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

Canadian Apartment Properties Real Estate Investment Trust

August 12, 2005 16:28 ET

CAP REIT Announces Second Quarter 2005 Results

TORONTO, ONTARIO--(CCNMatthews - Aug. 12, 2005) -

New Montreal Acquisition to Drive Growth and Enhance Geographic Diversification

Canadian Apartment Properties Real Estate Investment Trust ("CAP REIT") (TSX:CAR.UN) announced today results for the three and six months ended June 30, 2005. The results include the contribution from the acquisition of Residential Equities Real Estate Investment Trust ("ResREIT") completed on June 1, 2004.

HIGHLIGHTS:

- Acquisitions drive growth in revenues, distributable income

- Higher occupancies and average rents compared to last year

- Additions to executive management team to enhance future operational performance

- Purchase of Montreal portfolio strengthens geographic diversification and growth profile

Revenues for the three months ended June 30, 2005 increased 48.5% to $65.0 million from $43.8 million last year. For the first six months of 2005, revenues rose 68.9% to $130.3 million from $77.2 million in 2004. Revenues in 2004 included one month's contribution from the 10,890 suites acquired from ResREIT effective June 1, 2004.

Primarily due to the increase in revenues, net operating income ("NOI") for the three months ended June 30, 2005 rose 45.3% to $35.4 million compared to $24.4 million last year. For the first six months of 2005, NOI increased 65.1% compared to the same period in 2004. Total operating expenses for the three months ended June 30, 2005 rose 52.6% to $29.6 million compared to $19.4 million last year due to the increased size of the portfolio and other costs incurred to attract and retain tenants . For the six months ended June 30, 2005, total operating expenses increased 72.9% to $65.0 million from $37.6 million last year. Due to these higher operating costs, NOI as a percentage of revenues declined to 54.5% and 50.1% for the three and six months ended June 30, 2005 respectively, compared to 55.7% and 51.3% last year.

Occupancy rose to 96.5% at the end of the second quarter compared to 95.8% at the same time last year. Through the first six months of 2005, CAP REIT completed the renovation of 798 suites pursuant to its programs to attract and retain tenants. These suites were vacant for varying periods up to 60 days, negatively impacting occupancies compared to the prior year when only 303 suites were renovated. Not including the 75 suites under renovation at the end of June 2005, effective occupancy was 96.8% compared to 96.0% last year. Average rents for the portfolio rose to $886 per suite as at June 30, 2005 from $882 last year.

For CAP REIT's stabilized portfolio defined as properties owned at December 31, 2003, revenues declined by 1.0% while operating costs decreased by 1.8%, combining to produce a 0.2% decrease in same property NOI for the six months ended June 30, 2005.

Distributable income ("DI") increased 29.7% in the second quarter to $16.6 million from $12.8 million last year and for the six months ended June 30, 2005, DI rose 46.9% to $28.6 million from $19.4 million last year. DI per Unit decreased in the second quarter to $0.321 per Unit from $0.353 per Unit last year and for the six months ended June 30, 2005, DI per Unit was $0.554 per Unit compared to $0.595 per Unit last year.

The payout ratio for the second quarter of 2005 was 84.0% compared to 76.5% last year. For the first six months of 2005, the payout ratio was 97.5% compared to 90.8% in 2004. The effective payout ratio was 72.2% in the second quarter of 2005 and 83.3% for the first six months of 2005 compared to 67.7% and 78.7%, respectively last year, after excluding from distributions the cash reinvested by investors in the Distribution Reinvestment Plan ("DRIP").

Funds from operations ("FFO") for the second quarter of 2005 was $16.6 million or $0.321 per Unit compared to $11.8 million or $0.325 per Unit last year. For the first six months of 2005, FFO was $28.0 million or $0.544 per Unit compared to $18.4 million or $0.564 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.

