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

Canadian Apartment Properties Real Estate Investment Trust

November 08, 2010 17:10 ET

CAPREIT Continues Strong Growth Trend in Third Quarter 2010

Sustainable Growth in NOI Generates Considerable Increase in NFFO and NFFO Per Unit

TORONTO, ONTARIO--(Marketwire - Nov. 8, 2010) - Canadian Apartment Properties Real Estate Investment Trust ("CAPREIT") (TSX:CAR.UN) announced today continuing strong operating and financial results for the three and nine months ended September 30, 2010.

HIGHLIGHTS (1)                  
    Three Months Ended     Nine Months Ended  
    September 30     September 30  
    2010   2009     2010   2009  
Operating Revenues (000s) $ 84,679   $ 80,710     $ 248,507   $ 240,398  
Net Operating Income ("NOI") (000s) (2) $ 49,731   $ 46,543     $ 141,519   $ 130,941  
NOI Margin (2)   58.7 %   57.7 %     56.9 %   54.5 %
Normalized Funds From Operations ("NFFO") Per Unit – Basic (2)(3) $ 0.376   $ 0.357     $ 1.058   $ 0.959  
NFFO Payout Ratio (2)(3)   74.5 %   78.4 %     79.6 %   87.4 %
(1) Unless otherwise indicated, all figures in this press release, including those figures relating to prior year comparable periods, have been adjusted to exclude the results of discontinued operations.
(2) NOI, NFFO and NFFO per Unit are measures used by management in evaluating operating performance. Please refer to the cautionary statements under the heading "Non-GAAP Financial Measures" and the reconciliations provided in this press release.
(3) Not adjusted for the effect of discontinued operations.
   
   
-- Q3 operating revenues up 4.9% compared to prior year period on higher average monthly rents, increased occupancies, and contributions from acquisitions
   
-- Average monthly rents rose 2.6% in the third quarter compared to prior year
   
-- Occupancy improved to 98.7% from 98.4% in Q3 2009
   
-- Q3 NOI up 6.8% from last year with NOI margin increasing to 58.7%
   
-- Organic growth continued with stabilized NOI up 4.1%, the 19th consecutive quarter of stable or improved year-over-year stabilized NOI
   
-- Q3 YTD NFFO up a significant 11.5% generating an improved NFFO payout ratio of 79.6%
   
-- Q3 YTD NFFO per Unit also up significantly by 10.3% to $1.058
   
-- $60 million of mortgage refinancings completed in Q3 at an average interest rate of 3.03%, which is expected to produce significant future interest rate savings
   
-- Prices locked in at favourable rates for approximately 85% of expected daily natural gas requirements for the 2011 winter season
   
-- Enhanced the geographic diversification and continued the repositioning towards a higher-quality portfolio in the third quarter through the acquisition of 307 suites located in British Columbia and the disposition of 716 suites in non-core properties located in Ontario
   
-- Completed the revaluation of its investment properties under International Financial Reporting Standards ("IFRS") as at January 1, 2010, which will result in a fair value-based carrying amount for investment properties of approximately $2.9 billion, or approximately $700 million greater than the depreciated cost of $2.2 billion as reported at December 31, 2009 under current GAAP
 
PORTFOLIO OPERATING RESULTS
 
    Three Months Ended       Nine Months Ended  
    September 30       September 30  
    2010     2009       2010     2009  
Overall Portfolio Occupancy (1)                 98.7 %   98.4 %
Overall Portfolio Average Monthly Rents (1)(2)               $ 977   $ 952  
Operating Revenues (000s) $ 84,679   $ 80,710     $ 248,507   $ 240,398  
Operating Expenses (000s) $ 34,948   $ 34,167     $ 106,988   $ 109,457  
NOI (000s) (3) $ 49,731   $ 46,543     $ 141,519   $ 130,941  
NOI Margin   58.7 %   57.7 %     56.9 %   54.5 %
Number of Suites and Sites Acquired   307     14       682     24  
Number of Suites Disposed   716           1,054      
(1)   As at September 30.
(2)     Average monthly rents are defined as actual rents, net of vacancies, divided by the total number of suites and sites in the portfolio and do not include revenues from parking, laundry or other sources.
(3)     NOI is a measure used by management in evaluating operating performance. Please refer to the cautionary statements under the heading "Non-GAAP Financial Measures" and the reconciliations provided in this press release.  

