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

Canadian Apartment Properties Real Estate Investment Trust

May 14, 2008 18:01 ET

CAP REIT Announces Strong Q1 2008 Results

TORONTO, ONTARIO--(Marketwire - May 14, 2008) - Canadian Apartment Properties Real Estate Investment Trust ("CAP REIT") (TSX:CAR.UN) announced today strong operating and financial results for the three months ended March 31, 2008.

Q1 2008 HIGHLIGHTS:

- Average monthly rents increase 3.6%

- Occupancies strengthen to 98.2%

- NOI margin rises on enhanced operating performance

- Same property NOI up 7.6%

- Ninth consecutive quarter of same property NOI growth

- Strong accretive growth with FFO per Unit up 17%

- Improved payout ratios

- Gain of $17.1 million on sales of non-core properties

Operating revenues for the three months ended March 31, 2008 rose 11.0% to $78.1 million from $70.4 million for the same period in the prior year. The growth in revenues is due primarily to the contribution from acquisitions completed over the last twelve months and higher average monthly rents and occupancies across CAP REIT's portfolio.

Operating expenses improved to 50.8% as a percentage of operating revenues, down from 53.3% for the quarter ended March 31, 2007 primarily due to lower energy and repair and maintenance costs as a percentage of revenues compared to the same period last year.

Primarily as a result of the increase in revenues and improved operating performance, net operating income ("NOI") for the first quarter of 2008 rose 17.1% to $38.4 million from $32.8 million in last year's first quarter. As a percentage of revenues, NOI increased to 49.2% compared to 46.7% for the same period last year.

CAP REIT is also pleased to announce a ninth consecutive quarter of stabilized portfolio growth as NOI for properties owned at December 31, 2006 increased 7.6% for the three months ended March 31, 2008.

Average monthly rents increased across all sectors of the residential suite portfolio resulting in an increase in overall average monthly rents as at March 31, 2008 to $929 as compared to $897 last year. Average monthly rents for the properties owned prior to March 31, 2007 also increased as at March 31, 2008 to $933 from $897 as at March 31, 2007. The increases were due to successful sales and marketing strategies that resulted in increases of $14.00 or 1.4% on suite turnovers and $24.00 or 2.6% increases on lease renewals. Occupancy as at March 31, 2008 also strengthened for the residential suite portfolio to 98.2% from 97.0% in the prior year. The occupancy for the land lease portfolio has remained very stable at 99.6% since acquisition. Management believes the trend of gradual increases in average monthly rents and occupancies will continue going forward.

"We are very pleased with our first quarter results as strengthening fundamentals in the Canadian rental residential business, combined with our pro-active property management initiatives and capital improvement programs, are beginning to have a positive impact on our operating and financial performance," commented Thomas Schwartz, President and CEO.

Distributable Income ("DI") was $16.6 million or $0.255 per Unit for the three months ended March 31, 2008 compared to $13.0 million or $0.219 per Unit for the same period last year. The 16.4% increase in DI per Unit in the first quarter of 2008 was achieved despite a 10.2% increase in the weighted average number of Units outstanding compared with the prior year. For the quarter ended March 31, 2008, CAP REIT's payout ratio strengthened to 109.0% compared to 125.5% in last year's first quarter. Including distributions re-invested through the DRIP, the effective payout ratio was 88.1% for the first quarter of 2008 compared to 102.6% in the same prior year period. The first quarter of the year is seasonally weaker due to higher utility and other costs associated with winter weather. 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 maintenance capital expenditures.

For the three months ended March 31, 2008, Funds from Operations ("FFO") increased 28.9% and 17.0% to $16.2 million or $0.248 per Unit, respectively, from $12.5 million or $0.212 per Unit for the same period last year. The growth in FFO per Unit in the first quarter of 2008 was despite the 10.2% increase in the weighted average number of Units outstanding compared with the first quarter of 2007. The FFO payout ratio for the first quarter of 2008 was 112.1% compared to 129.7% in the same period last year. The effective FFO payout ratio, excluding cash reinvested through the DRIP, improved to 90.5% from 106.1% last year.

