TORONTO, May 08, 2024 (GLOBE NEWSWIRE) -- Canadian Apartment Properties Real Estate Investment Trust ("CAPREIT") (TSX: CAR.UN) announced today strong operating and financial results for the three months ended March 31, 2024. Management will host a conference call to discuss the financial results on Thursday, May 9, 2024 at 9:00 a.m. ET.
HIGHLIGHTS
| As at | March 31, 2024 | December 31, 2023 | March 31, 2023 | ||||||
| Total Portfolio Performance and Other Measures | |||||||||
| Number of suites and sites(1) | 64,151 | 64,260 | 65,527 | ||||||
| Investment properties fair value(2) (000s) | $ | 16,695,616 | $ | 16,532,096 | $ | 17,121,228 | |||
| Occupied AMR(1)(3) | |||||||||
| Canadian Residential Portfolio(4) | $ | 1,552 | $ | 1,516 | $ | 1,428 | |||
| The Netherlands Portfolio | € | 1,068 | € | 1,063 | € | 1,002 | |||
| Occupancy(1) | |||||||||
| Canadian Residential Portfolio(4) | 98.4 | % | 98.8 | % | 98.6 | % | |||
| The Netherlands Portfolio | 98.5 | % | 98.5 | % | 98.7 | % | |||
| Total Portfolio(5) | 98.0 | % | 98.2 | % | 98.1 | % | |||
| (1) | Excludes commercial suites. |
| (2) | Investment properties exclude assets held for sale, as applicable. |
| (3) | Occupied average monthly rent ("Occupied AMR") is defined as actual residential rents divided by the total number of occupied suites or sites in the property, and does not include revenues from parking, laundry or other sources. |
| (4) | Excludes MHC sites. |
| (5) | Includes MHC sites. |
| For the Three Months Ended March 31, | 2024 | 2023 | ||||
| Financial Performance | ||||||
| Operating revenues (000s) | $ | 275,816 | $ | 260,947 | ||
| Net operating income ("NOI") (000s) | $ | 177,049 | $ | 163,858 | ||
| NOI margin | 64.2 | % | 62.8 | % | ||
| Same property NOI (000s) | $ | 172,719 | $ | 160,504 | ||
| Same property NOI margin | 64.1 | % | 63.4 | % | ||
| Net income (loss) (000s) | $ | 182,113 | $ | (103,227 | ) | |
| Funds From Operations ("FFO") per unit – diluted(1) | $ | 0.609 | $ | 0.567 | ||
| Distributions per unit | $ | 0.362 | $ | 0.362 | ||
| FFO payout ratio(1) | 59.5 | % | 63.6 | % | ||
| (1) | These measures are not defined by International Financial Reporting Standards ("IFRS"), do not have standard meanings and may not be comparable with other industries or companies. Please refer to the cautionary statements under the heading "Non-IFRS Measures" and the reconciliations provided in this press release. |
| As at | March 31, 2024 | December 31, 2023 | March 31, 2023 | ||||||
| Financing Metrics and Liquidity | |||||||||
| Total debt to gross book value(1) | 41.8 | % | 41.6 | % | 40.1 | % | |||
| Weighted average mortgage effective interest rate(2) | 2.84 | % | 2.80 | % | 2.61 | % | |||
| Weighted average mortgage term (years)(2) | 4.7 | 4.9 | 5.2 | ||||||
| Debt service coverage (times)(1)(3) | 1.8 | x | 1.8 | x | 1.9 | x | |||
| Interest coverage (times)(1)(3) | 3.3 | x | 3.3 | x | 3.6 | x | |||
| Cash and cash equivalents (000s)(4) | $ | 58,495 | $ | 29,528 | $ | 24,594 | |||
| Available liquidity – Canadian Credit Facilities (000s)(5) | $ | 324,657 | $ | 340,059 | $ | 240,995 | |||
| Capital | |||||||||
| Unitholders' equity (000s) | $ | 9,374,475 | $ | 9,278,595 | $ | 9,774,480 | |||
| Net asset value ("NAV") (000s)(1) | $ | 9,287,633 | $ | 9,212,594 | $ | 9,760,956 | |||
| Total number of units – diluted (000s) | 169,501 | 169,868 | 169,831 | ||||||
| NAV per unit – diluted(1) | $ | 54.79 | $ | 54.23 | $ | 57.47 | |||
| (1) | These measures are not defined by IFRS, do not have standard meanings and may not be comparable with other industries or companies. Please refer to the cautionary statements under the heading "Non-IFRS Measures" and the reconciliations provided in this press release. |
| (2) | Excludes liabilities related to assets held for sale, as applicable. |
| (3) | Based on the trailing four quarters. |
| (4) | Consists of $44,564 and $13,931 in Canada and ERES, respectively (December 31, 2023 – $19,446 and $10,082, respectively, March 31, 2023 – $14,069 and $10,525, respectively). |