Operating Revenues

For the three and nine months ended September 30, 2010, total operating revenues increased by 4.9% and 3.4%, respectively, compared to the same periods last year primarily due to acquisitions completed in the first nine months of the year as well as increased average monthly rents and higher occupancy levels. The increase in revenues was partially offset by the impact of the lost contribution from properties sold during the period.

Average monthly rents increased in all sectors and geographic regions of the portfolio, with the exception of Alberta, resulting in a 2.6% increase in overall average monthly rents as at September 30, 2010 to $977, compared to $952 as at September 30, 2009. Overall occupancy reached virtually full levels at 98.7% at September 30, 2010 compared to 98.4% last year. The increases in average monthly rents and occupancy levels were due to a combination of the acquisition of more luxury-oriented properties and the disposition of some affordable properties in the first nine months of the year, successful sales and marketing strategies and continued strength in the residential rental sector in the majority of CAPREIT's regional markets.

Suite turnovers in the residential suite portfolio (excluding co-ownerships) during the three months ended September 30, 2010 resulted in average monthly rent increasing by approximately $10 or 1.0% per suite compared to a decrease of approximately $10 or 1.1% in the same period last year. For the first nine months of 2010, suite turnovers resulted in a $6 or 0.6% increase in average monthly rents compared to a decrease of $7 or 0.7% in the same period last year. Although the change in average monthly rents from suite turnovers improved from the same periods last year, the effect of aggressive rent discounting in the Alberta market of approximately $41 or 3.9% per suite in the third quarter ($51 or 4.8% per suite for the nine months ended September 30, 2010) continues to have an adverse impact. Excluding the impact of the Alberta portfolio, residential suite turnovers would have resulted in average monthly rent increases of $16 or 1.6% per suite in the third quarter ($12 or 1.2% for the nine months ended September 30, 2010).

Pursuant to Management's focus on increasing overall portfolio rents, average monthly rents on lease renewals increased by approximately $22 or 2.3% for the three months ended September 30, 2010 compared to $19 or 2.1% for the same period last year. For the nine months ended September 30, 2010, average monthly rents increased by a similar $22 or 2.3%, and slightly ahead of the same period last year.

Operating Expenses

For the three and nine months ended September 30, 2010, operating expenses as a percentage of operating revenues improved to 41.3% and 43.1%, respectively, compared to 42.3% and 45.5% for the same periods last year.

Operating expenses increased for the three months ended September 30, 2010, due to a combination of (i) the impact of property acquisitions in the period, (ii) the introduction of harmonized sales tax ("HST") in Ontario and British Columbia, (iii) rising electricity rates in Ontario, and (iv) higher insurance costs. However, the significant decrease in operating expenses through the first nine months of 2010 was primarily due to lower overall utility and repairs and maintenance ("R&M") costs. The decrease in utility costs was primarily a result of CAPREIT's energy savings initiatives and a revised natural gas supply strategy combined with milder weather in 2010 compared to 2009. Lower R&M costs were the result of Management's capital investment programs in prior years as well as the successful waste recycling programs that have resulted in steadily reducing garbage levies.

Subsequent to the third quarter, CAPREIT entered into a second floating-to-fixed natural gas financial instrument covering the period from November 2010 through March 2011. Combined, the two financial instruments fix the price of natural gas at $4.20 per Gigajoule for 3,200 Gigajoules per day, which represents approximately 85% of CAPREIT's anticipated natural gas delivery requirements during the five month period. The fixed price will serve to protect CAPREIT from significant potential increases in natural gas market prices during the peak heating season.

Net Operating Income

In the third quarter of 2010, NOI improved by $3.2 million or 6.8% while the NOI margin improved to 58.7% as compared to 57.7% last year. For the nine months ended September 30, 2010, overall NOI increased by $10.6 million or 8.1%, while the NOI margin improved significantly to 56.9% from 54.5% for the same period last year.

As of September 30, 2010, CAPREIT has generated 19 consecutive quarters of stable or improved year-over-year NOI growth for stabilized properties. For the three and nine months ended September 30, 2010, operating revenues for stabilized suites and sites increased 2.4% and 2.1%, respectively, while operating costs remained flat and decreased 2.9% compared to the same periods last year. As a result, stabilized NOI increased by 4.1% and 6.3%, respectively, for the three and nine months ended September 30, 2010. 

