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

Canadian Apartment Properties Real Estate Investment Trust

November 10, 2008 17:44 ET

CAP REIT Announces Strong Third Quarter Performance

TORONTO, ONTARIO--(Marketwire - Nov. 10, 2008) - Canadian Apartment Properties Real Estate Investment Trust ("CAP REIT") (TSX:CAR.UN) announced today strong operating and financial performance for the three and nine months ended September 30, 2008.

Q3 2008 HIGHLIGHTS:

- Revenues up 8.8% on portfolio growth and strong operating performance

- Occupancy increases to 98.3% while average monthly rents rise 2.9%

- Net Operating Income margin increases to 57.4%

- Same property NOI up 4.7%, the eleventh consecutive quarter of NOI growth

- Distributable Income and Funds from Operations up 11.4% and 12.8%, respectively

- DI per Unit and FFO per Unit increase 1.7% and 2.9%, respectively

- Track record of accretive growth continues

- Balance sheet strengthens further

Operating revenues for the three months ended September 30, 2008 rose 8.8% to $80.7 million from $74.2 million for the same period in the prior year. For the first nine months of 2008, operating revenues increased 10.1% to $237.8 million compared to $216.1 million for the same period last year. The growth in revenues is primarily due to the contribution from acquisitions completed over the last twelve months and higher average monthly rents and occupancies across CAP REIT's portfolio.

Average monthly rents increased across the residential suite portfolio at September 30, 2008 to $945 as compared to $918 last year. Average monthly rents for the properties owned prior to September 30, 2007 also increased as at September 30, 2008 to $945 from $918 as at September 30, 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 resulted in increases of $21 or 2.2% on suite turnovers and $21 or 2.3% increases on lease renewals. Occupancy as at September 30, 2008 also strengthened for the residential suite portfolio to 98.3% from 97.9% in the prior year. The occupancy for the land lease portfolio has remained very stable at 99.8% since acquisition. Management believes that demand for rental accommodation will increase in the majority of its markets, resulting in continued gradual increases in average monthly rents and occupancies maintained in the range of 98%.

Operating expenses improved to 42.6% as a percentage of operating revenues in the third quarter, an improvement from the 43.3% in the quarter ended September 30, 2007 primarily due to lower utilities costs as a percentage of revenues due to CAP REIT's energy management strategies, as well as lower realty taxes as a percentage of revenues compared to the same period last year. For the nine months ended September 30, 2008, operating expenses improved to 45.6% as a percentage of operating revenues, down from 47.0% for the same period last year.

Primarily as a result of the increase in revenues and improved operating performance, net operating income ("NOI") for the third quarter of 2008 rose 10.2% to $46.4 million from $42.1 million in last year's third quarter. For the first nine months of 2008, NOI rose 12.9% to $129.4 million compared to $114.6 million for the same period last year. As a percentage of revenues, NOI increased to 57.4% for the third quarter of 2008 and 54.4% for the first nine months of 2008 compared to 56.7% and 53.0% respectively, for the same periods last year.

CAP REIT is also pleased to announce the eleventh consecutive quarter of stabilized portfolio growth as NOI for properties owned at December 31, 2006 increased 4.7% for the three months and 5.6% for the nine months ended September 30, 2008, a key driver in CAP REIT's 5.4% increase in Funds From Operations per Unit through the first nine months of 2008.

"Fundamentals in the Canadian apartment business remain strong despite the current economic slowdown we are experiencing, and we are confident our solid operating performance is sustainable going forward" commented Thomas Schwartz, President and CEO. "The cost gap between renting and owning a home has reached historic highs, and with consumer sentiment turning more negative toward home ownership due to reduced expectations of housing price gains and a significant tightening in mortgage requirements for home purchases, demand for apartment and townhouse rentals remains very strong in the majority of our markets."

"In addition, the defensive characteristics of our property portfolio due to our diversification by both geography and asset type continue to mitigate risk to any one region or demographic sector. Furthermore, we believe our strong presence in the Ontario market will serve to further protect Unitholders as the province's diversified economic base is not tied to any one cyclical industry," Mr. Schwartz continued.

Distributable Income ("DI") increased 11.4% to $23.7 million or $0.362 per Unit for the three months ended September 30, 2008 compared to $21.3 million or $0.356 per Unit for the same period last year. The 1.7% increase in DI per Unit in the third quarter of 2008 was achieved despite a 9.5% increase in the weighted average number of Units outstanding compared with the prior year. For the nine months ended September 30, 2008, DI was $62.9 million or $0.963 per Unit compared to $54.2 million or $0.911 per Unit for the same period last year. For the nine months ended September 30, 2008, CAP REIT's payout ratio strengthened to 86.6% compared to 90.9% in the comparable period last year. Including distributions re-invested through the DRIP, the effective payout ratio was 71.2% compared to 73.7% last year. For the three months ended September 30, 2008, the payout ratio and effective payout ratio were 76.8% and 63.9%, respectively compared to 77.8% and 63.9% in the prior year's third quarter. 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 September 30, 2008, Funds From Operations ("FFO") increased 12.8% to $23.5 million or $0.358 per Unit from $20.8 million or $0.348 per Unit for the same period last year. The 2.9% growth in FFO per Unit in the third quarter of 2008 was despite the 9.5% increase in the weighted average number of Units outstanding compared with the third quarter of 2007. For the first nine months of 2008, FFO was $61.8 million or $0.945 per Unit compared to $53.3 million or $0.897 per Unit for the same period in 2007. The FFO payout ratio for the three and nine months ended September 30, 2008 was 77.6% and 88.2% respectively, compared to 79.6% and 92.3% for the same periods last year. The effective FFO payout ratio, excluding cash reinvested through the DRIP, was 64.6% and 72.5% for the three and nine months ended September 30, 2008 respectively compared to 65.5% and 74.9% for the same periods last year.