| (5) | Includes $254,657 available on the Canadian Acquisition and Operating Facility (December 31, 2023 –$340,059, March 31, 2023 – $240,995) and $70,000 available on the unsecured non-revolving construction and term credit facility to reduce greenhouse gas ("GHG") emissions ("GHG Reduction Facility") (December 31, 2023 and March 31, 2023 – N/A). |
"We continued momentum on the execution of our strategy in 2024, and we’re pleased to see that translate into another quarter of strong results," commented Mark Kenney, President and Chief Executive Officer. "I am especially excited about our recent disposition of two properties in Langley, which we sold to a non-profit organization that was funded by the BC Rental Protection Fund. This instrumental transaction will enable those suites to remain affordable in perpetuity, while we were able to free up capital to reinvest in new supply. We're eager to continue participating in productive public-private partnerships such as this, and we hope to see more of our non-core legacy buildings transfer to the hands of non-profit organizations in the future."
"We redeployed capital from our strategic sales into the acquisition of two new build, concrete rental apartment properties in London, which we purchased at a steep discount to replacement cost, and at a cap rate that exceeds the weighted average cap rate on our first quarter dispositions," said Julian Schonfeldt, Chief Investment Officer. "In addition, so far this year, we've reduced our ownership in Irish Residential Properties REIT plc from 18.7% to 9.7% through the sale of $70.6 million worth of equity. We used part of the proceeds to accretively repurchase $27 million worth of CAPREIT’s units at a discount to NAV, with the remainder of our capital inflow reallocated into paying down higher interest debt. We’re excited about the progress we’ve made with this capital recycling so far in 2024, and we remain increasingly focused on our objective of increasing the quality of our core apartment portfolio in Canada, while simultaneously increasing our earnings per unit."
"Robust rent growth and ongoing high occupancy trends continued throughout the quarter, and we achieved a solid same property NOI margin of 64.1% for the three months ended March 31, 2024," added Stephen Co, Chief Financial Officer. "This is up by 70 basis points versus the comparative period, largely due to lower utility costs resulting from milder winter weather experienced across the country. Organic growth contributed to the 7.4% increase in diluted FFO per unit, which we realized on top of elevated interest costs we're incurring on our mortgage portfolio and credit facilities. Our balance sheet in Canada is strong with approximately $369 million in available liquidity, and this will continue to fuel our ability to execute on our capital allocation strategy moving forward."
SUMMARY OF Q1 2024 RESULTS OF OPERATIONS
Strategic Initiatives Update
- CAPREIT continues to invest in strategic opportunities that are accretive. For the three months ended March 31, 2024, CAPREIT acquired a property comprised of 291 suites located in London, Ontario for a total purchase price of $130 million (excluding transaction costs and other adjustments).
- For the three months ended March 31, 2024, CAPREIT disposed of 380 suites which were comprised of four non-core properties located in British Columbia and Québec and 24 single residential suites located in the Netherlands for $94.7 million (excluding transaction costs and other adjustments).
- In March 2024, CAPREIT received the TSX's acceptance of its notice to proceed with an NCIB, following expiry of the previous NCIB on March 23, 2024. During the three months ended March 31, 2024, CAPREIT purchased and cancelled approximately 0.6 million Trust Units, under the NCIB program, at a weighted average purchase price of $48.19 per Trust Unit, for a total cost of $27.1 million.