"We are pleased to see the continued growth in Net Operating Income through the third quarter of 2010 as our proven property management strategies contribute to solid increases in occupancies and average monthly rents, while our ongoing property capital investment programs generate sustainable reductions in our operating costs," commented Thomas Schwartz, President and Chief Executive Officer.

NON-GAAP FINANCIAL MEASURES
 
    Three Months Ended       Nine Months Ended  
    September 30       September 30  
    2010     2009       2010     2009  
NFFO (000s) $ 25,130   $ 23,581     $ 70,472   $ 63,202  
NFFO Per Unit – Basic $ 0.376   $ 0.357     $ 1.058   $ 0.959  
Cash Distributions Per Unit $ 0.270   $ 0.270     $ 0.810   $ 0.810  
NFFO Payout Ratio   74.5 %   78.4 %     79.6 %   87.4 %
NFFO Effective Payout Ratio   62.2 %   66.5 %     67.5 %   74.7 %

Normalized Funds From Operations

NFFO is not a financial measure determined by Canadian generally accepted accounting principles ("GAAP"), however, it is used by CAPREIT to assess overall operating performance. NFFO, which excludes from Funds From Operations ("FFO") the effect of changes in the fair value of derivative financial instruments and certain other non-recurring expenses, increased by 6.6% and 11.5%, respectively, for the three and nine months ended September 30, 2010, compared to the same periods last year. The increase was primarily due to the strong progress in reducing operating costs including utility and R&M costs, higher average monthly rents and improved occupancy levels resulting from Management's sales and marketing programs, and the contribution from recent acquisitions. These gains were partially offset by the impact of the introduction of the HST in Ontario and British Columbia effective July 1, 2010, and the lost contribution from properties sold during the year. NFFO per Unit increased by 5.3% and 10.3%, respectively, for the three and nine months ended September 30, 2010 compared to the same periods last year.

The payout ratio of distributions declared to NFFO improved for the three months ended September 30, 2010 to 74.5%, compared to 78.4% for the same period last year. For the first nine months of 2010, the NFFO payout ratio improved to 79.6% compared to 87.4% last year.

The effective NFFO payout ratio, which compares net distributions paid to Unitholders to NFFO, improved significantly to 62.2% and 67.5%, respectively, for the three and nine months ended September 30, 2010, from 66.5% and 74.7% for the same periods last year, primarily due to significant operating cost reductions as well as higher reinvestments of distributions under the Distribution Reinvestment Plan ("DRIP"). The average participation rate in the DRIP increased to 16.5% and 15.1%, respectively, for the three and nine months ended September 30, 2010 from 15.1% and 14.6% for the same periods last year.

LIQUIDITY AND LEVERAGE
 
As at September 30, 2010   2009  
         
Mortgage Debt to Gross Book Value 57.12 % 57.22 %
Total Debt to Gross Book Value 63.53 % 62.97 %
Total Debt to Total Capitalization 60.22 % 62.41 %
         
Debt Service Coverage Ratio (times) (1) 1.34   1.27  
Interest Coverage Ratio (times) (1) 2.10   2.06  
         
Weighted Average Mortgage Interest Rate (%) (2) 4.91   5.09  
Weighted Average Mortgage Term to Maturity (years) 4.6   5.1  
(1) For the trailing four quarters ended September 30.
(2) Effective weighted average interest rate including deferred financing costs and fair value adjustments but excluding CMHC premiums. Additionally, including the amortization of the realized component of the loss on settlement of $9.9 million included in Accumulated Other Comprehensive Loss, the effective portfolio weighted average interest rate at September 30, 2010 would be 0.09% higher (September 30, 2009 - 0.07%).

Financial Strength

CAPREIT's strong balance sheet and financial position will enable Management to take advantage of the current low interest rate environment through the combination of refinancings as well as modest increases in overall leverage.

