 7.4 years compared to 7.1 years as at December 31,
2003. Undrawn amounts on the acquisition and operating credit facilities
were $35.2 million as at December 31, 2004, compared to $40.9 million
last year.

Funds from Operations ("FFO") for the fourth quarter of 2004 were $14.9
million or $0.292 per Unit compared to $8.9 million or $0.307 per Unit
last year. For the year ended December 31, 2004, FFO was $50.2 million
or $1.201 per Unit compared to $36.0 million or $1.257 per Unit in 2003.
FFO has been calculated in accordance with the recommendations of the
Canadian Institute of Public and Private Real Estate Companies
("CIPPREC") dated November 30, 2004. The reduction in FFO per Unit as
compared to 2003 is primarily due to the treatment of one-time deferred
financing costs (for underwriting fees and related costs for the bridge
facility) of $1.9 million or $0.05 per Unit, which are not added back
for the FFO calculation.

CAP REIT has engaged the services of a professional services firm to
review its overall management structure and information systems.
Management recognized that with the acquisition of the ResREIT
portfolio, a thorough evaluation of its property management,
administrative and financial infrastructure was necessary. Once the
evaluation is completed, CAP REIT will be implementing programs to
ensure it is able to effectively capitalize on the increase in the size
and critical mass of its portfolio while establishing a solid foundation
on which further growth can be achieved.



Financial Highlights:

---------------------------------------------------------------------
Period Ended December 31,
($ Thousands, except Three Months Year
per Unit amounts) 2004 2003 2004 2003
---------------------------------------------------------------------
Operating Revenues $ 65,277 $ 33,335 $ 207,675 $ 129,726
Net Operating
Income (NOI) $ 33,673 $ 17,682 $ 108,680 $ 69,526
NOI Margin 51.6% 53.0% 52.3% 53.6%
Net Income $ 2,836 $ 6,315 $ 10,222 $ 28,692
Net Income per Unit $ 0.056 $ 0.218 $ 0.244 $ 1.001
---------------------------------------------------------------------
Distributable
Income(1) (3) $ 15,035 $ 8,872 $ 52,283 $ 36,026
Distributable
Income per Unit(1) $ 0.295 $ 0.307 $ 1.250 $ 1.257
Distributions
Declared per Unit $ 0.270 $ 0.285 $ 1.080 $ 1.073
Payout Ratio
(before property
gain) 91.6% 92.9% 86.3% 85.4%
Effective Payout
Ratio(2) 84.3% 78.5% 77.4% 71.9%
---------------------------------------------------------------------
Funds from
Operations(1) (3) $ 14,866 $ 8,872 $ 50,235 $ 36,026
Funds from
Operation per
Unit(1) $ 0.292 $ 0.307 $ 1.201 $ 1.257
Number of Suites 24,132 13,438
Income Properties $1,822,421 $ 821,814
Weighted Average
Number of Units
(000s) 50,980 28,893 41,816 28,659
---------------------------------------------------------------------
---------------------------------------------------------------------

(1) Excludes gain on discontinued operations of $2.56 million or
0.061 per Unit for three months and year ended December 31, 2004
and gain on property disposition of $2.11 million or $0.074 per
Unit for the year ended December 31, 2003.

(2) Excludes cash reinvested from the DRIP and gains on property
dispositions.

(3) Distributable income and funds from operations are not measures
defined by Canadian GAAP.


CAP REIT's Annual 2004 Consolidated Financial Statements including
Management's Discussion and Analysis and Supplemental Information can be
found on the investor relations page at www.capreit.net.

As one of Canada's largest residential landlords, CAP REIT (TSX -
CAR.UN) is a growth-oriented investment trust owning interests in 24,132
residential suites located in major urban centres from coast to coast
across the country. 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 www.capreit.net.

-30-

Contact Information

  • FOR FURTHER INFORMATION PLEASE CONTACT:
    CAP REIT
    Mr. Michael Stein
    Executive Chairman
    (416) 861-5788
    or
    CAP REIT
    Mr. Thomas Schwartz
    President & CEO
    (416) 861-9404
    or
    CAP REIT
    Mr. Yazdi Bharucha
    CFO & Secretary
    (416) 861-5771