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

Canadian Apartment Properties Real Estate Investment Trust

August 14, 2007 18:04 ET

CAP REIT Announces Strong Second Quarter 2007 Results

TORONTO, ONTARIO--(Marketwire - Aug. 14, 2007) - Canadian Apartment Properties Real Estate Investment Trust ("CAP REIT")(TSX:CAR.UN) announced today results for the three and six months ended June 30, 2007.

HIGHLIGHTS:

- Second quarter revenues up 7.8% on portfolio growth and higher average monthly rents

- Quarterly and YTD NOI margins improve on enhanced operating performance

- Q2 same property NOI up 4.9%

- Q2 FFO per Unit increases 6.3% to $0.336 from $0.316 per Unit last year

- Second quarter payout ratio improves to 82.3% from 86.8% last year

- Growth and portfolio diversification initiatives continue

Operating revenues in the second quarter of 2007 rose 7.8% to $75.3 million from $69.9 million last year, primarily due to acquisitions completed over the last twelve months and higher average monthly rents across CAP REIT's portfolio. Revenues for the first six months of 2007 rose 7.2% to $149.1 million compared to $139.2 million for the same six month period last year.

Primarily as a result of the increase in revenues and improved operating performance, net operating income (NOI) for the three and six months ended June 30, 2007 rose 10.2% and 7.9% to $41.8 million and $76.1 million, respectively, compared to $37.9 million and $70.5 million respectively, in the same periods last year. As a percentage of revenues, NOI was 55.5% in the second quarter of 2007 compared to 54.3% last year, and 51.0% for the first half of 2007 compared to 50.7% for the same six month period last year. CAP REIT is also pleased to announce a sixth consecutive quarter of stabilized portfolio growth as NOI for properties owned at December 31, 2005 increased 4.9% for the three months ended June 30, 2007. For the six months ended June 30, 2007, NOI was up 2.6% for the stabilized portfolio.

Operating expenses as a percentage of operating revenues decreased during the first six months of 2007 due primarily to lower property taxes and energy costs compared to the prior year. During the first half of 2007, CAP REIT successfully implemented a new lease administration system that enhances control on rent setting for every suite in the portfolio. The new system provides improved functionality at each property to manage leases, make changes and update resident rents. Management believes that the new system will result in increased resident service, more effective rent settings, and an enhanced resident profile.

The trend of gradual increases in average monthly rents across all segments of CAP REIT's portfolio continued in the second quarter of 2007 as average monthly rents increased to $890 as at June 30, 2007 compared to $882 last year. The increases were due primarily to strong 2.1% increases on suite turnovers and 3.0% increases on lease renewals, as well as the positive impact resulting from the implementation of CAP REIT's new lease management system. The increase in average monthly rents and enhanced NOI was generated despite a marginal decrease in average occupancy at June 30, 2007 to 96.6% compared to 97.1% last year due to management's efforts to build a higher quality resident base.

"We were pleased to see the solid improvement in our operating performance in the second quarter, and expect this trend will continue as our focus on improving our resident profile results in continued increases in average monthly rents and profitability going forward," commented Thomas Schwartz, President and CEO.

Distributable Income ("DI") was $19.9 million or $0.335 per Unit for the three months ended June 30, 2007 and $32.9 million or $0.554 per Unit for the first half of 2007 compared to $17.5 million or $0.316 per Unit and $30.5 million or $0.552 per Unit respectively, in the same periods last year. The 6.0% growth in DI per Unit in the second quarter was despite the 7.5% increase in the weighted average number of Units outstanding compared with the same period last year. CAP REIT's payout ratio improved to 82.3% in the second quarter of 2007 compared to 86.8% last year. For the six months ended June 30, 2007 the payout ratio was 99.3% compared to 99.2% last year.

Funds from Operations ("FFO") in the second quarter of 2007 increased 14.3% to $20.0 million or $0.336 per Unit from $17.5 million or $0.316 per Unit in last year's second quarter. For the six months ended June 30, 2007, FFO was $32.5 million or $0.548 per Unit compared to $29.7 million or $0.539 per Unit last year. The 6.3% growth in FFO per Unit in the second quarter was despite the 7.5% increase in the weighted average number of Units outstanding compared with the same period last year.

