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

Canadian Apartment Properties Real Estate Investment Trust

February 26, 2009 19:01 ET

CAP REIT Announces Strong Fourth Quarter and Year-End Results

TORONTO, ONTARIO--(Marketwire - Feb. 26, 2009) - Canadian Apartment Properties Real Estate Investment Trust ("CAP REIT") (TSX:CAR.UN) announced today strong operating and financial results for the three months and year ended December 31, 2008.

2008 YEAR-END HIGHLIGHTS:

- Revenues up 9.0% on strong operating performance

- Occupancy increases to 98.5% while average monthly rents rise 2.8%

- Net Operating Income margin increases to 54.0%

- Same property NOI up 4.8%

- Distributable Income up 12.8%

- Normalized Funds from Operations increase 12.0%

- DI per Unit and NFFO per Unit increase 4.1% and 3.4%, respectively

- Balance sheet strengthens further

For the year ended December 31, 2008, operating revenues increased 9.0% to $320.4 million compared to $294.0 million last year. Operating revenues for the fourth quarter of 2008 rose 6.1% to $82.6 million from $77.9 million for the same period in the prior year. The growth in revenues is primarily due to acquisitions completed and to solid gains in average monthly rents and occupancies across CAP REIT's portfolio compared to the prior year.

Overall average monthly rents increased across the portfolio at December 31, 2008 to $934 as compared to $909 last year. Average monthly rents for the residential suites owned prior to December 31, 2007 also increased as at December 31, 2008 to $950 from $924 as at December 31, 2007. The increases were due to successful sales and marketing strategies and, despite the recent economic slowdown, continued strength in the Canadian rental residential sector. Increases of $20 or 2.1% were achieved on suite turnovers, and $21 or 2.2% on lease renewals. Overall occupancy as at December 31, 2008 also strengthened for the portfolio to 98.5% from 98.0% in the prior year. The residential suite portfolio improved to 98.4% from 97.9% in the prior year. Average monthly rents for the land lease portfolio rose moderately in 2008 compared to the prior year, while occupancy has remained very stable at 99.8% since acquisition. Management believes that demand for rental accommodation will remain strong for the foreseeable future in the majority of its markets, resulting in continued gradual increases in average monthly rents and occupancies being maintained in the range of 98%.

For the year ended December 31, 2008, operating expenses improved to 46.0% as a percentage of operating revenues, down from 47.1% in 2007. For the fourth quarter of 2008, operating expenses as a percentage of operating revenues were stable at 47.3% compared to 47.4% in the same period last year. The reductions in 2008 were primarily due to lower utilities costs as a percentage of revenues due to CAP REIT's energy management strategies, and reduced realty taxes as a percentage of revenues compared to the same periods last year.

Primarily as a result of the increase in revenues and improved operating performance, net operating income ("NOI") for the year ended December 31, 2008 rose 11.2% to $172.9 million, and 6.3% to $43.6 million in the fourth quarter of 2008 compared to the same periods last year. As a percentage of revenues, NOI increased to 54.0% for the year and 52.7% for the fourth quarter of 2008 compared to 52.9% and 52.6% respectively, for the same periods in 2007.

CAP REIT is also pleased to announce the twelfth consecutive quarter of stabilized portfolio growth, as NOI for properties owned at December 31, 2006 increased 2.6% for the three months ended December 31, 2008. For the year ended December 31, 2008, same property NOI increased 4.8%.

"We are very pleased with our continuing strong operating and financial performance in 2008," commented Thomas Schwartz, President and CEO. "Despite the slowdown in the Canadian economy, we are experiencing very solid industry fundamentals in the majority of our markets, and expect our strong and stable performance will continue through 2009."

For the year ended December 31, 2008, Distributable Income ("DI") increased to $82.5 million or $1.261 per Unit compared to $73.1 million or $1.211 per Unit last year. The 4.1% increase in DI per Unit in 2008 was despite the 8.3% increase in the weighted average number of Units outstanding compared with the prior year. For 2008, CAP REIT's DI payout ratio strengthened to 88.2% compared to 91.3% in 2007. The effective DI payout ratio, which compares actual net cash distributions paid (not including distributions re-invested through the DRIP) to DI, improved to 72.9% in 2008 compared to 74.1% last year. 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 ongoing maintenance capital expenditures. For the fourth quarter of 2008, DI was $19.6 million or $0.298 per Unit compared to $19.0 million or $0.300 per Unit for the same period last year. The fourth quarter was impacted by non-recurring legal and consultancy costs amounting to approximately $0.5 million or $0.01 per Unit and by the 3.8% increase in the weighted average number of Units outstanding compared to the prior year period.

