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

Canadian Apartment Properties Real Estate Investment Trust

August 13, 2008 16:59 ET

CAP REIT Announces Continued Growth in Q2 2008 Results

TORONTO, ONTARIO--(Marketwire - Aug. 13, 2008) - Canadian Apartment Properties Real Estate Investment Trust ("CAP REIT") (TSX:CAR.UN) announced today strong operating and financial performance for the three and six months ended June 30, 2008.

Q2 2008 HIGHLIGHTS:

- Revenues up 10.5% driven by acquisitions and strong operating performance

- Occupancy increases to 98.2% while average monthly rents rise 3.7%

- Net Operating Income margin increases to 56.4%

- Same property NOI up 4.7%, the tenth consecutive quarter of NOI growth

- Distributable Income and Funds from Operations up 13.5% and 11.0%, respectively

- Track record of accretive growth continues

- Balance sheet strengthens further

Operating revenues for the three months ended June 30, 2008 rose 10.5% to $79.0 million from $71.5 million for the same period in the prior year. For the first six months of 2008, operating revenues increased 10.7% to $157.1 million compared to $141.9 million for the same period last year. The growth in revenues is primarily due to the contribution from acquisitions completed over the last twelve months and higher average monthly rents and occupancies across CAP REIT's portfolio.

Average monthly rents increased across the residential suite portfolio at June 30, 2008 to $935 as compared to $902 last year. Average monthly rents for the properties owned prior to June 30, 2007 also increased as at June 30, 2008 to $940 from $902 as at June 30, 2007. The increases were due to successful sales and marketing strategies and continued strength in the Canadian rental residential sector that resulted in increases of $18 or 1.8% on suite turnovers and $23 or 2.4% increases on lease renewals. Occupancy as at June 30, 2008 also strengthened for the residential suite portfolio to 98.2% from 96.9% in the prior year. The occupancy for the land lease portfolio has remained very stable at 99.7% since acquisition. Management believes the trend of gradual increases in average monthly rents and occupancies will continue going forward.

Operating expenses improved to 43.6% as a percentage of operating revenues, down from 44.5% for the quarter ended June 30, 2007 primarily due to lower energy, repair and maintenance, insurance and other operating costs as a percentage of revenues compared to the same period last year. For the six months ended June 30, 2008, operating expenses improved to 47.2% as a percentage of operating revenues, down from 48.9% for the same period last year.

Primarily as a result of the increase in revenues and improved operating performance, net operating income ("NOI") for the second quarter of 2008 rose 12.3% to $44.6 million from $39.7 million in last year's second quarter. For the first six months of 2008, NOI rose 14.5% to $83.0 million compared to $72.5 million for the same period last year. As a percentage of revenues, NOI increased to 56.4% for the second quarter of 2008 and 52.8% for the first six months of 2008 compared to 55.5% and 51.1% respectively, for the same periods last year.

CAP REIT is also pleased to announce a tenth consecutive quarter of stabilized portfolio growth as NOI for properties owned at December 31, 2006 increased 4.7% for the three months and 6.0% for the six months ended June 30, 2008.

"We are very pleased with our operating performance this year," commented Thomas Schwartz, President and CEO. "Our effective sales and marketing programs, our focus on strong resident relations, and investments in the productive capacity of our property portfolio are enabling us to capitalize on the strengthening fundamentals in the Canadian rental residential business."

"We are particularly pleased that, coming off a very harsh winter with record cold temperatures in many of our markets, our energy management initiatives continue to reduce our utilities cost as a percentage of revenues. Looking ahead, we are confident our investments in energy saving initiatives, combined with our proactive hedging programs, will continue to control these costs and enhance our profitability."

Distributable Income ("DI") increased 13.5% to $22.6 million or $0.346 per Unit for the three months ended June 30, 2008 compared to $19.9 million or $0.335 per Unit for the same period last year. The 3.3% increase in DI per Unit in the second quarter of 2008 was achieved despite a 10.1% increase in the weighted average number of Units outstanding compared with the prior year. For the six months ended June 30, 2008, DI was $39.2 million or $0.600 per Unit compared to $32.9 million or $0.554 per Unit for the same period last year. For the six months ended June 30, 2008, CAP REIT's payout ratio strengthened to 92.6% compared to 99.3% in the comparable period last year. Including distributions re-invested through the DRIP, the effective payout ratio was 75.6% compared to 80.0% last year. For the three months ended June 30, 2008, the payout ratio and effective payout ratio were 80.5% and 66.5% respectively compared to 82.3% and 65.3% in the prior year's second quarter. Management is confident that net DI retained after inclusion of the DRIP investment on an annual basis will be more than sufficient to fund its maintenance capital expenditures.

For the three months ended June 30, 2008, Funds from Operations ("FFO") increased 11.0% to $22.2 million or $0.339 per Unit from $20.0 million or $0.336 per Unit for the same period last year. The growth in FFO per Unit in the second quarter of 2008 was despite the 10.1% increase in the weighted average number of Units outstanding compared with the second quarter of 2007. For the first half of 2008, FFO was $38.3 million or $0.587 per Unit compared to $32.5 million or $0.548 per Unit for the same period in 2007. The FFO payout ratio for the three and six months ended June 30, 2008 was 82.0% and 94.7% respectively, compared to 82.0% and 100.4% for the same periods last year. The effective FFO payout ratio, excluding cash reinvested through the DRIP, was 67.7% and 77.4% for the three and six months ended June 30, 2008 respectively compared to 65.1% and 80.9% for the same periods last year.