For the period ended March 31, 2008, net income was $14.4 million or $0.220 per Unit as compared to a net loss of $4.0 million or $(0.068) per Unit for the same period last year. Net income in 2008 included a charge of $1.2 million of reorganization costs incurred for changes to CAP REIT's capital structure. Also included in the first quarter of 2008 is a gain of approximately $17.1 million ($0.262 Per Unit) on the disposal of non-core properties during the period. There were no property dispositions in the prior year.

"We believe the significant gain realized on the sale of these non-core properties is clear proof that our hands-on management and capital improvement programs are adding significant value to our property portfolio," Mr. Schwartz added.

The ratio of total debt (including borrowings on the Acquisition and Operating Facilities) to gross book value was 60.03% as at March 31, 2008, down from 62.58% at the same time last year. The weighted average interest rate of CAP REIT's total mortgage portfolio was 5.36% at March 31, 2008, while the weighted average term to maturity was 5.3 years. Availability under its Acquisition and Operating Facilities rose to $183.4 million as at March 31, 2008 from $84.7 million at the same time last year.

Capital expenditures reduced to $6.5 million in the first quarter of 2008 compared to $8.4 million last year due to the timing of certain capital investment programs and lower suite improvement costs. Management believes that total capital spending in 2008 will be between $45 million and $50 million.

"Looking ahead, we remain very positive about our future prospects. Fundamentals in our business continue to strengthen, driven by increased immigration, demographic trends and a growing seniors' population, as well as the significant difference in cost between owning and renting a residence. Combined with continued growth in our portfolio, our successful sales and market strategies, our value-enhancing capital improvement programs, and the recognition of our brand as Canada's Landlord of Choice, we believe we will see further increases in operating and financial performance going forward," Mr. Schwartz concluded.

Financial Highlights:



------------------------------------------------------------------------
Period Ended March 31, Three Months
($ Thousands, except per Unit amounts) 2008 2007
------------------------------------------------------------------------
Operating Revenues $ 78,104 $ 70,360
Net Operating Income (NOI) $ 38,421 $ 32,823
NOI Margin 49.2% 46.7%
Loss from Continuing Operations(1) $ (2,851) $ (3,935)
Income (Loss) from Discontinued Operations $ 17,214 $ (107)
Net Income (Loss) $ 14,363 $ (4,042)
Net Loss per Unit - Continuing Operations
(Basic) $ (0.044) $ (0.066)
Net Income (Loss) per Unit - Discontinued
Operations (Basic) $ 0.264 $ (0.002)
Net Income (Loss) per Unit - (Basic) $ 0.220 $ (0.068)
------------------------------------------------------------------------
Distributable Income (DI)(2)(3) $ 16,617 $ 12,962
Distributable Income per Unit - Basic(2) $ 0.255 $ 0.219
Distributions Declared per Unit $ 0.270 $ 0.270
Payout Ratio(2) 109.0% 125.5%
Effective Payout Ratio(2)(4) 88.1% 102.6%
DI Retention(5) $ 1,985 $ (342)
------------------------------------------------------------------------
Funds from Operations (FFO)(2)(6) $ 16,160 $ 12,541
Funds from Operation per Unit - Basic(2) $ 0.248 $ 0.212
------------------------------------------------------------------------
Number of Suites & Sites 27,624 27,105
Income Properties $2,097,623 $2,093,312(7)
Weighted Average Number of Units (000's) -
Basic 65,243 59,183
------------------------------------------------------------------------
------------------------------------------------------------------------

(1) 2008 includes recovery of provision for future income taxes of $103
and reorganization costs of $1,205 for the three months ended March
31, 2008.
(2) 2008 excludes gain on disposals of $17,105 or $0.262 per Unit.
(3) DI is defined in CAP REIT's Declaration of Trust dated January 8, 2008.
(4) Excludes from distributions cash reinvested by Unitholders through DRIP.
(5) Distributable income less distributions declared after DRIP
reinvestment.
(6) FFO is calculated in accordance with the recommendations of the Real
Property Association of Canada ("REALpac").
(7) As at December 31, 2007.

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 14 and 16 of the
Management's Discussion and Analysis dated May 14, 2008.


CAP REIT's Consolidated Financial Statements for the three months ended March 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 26,540 residential suites and two land lease communities comprising 1,267 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