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

Canadian Apartment Properties Real Estate Investment Trust

November 09, 2006 17:21 ET

CAP REIT Announces Positive Third Quarter 2006 Results

TORONTO, ONTARIO--(CCNMatthews - Nov. 9, 2006) - Canadian Apartment Properties Real Estate Investment Trust ("CAP REIT")(TSX:CAR.UN) announced today results for the three and nine months ended September 30, 2006.



HIGHLIGHTS:

- Portfolio average occupancy rises sharply to 98.3% at quarter end
- Average rents increase on both turnovers and renewals
- Net Operating Income margin improves on solid same property NOI growth
- Third consecutive quarter of positive NOI growth for stabilized portfolio
- Industry fundamentals continue to improve


Operating revenues in the third quarter of 2006 increased 11.0% to $71.5 million from $64.5 million last year. For the nine months ended September 30, 2006, operating revenues rose 10.5% to $210.7 million from $190.7 million for the first nine 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 third quarter and first nine months of 2006 rose 10.5% to $39.6 million and 10.8% to $110.1 million, respectively compared to the same periods last year. As a percentage of revenues, NOI was 55.3% in the third quarter of 2006 compared to 55.5% last year, and 52.2% through the first nine months of 2006 compared to 52.1% last year. NOI for the stabilized portfolio increased 1.4% in the nine months ended September 30, 2006, the third consecutive quarter of positive NOI growth for the stabilized portfolio.

Operating expenses as a percentage of operating revenues remained stable in the third quarter. Reduced property taxes and stable energy costs in 2006 have been offset by a slight increase in repair and maintenance, payroll and advertising costs.

Overall average occupancy at September 30, 2006 improved to 98.3% from 97.7% last year. Average rents increased to $893 at the end of the third quarter of 2006 compared to $882 last year. Average occupancy for the properties owned prior to September 30, 2005 increased to 98.3% at September 30, 2006 from 97.7% at the same time last year, while average rents rose to $898 per suite from $882 per suite as at September 30, 2005.

"Our successful sales and marketing programs, combined with improving fundamentals in the rental housing sector, are generating continuing improvements in our overall occupancies and average rents. We look for these trends to continue going forward," commented Thomas Schwartz, President and CEO. "In addition, rising home prices and increased mortgage rates have significantly widened the gap between renting and home ownership, factors that bode well for further growth in our operating performance."

Distributable income ("DI") increased 5.2% in the third quarter to $19.3 million or $0.339 per Unit compared to $18.4 million or $0.337 per Unit in last year's third quarter. For the nine months ended September 30, 2006, DI rose 6.1% to $49.8 million or $0.893 per Unit compared to $46.9 million or $0.894 per Unit for the same period last year. Per Unit amounts in 2006 were impacted by a short-term increase in operating costs during the third quarter incurred to enhance occupancies at certain properties, and the 4.5% and 6.2% increase in the weighted average number of Units outstanding in the third quarter and first nine months of 2006 compared with the prior year period.

On August 22, 2006 CAP REIT completed the sale of 3,570,000 Units on a bought-deal basis for aggregate gross proceeds of $60.3 million. The net proceeds of $57.3 million were used primarily to repay floating interest rate borrowings on the acquisition facility. So far this year CAP REIT has acquired a total of twenty-two apartment buildings and townhouse complexes comprising 1,110 suites for total costs of approximately $81.7 million.

The ratio for total indebtedness (including borrowings on the Operating and Acquisition Facilities) to gross book value was 61.4%, as at September 30, 2006 compared to 63.9% last year. The weighted average interest rate on CAP REIT's total mortgage portfolio, including the effect of interest rate forward contracts, reduced to 5.35% at September 30, 2006 while the weighted average term to maturity was 7.6 years compared to 5.42% and 8.1 years last year.

Funds from Operations ("FFO") in the third quarter of 2006 increased 5.1% to $19.3 million or $0.339 per Unit as compared to $18.4 million or $0.337 per Unit in last year's third quarter. For the first nine months of 2006, FFO rose 5.6% to $49.0 million or $0.880 per Unit compared to $46.4 million or $0.885 per Unit for the first nine months of 2005. Per Unit amounts in 2006 were impacted by the same factors outlined above.



Financial Highlights:

--------------------------------------------------------------------------
Period Ended September 30,
($ Thousands, except per Three Months Nine Months
Unit amounts) 2006 2005 2006 2005
--------------------------------------------------------------------------
Operating Revenues $ 71,526 $ 64,453 $ 210,702 $ 190,732
Net Operating Income (NOI) $ 39,558 $ 35,787 $ 110,077 $ 99,351
NOI Margin 55.3% 55.5% 52.2% 52.1%
Net Income $ 2,900 $ 3,477 $ 931 $ 2,836
Net Income per Unit - Basic and
Diluted $ 0.051 $ 0.064 $ 0.017 $ 0.054
--------------------------------------------------------------------------
Distributable Income(1) $ 19,310 $ 18,362 $ 49,782 $ 46,940
Distributable Income per Unit -
Basic $ 0.339 $ 0.337 $ 0.893 $ 0.894
Distributions Declared per Unit $ 0.270 $ 0.270 $ 0.810 $ 0.810

Payout Ratio 82.0% 80.3% 92.5% 90.7%
Effective Payout Ratio(2) 73.6% 67.2% 81.3% 77.0%
--------------------------------------------------------------------------
Funds from Operations(3) $ 19,311 $ 18,369 $ 49,044 $ 46,433
Funds from Operation per Unit -
Basic $ 0.339 $ 0.337 $ 0.880 $ 0.885
--------------------------------------------------------------------------
Number of Suites 26,362 26,049
Income Properties $1,972,155 $1,899,005
Weighted Average Number of Units
(000's) - Basic 56,890 54,454 55,739 52,492
Weighted Average Number of Units
(000's) - Diluted 57,158 54,491 55,957 52,542
--------------------------------------------------------------------------
--------------------------------------------------------------------------

(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.

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, see page 13 and 14 of the
Management's Discussion and Analysis dated November 9, 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 nine months ended September 30, 2006, including Management's Discussion and Analysis, can be found on the investor relations page at www.capreit.net.

On October 31, 2006, the Federal Minister of Finance announced proposed changes to the taxation of distributions for certain income trusts. For existing trusts, these changes are not effective until 2011. In addition, trusts commonly referred to as real estate investment trusts will be exempt from the new taxation rule, if they meet certain conditions. At this time, we believe that these proposed changes should not affect CAP REIT but it will be necessary to assess CAP REIT's position once legislation is introduced.

As one of Canada's largest residential landlords, CAP REIT (TSX:CAR.UN) is a growth-oriented investment trust owning interests in 26,362 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
    Website: www.capreit.net