During the second quarter, CAP REIT began to implement a number of recommendations arising from an independent review of the REIT's organizational structure, the roles and responsibilities of the executive management team, its business processes and supporting information technology systems. These initiatives are aimed at ensuring CAP REIT is able to effectively capitalize on the increase in the size and critical mass of its portfolio, while establishing a foundation on which further growth can be achieved. A new Vice President of Marketing, Director of Human Resources and Vice President of Information Systems/CIO have joined the CAP REIT team. In addition, new state-of-the-art information technology and management systems are being evaluated to automate and streamline reporting, property management, tenant management and other functional areas, including strategic business intelligence.

"We have now begun to implement the recommendations from our strategic review, and we are already seeing a number of benefits arising from these initiatives," commented Thomas Schwartz, President and CEO. "While the additions to our management team and our other initiatives may increase costs over the short term, we are confident they will lead to enhanced operational and financial performance over time while enabling us to capitalize on growth opportunities going forward."

On June 21, 2005, CAP REIT acquired 100% ownership in four low-rise apartment buildings in Quebec City containing 78 suites. The total acquisition cost of $3.7 million was satisfied by cash and a new $2.1 million mortgage with an interest rate of 3.96%.

Subsequent to the end of the second quarter, CAP REIT agreed to acquire a portfolio of 1,431 mid-tier residential suites and 27,800 square feet of commercial space, located in seven high-rise buildings and 27 low-rise multi-residential complexes in Montreal, Quebec. The purchase price for the properties will be approximately $80 million, and will be partially financed by proceeds from the $60.1 million bought-deal offering of 4.1 million Trust Units, which closed on August 4, 2005.

Following the completion of the Montreal portfolio acquisition, expected to close on September 1, 2005, CAP REIT's Quebec portfolio will consist of 4,213 suites or 16.4% of its total portfolio, of which 3,127 suites will be in Montreal and 1,086 suites in Quebec City.

"With these accretive acquisitions, we are increasing our presence in the strong Montreal and Quebec City rental markets and enhancing the overall geographic diversification of our property portfolio," Mr. Schwartz concluded. "Looking ahead, we will continue to evaluate other opportunities to re-position our portfolio and increase our presence in regions outside of the Greater Toronto Area."



Financial Highlights:
---------------------------------------------------------------------
Period Ended June 30,
($ Thousands, except Three Months Six Months
per Unit amounts) 2005 2004 2005 2004
---------------------------------------------------------------------
Operating Revenues $65,047 $43,791 $130,329 $77,173
Net Operating Income (NOI) $35,427 $24,387 $ 65,352 $39,584
NOI Margin 54.5% 55.7% 50.1% 51.3%
Net Income (Loss) $ 2,290 $ 3,346 $ (641) $ 4,283
Net Income (Loss) per
Unit - Basic $ 0.044 $ 0.092 $ (0.012) $ 0.131
Net Income (Loss) per
Unit - Diluted $ 0.044 $ 0.092 $ (0.012) $ 0.131
---------------------------------------------------------------------
Distributable Income(1) $16,630 $12,823 $ 28,554 $19,437
Distributable Income per
Unit - Basic $ 0.321 $ 0.353 $ 0.554 $ 0.595
Distributable Income per
Unit - Diluted $ 0.321 $ 0.353 $ 0.554 $ 0.594
Distributions Declared
per Unit $ 0.270 $ 0.270 $ 0.540 $ 0.540
Payout Ratio 84.0% 76.5% 97.5% 90.8%
Effective Payout Ratio(2) 72.2% 67.7% 83.3% 78.7%
---------------------------------------------------------------------
Funds from Operations(1) $16,630 $11,792 $ 28,000 $18,406
Funds from Operations per
Unit - Basic $ 0.321 $ 0.325 $ 0.544 $ 0.564
Funds from Operations per
Unit - Diluted $ 0.321 $ 0.325 $ 0.543 $ 0.563
Number of Suites 24,212 24,328
Income Properties $1,819,348 $1,837,413
Weighted Average Number of
Units (000s) - Basic 51,707 36,278 51,495 32,643
Weighted Average Number of
Units (000s) - Diluted 51,759 36,299 51,551 32,707
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(1) Non-GAAP measure and excludes gain on property dispositions.
(2) Excludes cash reinvested through the DRIP.


CAP REIT's Second 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 24,212 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