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

Canadian Apartment Properties Real Estate Investment Trust

November 09, 2007 18:05 ET

CAP REIT Announces Continued Strength in Third Quarter 2007 Results

TORONTO, ONTARIO--(Marketwire - Nov. 9, 2007) - Canadian Apartment Properties Real Estate Investment Trust ("CAP REIT") (TSX:CAR.UN) announced today results for the three and nine months ended September 30, 2007.

HIGHLIGHTS:

- Average monthly rents increase across all sectors of the portfolio

- Occupancies remain strong at 97.7%

- Quarterly and YTD NOI margins improve on enhanced operating performance

- Same property NOI up 4.3% and 3.2% in the quarter and year-to-date periods

- DI and FFO per Unit for the nine months was $0.911 and $0.897 compared to $0.893 and $0.880 in the previous year

- Payout ratios continue to strengthen

- New land lease communities contribute to revenue and NOI growth

Operating revenues in the third quarter of 2007 rose 9.5% to $74.9 million from $68.4 million last year, primarily due to acquisitions completed over the last twelve months and higher average monthly rents across CAP REIT's portfolio. Revenues for the nine months ended September 30, 2007 rose 7.5% to $217.4 million compared to $202.3 million for the same nine month period last year.

Primarily as a result of the increase in revenues and improved operating performance, net operating income (NOI) for the three and nine months ended September 30, 2007 rose 12.6% and 9.1% to $42.6 million and $115.4 million, respectively, compared to the same periods last year. As a percentage of revenues, NOI increased to 56.8% in the third quarter of 2007 compared to 55.3% last year, and 53.1% for the first nine months of 2007 compared to 52.3% for the same nine month period last year. CAP REIT is also pleased to announce a seventh consecutive quarter of stabilized portfolio growth as NOI for properties owned at December 31, 2005 increased 4.3% for the three months ended September 30, 2007. For the nine months ended September 30, 2007, NOI was up 3.2% for the stabilized portfolio.

Operating expenses as a percentage of operating revenues decreased from 47.7% to 46.9% during the first nine months of 2007 due primarily to lower property taxes and energy costs compared to the prior year. CAP REIT has successfully implemented a new lease administration system that enhances control on rent setting for every suite in the portfolio. The new system provides improved functionality at each property to manage leases, make changes and update resident rents by suite. Management believes that the new system will result in increased resident service, more effective rent settings, and an enhanced resident profile.

The trend of gradual increases in average monthly rents across all segments of CAP REIT's portfolio continued in the third quarter of 2007 as average monthly rents for its residential suite portfolio increased to $907 as at September 30, 2007 compared to $893 last year. The increases were due primarily to strong 2.1% increases on suite turnovers and 2.9% increases on lease renewals, as well as the positive impact resulting from the implementation of CAP REIT's new lease administration system. The increase in average monthly rents was generated despite a marginal decrease in average occupancy for the residential suite portfolio to 97.7% compared to 98.3% last year due to management's efforts to enhance its resident profile. CAP REIT's new land lease community portfolio, acquired on July 10, 2007, maintained strong occupancies at 99.8% with average monthly rents of $589 as at September 30, 2007.

"We were pleased to see continuing strength in our operating and financial performance as we capitalize on improving trends in our markets," commented Thomas Schwartz, President and CEO. "We are also pleased that our new land lease communities made a positive contribution to our results, and anticipate further growth as we look to expand our presence in this sector of our business."

Distributable Income ("DI") was $21.3 million or $0.356 per Unit for the three months ended September 30, 2007 and $54.2 million or $0.911 for the first nine months of 2007 compared to $19.3 million or $0.339 per Unit and $49.8 million or $0.893 per Unit respectively, in the same periods last year. The 5.0% growth in DI per Unit in the third quarter was despite the 5.1% increase in the weighted average number of Units outstanding compared with the same period last year. CAP REIT's payout ratio improved to 77.8% in the third quarter of 2007 compared to 82.0% last year. For the nine months ended September 30, 2007 the payout ratio strengthened to 90.9% compared to 92.5% last year.

Funds from Operations ("FFO") in the third quarter of 2007 increased 7.7% to $20.8 million or $0.348 per Unit from $19.3 million or $0.339 per Unit in last year's third quarter. For the nine months ended September 30, 2007, FFO was $53.3 million or $0.897 per Unit compared to $49.0 million or $0.880 per Unit last year. The growth in FFO per Unit in the third quarter and year-to-date periods was despite the increase in the weighted average number of Units outstanding compared with the same periods last year.

