CAPREIT Reports Another Record Quarter in Q3 2011
Acquisitions and Strong Organic Growth Contribute to Solid Increase in NFFO
(firmenpresse) - TORONTO, ONTARIO -- (Marketwire) -- 11/07/11 -- Canadian Apartment Properties Real Estate Investment Trust ("CAPREIT") (TSX: CAR.UN) announced today strong operating and financial results for the three and nine months ended September 30, 2011.
"Our strong organic growth continued in the third quarter of 2011, generating solid increases in all of our key operational and performance metrics compared to last year," commented Thomas Schwartz, President and CEO. "Looking ahead, we anticipate this strong performance will continue as we invest the funds raised in our recently-completed equity offering in our proven value-enhancing initiatives."
Operating Revenues
For the three and nine months ended September 30, 2011, total operating revenues increased by 9.1% and 5.6%, respectively, compared to the same periods last year primarily due to increased average monthly rents, higher occupancies in most regions and the contribution from acquisitions, partially offset by property dispositions. For the three and nine months ended September 30, 2011, ancillary revenues, including parking, laundry and antenna income, rose by 12.7% and 16.3%, respectively, as Management continued its focus on maximizing the revenue potential of its property portfolio.
CAPREIT's annualized net rental revenue run-rate based on the average monthly rents in place on CAPREIT's share of residential suites and sites as at September 30, 2011 increased to $358.6 million, up 10.6% from $324.1 million as of September 30, 2010 due primarily to acquisitions completed within the past twelve months. Net rental revenue for the twelve months ended September 30, 2011 was $334.8 million (2010 - $321.1 million).
Average monthly rents increased in all sectors and most geographic regions of the portfolio resulting in a 1.4% increase in overall average monthly rents as at September 30, 2011 to $991, from $977 as at September 30, 2010. Overall occupancy at September 30, 2011 improved to 98.8% from 98.7% in the prior year. The increases in average monthly rents and occupancy were due to ongoing 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, 2011 resulted in average monthly rent increasing by approximately $16 or 1.6% per suite compared to an increase of approximately $10 or 1.0% in the same period last year. For the first nine months of 2011, suite turnovers resulted in average monthly rent increasing by approximately $12 or 1.2% compared to an increase of $6 or 0.6% in the same period last year. Although the change in average monthly rents from suite turnovers improved from the same periods last year, it is partially offset by rent discounting in the Alberta market by approximately $3 or 0.3% per suite for the first nine months of 2011. Improving industry and economic conditions in Alberta resulted in suite turnovers average monthly rent increasing by approximately $9 or 0.8% per suite in the third quarter of 2011. Excluding the impact of the Alberta portfolio, residential suite turnovers would have instead resulted in average monthly rent increases of $13 or 1.3% for the nine months ended September 30, 2011.
Pursuant to Management's focus on increasing overall portfolio rents, for the three months ended September 30, 2011 average monthly rents on lease renewals increased by approximately $15 or 1.5% compared to $22 or 2.3% for the same period last year. For the nine months ended September 30, 2011, average monthly rents increased by $14 or 1.4% compared to $22 or 2.3% for the same period last year. The lower rate of growth in average monthly rents on lease renewals during the current year periods are due primarily to the Ontario guideline increase of 0.7% for 2011, which compares unfavourably to the permitted Ontario guideline increase of 2.1% in 2010. In July 2011, the Ontario Ministry of Municipal Affairs and Housing announced the rent control guideline for 2012 will be 3.1%. Management is actively pursuing applications for above guideline increases to raise average monthly rents on lease renewals.
Operating Expenses
Operating expenses as a percentage of revenues decreased for the three and nine months ended September 30, 2011 to 40.7% and 42.6 % from 41.3% and 43.3% for the same periods last year.
The decrease is primarily due to: (i) the diversification of the portfolio into regions with lower taxation rates, (ii) successful energy-saving initiatives, and a natural gas supply strategy implemented last year due to reduce utility costs, and (iii) enhanced procurement strategies and lower insurance costs.
Net Operating Income
In the third quarter of 2011, NOI improved by $5.1 million or 10.3%, and the NOI margin increased to 59.3% from 58.7% last year. For the first nine months of 2011, overall NOI increased by $9.8 million or 6.8%, and the NOI margin improved to 57.4% from 56.7% for the same period last year. The significant improvements in NOI contribution in specific regions of the portfolio were primarily the result of acquisitions and dispositions completed in the last 12 month period.
For the three and nine months ended September 30, 2011, operating revenues for stabilized suites and sites increased 2.6% and 3.1%, respectively, while operating expenses rose by a smaller 0.9% and 2.5%, respectively, compared to the same periods last year. As a result, for the three and nine months ended September 30 2011, stabilized NOI increased by a significant 3.7% and 3.6%, respectively.
Normalized Funds From Operations
NFFO is not a financial measure determined by IFRS, however, it is used by CAPREIT to assess overall operating performance. NFFO, which excludes from Funds From Operations ("FFO") the effect of the change in fair value of hedging instruments originally put in place for interest rate protection, losses incurred on the amendment of natural gas physical delivery contracts and the effect of certain non-recurring items, increased by 16.0% and 11.1%, respectively, for the three and nine months ended September 30, 2011, compared to the same periods last year. The increase was primarily due to the contribution from acquisitions, higher average monthly rents and higher occupancy levels.
For the nine months ended September 30, 2011, basic NFFO per Unit decreased by 1.5% compared to the same period last year due primarily to the approximately 13% increase in the weighted average number of Units outstanding arising from the equity offering completed in December 2010. However, for the three months ended September 30, 2011, basic NFFO per Unit increased by 2.6% compared to the same periods last year resulting from higher NFFO, partially offset by increase in the weighted average number of Units outstanding. Management expects per Unit FFO and NFFO and related payout ratios will be impacted by the October 31, 2011 Equity Offering in the short term.