For the quarter ended June 30, 2008, net income was $3.4 million or $0.052 per Unit as compared to a net loss of $58.9 million or $(0.993) per Unit for the same period last year. For the first six months of 2008, net income was $17.8 million or $0.272 per Unit compared to a net loss of $63.0 million or $(1.062) per Unit for the same period last year. Net income in 2008 includes a gain of $17.0 million on the sale of twelve non-core properties completed in the first quarter of the year, and a charge of $1.6 million for reorganization costs incurred for changes to CAP REIT's capital structure.

The ratio of total debt (including borrowings on the Acquisition and Operating Facilities) to gross book value was 60.5% as at June 30, 2008, down from 63.2% at the same time last year. The weighted average interest rate of CAP REIT's total mortgage portfolio was 5.35% at June 30, 2008, while the weighted average term to maturity was 5.1 years. Availability under its Acquisition and Operating Facilities rose to $141.2 million as at June 30, 2008 from $125.1 million at the same time last year.

Capital expenditures reduced to $18.3 million in the first half of 2008 compared to $20.9 million last year due to the timing of certain capital investment programs and lower suite improvement costs. Management believes that total capital spending in 2008 will be in the $50 million range.

"The outlook for the Canadian residential rental business continues to improve. Demand continues to grow, driven by the high cost of home ownership, tightened availability for home purchase financing, increased immigration, and a rapidly growing seniors population that views rental accommodation as a cost-effective choice. With a strong balance sheet, enhanced operating performance, and a strong market presence as Canada's Landlord of Choice, we are well positioned to continue enhancing Unitholder value over the long term," Mr. Schwartz concluded.

Financial Highlights:



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Period Ended June 30,
($ Thousands, Three Months Six Months
except per Unit amounts) 2008 2007 2008 2007
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Operating Revenues $ 78,977 $ 71,495 $ 157,081 $ 141,855
Net Operating Income (NOI) $ 44,581 $ 39,688 $ 83,002 $ 72,511
NOI Margin 56.4% 55.5% 52.8% 51.1%
Income (Loss)
from Continuing Operations(1) $ 3,446 $ (54,528)$ 595 $ (58,463)
(Loss) Income
from Discontinued Operations $ (59)$ (4,396)$ 17,155 $ (4,503)
Net Income (Loss) $ 3,387 $ (58,924)$ 17,750 $ (62,966)
Net Income (Loss) per Unit -
Continuing Operations - Basic $ 0.053 $ (0.919)$ 0.009 $ (0.986)
Net (Loss) Income per Unit -
Discontinued Operations - Basic $ (0.001)$ (0.074)$ 0.263 $ (0.076)
Net Income (Loss)
per Unit - Basic $ 0.052 $ (0.993)$ 0.272 $ (1.062)
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Distributable Income (DI)(2)(3) $ 22,582 $ 19,898 $ 39,199 $ 32,860
Distributable Income
per Unit - Basic(2) $ 0.346 $ 0.335 $ 0.600 $ 0.554
Distributions Declared per Unit $ 0.270 $ 0.270 $ 0.540 $ 0.540
Payout Ratio(2) 80.5% 82.3% 92.6% 99.3%
Effective Payout Ratio(2)(4) 66.5% 65.3% 75.6% 80.0%
DI Retention(5) $ 7,569 $ 6,898 $ 9,553 $ 6,556
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Funds from Operations
(FFO)(2)(6) $ 22,164 $ 19,964 $ 38,324 $ 32,505
Funds from Operation
per Unit - Basic(2) $ 0.339 $ 0.336 $ 0.587 $ 0.548
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Number of Suites & Sites 27,807 27,105
Income Properties 2,116,691 2,093,312(7)
Weighted Average
Number of Units (000's) - Basic 65,334 59,353 65,288 59,268
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(1) 2008 includes provision for future income taxes of $313 and $210, and
reorganization costs of $345 and $1,550 for the three and six months
ended June 30, 2008, respectively.
(2) 2008 excludes (loss) and gain on disposals of properties for the three
and six months ended June 30, 2008 respectively.
(3) DI is defined in CAP REIT's Declaration of Trust dated July 11, 2008.
(4) Excludes from distributions cash reinvested by Unitholders
through DRIP.
(5) Distributable income less distributions declared after DRIP
reinvestment.
(6) FFO is calculated in accordance with the recommendations of the Real
Property Association of Canada ("REALpac").
(7) As at December 31, 2007.

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 of cash from operating
activities to DI and net income (loss) to FFO, see pages 14 and 16 of the
Management's Discussion and Analysis dated August 13, 2008.


CAP REIT's Consolidated Financial Statements for the three and six months ended June 30, 2008, 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 27,324 residential suites and two land lease communities comprising 1,267 sites located in or near 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.

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.

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
    Website: www.capreit.net