CAP REIT has recorded a non-cash charge to earnings during the third quarter and year-to-date periods relating to temporary differences between the accounting and tax basis of CAP REIT's assets and liabilities. The charge has no impact on Distributable Income or Funds From Operations. The charge relates to CAP REIT's future income tax liabilities as a result of tax legislation included in Bill C-52, the Budget Implementation Act, 2007 ("Bill C-52"), which received Royal Assent on June 22, 2007. Bill C-52 is not expected to apply to CAP REIT until 2011 as it provides for a transition period for publicly traded entities that existed prior to November 1, 2006. Bill C-52 will not apply to an entity that qualifies for the real estate investment trust exemption (the "REIT Exemption"). CAP REIT intends to qualify for the REIT Exemption prior to 2011. In order to so qualify, CAP REIT will identify alternatives for the optimal structure to obtain the REIT Exemption.

The ratio of total debt (including borrowings on the Acquisition and Operating Facilities) to gross book value was 65.3% as at September 30, 2007 compared to 61.4% last year. The weighted average interest rate of CAP REIT's total mortgage portfolio, was 5.37% at September 30, 2007 compared to 5.29% last year, while the weighted average term to maturity was 5.8 years compared to 6.2 years last year.

As announced on September 26, 2007, CAP REIT has agreed to sell ten non-core Ontario and Quebec properties. The transaction is expected to close in mid-January 2008. These properties have been accounted for as discontinued operations for the three and nine months ended September 30, 2007 and 2006.

Subsequent to the end of the third quarter, CAP REIT issued 5,350,000 Units at $18.65 per Unit on a bought-deal basis. The net proceeds of approximately $95.2 million were used to repay a portion of the borrowings outstanding on CAP REIT's Acquisition and Operating Facilities.

"With the completion of this offering, and including the net proceeds from the sale of the non-core properties to be received in January 2008, we will have considerable acquisition capacity to maintain our pace of prudent growth over the coming quarters," Mr. Schwartz continued.

Capital expenditures were $38.5 million in the first nine months of 2007 compared to $25.3 million in the prior year. The increase is due to new acquisitions completed over the prior twelve months, combined with targeted acceleration in the insuite renovation and common area upgrade programs carried out in certain markets.

"Looking ahead, we will continue to invest in our properties for the benefit of our residents and our Unitholders," Mr. Schwartz added. "Enhancing the infrastructure and interiors of our buildings ensures we will maximize the return on investment we achieve from our properties in all economic cycles, while at the same time increasing the value of our portfolio. This is a necessary and key component of our long-term strategy to build value for our Unitholders."



Financial Highlights:
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Period Ended September 30,
($ Thousands, except per Unit Three Months Nine Months
amounts) 2007 2006 2007 2006
---------------------------------------------------------------------------
Operating Revenues $ 74,897 $ 68,406 $ 217,433 $ 202,345
Net Operating Income (NOI) $ 42,551 $ 37,797 $ 115,392 $ 105,813
NOI Margin 56.8% 55.3% 53.1% 52.3%
(Loss) Income from Continuing
Operations(1) $ (1,074) $ 2,664 $ (59,583) $ 770
Income from Discontinued
Operations(2) $ 4,714 $ 236 $ 257 $ 161
Net Income (Loss) $ 3,640 $ 2,900 $ (59,326) $ 931
Net (Loss) Income per Unit -
Continuing Operations
(Basic) $ (0.018) $ 0.047 $ (1.002) $ 0.014
Net Income (Loss) per Unit -
Discontinued Operations
(Basic) $ 0.079 $ 0.004 $ 0.004 $ 0.003
---------------------------------------------------------------------------
Distributable Income (DI)(3) $ 21,297 $ 19,310 $ 54,157 $ 49,782
Distributable Income per
Unit - Basic $ 0.356 $ 0.339 $ 0.911 $ 0.893
Distributions Declared per
Unit $ 0.270 $ 0.270 $ 0.810 $ 0.810
Payout Ratio 77.8% 82.0% 90.9% 92.5%
Effective Payout Ratio(4) 63.9% 73.6% 73.7% 81.3%
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Funds from Operations
(FFO)(5) $ 20,800 $ 19,311 $ 53,305 $ 49,044
Funds from Operation per
Unit - Basic $ 0.348 $ 0.339 $ 0.897 $ 0.880
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Number of Suites 29,086 26,362
Income Properties $ 2,105,182 $ 1,883,147(6)
Weighted Average Number of
Units (000's) - Basic 59,799 56,890 59,447 55,739
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(1) Includes provision for future income taxes of $3,236 and $59,608 for
the three and nine months ended September 30, 2007, respectively.
(2) Includes recovery of future income taxes of $4,628 for the three months
ended September 30, 2007.
(3) DI is defined in CAP REIT's Declaration of Trust dated July 8, 2007.
(4) Excludes cash reinvested through the DRIP.
(5) FFO is calculated in accordance with the recommendations of the Real
Property Association of Canada ("REALPAC").
(6) As at December 31, 2006.


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 DI to cash from operating activities and FFO to net income (loss), see pages 15 and 17 of the Management's Discussion and Analysis dated November 9, 2007.

CAP REIT's Consolidated Financial Statements for the three and nine months ended September 30, 2007, 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 27,853 residential suites and two land lease communities comprising 1,233 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