For the quarter ended September 30, 2008, net income was $5.0 million or $0.076 per Unit as compared to $3.6 million or $ 0.061 per Unit for the same period last year. For the first nine months of 2008, net income was $22.7 million or $0.348 per Unit compared to a net loss of $59.3 million or $(0.998) per Unit for the same period last year. Net loss in 2007 includes a non-cash charge to earnings of $59.6 million relating to the temporary differences between the accounting and tax basis of CAP REIT's assets and liabilities. Net income in 2008 includes a gain of $17.0 million on the sale of twelve non-core properties completed in the first quarter of the year, and a charge of $1.6 million for reorganization costs incurred for changes to CAP REIT's capital structure.

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 61.6% as at September 30, 2008, compared to 65.3% for the prior year. The weighted average interest rate of CAP REIT's total mortgage portfolio was 5.33% at September 30, 2008, while the weighted average term to maturity was 5.2 years. Approximately 95.1% of CAP REIT's mortgages are CMHC insured. CAP REIT's interest coverage ratio also improved as at September 30, 2008 to 2.09 compared to 1.95 at the same time last year. Availability under its Acquisition and Operating Facilities rose to $127.6 million as at September 30, 2008 from $64.9 million at the same time last year.

Capital expenditures reduced to $34.7 million in the first nine months of 2008 compared to $35.6 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 in the $50 million range.

"Our strong balance sheet and conservative leverage and coverage ratios, combined with continued access to lower cost CMHC-insured financing, will continue to provide CAP REIT with the necessary financial resources and credit to maintain our value enhancing programs," Mr. Schwartz concluded.



Financial Highlights:
----------------------------------------------------------------------------
Period Ended September 30,
($ Thousands, except per Three Months Nine Months
Unit amounts) 2008 2007 2008 2007
----------------------------------------------------------------------------
Operating Revenues $ 80,721 $ 74,223 $ 237,802 $ 216,078
Net Operating Income (NOI) $ 46,364 $ 42,075 $ 129,366 $ 114,586
NOI Margin 57.4% 56.7% 54.4% 53.0%
Income (Loss) from
Continuing Operations(1) $ 4,994 $(1,000) $ 5,589 $ (59,463)
Income from Discontinued
Operations - $ 4,640 $ 17,155 $ 137
Net Income (Loss) $ 4,994 $ 3,640 $ 22,744 $ (59,326)
Net Income (Loss) per Unit
Continuing Operations
- Basic $ 0.076 $(0.017) $ 0.086 $ (1.000)
Net Income per Unit
- Discontinued Operations
- Basic - $ 0.078 $ 0.262 $ 0.002
Net Income (Loss)
per Unit Basic $ 0.076 $ 0.061 $ 0.348 $ (0.998)
----------------------------------------------------------------------------
Distributable
Income (DI)(2)(3) $ 23,730 $ 21,297 $ 62,929 $ 54,157
Distributable Income
per Unit - Basic(2) $ 0.362 $ 0.356 $ 0.963 $ 0.911
Distributions Declared
per Unit $ 0.270 $ 0.270 $ 0.810 $ 0.810
Payout Ratio(2) 76.8% 77.8% 86.6% 90.9%
Effective Payout
Ratio(2)(4) 63.9% 63.9% 71.2% 73.7%
DI Retention(5) $ 8,571 $ 7,683 $ 18,124 $ 14,240
----------------------------------------------------------------------------
Funds from
Operations (FFO)(2)(6) $ 23,469 $ 20,800 $ 61,793 $ 53,305
Funds from Operation per
Unit - Basic(2) $ 0.358 $ 0.348 $ 0.945 $ 0.897
----------------------------------------------------------------------------
Number of Suites & Sites 28,739 29,086
Income Properties $2,178,400 $2,093,312(7)
Weighted Average Number of
Units (000's) - Basic 65,496 59,799 65,358 59,447
----------------------------------------------------------------------------
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(1) 2008 includes provision for future income taxes of $33 and $243, and
reorganization costs of $49 and $1,599 for the three and nine months
ended September 30, 2008, respectively.
(2) 2008 excludes gain on disposal of properties for the nine months ended
September 30, 2008.
(3) DI is defined in CAP REIT's Declaration of Trust dated July 11, 2008.
(4) Excludes from distributions cash reinvested by Unitholders through
the 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 cash provided by operating activities to DI and net income (loss) to FFO, see pages 12 and 14 of the Management's Discussion and Analysis dated November 10, 2008.

CAP REIT's Consolidated Financial Statements for the three and nine months ended September 30, 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 27,461 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