CAPREIT Reports Third Quarter 2023 Results

TORONTO, Nov. 08, 2023 (GLOBE NEWSWIRE) -- 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, 2023. Management will host a conference call to discuss the financial results on Thursday, November 9, 2023 at 9:00 a.m. ET.

HIGHLIGHTS

"We're proud to have achieved another quarter of robust operational and financial performance," commented Mark Kenney, President and Chief Executive Officer. "Occupancies remained stable at our highest levels, with nearly 99% of our suites occupied at current period end, reflecting the ongoing tightening we continue to see across all of our Canadian rental markets. We're simultaneously making steady progress on our strategy, with a focus on our portfolio modernization program which has completed the acquisition of over $200 million of newly constructed buildings located in strong-performing, high-growth geographies, funded through the disposition of our non-core Canadian properties. In optimizing our portfolio through downsizing on suite count and upsizing on quality, we're also having to optimize our organizational structure to adapt and ensure alignment with our re-envisioned CAPREIT 2.0 strategy for success now, and in the future."

"Our same property NOI margin held strong at 66.5% for the quarter, inclusive of higher operating expenses from inflation, foreign exchange and repair and maintenance costs," added Stephen Co, Chief Financial Officer. "On the latter, we're strategically scaling back on our discretionary value-enhancing expenditure, and are instead intentionally reallocating that capital into R&M projects, in response to the tight rental market in which we're currently operating. That said, we continue to prioritize our environmental and energy initiatives, alongside our active management of debt financing and leverage in order to maintain our solid and conservative balance sheet position. We have ongoing opportunity for accretive use of funds across our various avenues for capital redeployment, and we will continue to actively exercise these levers in tandem to ultimately maximize value for our Unitholders."

SUMMARY OF Q3 - 2023 RESULTS OF OPERATIONS

Strategic Initiatives Update

• CAPREIT continues to invest in strategic opportunities that are accretive. For the nine months ended September 30, 2023, CAPREIT acquired five properties for a total acquisition cost of $208.3 million.
• CAPREIT disposed of 388 suites which comprised of five non-core properties and three single residential suites located in Canada and the Netherlands, respectively, for the three months ended September 30, 2023 for $60.8 million (excluding transaction costs and other adjustments). For the nine months ended September 30, 2023, CAPREIT disposed of $354.5 million (excluding transaction costs and other adjustments) worth of non-core property dispositions.
• CAPREIT did not purchase any Trust Units for cancellation during the three months ended September 30, 2023. During the nine months ended September 30, 2023, CAPREIT purchased and cancelled approximately 2.2 million Trust Units under the normal course issuer bid ("NCIB") program, at a weighted average purchase price of $46.53 per Trust Unit, for a total cost of $100.9 million.
• Pursuant to CAPREIT's strategy of upgrading and diversifying its property portfolio through accretive, on-strategy acquisitions and selected non-core or opportunistic dispositions, CAPREIT is currently targeting the disposition of approximately $400 million to $500 million of Canadian properties in 2023.

Operating Results

• Same property Occupied AMR for the Canadian residential portfolio as at September 30, 2023 increased by 5.8% compared to September 30, 2022, while same property occupancy for the Canadian residential portfolio remained relatively stable at 98.9%.
• NOI increased by 7.8% and 7.1%, respectively, for the same property portfolio for the three and nine months ended September 30, 2023, compared to the same periods last year. Additionally, same property NOI margin remained consistent at 66.5%, for the three months ended September 30, 2023 and increased to 65.4%, up 0.3%, for the nine months ended September 30, 2023, compared to the same periods last year.
• Diluted FFO per unit (formerly known as "diluted NFFO per unit") increased by 4.6% and 2.7% for the three and nine months ended September 30, 2023, respectively, compared to the same periods last year primarily due to same property operational growth and supplemented by accretive NCIB purchases.

Balance Sheet Highlights

• CAPREIT's financial position remains strong with $257.9 million of available capacity on its Canadian Acquisition and Operating Facility.
• Based on the current property portfolio and execution of strategic initiatives, management expects to raise between $600 million and $650 million in mortgages for the Canadian portfolio for 2023.
• To date, CAPREIT completed or committed consolidated mortgage financings of $605.8 million. The mortgages refinanced have a weighted average term to maturity of 6.9 years and a weighted average interest rate of 4.40%.
• For the three and nine months ended September 30, 2023, CAPREIT recorded a fair value loss on investment properties of $507.0 million and $803.2 million, respectively, primarily driven by capitalization rate ("cap rate") expansion in the Greater Toronto Area within the Canadian portfolio and in the Netherlands portfolio as a reflection of the market conditions. The overall carrying value of investment properties (excluding assets held for sale) as at September 30, 2023 was $16.5 billion compared to $17.0 billion as at June 30, 2023 and $17.2 billion as at December 31, 2022.
• Diluted NAV per unit as at September 30, 2023 decreased to $54.36 from $57.08 as at June 30, 2023 and $58.01 as at December 31, 2022, primarily due to fair value losses recognized in investment properties, partially offset by the effects of accretive purchases of Trust Units for cancellation through the NCIB program.