Normalized Funds From Operations ("NFFO"), which excludes the effect of the decline of $17.6 million in fair value of hedging instruments which were originally put in place for interest rate protection, rose 12.0% to $81.0 million or $1.238 per Unit compared to $72.3 million or $1.197 per Unit last year. The NFFO payout ratio for the year was 89.8% compared to 92.4% in 2007. The effective NFFO payout ratio, which compares actual net distributions paid (not including distributions re-invested through the DRIP) to NFFO, improved to 74.2% compared to 74.9% last year. For the three months ended December 31, 2008, NFFO was $19.2 million or $0.293 per Unit compared to $19.0 million or $0.301 per Unit in the same period last year. The fourth quarter was impacted by non-recurring legal and consulting costs amounting to approximately $0.5 million or $0.01 per Unit and by the 3.8% increase in the weighted average number of Units outstanding compared to the prior year period. Funds From Operations ("FFO"), including the unrealized loss on derivative financial instruments, were $63.4 million or $0.969 per Unit compared to $72.3 million or $1.197 per Unit in 2007, and $1.6 million or $0.024 per Unit in the fourth quarter of 2008 compared to $19.0 million or $0.301 per Unit for the same period last year. NFFO and FFO also exclude a gain on sale of assets of approximately $17.0 million or $0.261 per Unit.

Beginning with the fourth quarter and year ended December 31, 2008, CAP REIT began disclosing Adjusted Funds From Operations ("AFFO"), which deducts from NFFO the industry provision for maintenance capital expenditures. For 2008, AFFO increased 13.4% to $69.3 million or $1.059 per Unit from $61.1 million or $1.012 per Unit in 2007. The AFFO payout ratio, which compares actual net cash distributions paid in 2008 (not including distributions reinvested through the DRIP) to AFFO, was 86.7% compared to 88.7% in the prior year.

For the year ended December 31, 2008, CAP REIT incurred a net loss of $3.5 million or $(0.053) per Unit compared to a net loss of $50.2 million or $(0.831) per Unit last year. The net loss for 2008 includes $1.6 million in reorganization costs incurred for changes to CAP REIT's capital structure, $17.6 million in unrealized losses on derivative financial instruments, and a gain of $17.0 million on the sale of non-core assets in the first quarter of the year. For the fourth quarter of 2008, CAP REIT incurred a net loss of $26.2 million or $(0.400) per Unit as compared to net income of $9.1 million or $ 0.145 per Unit for the same period last year.

The ratio of total debt (including borrowings on the Acquisition and Operating Facilities) to gross book value (not including any fair value adjustments related to the significant appreciation in the value of CAP REIT's portfolio) was 61.82% as at December 31, 2008, compared to 61.55% for the prior year. The weighted average interest rate of CAP REIT's total mortgage portfolio was 5.30% at December 31, 2008, while the weighted average term to maturity was 5.0 years. Approximately 95.0% of CAP REIT's mortgages are CMHC-insured. CAP REIT's interest coverage and debt coverage ratios improved as at December 31, 2008, to 2.06 and 1.30 times respectively, compared to 1.94 and 1.26 times respectively, at the same time last year. Availability under CAP REIT's Acquisition and Operating Facilities was $94.5 million as at December 31, 2008, compared to $146.8 million at the same time last year.

"Our financial position continued to strengthen through 2008, and we ended the year with what we believe is one of the strongest balance sheets in our industry," Mr. Schwartz added. "With our improving payout ratios, solid debt coverage ratios, and strengthening industry fundamentals, we are confident in our ability to maintain cash distributions to Unitholders at current levels."

Mr. Schwartz continued: "With the majority of our mortgages CMHC-insured, we are also well positioned to meet our mortgage renewal commitments in 2009. In addition, as in past years, we will generate additional CMHC-insured financing to support our capital investment projects by topping up our existing mortgages."

Capital expenditures were $50.0 million in 2008 compared to $44.2 million last year. The increase was due to increased investments in energy savings initiatives and the acceleration of building improvement programs, partially offset by lower suite improvement costs.