- On February 22, 2024, CAPREIT filed a prospectus supplement to establish an at-the-market program ("ATM Program") that allows CAPREIT, at its sole discretion, to issue Trust Units up to an aggregate sale price of $400 million from treasury to the public from time to time, directly on the TSX or on other marketplaces on which the Trust Units are listed or quoted in Canada or where the Trust Units are traded in Canada, at prevailing market prices. During the three months ended March 31, 2024, no Trust Units were issued under the ATM Program.
- During the three months ended March 31, 2024, CAPREIT transacted on the sale of Irish Residential Properties REIT plc ("IRES") shares totalling $57.9 million, of which $43.7 million settled during the three months ended March 31, 2024 with the balance settling after March 31, 2024. Subsequent to March 31, 2024, CAPREIT settled on the disposition of additional IRES shares totalling $12.7 million, bringing CAPREIT's ownership interest from 18.7% as at December 31, 2023 to 9.7% as at May 8, 2024.
- CAPREIT's strategy to upgrade the quality and diversification of the property portfolio through repositioning and capital recycling initiatives to grow earnings and cash flow potential continues for 2024. CAPREIT is currently targeting the disposition of over $400 million of non-core Canadian properties during 2024.
Operating Results
- On turnovers and renewals, monthly residential rents for the three months ended March 31, 2024 increased by 4.1% for the Canadian residential portfolio, compared to 3.7% for the three months ended March 31, 2023.
- Same property Occupied AMR for the Canadian residential portfolio as at March 31, 2024 increased by 6.5% compared to March 31, 2023, while same property occupancy for the Canadian residential portfolio remained relatively stable at 98.5% (March 31, 2023 - 98.6%).
- NOI for the same property portfolio increased by 7.6% for the three months ended March 31, 2024 compared to the same period last year. Additionally, NOI margin for the same property portfolio increased to 64.1%, up 0.7% compared to the same period last year.
- Diluted FFO per unit was up 7.4%, including an approximately 0.9% decrease in the weighted average number of units outstanding, for the three months ended March 31, 2024 compared to the same period last year, primarily due to contributions from acquisitions, higher same property NOI and accretive NCIB purchases, partially offset by lower other income and higher interest expense on credit facilities payable and mortgages payable.
Balance Sheet Highlights
- CAPREIT's financial position remains strong, with approximately $369.3 million of available Canadian liquidity, comprising $44.6 million of Canadian cash and cash equivalents, $254.7 million of available capacity on its Canadian Acquisition and Operating Facility and $70.0 million on its GHG Reduction Facility.
- To date, CAPREIT completed or committed mortgage financings totalling $143.2 million, with a weighted average term to maturity of 8.7 years and a weighted average interest rate of 4.64%.
- For the three months ended March 31, 2024 the overall carrying value of investment properties (excluding assets held for sale) increased by $163.5 million primarily due to net acquisitions of $83.2 million, fair value gains of $71.7 million, property capital investments of $42.4 million, which were partially offset by transfers to assets held for sale of $33.0 million.
- Diluted NAV per unit as at March 31, 2024 increased to $54.79 from $54.23 as at December 31, 2023, reflecting an increase in investment property values in CAPREIT's Canadian portfolio, supplemented by the effects of accretive purchases of Trust Units for cancellation through the NCIB program.
OPERATIONAL AND FINANCIAL RESULTS
Portfolio Occupied Average Monthly Rents
| Total Portfolio | Same Property Portfolio(1) | |||||||||||
| As at March 31, | 2024 | 2023 | 2024 | 2023 | ||||||||
| Occupied AMR | Occ. % | Occupied AMR | Occ. % | Occupied AMR | Occ. % | Occupied AMR | Occ. % | |||||
| Total Canadian residential suites | $ | 1,552 | 98.4 | $ | 1,428 | 98.6 | $ | 1,539 | 98.5 | $ | 1,445 | 98.6 |
| Total MHC sites | $ | 447 | 95.9 | $ | 433 | 95.8 | $ | 447 | 95.9 | $ | 433 | 95.7 |
| The Netherlands portfolio | € | 1,068 | 98.5 | € | 1,002 | 98.7 | € | 1,068 | 98.5 | € | 1,001 | 98.7 |
| (1) | Same property Occupied AMR and occupancy include all properties held as at March 31, 2023, but exclude properties disposed of or held for sale as at March 31, 2024. |
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 $1.85 as at March 31, 2024, increased from $1.75 as at March 31, 2023.