CAPREIT is achieving its financing plan goals as demonstrated by the following key indicators:

-- The ratio of total debt to gross book value as at September 30, 2010 remains conservative at 63.53% as compared to 62.97% last year
   
-- Debt service and interest coverage ratios improved for the trailing four quarters ended September 30, 2010, compared to last year despite the impact of additional mortgage financing obtained in the last 12 months on principal and interest payments
   
-- At September 30, 2010, 95.3% (September 30, 2009 – 96.1%) of CAPREIT's mortgage portfolio is insured by the Canada Mortgage and Housing Corporation ("CMHC") (excluding the mortgages on CAPREIT's manufactured home community land lease sites)
   
-- The effective portfolio weighted average interest rate on mortgages has steadily declined from 5.09% as at September 30, 2009, to 4.91% as at September 30, 2010, which will result in significant interest rate savings in future years

Management does not anticipate any material difficulties in completing the renewal of mortgages maturing during the remainder of 2010 and refinancing the principal repayments through the year, with new mortgages at lower interest rates than those currently in place. Excluding the effect of acquisitions and dispositions, mortgage refinancings of $60.3 million, consisting of renewals of existing mortgages of $46.1 million, and additional top-up financings of $14.3 million, were completed in the third quarter for a weighted average term of 4.5 years and at a weighted average interest rate of 3.03%, which is significantly below the weighted average interest rate of 4.89% for the mortgages that mature in 2010.

Management initially set its total mortgage renewal and refinancing plan for 2010 of between $285 million to $300 million (approximately $200 million for renewals and $100 million for additional top up financing), of which $167.7 million ($100.0 million for renewals and $67.7 million for top ups) has been closed or committed up to November 8, 2010. These targets exclude the $47.7 million in new borrowings used to fund acquisitions during 2010. In light of the lower levels of property capital investments in the first nine months of 2010, the increase in the borrowing capacity under the Credit Facilities, the higher cash flow from operating activities compared to last year and the proceeds generated from the disposition of properties, Management estimates that it will raise between $250 million and $275 million in total mortgage renewals and refinancings for 2010. Based on current interest rates for CMHC-insured mortgages, Management expects to realize interest rate savings for mortgages maturing in 2010 that will benefit CAPREIT over the long term.

Property Capital Investment Plan

During the first nine months of 2010, CAPREIT made property capital investments of $48.9 million as compared to $58.7 million for the same period last year.

Year-over-year property capital investments were lower primarily due to the timing of building improvement programs, partially offset by higher investments in suite improvements, common areas and high-efficiency boilers, all of which tend to increase NOI more quickly. In addition, CAPREIT continues to invest in environment-friendly and energy-saving initiatives, including the above-mentioned boilers, energy-efficient lighting systems, water saving and waste recycling programs, which have permitted CAPREIT to mitigate potentially higher increases in utility and R&M costs and have improved overall portfolio NOI significantly. Management has lowered its anticipated capital investments forecast for 2010 and now expects to invest between $85.0 million to $90.0 million in its properties during the year.

IFRS

Management has substantially completed the quantification of the impact of International Accounting Standard ("IAS") 40, Investment Property, related differences on its January 1, 2010 opening balance sheet under IFRS compared to its December 31, 2009 balance sheet under current GAAP. Management expects the revaluation of its investment properties will result in a fair value-based carrying amount of approximately $2.9 billion as at January 1, 2010, or approximately $700 million greater than the depreciated cost of $2.2 billion reported under current GAAP.

The Debt to Gross Book Value leverage ratio calculation as of January 1, 2010 is expected to decrease to below 60% based on these revised fair values compared to CAPREIT's stated leverage ratio of 62.75% at December 31, 2009 based on historical cost under GAAP.

For additional information, refer to the International Financial Reporting Standards disclosure in Section IV of CAPREIT's Management's Discussion and Analysis ("MD&A") for the three and nine months ended September 30, 2010.

Acquisitions and Dispositions

On July 5, 2010, CAPREIT completed the sale of a property comprising 146 suites located in London, Ontario for a sale price of $7.6 million, excluding closing and transaction costs. The net cash proceeds from this sale were used to repay mortgages in the amount of $5.6 million, and the balance to reduce bank indebtedness.

On July 29, 2010, CAPREIT acquired eight properties (two affordable, four mid-tier and two luxury) comprising 307 suites located in or near Victoria, British Columbia. The total acquisition costs of $47.2 million were funded from: (i) mortgage financings in the amount of $25.6 million for a five-year term; (ii) assumption of an existing mortgage in the amount of $0.8 million at an interest rate of 4.73% maturing on February 1, 2016; and (iii) funds drawn from CAPREIT's acquisition and operating facility.

On July 29, 2010, CAPREIT completed the sale of five properties comprising 570 suites located in Mississauga and Kitchener, Ontario for a sale price of $45.9 million, excluding closing and transaction costs. The net cash proceeds from this sale of $42.3 million were used to repay existing mortgages in the amount of $20.1 million, and the balance to reduce bank indebtedness.