The net loss for the three and six months ended June 30, 2007 of $58.9 million and $63.0 million, respectively, is a result of a non-cash charge to earnings of $61.0 million during the second quarter relating to the temporary differences between the accounting and tax basis of CAP REIT's assets and liabilities. The charge relates to CAP REIT's future income tax liabilities as a result of tax legislation included in Bill C-52, the Budget Implementation Act, 2007 ("Bill C-52"). Bill C-52 is not expected to apply to CAP REIT until 2011 as it provides for a transition period for publicly traded entities that existed prior to November 1, 2006. Bill C-52 will not apply to an entity that qualifies for the real estate investment trust exemption (the "REIT Exemption"). In common with a number of other REITs, the Trust does not currently meet the technical requirements for the REIT Exemption under Bill C-52. Accordingly, CAP REIT was required to provide for future income taxes. CAP REIT intends to qualify for the REIT Exemption prior to 2011. In order to qualify, CAP REIT will identify alternatives for the optimal structure to obtain the REIT Exemption. This charge of $61.0 million has no impact on Distributable Income or Funds From Operations.

The ratio of total debt (including borrowings on the Acquisition and Operating Facilities) to gross book value was 63.2% as at June 30, 2007 compared to 63.7% last year. The weighted average interest rate of CAP REIT's total mortgage portfolio was 5.37% at June 30, 2007 compared to 5.29% last year, while the weighted average term to maturity was 6.1 years compared to 6.3 years last year. During the first half of 2007, CAP REIT leveraged the strength of its balance sheet and stability of its property portfolio to arrange new financing of approximately $136.0 million. The funds were used to reduce its Acquisition and Operating Facilities and lower interest costs. These initiatives essentially completed management's refinancing plans for the year, locking in lower average interests rates compared to current market conditions and anticipated further increases in interest rates.

Capital expenditures were $22.4 million in the first six months of 2007 compared to $13.6 million in the prior year. The increase is due to investments made in acquisitions completed over the prior twelve months, as well as an acceleration in suite renovation programs in certain markets. CAP REIT estimates it will invest approximately $40 million in capital expenditures in 2007.

Subsequent to the end of the quarter, CAP REIT announced that it had acquired two of Canada's premiere luxury land lease adult lifestyle communities. Combined, the two communities consist of 1,233 rental sites. Occupancies at the two properties are a very stable 99.5%. The total purchase price was $75.0 million.

"We are continuing to investigate creative ways to expand and enhance the diversification of our property portfolio. This highly accretive transaction is just one example of how we are leveraging our decades of real estate experience for the benefit of our Unitholders," Mr. Schwartz concluded.




Financial Highlights:
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Period Ended June 30,
($ Thousands, except per Unit Three Months Six Months
amounts) 2007 2006 2007 2006
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Operating Revenues $75,273 $69,859 $149,135 $139,176
Net Operating Income (NOI) $41,805 $37,919 $76,112 $70,519
NOI Margin 55.5% 54.3% 51.0% 50.7%
Net (Loss) Income $(58,924) $1,457 $(62,966) $(1,969)
Net (Loss) Income per Unit
- Basic and Diluted $(0.993) $0.026 $(1.062) $(0.036)
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Distributable Income (DI) (1) $19,898 $17,469 $32,860 $30,472
Distributable Income per Unit
- Basic $0.335 $0.316 $0.554 $0.552
Distributions Declared per Unit $0.270 $0.270 $0.540 $0.540
Payout Ratio 82.3% 86.8% 99.3% 99.2%
Effective Payout Ratio (2) 65.3% 76.3% 80.0% 86.2%
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Funds from Operations (FFO)(3) $19,964 $17,470 $32,505 $29,733
Funds from Operation per Unit
- Basic $0.336 $0.316 $0.548 $0.539
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Number of Suites - - 27,105 25,809
Income Properties - - $2,033,373 $1,983,072(4)
Weighted Average Number of
Units (000's) - Basic 59,353 55,220 59,268 55,154
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(1) DI is defined in CAP REIT's Declaration of Trust dated May 23, 2007.
(2) Excludes cash reinvested through the DRIP.
(3) FFO is calculated in accordance with the recommendations of the Real
Property Association of Canada ("REALPAC").
(4) As at December 31, 2006.


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 net loss, DI to cash from operating activities and FFO to net loss , see pages 14 and 15 of the Management's Discussion and Analysis dated August 14, 2007.

CAP REIT's Consolidated Financial Statements for the three and six months ended June 30, 2007, including Management's Discussion and Analysis, can be found in the investor relations section 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 27,105 residential suites located in or near major urban centres from coast to coast and two land lease adult lifestyle communities of 1,233 rental sites located in Ontario. 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