Comparing distributions declared to NFFO, the NFFO payout ratios for the three months ended September 30, 2011 improved to 72.0% compared to 74.2% for the same period last year. For the nine months ended September 30, 2011, the NFFO payout ratio was 80.0% compared to 79.2% for the same period last year. The effective NFFO payout ratio, which compares NFFO to net distributions paid, improved for the three and nine months ended September 30, 2011, to 56.6% and 62.4%, respectively, from 62.0% and 67.3% for the same periods last year primarily due to higher NFFO during the current year periods and higher participation in distributions reinvested. Management believes NFFO will be sufficient to fund CAPREIT's distributions on an annualized basis.
Financial Strength
Management believes CAPREIT's strong balance sheet and liquidity position will enable it to continue to take advantage of acquisition and property capital investment opportunities.
CAPREIT is achieving its financing goals as demonstrated by the following key indicators:
Property Capital Investment Plan
During the first nine months of 2011, CAPREIT made property capital investments of $74.8 million as compared to $48.9 million for the same period last year.
Property capital investments were higher in 2011 compared to the prior year primarily due to the acceleration of building improvement programs and higher investments in suite improvements, common areas and equipment, which generally tend to increase NOI more quickly. The acceleration is in line with the revised capital investment plan announced in the fourth quarter of 2010. CAPREIT continues to invest in energy-saving initiatives, including boilers, energy-efficient lighting systems, and water-saving programs, which permit CAPREIT to mitigate potentially higher increases in utility and R&M costs and significantly improve overall portfolio NOI.
Acquisitions
During the third quarter of 2011, CAPREIT completed the acquisition of an 811-suite portfolio in Laval, Quebec. The total acquisition costs of $74.2 million were funded through the assumption of existing CMHC-insured mortgages totalling $47.0 million, at a weighted average stated interest rate of 4.80% and a weighted average term to maturity of 12.5 years, with the balance in cash from the Acquisition and Operating Facility.
In addition, CAPREIT acquired a 229-suite property in Scarborough, Ontario. The total acquisition costs of $17.3 million was funded through new CMHC-insured 10.5 year mortgage financing of approximately $12.9 million at an interest rate of 3.88%, with the balance in cash from the Acquisition and Operating Facility.
Subsequent Event
On October 31, 2011, under the 2011 Equity Offering CAPREIT issued 6,500,000 Units at $20.30 per Unit for aggregate gross proceeds of $131.9 million. Also on October 31, 2011, CAPREIT issued 975,000 Units at $20.30 under an over-allotment option granted in connection with the 2011 Equity Offering, for aggregate gross proceeds of $19.8 million. The net proceeds of both issuances after Underwriters' fees and issue costs were $144.8 million and were used to reduce the REIT's Acquisition and Operating Facility.
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, 2011, which have been filed on SEDAR and can be viewed at under CAPREIT's profile or on CAPREIT's website on the investor relations page at .
Conference Call
A conference call hosted by Thomas Schwartz, President and CEO and Scott Cryer, Chief Financial Officer, will be held Tuesday, November 8, 2011 at 10.00 am EST. 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 , 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 (905) 694-9451 or toll free (800) 408-3053. The Passcode for the Instant Replay is 5704780#. The Instant Replay will be available until midnight, November 15, 2011. The call and accompanying slides will also be archived on the CAPREIT website at . For more information about CAPREIT, its business and its investment highlights, please refer to our website at .
About CAPREIT
CAPREIT owns interests in multi-unit residential rental properties, including apartments, townhomes and manufactured home communities located in and near major urban centres across Canada. At September 30, 2011, CAPREIT had owning interests in 30,821 residential units, comprised of 29,496 residential suites and two Ontario manufactured home communities ("MHC") comprising 1,325 land lease sites. For more information about CAPREIT, its business and its investment highlights, please refer to our website at and our public disclosure which can be found under our profile at .
Non-IFRS Financial Measures
CAPREIT prepares and releases unaudited quarterly and audited consolidated annual financial statements prepared in accordance with IFRS. In this and other earnings releases and investor conference calls, as a complement to results provided in accordance with IFRS, CAPREIT also discloses and discusses certain non-IFRS financial measures, including Net Rental Revenue Run-Rate, NOI, FFO, NFFO and applicable per Unit amounts and payout ratios. These non-IFRS measures are further defined and discussed in the MD&A released on November 7, 2011, which should be read in conjunction with this press release. Since Net Rental Revenue Run-Rate, NOI, FFO and NFFO are not determined by IFRS, they may not be comparable to similar measures reported by other issuers. CAPREIT has presented such non-IFRS measures as Management believes these non-IFRS 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 Income and such non-IFRS measures and Adjusted Funds From Operations ("AFFO") is included in this press release. These non-IFRS measures should not be construed as alternatives to net income (loss) or cash flow from operating activities determined in accordance with IFRS 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 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; that inflation will remain low; that interest rates will rise modestly in the medium term; 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 more 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 and hedging, 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, legal and regulatory concerns, the nature of units of CAPREIT ("Trust Units") and of CAPREIT's subsidiary, CAPREIT Limited Partnership ("Exchangeable 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 , under CAPREIT's profile, as well as under Risks and Uncertainties section of the MD&A released on November 7, 2011. The information in this press release is based on information available to Management as of November 7, 2011. 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
Contacts:
CAPREIT
Mr. Michael Stein
Chairman
(416) 861-5788
CAPREIT
Mr. Thomas Schwartz
President & CEO
(416) 861-9404
CAPREIT
Mr. Scott Cryer
Chief Financial Officer
(416) 861-5771
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Datum: 07.11.2011 - 16:10 Uhr
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