A gain of $9.6 million ($0.143 per Unit) has been recognized in connection with dispositions in the third quarter of 2010.

"The market for residential rental properties remains highly competitive resulting in very low capitalization rates and an environment where it is challenging to find acquisition opportunities that will be accretive to our Unitholders," Mr. Schwartz continued. "These market fundamentals reflect the ongoing strength of the Canadian apartment sector and the very positive outlook for its future. While we are in active discussions with third parties in our effort to seek out accretive purchases that will further strengthen and diversify our portfolio, there is some risk that we may not reach our target of acquiring between 1,500 and 2,000 suites this year."

Additional Information

More detailed information and analysis is included in CAPREIT's unaudited consolidated interim financial statements and MD&A for the three and nine months ended September 30, 2010, which have been filed on SEDAR and can be viewed at www.sedar.com under CAPREIT's profile or on CAPREIT's website on the investor relations page at www.capreit.net. Additionally, supplemental information can be viewed at www.sedar.com under CAPREIT's profile and at www.capreit.net.

Conference Call

A conference call hosted by Thomas Schwartz, President and Chief Executive Officer and Richard J. Smith, Chief Financial Officer, will be held Tuesday, November 9, 2010 at 10.00 am ET. The telephone numbers for the conference call are: Local: (416) 340-2218, North American Toll Free: (877) 240-9772.

A slide presentation to accompany Management's comments during the conference call will be available one hour and a half prior to the conference call. To view the slides, access the CAPREIT website at www.capreit.net, click on "Investor Relations" and follow the link at the top of the page. Please log on at least 15 minutes before the call commences.

The telephone numbers to listen to the call after it is completed (Instant Replay) are local (416) 695-5800 or toll free (800) 408-3053. The Passcode for the Instant Replay is 4432371#. The Instant Replay will be available until midnight, November 16, 2010. The call and accompanying slides will also be archived on the CAPREIT website at www.capreit.net. For more information about CAPREIT, its business and its investment highlights, please refer to our website at www.capreit.net.

About CAPREIT

As one of Canada's largest residential landlords, CAPREIT (TSX:CAR.UN) is a growth-oriented investment trust owning interests in 27,228 residential suites and two manufactured home communities comprising 1,316 land lease sites located in or near major urban centres from coast to coast. For more information about CAPREIT, its business and its investment highlights, please refer to our website at www.capreit.net and our public disclosure which can be found under our profile at www.sedar.com.

Non-GAAP Financial Measures

CAPREIT prepares and releases unaudited quarterly and audited consolidated annual financial statements prepared in accordance with GAAP. In this and other earnings releases and investor conference calls, as a complement to results provided in accordance with GAAP, CAPREIT also discloses and discusses certain non-GAAP financial measures, including NOI, FFO, NFFO and applicable per Unit amounts and payout ratios. These non-GAAP measures are further defined and discussed in the November 8, 2010 MD&A, which should be read in conjunction with this news release. Since NOI, FFO and NFFO are not determined by GAAP, they may not be comparable to similar measures reported by other issuers. CAPREIT has presented such non-GAAP measures as Management believes these non-GAAP measures are relevant measures of the ability of CAPREIT to earn and distribute cash returns to Unitholders and to evaluate CAPREIT's performance. A reconciliation of Net Loss and such non-GAAP measures and Adjusted Funds From Operations ("AFFO") is included in this press release. These non-GAAP measures should not be construed as alternatives to net income (loss) or cash flow from operating activities determined in accordance with GAAP as an indicator of CAPREIT's performance.