Canadian Portfolio
| For the Three Months Ended March 31, | 2024 | 2023 | ||
| Change in Monthly Rent | Turnovers and Renewals(1) | Change in Monthly Rent | Turnovers and Renewals(1) | |
| % | % | % | % | |
| Suite turnovers | 23.2 | 2.4 | 26.7 | 2.6 |
| Lease renewals | 3.0 | 45.0 | 2.4 | 45.4 |
| Weighted average of turnovers and renewals | 4.1 | 3.7 | ||
| (1) | Percentage of suites turned over or renewed during the period is based on the total weighted average number of residential suites (excluding co-ownerships and MHC sites) held during the period. |
The Netherlands Portfolio
| For the Three Months Ended March 31, | 2024 | 2023 | ||
| Change in Monthly Rent | Turnovers and Renewals(1) | Change in Monthly Rent | Turnovers and Renewals(1) | |
| % | % | % | % | |
| Suite turnovers | 15.6 | 3.1 | 19.9 | 3.9 |
| Lease renewals | — | — | — | — |
| Weighted average of turnovers and renewals | 15.6 | 19.9 | ||
| (1) | Percentage of suites turned over or renewed during the period is based on the total weighted average number of Dutch residential suites held during the period. |
As the Netherlands lease renewals occur once a year in July, there were no changes in lease renewals for the three months ended March 31, 2024 and March 31, 2023. For rent renewal increases due to indexation beginning on July 1, 2024, ERES served tenant notices to 6,572 suites, representing 96% of the residential portfolio, across which the average rental increase due to indexation and household income adjustment is 5.3%.
Net Operating Income
Same properties for the three months ended March 31, 2024 are defined as all properties owned by CAPREIT continuously since December 31, 2022, and therefore do not take into account the impact on performance of acquisitions or dispositions completed during 2024 and 2023, or properties that are classified as held for sale as at March 31, 2024.
| ($ Thousands) | Total NOI | Same Property NOI | ||||||||||||||
| For the Three Months Ended March 31, | 2024 | 2023(1) | %(2) | 2024 | 2023 | %(2) | ||||||||||
| Operating Revenues | ||||||||||||||||
| Rental revenues | $ | 262,457 | $ | 249,000 | 5.4 | $ | 256,590 | $ | 241,523 | 6.2 | ||||||
| Other(3) | 13,359 | 11,947 | 11.8 | 13,049 | 11,605 | 12.4 | ||||||||||
| Total operating revenues | $ | 275,816 | $ | 260,947 | 5.7 | $ | 269,639 | $ | 253,128 | 6.5 | ||||||
| Operating expenses | ||||||||||||||||
| Realty taxes | $ | (24,819 | ) | $ | (24,037 | ) | 3.3 | $ | (24,301 | ) | $ | (23,281 | ) | 4.4 | ||
| Utilities | (23,161 | ) | (24,159 | ) | (4.1 | ) | (22,845 | ) | (23,158 | ) | (1.4 | ) | ||||
| Other(4) | (50,787 | ) | (48,893 | ) | 3.9 | (49,774 | ) | (46,185 | ) | 7.8 | ||||||
| Total operating expenses(5) | $ | (98,767 | ) | $ | (97,089 | ) | 1.7 | $ | (96,920 | ) | $ | (92,624 | ) | 4.6 | ||
| NOI | $ | 177,049 | $ | 163,858 | 8.1 | $ | 172,719 | $ | 160,504 | 7.6 | ||||||
| NOI margin | 64.2 | % | 62.8 | % | 64.1 | % | 63.4 | % | ||||||||
| (1) | Certain 2023 comparative figures have been reclassified to conform with current period presentation. |
| (2) | Represents the year-over-year percentage change. |
| (3) | Comprises ancillary income such as parking, laundry and antenna revenue. |
| (4) | Comprises R&M, wages, insurance, advertising, legal costs and expected credit losses. |
| (5) | Total operating expenses, on a constant currency basis, increased by approximately 1.6% and 4.6%, respectively, for the total and same property portfolio compared to the same period last year. |
The following table reconciles same property NOI and NOI from acquisitions, dispositions and assets held for sale to total NOI, for the three months ended March 31, 2024 and March 31, 2023:
| ($ Thousands) | ||||||
| For the Three Months Ended March 31, | 2024 | 2023 | ||||
| Same property NOI | $ | 172,719 | $ | 160,504 | ||
| NOI from acquisitions | 3,414 | 212 | ||||
| NOI from dispositions and assets held for sale | 916 | 3,142 | ||||
| Total NOI | $ | 177,049 | $ | 163,858 | ||
Operating Revenues
For the three months ended March 31, 2024, same property operating revenues increased by $16.5 million, primarily driven by increases in monthly rents on turnovers and renewals. Total operating revenues increased by $14.9 million during the same period, due to $16.6 million of operational growth, primarily on the same property operating portfolio and to a lesser extent on assets held for sale as at March 31, 2024 and a $4.4 million increase from acquisitions, partially offset by $6.1 million lower revenues due to dispositions.