"Over the near term we will be increasing our emphasis on capital reinvestment programs in our current portfolio," Mr. Schwartz concluded. "We believe we can generate significant increases in cash flow through our energy savings initiatives, including high efficiency heating boilers and individual suite metering, as well as energy-efficient lighting systems, water savings programs, and garbage recycling programs. In addition, we will be capitalizing on very competitive pricing to accelerate our building improvement programs, including upgraded parking garages, balconies, sidewalks and enhanced life safety systems. These projects, identified at the time of acquisition, will serve to re-position the portfolio and significantly enhance its value. In total, we expect to invest between $75 and $80 million in our existing portfolio this year. Importantly, with the continued access to CMHC-financing, we believe we are well positioned to implement this increased level of capital expenditures."



Financial Highlights:
----------------------------------------------------------------------------
Period Ended December 31, Three Months Year
($ Thousands, except
per Unit amounts) 2008 2007 2008 2007
----------------------------------------------------------------------------
Operating Revenues $ 82,616 $ 77,900 $ 320,418 $ 293,978
Net Operating Income (NOI) $ 43,567 $ 40,989 $ 172,933 $ 155,575
NOI Margin 52.7% 52.6% 54.0% 52.9%
Income from Continuing
Operations before Other
Costs & Taxes $ 297 $ 386 $ 7,728 $ 531
Reorganization Costs $ - - $ (1,599) $ -
Unrealized Loss on Derivative
Financial Instruments $ (17,627) - $ (17,627) $ -
(Provision for) Recovery of
Future Income Taxes $ (8,891) $ 7,819 $ (9,134) $ (51,789)
Net (Loss) Income $ (26,221) $ 9,130 $ (3,477) $ (50,196)
Net (Loss) Income per
Unit - Basic $ (0.400) $ 0.145 $ (0.053) $ (0.831)
----------------------------------------------------------------------------
Distributable Income
(DI)(1)(2) $ 19,552 $ 18,972 $ 82,481 $ 73,129
Distributable Income per
Unit - Basic(1) $ 0.298 $ 0.300 $ 1.261 $ 1.211
Distributions Declared per
Unit $ 0.270 $ 0.270 $ 1.080 $ 1.080
Payout Ratio(1) 93.3% 92.8% 88.2% 91.3%
Effective Payout Ratio(1)(3) 78.3% 75.1% 72.9% 74.1%
DI Retention(4) $ 1,314 $ 1,372 $ 9,727 $ 6,327
----------------------------------------------------------------------------
Funds from Operations
(FFO) (1)(5) $ 1,573 $ 18,990 $ 63,366 $ 72,295
Funds from Operation per
Unit - Basic(1) $ 0.024 $ 0.301 $ 0.969 $ 1.197
Normalized Funds from
Operations (NFFO)(1) $ 19,200 $ 18,990 $ 80,993 $ 72,295
Normalized Funds from
Operations per Unit -
Basic(1) $ 0.293 $ 0.301 $ 1.238 $ 1.197
Adjusted Funds from
Operations (AFFO)(1) $ 16,275 $ 16,188 $ 69,293 $ 61,085
Adjusted Funds from
Operations per Unit -
Basic(1) $ 0.248 $ 0.256 $ 1.059 $ 1.012
AFFO Payout Ratio 94.0% 88.0% 86.7% 88.7%
----------------------------------------------------------------------------
Number of Suites & Sites 28,892 29,111
Income Properties $2,192,945 $2,093,312
Weighted Average Number of
Units (000's) - Basic 65,572 63,174 65,412 60,387
----------------------------------------------------------------------------
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(1) 2008 excludes gain on sale of assets of $17.0 million or $0.261 per Unit
for the year ended December 31, 2008.
(2) DI is defined in CAP REIT's Declaration of Trust dated July 11, 2008.
(3) Excludes from distributions cash reinvested by Unitholders through the
DRIP.
(4) Distributable income less distributions declared after DRIP
reinvestment.
(5) FFO is calculated in accordance with the recommendations of the Real
Property Association of Canada ("REALpac").


NOI, DI, FFO, NFFO and AFFO are not defined by generally accepted accounting principles ("GAAP"), do not have standard meanings and may not be comparable with other industries or companies.

CAP REIT's Consolidated Financial Statements for the fourth quarter and year ended December 31, 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 27,614 residential suites and two land lease communities comprising 1,278 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