OPERATIONAL AND FINANCIAL RESULTS

Portfolio Occupied Average Monthly Rents

The rate of growth in total portfolio Occupied AMR has been primarily driven by (i) new acquisitions completed over the past 12 months and (ii) same property operational growth. The rate of growth in same property Occupied AMR has been primarily due to (i) rental increases on turnover in the rental markets of most provinces across the Canadian portfolio and (ii) rental increases on renewals.

The weighted average gross rent per square foot for total Canadian residential suites was approximately $1.80 as at September 30, 2023, increased from $1.70 as at September 30, 2022.

Net Operating Income

Same properties for the three and nine months ended September 30, 2023 are defined as all properties owned by CAPREIT continuously since December 31, 2021, and therefore do not take into account the impact on performance of acquisitions or dispositions completed during 2023 and 2022, or properties that are classified as held for sale as at September 30, 2023.

Operating Revenues

For the three months ended September 30, 2023, same property operating revenues increased by $18.7 million primarily driven by increases in monthly rents on turnovers and renewals. Total operating revenues increased by $16.3 million during the same period, due to $18.8 million of operational growth on the same property operating portfolio and assets held for sale as at September 30, 2023 and $3.5 million increase from acquisitions, partially offset by $6.0 million lower revenues due to dispositions.

For the nine months ended September 30, 2023, same property operating revenues increased by $46.8 million primarily driven by increases in monthly rents on turnovers and renewals. Total operating revenues increased by $42.8 million during the same period, due to $47.1 million of operational growth on the same property operating portfolio and assets held for sale as at September 30, 2023 and $13.2 million increase from acquisitions, partially offset by $17.5 million lower revenues due to dispositions.

Operating Expenses

For the three and nine months ended September 30, 2023 operating costs increased for the same property portfolio compared to the same periods last year primarily due to increase in other operating expenses. Other operating expenses increased primarily due to higher R&M costs. The higher R&M costs in both periods are due to general inflationary pressures, as well as higher maintenance costs that correspond with a reduction in discretionary capital expenditures, reflecting CAPREIT's strategic reallocation of capital in response to the tight rental market in Canada.

For the three and nine months ended September 30, 2023, other operating expenses for the total portfolio increased for the same reasons as described above and due to certain required maintenance costs for the operation of CAPREIT's septic systems at primarily two MHC properties, one of which was disposed of on March 1, 2023 while the other was disposed of on June 30, 2023.

ADDITIONAL INFORMATION

More detailed information and analysis is included in CAPREIT's unaudited condensed consolidated interim financial statements and MD&A for the three and nine months ended September 30, 2023, which have been filed on SEDAR+ and can be viewed at www.sedarplus.ca under CAPREIT's profile or on CAPREIT's website on the investor relations page at www.capreit.ca.

Conference Call

A conference call hosted by Mark Kenney, President and Chief Executive Officer, Stephen Co, Chief Financial Officer, and Julian Schonfeldt, Chief Investment Officer, will be held on Thursday, November 9, 2023 at 9:00 am ET. The telephone numbers for the conference call are: Canadian Toll Free: (833) 950-0062, International: +1 (929) 526-1599. The conference call access code is 078065.

The call will also be webcast live and accessible through the CAPREIT website at www.capreit.ca – click on "For Investors" and follow the link at the top of the page. A replay of the webcast will be available for one year after the webcast at the same link.

The slide presentation to accompany management's comments during the conference call will be available on the CAPREIT website an hour and a half prior to the conference call.

About CAPREIT

CAPREIT is Canada's largest publicly traded provider of quality rental housing. As at September 30, 2023, CAPREIT owns approximately 64,500 residential apartment suites, townhomes and manufactured home community sites that are well-located across Canada and the Netherlands, with approximately $16.5 billion of investment properties in Canada and Europe. For more information about CAPREIT, its business and its investment highlights, please visit our website at www.capreit.ca and our public disclosures which can be found under our profile at www.sedarplus.ca.

