Canadian Apartment Properties Real Estate Investment Trust
TSX : CAR.UN

Canadian Apartment Properties Real Estate Investment Trust

August 11, 2006 08:40 ET

CAP REIT Announces 2006 Second Quarter Results

TORONTO, ONTARIO--(CCNMatthews - Aug. 11, 2006) - Canadian Apartment Properties Real Estate Investment Trust ("CAP REIT")(TSX:CAR.UN) announced today results for the three and six months ended June 30, 2006.

HIGHLIGHTS:

- Increase in operating revenues driven by acquisitions, higher occupancies and increased average rents in the majority of CAP REIT's markets

- Same property NOI positive for second consecutive quarter

- Improving trends in gross rents on suite turnover and renewals

- Reduced overall leverage ratio and exposure to floating interest rates

- Filed prospectus for sale of Units to raise approximately $60.3 million

Operating revenues in the second quarter of 2006 increased 10.9% to $69.9 million from $63.0 million last year. For the six months ended June 30, 2006, operating revenues rose 10.2% to $139.2 million from $126.3 million for the first six months of 2005. The increased revenues are primarily the result of acquisitions completed over the last twelve months as well as higher occupancies and average rents in the majority of markets in which CAP REIT operates.

Primarily due to the increase in revenues, net operating income ("NOI") for the second quarter and first six months of 2006 rose 10.2% to $37.9 million and 10.9% to $70.5 million, respectively compared to the same periods last year. As a percentage of revenues, NOI was 54.3% in the second quarter of 2006 compared to 54.6% last year, and 50.7% through the first six months of 2006 compared to 50.3% last year. NOI for the stabilized portfolio increased 1.7% in the six months ended June 30, 2006, and 0.6% in the second quarter of 2006, the second consecutive quarter of positive NOI growth for the stabilized portfolio.

Operating expenses as a percentage of operating revenues remained stable in the second quarter and were lower for the first six months 2006 compared to the prior year periods. Reduced property taxes and stable energy costs in 2006 have been offset by a slight increase in advertising, repair and maintenance, and payroll expenses compared to the same periods last year.

Overall average occupancy at June 30, 2006 improved to 97.1% from 96.5% last year. Average rents were $882 at the end of the second quarter of 2006 compared to $886 last year. The small decline is mainly due to acquisitions made over the last twelve months in Montreal where rents are lower than the national averages. However, average rents for the properties owned prior to June 30, 2005 increased to $899 per suite as at June 30, 2006 compared to $888 per suite as at June 30, 2005 with solid gains in the mid-tier and luxury segments. Occupancies and average rents were also impacted in the second quarter by seasonal student vacancies in Halifax and London markets.

CAP REIT also began to see steady increases in overall gross rents on tenant turnover and lease renewals through the first six months of 2006, as a result of management's successful sales and marketing strategies and improving fundamentals in the majority of CAP REIT's markets.

"We were pleased to see steady progress in our ability to increase rents on suite turnovers and renewals, and expect this trend will continue going forward," commented Thomas Schwartz, President and CEO.

Distributable income ("DI") increased 5.0% in the second quarter to $17.5 million compared to $16.6 million in last year's second quarter. DI per Unit for the second quarter was $0.316 per Unit compared to $0.322 per Unit for the second quarter last year. For the six months ended June 30, 2006, DI rose 6.6% to $30.5 million as compared to $28.6 million for the same period last year. DI per Unit for the six months ended June 30, 2006 was $0.552 per Unit compared to $0.555 per Unit for the same six month period last year. Per Unit amounts in the second quarter and first six months of 2006 were impacted by the 6.8% and 7.1% increase, respectively in the weighted average number of Units outstanding compared with the prior year periods.

The leverage ratio for total indebtedness (including borrowings on the operating and acquisition facilities) to gross book value was 63.7%, as at June 30, 2006 compared to 64.7% last year. The weighted average interest rate on CAP REIT's total mortgage portfolio reduced to 5.35% at June 30, 2006 from 5.48% as at June 30, 2005, and the weighted average term to maturity was 7.8 years compared to 8.5 years at the end of the second quarter of 2005 (including the impact of interest rate forward contracts). Management has arranged additional financings for approximately $21.9 million, which will further reduce the amount of floating rate debt during the third and fourth quarters of 2006.

