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

Canadian Apartment Properties Real Estate Investment Trust

November 11, 2005 17:45 ET

CAP REIT Announces Positive Third Quarter 2005 Results

TORONTO, ONTARIO--(CCNMatthews - Nov. 11, 2005) - Canadian Apartment Properties Real Estate Investment Trust ("CAP REIT") (TSX:CAR.UN) announced today positive results for the three and nine months ended September 30, 2005. The results include the contribution from the acquisition of Residential Equities Real Estate Investment Trust ("ResREIT") completed on June 1, 2004, as well as the Montreal portfolio from September 1, 2005.

HIGHLIGHTS:

- Acquisitions, higher occupancies and increased average monthly rents drive growth in revenue

- Third quarter NOI margin improves compared to third quarter last year

- Third quarter FFO per Unit increases from third quarter last year

- Average occupancy rises to 97.7%

- Acquisitions and planned disposition reposition portfolio and enhance geographic diversification

- Strong balance sheet and reduced debt leverage enhance growth profile

"We were very pleased with our strong performance in the third quarter," commented Thomas Schwartz, President and CEO. "We are making steady progress with our two-year program to generate the cost synergies and economies of scale resulting from the increase in the size of our property portfolio, and as we capitalize on the positive trends now being experienced in our business, we expect our results will continue to improve."

Revenues for the three months ended September 30, 2005 increased 2.0% to $64.5 million from $63.2 million last year. For the first nine months of 2005, revenues rose 38.6% to $190.7 million from $137.6 million in 2004.The increase is due to acquisitions completed, higher occupancies and increased rents.

Total operating expenses for the three months ended September 30, 2005 decreased compared to last year due primarily to cost efficiencies realized over the last year. For the nine months ended September 30, 2005, total operating expenses were higher due to the increase in the size of the portfolio. Operating expenses in 2005 include a number of one-time transitional costs related to the integration of the ResREIT portfolio completed on June 1, 2004. For the nine months ended September 30, 2005, energy costs were higher (by approximately 1.4% of gross revenues) than the prior year.

Primarily due to the increase in revenues and enhanced operating efficiencies, net operating income ("NOI") for the three months ended September 30, 2005 rose 3.9% to $35.8 million compared to $34.4 million last year. NOI as a percentage of revenues also improved in the third quarter to 55.5% from 54.5% last year. For the first nine months of 2005, NOI increased 36.6% to $99.4 million from $72.8 million compared to the same period in 2004 despite soft market conditions experienced through the first two quarters of the year. NOI margin remained stable at 52.1% compared to 52.9% last year.

Occupancy rose to 97.7% at the end of the third quarter compared to 96.5% at the end of the second quarter of 2005 and 96.7% at the same time last year. CAP REIT completed the renovation of 1,862 suites through the first nine months of 2005 and 1,064 suites through the third quarter pursuant to its program to stabilize and enhance rental performance in certain targeted properties.

Average rents increased in all segments of the portfolio due to targeted and highly effective sales and marketing strategies and suite renovation programs at specific properties. Excluding the lower average rents for the recently-acquired Montreal portfolio, overall average rents for the total portfolio increased marginally at quarter end as compared to last year.

"Our innovative sales and marketing strategies, combined with our aggressive capital improvement and suite renovation programs, are resulting in steadily rising occupancies and higher rents across the portfolio," Mr. Schwartz stated. "As our markets continue to strengthen, we expect further improvement in our operating performance going forward."

Distributable income ("DI") increased 3.0% in the third quarter of 2005 to $18.3 million or $0.337 per Unit from $17.8 million or $0.351 per Unit last year. For the nine months ended September 30, 2005, DI rose 25.9% to $46.9 million or $0.893 per Unit from $37.2 million or $0.962 per Unit last year. Included in DI last year was $0.017 per Unit in the third quarter and $0.049 per Unit for the nine months ended September 30, 2004 for the add back of one-time deferred financing costs related to the ResREIT acquisition. Not including these amounts, DI per Unit was $0.334 and $0.913 per Unit for the three and nine months ended September 30, 2004, respectively. Per Unit amounts in 2005 were impacted by the 7.2% and 35.5% increase in the weighted average number of Units outstanding for the three and nine months ended September 30, 2005, respectively compared to the prior year periods.

The payout ratio for the third quarter of 2005 was 80.4% compared to 77.0% last year. For the first nine months of 2005, the payout ratio was 90.8% compared to 84.2% in 2004. The effective payout ratio, after excluding from distributions the cash reinvested by investors in the Distribution Reinvestment Plan (DRIP), was 67.2% in the third quarter of 2005 and 77.0% for the first nine months of 2005 compared to 70.1% and 74.6%, respectively last year.

Funds from operations ("FFO") for the third quarter of 2005 rose to $18.3 million or $0.337 per Unit from $17.0 million or $0.334 per Unit last year. For the first nine months of 2005, FFO was $46.3 million or $0.883 per Unit compared to $35.4 million or $0.913 per Unit in the prior year. FFO in the first quarter of 2005 includes approximately $0.01 per Unit for Long-Term Incentive Plan compensation cost for Units granted to executives, employees and trustees. FFO has been calculated in accordance with the recommendations of the Real Property Association of Canada ("RealPac") dated November 30, 2004.