Cautionary Statements Regarding Forward-Looking Statements

Certain statements contained, or contained in documents incorporated by reference, in this press release constitute forward-looking information within the meaning of securities laws. Forward-looking information may relate to CAPREIT's future outlook and anticipated events or results and may include statements regarding the future financial position, business strategy, budgets, litigation, projected costs, capital investments, financial results, taxes, plans and objectives of or involving CAPREIT. Particularly, statements regarding CAPREIT's future results, performance, achievements, prospects, costs, opportunities and financial outlook, including those relating to capital investments, acquisition and capital investment strategy and the real estate industry generally, are forward-looking statements. In some cases, forward-looking information can be identified by terms such as "may", "will", "should", "expect", "plan", "anticipate", "believe", "intend", "estimate", "predict", "potential", "continue" or the negative thereof or other similar expressions concerning matters that are not historical facts. Forward-looking statements are based on certain factors and assumptions regarding expected growth, results of operations, performance and business prospects and opportunities. In addition, certain specific assumptions were made in preparing forward-looking information, including: that the Canadian economy will generally experience growth, however, with specific geographic areas of weakness including Alberta and parts of Ontario; that inflation will remain at historically low rates; that interest rates will rise modestly starting in 2011; that CMHC mortgage insurance will continue to be available and that a sufficient number of lenders will participate in the CMHC-insured mortgage program to ensure competitive rates; that conditions within the real estate market, including competition for acquisitions, will become favourable; that the Canadian capital markets will continue to provide CAPREIT with access to equity and/or debt at reasonable rates; that vacancy rates for CAPREIT properties will be consistent with historical norms; that rental rates will grow at levels similar to the rate of inflation on renewal; that rental rates on turnovers will remain stable; that CAPREIT will effectively manage price pressures relating to its energy usage; and, with respect to CAPREIT's financial outlook regarding capital investments, assumptions respecting projected costs of construction and materials, availability of trades, the cost and availability of financing, CAPREIT's investment priorities, the properties in which investments will be made, the composition of the property portfolio and the projected return on investment in respect of specific capital investments.
Although the forward-looking statements contained in this press release are based on assumptions Management believes are reasonable as of the date hereof, there can be no assurance actual results will be consistent with these forward-looking statements; they may prove to be incorrect. Forward-looking statements necessarily involve known and unknown risks and uncertainties, many of which are beyond CAPREIT's control, that may cause CAPREIT or the industry's actual results, performance, achievements, prospects and opportunities in future periods to differ materially from those expressed or implied by such forward-looking statements. These risks and uncertainties include, among other things, risks related to: real property ownership, leasehold interests, co-ownerships, investment restrictions, operating risk, energy costs, environmental matters, insurance, capital investments, indebtedness, interest rate hedging, taxation, harmonization of federal goods and services tax and provincial sales tax, government regulations, controls over financial accounting, International Financial Reporting Standards ("IFRS"), legal and regulatory concerns, the nature of units of CAPREIT ("Trust Units") and of CAPREIT's subsidiary, CAPREIT Limited Partnership ("CAPLP Units") (collectively, the "Units"), Unitholder liability, liquidity and price fluctuation of Units, dilution, distributions, participation in CAPREIT's distribution reinvestment plan, potential conflicts of interest, dependence on key personnel, general economic conditions, competition for residents, competition for real property investments, continued growth and risks related to acquisitions. There can be no assurance that the expectations of CAPREIT's Management will prove to be correct. These risks and uncertainties are more fully described in regulatory filings, including CAPREIT's Annual Information Form, which can be obtained on SEDAR at www.sedar.com, under CAPREIT's profile, as well as under Risks and Uncertainties in Section VII of CAPREIT's MD&A for the three and nine months ended September 30, 2010 and other SEDAR filings made by CAPREIT. The information in this press release is based on information available to Management as of November 8, 2010. Subject to applicable law, CAPREIT does not undertake any obligation to publicly update or revise any forward-looking information.

SOURCE: Canadian Apartment Properties Real Estate Investment Trust

SELECTED UNAUDITED FINANCIAL INFORMATION
           
Condensed Balance Sheets          
           
As at September 30, 2010   December 31, 2009
($ Thousands)          
Income Properties $ 2,260,524   $ 2,154,125
Total Assets   2,342,341     2,279,779
Mortgages Payable   1,605,127     1,512,715
Bank Indebtedness   180,394     146,891
Total Liabilities   1,912,679     1,822,595
Unitholders' Equity   429,662     457,184
   