In addition, on August 2, 2006, CAP REIT filed a preliminary short-form prospectus related to the sale of 3,570,000 Units to a syndicate of underwriters on a bought-deal basis for aggregate gross proceeds of approximately $60.3 million. The net proceeds of approximately $57.3 million will be used first to repay a portion of amounts currently owing under CAP REIT's acquisition facility and the balance, if any, for future acquisitions, capital expenditures and for general trust purposes. With the completion of this offering and the Longueuil acquisition discussed below, CAP REIT's proforma debt ratio will be approximately 61.3%. This will enable CAP REIT to acquire approximately $626 million in additional new properties, assuming total indebtedness of 70% of gross book value of CAP REIT's assets. The closing is currently expected to occur on August 22, 2006.

Funds from operations ("FFO") in the second quarter of 2006 increased 4.9% to $17.5 million as compared to $16.7 million in last year's second quarter. FFO per Unit was $0.316 per Unit compared to $0.322 per Unit for the second quarters of 2006 and 2005, respectively. For the first six months of 2006, FFO rose 5.9% to $29.7 million compared to $28.1 million for the first six months of 2005. FFO per Unit was $0.539 per Unit compared to $0.545 per Unit for the same six month periods in 2006 and 2005, respectively. Per Unit amounts in the second quarter and first six months of 2006 were impacted by the 6.8% and 7.1% increase, respectively in the weighted average number of Units outstanding compared with the prior year periods.

On July 27, 2006, CAP REIT completed the acquisition of two neighbouring projects located in Longueuil, Quebec, consisting of 338 suites in the affordable and mid-tier categories. The total acquisition costs of approximately $19.0 million were satisfied by the assumption of approximately $11.4 million in mortgage financings ranging from one to five years with effective interest rates of 4.51% to 4.67% and the balance from the acquisition facility.

"With the completion of the Longueuil transaction, we have added 895 suites to the portfolio so far this year. We continue to evaluate additional growth opportunities, and with a strong pipeline of acquisition opportunities, we remain confident we will achieve our annual target of adding between 1,500 and 2,000 suites to the portfolio by the end of 2006," Mr. Schwartz concluded.



Financial Highlights:

-----------------------------------------------------------------------
Period Ended June 30,
($ Thousands, except per Three Months Six Months
Unit amounts) 2006 2005 2006 2005
-----------------------------------------------------------------------
Operating Revenues $ 69,859 $ 63,010 $ 139,176 $ 126,279
Net Operating Income (NOI)$ 37,919 $ 34,407 $ 70,519 $ 63,564
NOI Margin 54.3% 54.6% 50.7% 50.3%
Net Income (Loss) $ 1,457 $ 2,290 $ (1,969) $ (641)
Net Income (Loss) per
Unit - Basic and Diluted $ 0.026 $ 0.044 $ (0.036) $ (0.012)
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Distributable Income (1) $ 17,469 $ 16,641 $ 30,472 $ 28,578
Distributable Income per
Unit - Basic $ 0.316 $ 0.322 $ 0.552 $ 0.555
Distributions Declared per
Unit $ 0.270 $ 0.270 $ 0.540 $ 0.540
Payout Ratio 86.8% 83.9% 99.2% 97.4%
Effective Payout Ratio (2) 76.3% 72.1% 86.2% 83.3%
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Funds from Operations (3) $ 17,470 $ 16,661 $ 29,733 $ 28,064
Funds from Operation per
Unit - Basic $ 0.316 $ 0.322 $ 0.539 $ 0.545
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Number of Suites 25,809 24,212
Income Properties $1,945,844 $1,907,315(4)
Weighted Average Number
of Units (000's) - Basic 55,220 51,707 55,154 51,495
Weighted Average Number
of Units (000's) - Diluted 55,414 51,759 55,346 51,551
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(1) DI is defined in CAP REIT's Declaration of Trust dated May 25, 2006.
(2) Excludes cash reinvested through the DRIP.
(3) FFO is calculated in accordance with the recommendations of the Real
Property Association of Canada ("REALPAC) dated November 30, 2004.
(4) As at December 31, 2005.

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 income (loss), see page 10 and 15 of the Management's Discussion and
Analysis dated August 10, 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 www.sedar.com.

CAP REIT's Consolidated Financial Statements for the three and six months ended June 30, 2006, including Management's Discussion and Analysis, 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 26,147 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 www.capreit.net.

Contact Information

  • CAP REIT
    Mr. Michael Stein
    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
    www.capreit.net