On September 1, 2005, CAP REIT acquired a portfolio of 1,431 mid-tier residential suites located in seven high-rise buildings and twenty-seven low-rise multi-residential complexes in Montreal, Quebec. The total acquisition costs for the properties was approximately $80.6 million with $52.1 million in new mortgages placed on the properties at closing.

On August 4, 2005, CAP REIT completed a bought-deal offering of 4.1 million Units for total gross proceeds of $60.065 million. Approximately $28.5 million of the proceeds were used to finance the recent Montreal portfolio acquisition.

On September 30, 2005, CAP REIT acquired a portfolio of two luxury and one mid-tier apartment properties in Vancouver, British Columbia containing a total of 406 suites. The total acquisition costs were approximately $57.7 million, with $36.4 million in mortgages placed on the properties, of which $29.8 million were new mortgages. CAP REIT has agreed to sell a portfolio of thirteen smaller, non-core apartment complexes in Ontario (including three former ResREIT properties) totaling 797 suites, of which eleven complexes are in the Greater Toronto Area (GTA). The total sale price will be approximately $70.3 million and is expected to close in December, 2005. The cash proceeds, net of closing costs, from the sale of approximately $42.0 million will be redeployed to reduce the acquisition credit facility, fund the approved Normal Course Issuer Bid or for future acquisitions.

Following the completion of these acquisitions and dispositions, the geographic diversification of CAP REIT's portfolio will be considerably enhanced. Of the total portfolio, 69.7% will be located in Ontario (50.5% in the GTA), 16.7% in Quebec, 4.9% in Alberta, 4.3% in Nova Scotia, 3.5% in British Columbia and 0.9% in Saskatchewan.

"With these recent transactions, we have increased our presence in Vancouver and Montreal, two of Canada's strongest rental markets, and significantly enhanced the geographic diversification of our portfolio," Mr. Schwartz added. "One of our goals this year was to reposition our portfolio to further mitigate Unitholder risk, and with these transactions, we have made real progress in meeting this objective. In addition, we plan to redeploy the capital from the Ontario property sale in December to further enhance our growth and performance going forward."

Mr. Schwartz concluded: "The fundamentals in the residential rental industry are beginning to strengthen, driven by a rising interest rate environment, improved youth job growth, and rising immigration to our key Ontario and GTA markets. This optimism, combined with the successful steps we are taking to grow and reposition our property portfolio, will contribute to enhanced Unitholder value going forward. In addition, we are confident our strong balance sheet and reduced leverage will enable us to continue producing sustainable cash distributions over the long term."



Financial Highlights:

---------------------------------------------------------------------
Period Ended September 30,
($ Thousands, except per Three Months Nine Months
Unit amounts) 2005 2004 2005 2004
---------------------------------------------------------------------
Operating Revenues $ 64,453 $ 63,214 $190,732 $ 137,632
Net Operating Income (NOI) 35,787 34,439 99,351 72,757
NOI Margin 55.5% 54.5% 52.1% 52.9%
Net Income 3,477 3,103 2,836 7,386
Net Income per Unit - Basic $ 0.064 $ 0.061 $ 0.054 $ 0.191
Net Income per Unit - Diluted $ 0.064 $ 0.061 $ 0.054 $ 0.190
---------------------------------------------------------------------
Distributable Income (1) 18,345 17,811 46,899 37,248
Distributable Income
per Unit - Basic(1) $ 0.337 $ 0.351 $ 0.893 $ 0.962
Distributable Income
per Unit - Diluted $ 0.337 $ 0.350 $ 0.893 $ 0.960
Distributions Declared
per Unit $ 0.270 $ 0.270 $ 0.810 $ 0.810
Payout Ratio 80.4% 77.0% 90.8% 84.2%
Effective Payout Ratio (2) 67.2% 70.1% 77.0% 74.6%
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Funds from Operations 18,345 16,963 46,345 35,369
Funds from Operation
per Unit - Basic $ 0.337 $ 0.334 $ 0.883 $ 0.913
Funds from Operation per
Unit - Diluted $ 0.337 $ 0.334 $ 0.882 $ 0.912
Number of Suites 26,049 24,328 26,049 24,328
Income Properties - - 1,899,005 1,763,280
Weighted Average Number
of Units (000's) - Basic 54,454 50,797 52,492 38,739
Weighted Average Number
of Units (000's) - Diluted 54,491 50,827 52,542 38,791
---------------------------------------------------------------------
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(1) Includes $0.8 million ($0.017 per Unit) and $1.9 million ($0.049
per Unit) in the three and nine months ended September 30, 2004,
respectively for the add-back of one-time deferred financing
costs related to the ResREIT acquisition

(2) Excludes cash reinvested through the DRIP.


CAP REIT's Third Quarter 2005 Report to Unitholders, which includes Management's Discussion and Analysis of its results and financial position for the quarter, 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 26,049 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.

Contact Information

  • 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