   
Condensed Statements of Income and Comprehensive Income  
                           
    Three Months Ended       Nine Months Ended  
    September 30       September 30  
($ Thousands, except per Unit amounts)   2010     2009       2010     2009  
Net Operating Income $ 49,731   $ 46,543     $ 141,519   $ 130,941  
Less:                          
  Trust Expenses   3,281     5,568       9,880     13,170  
  Mortgage Interest   19,633     18,731       57,546     55,752  
  Interest on Bank Indebtedness   1,755     923       4,911     2,319  
  Net Loss on Natural Gas Contracts             4,497      
  Other Income   (463 )   (464 )     (1,388 )   (1,391 )
  Depreciation   20,997     19,347       61,376     56,618  
  Amortization   925     1,002       2,688     2,593  
  Restructuring Costs   33           565      
Income from Continuing Operations Before Gains (Losses) and Income Taxes   3,570     1,436       1,444     1,880  
Unrealized Loss on Derivative Financial Instruments   (36 )         (86 )    
Realized (Loss) Gain on Derivative Financial Instruments       (699 )         4,063  
(Provision for) Recovery of Future Income Taxes   (495 )   (11 )     475     (840 )
Income From Continuing Operations   3,039     726       1,833     5,103  
Income From Discontinued Operations   9,654     224       11,613     421  
Net Income $ 12,693   $ 950     $ 13,446   $ 5,524  
Other Comprehensive Income (Loss) $ 4,838   $ 3,497     $ 4,800   $ 9,903  
Comprehensive Income $ 17,531   $ 4,447     $ 18,246   $ 15,427  
Basic Net Income Per Unit                          
  Continuing Operations $ 0.045   $ 0.011     $ 0.028   $ 0.078  
  Discontinued Operations $ 0.145   $ 0.003     $ 0.174   $ 0.006  
Basic Net Income Per Unit $ 0.190   $ 0.014     $ 0.202   $ 0.084  
Diluted Net Income Per Unit                          
  Continuing Operations $ 0.045   $ 0.011     $ 0.027   $ 0.078  
  Discontinued Operations $ 0.144   $ 0.003     $ 0.174   $ 0.006  
Diluted Net Income Per Unit $ 0.189   $ 0.014     $ 0.201   $ 0.084  
Weighted Average Number of Units (000s) – Basic   66,762     66,086       66,591     65,933  
Weighted Average Number of Units (000s) – Diluted   67,287     66,208       66,960     66,023  
   
   
Condensed Statements of Cash Flows  
                           
    Three Months Ended       Nine Months Ended  
    September 30,       September 30,  
    2010     2009       2010     2009  
($ Thousands)                          
Cash Provided By Operating Activities:                          
  Net Income $ 12,693   $ 950     $ 13,446   $ 5,524  
  Items in Net Income Not Affecting Cash:                          
    Changes in Non-cash Operating Assets and Liabilities   4,195     (6,471 )     (9,464 )   (17,600 )
    Depreciation and Amortization   22,345     21,090       66,121     61,071  
    Provision for (Recovery of) Future Income Taxes   495     (56 )     (1,103 )   606  
    Other   (9,170 )   1,228       (5,284 )   (2,434 )
Cash Provided By Operating Activities   30,558     16,741       63,716     47,167  
Cash Used In Investing Activities   (19,509 )   (28,648 )     (85,365 )   (61,286 )
Cash (Used In) Provided By Financing Activities                          
  Mortgages and Other Liabilities   1,396     23,464       34,843     52,058  
  Bank indebtedness, net   2,607     12,820       33,503     32,223  
  Settlement of Derivative Financial Instruments       (8,556 )         (23,472 )
  Distributions, Net of DRIP and Other Equity Issuances   (15,052 )   (15,821 )     (46,697 )   (46,690 )
Cash (Used In) Provided By Financing Activities   (11,049 )   11,907       21,649     14,119  
Changes in Cash and Cash Equivalents During the Year                  
Cash and Cash Equivalents, Beginning of Year                  
Cash and Cash Equivalents, End of Year $   $     $   $  
   