Non-IFRS Measures

CAPREIT prepares and releases unaudited condensed consolidated interim financial statements and audited consolidated annual financial statements 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 discloses measures not recognized under IFRS which do not have standard meanings prescribed by IFRS. These include Funds From Operations ("FFO"), Net Asset Value ("NAV"), Total Debt, Gross Book Value, and Adjusted Earnings Before Interest, Tax, Depreciation, Amortization and Fair Value ("Adjusted EBITDAFV") (the "Non-IFRS Financial Measures"), as well as diluted FFO per unit, Ratio of Total Debt to Gross Book Value, Debt Service Coverage Ratio and Interest Coverage Ratio (the "Non-IFRS Ratios" and together with the Non-IFRS Financial Measures, the "Non-IFRS Measures"). These Non-IFRS Measures are further defined and discussed in the MD&A released on November 8, 2023, which should be read in conjunction with this press release. Since these measures and related per unit amounts are not recognized under IFRS, they may not be comparable to similar measures reported by other issuers. CAPREIT presents the Non-IFRS Measures because management believes Non-IFRS Measures are relevant measures of the ability of CAPREIT to earn revenue and to evaluate its performance, financial condition and cash flows. These Non-IFRS Measures have been assessed for compliance with the new National Instrument 52-112 and a reconciliation of these Non-IFRS Measures is included in this press release below. The Non-IFRS Measures should not be construed as alternatives to net income (loss) or cash flows from operating activities determined in accordance with IFRS as indicators of CAPREIT's performance or the sustainability of our distributions.

CAPREIT undertook a comprehensive review of MD&A disclosures and, starting with the first quarter of 2023, streamlined disclosures to focus on measures and metrics that management believes are the most relevant. Accordingly, CAPREIT is no longer disclosing Ratio of Total Debt to Gross Historical Cost and Ratio of Total Debt to Total Capitalization, amongst others. In this press release, CAPREIT relabeled Normalized Funds from Operations ("NFFO") to FFO (formerly known as "NFFO") and as such, introduced a modified definition of FFO which is identical to the prior definition of NFFO. As a result, CAPREIT will no longer refer to NFFO throughout the press release.

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, growth strategy, budgets, litigation, occupancy rates, rental rates, productivity, projected costs, acquisitions, dispositions, capital investments, development and development opportunities, 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 acquisitions, dispositions and capital investment strategies 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", "would", "should", "could", "likely", "expect", "plan", "anticipate", "believe", "intend", "estimate", "forecast", "predict", "potential", "project", "budget", "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 and Dutch economies will generally experience growth, which, however, may be adversely impacted by the global economy, inflation and increasing interest rates, potential health crises and their direct or indirect impacts on the business of CAPREIT; that Canada Mortgage and Housing Corporation ("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 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 on renewals will grow; that rental rates on turnovers will grow; that the difference between in-place and market-based rents will be reduced upon such turnovers and renewals; that the markets in which CAPREIT currently operates remain stable, with no material increase in supply of directly-competitive residential real estate; 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. Management's estimates, beliefs and assumptions are inherently subject to significant business, economic, competitive and other uncertainties and contingencies regarding future events and, as such, are subject to change. Although the forward-looking statements contained in this press release are based on assumptions and information that is currently available to management, including current market conditions and management's assessment of acquisition, disposition and other opportunities that are or may become available to CAPREIT, which are subject to change, management believes these statements have been prepared on a reasonable basis, reflecting CAPREIT's best estimates and judgments. However, there can be no assurance actual results, terms or timing will be consistent with these forward-looking statements, and 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's 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: rent control and residential tenancy regulations, general economic conditions, privacy, cyber security and data governance risks, talent management and human resources shortages, taxation-related risks, energy costs, public health crises, environmental matters, vendor management and third-party service providers, operating risk, valuation risk, climate change, other regulatory compliance risks, availability of debt, risks related to acquisitions, dispositions and property development, catastrophic events, litigation risk, liquidity and price volatility of Trust Units, CAPREIT's investment in ERES, potential conflicts of interest, investment restrictions, lack of diversification of investment assets, geographic concentration, illiquidity of real property, capital investments, leasing risk, competition for real property investments, dependence on key personnel, adequacy of insurance and captive insurance, competition for residents, controls over financial reporting, the nature of CAPREIT Trust Units, Unitholder liability, dilution, distributions, participation in CAPREIT's distribution reinvestment plan ("DRIP") and foreign operation and currency risks. 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.sedarplus.ca, under CAPREIT's profile, as well as under the "Risks and Uncertainties" section of the MD&A released on November 8, 2023. The information in this press release is based on information available to management as of November 8, 2023. 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 NON-IFRS MEASURES

A reconciliation of net income (loss) to FFO (formerly known as "NFFO") is as follows:

Reconciliation of Unitholders' Equity to NAV:

Reconciliation for Total Debt and Total Debt Ratios:

Reconciliation of Net Income (Loss) to Adjusted EBITDAFV:

Debt Service Coverage Ratio

Interest Coverage Ratio