   
Reconciliation of Net Income to FFO and to NFFO  
   
    Three Months Ended       Nine Months Ended  
    September 30       September 30  
    2010     2009       2010     2009  
($ Thousands, except per Unit amounts)                          
Net Income $ 12,693   $ 950     $ 13,446   $ 5,524  
Adjustments:                          
  Provision for (Recovery of) Future Income Taxes   495     (56 )     (1,103 )   606  
  Depreciation   20,997     19,918       62,472     58,268  
  Amortization of Tenant Improvements   65     75       200     225  
  Amortization of Intangible Assets   131     189       395     808  
  Amortization of Above and Below Market Leases   (28 )   (17 )     (55 )   (119 )
  Gain on Sale of Assets   (9,566 )         (10,857 )    
FFO $ 24,787   $ 21,059     $ 64,498   $ 65,312  
Adjustments:                          
  Restructuring Costs   33           565      
  Retiring Allowance (1)       1,642           1,642  
  Loss on Natural Gas Contracts             4,497      
  Unrealized Loss on Derivative Financial Instruments   36           86      
  Realized Loss (Gain) on Derivative Financial Instruments       699           (4,063 )
  Amortization of Loss on Derivative Financial Instruments included in Mortgage Interest   274     181       826     311  
NFFO $ 25,130   $ 23,581     $ 70,472   $ 63,202  
  NFFO – Continuing Operations $ 25,037   $ 22,843     $ 69,222   $ 61,355  
  NFFO – Discontinued Operations $ 93   $ 738     $ 1,250   $ 1,847  
  NFFO per Unit – Basic $ 0.376   $ 0.357     $ 1.058   $ 0.959  
  NFFO per Unit – Diluted $ 0.373   $ 0.356     $ 1.052   $ 0.957  
  Distributions Declared (2) $ 18,722     18,483     $ 56,078   $ 55,258  
  NFFO Payout Ratio (3)   74.5 %   78.4 %     79.6 %   87.4 %
  Net Distributions Paid (4) $ 15,637   $ 15,691     $ 47,601   $ 47,194  
  Excess NFFO over Net Distributions Paid $ 9,493   $ 7,890     $ 22,871   $ 16,008  
  Effective NFFO Payout Ratio (5)   62.2 %   66.5 %     67.5 %   74.7 %
(1) See Trust Expenses under the Net Income section in the MD&A for the three and nine months ended September 30, 2010. Amount includes $122 of non-cash compensation costs related to the accelerated vesting of LTIP and SELTIP Units previously awarded.
(2) For a description of distributions declared, see the Non-GAAP Financial Measures section in the MD&A for the three and nine months ended September 30, 2010.
(3) The payout ratio compares distributions declared to NFFO.
(4) For a description of net distributions paid, see the Non-GAAP Financial Measures section in the MD&A for the three and nine months ended September 30, 2010.
(5) The effective payout ratio compares net distributions paid to NFFO.
   
   
Reconciliation of NFFO to AFFO  
                           
    Three Months Ended       Nine Months Ended  
    September 30       September 30  
    2010     2009       2010     2009  
($ Thousands, except per Unit amounts)                          
NFFO $ 25,130   $ 23,581     $ 70,472   $ 63,202  
Adjustments:                          
  Maintenance Capital Investment Provision (1)   (2,969 )   (2,977 )     (8,907 )   (8,930 )
  Non-Cash Compensation for LTIP, SELTIP and DUP   371     383       1,091     1,370  
AFFO $ 22,532   $ 20,987     $ 62,656   $ 55,642  
  AFFO per Unit – Basic $ 0.337   $ 0.318     $ 0.941   $ 0.844  
  AFFO per Unit – Diluted $ 0.335   $ 0.317     $ 0.936   $ 0.843  
  Distributions Declared (2) $ 18,722   $ 18,483     $ 56,078   $ 55,258  
  AFFO Payout Ratio (3)   83.1 %   88.1 %     89.5 %   99.3 %
  Net Distributions Paid (4) $ 15,637   $ 15,691     $ 47,601   $ 47,194  
  Excess AFFO over Net Distributions Paid $ 6,895   $ 5,296     $ 15,055   $ 8,448  
  Effective AFFO Payout Ratio (5)   69.4 %   74.8 %     76.0 %   84.8 %
(1) An industry based estimate (see the Non-GAAP Measures section in the MD&A for the three and nine months ended September 30, 2010).
(2) For a description of distributions declared, see the Non-GAAP Financial Measures section in the MD&A for the three and nine months ended September 30, 2010.
(3) The payout ratio compares distributions declared to AFFO.
(4) For a description of net distributions paid, see the Non-GAAP Financial Measures section in the MD&A for the three and nine months ended September 30, 2010.
(5) The effective payout ratio compares net distributions paid to AFFO.

Contact Information

  • CAPREIT
    Mr. Michael Stein
    Chairman
    (416) 861-5788
    or
    CAPREIT
    Mr. Thomas Schwartz
    President & CEO
    (416) 861-9404
    or
    CAPREIT
    Mr. Richard J. Smith
    Chief Financial Officer
    (416) 861-5771