Operating Expenses
Operating expenses for the same property portfolio for the three months ended March 31, 2024 increased compared to the same period last year, primarily due to increases in other operating expenses. Increase in other operating expenses is primarily due to higher R&M costs and higher insurance costs. Higher R&M costs are due to general inflationary pressures, as well as higher maintenance costs that correspond with a reduction in suite and common area capital improvements, reflecting CAPREIT's strategic reallocation of capital in response to the tight rental market in Canada.
NORMAL COURSE ISSUER BID
For the three months ended March 31, 2024, CAPREIT purchased and cancelled approximately 0.6 million Trust Units under the NCIB program, at a weighted average purchase price of $48.19 per Trust Unit for a total cost of $27.7 million.
ATM PROGRAM
On February 22, 2024, CAPREIT filed a prospectus supplement to establish an ATM Program that allows CAPREIT, at its sole discretion to issue Trust Units up to an aggregate sale price of $400 million from treasury to the public from time to time, directly on the TSX or on other marketplaces on which the Trust Units are listed or quoted in Canada or where the Trust Units are traded in Canada, at prevailing market prices.
In connection with the establishment of the ATM Program, CAPREIT has entered into an equity distribution agreement dated February 22, 2024 (the “Equity Distribution Agreement”) with a major financial institution (the “Agent”). Any Trust Units sold in the ATM Program will be distributed through the TSX or any other permitted marketplace at the market prices prevailing at the time of sale. The volume and timing of distributions under the ATM Program, if any, will be determined at CAPREIT’s sole discretion. There is no certainty that any Trust Units will be offered or sold under the ATM Program. The ATM Program will be effective until June 9, 2025, unless terminated prior to such date by CAPREIT or otherwise in accordance with the terms of the Equity Distribution Agreement.
During the three months ended March 31, 2024, no Trust Units were issued under the ATM Program.
ADDITIONAL INFORMATION
More detailed information and analysis is included in CAPREIT's condensed consolidated interim financial statements and MD&A for the three months ended March 31, 2024, 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 CAPREIT's senior management team, will be held on Thursday, May 9, 2024 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 576092.
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 March 31, 2024, CAPREIT owns approximately 64,200 residential apartment suites, townhomes and manufactured home community sites that are well-located across Canada and the Netherlands, with approximately $16.7 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 FFO, 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, diluted NAV per unit, FFO payout ratio, 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 May 8, 2024, 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 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 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 CAPREIT's distributions.
Cautionary Statements Regarding Forward-Looking Statements
Certain statements contained in this press release constitute forward-looking information within the meaning of applicable 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, occupancy rates, rental rates, productivity, projected costs, 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 acquisition, disposition 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 high interest rates, potential health crises and their direct or indirect impacts on the business of CAPREIT, including CAPREIT's ability to enforce leases, perform capital expenditure work, increase rents and apply for above guideline increases ("AGIs"), obtain financings at favourable interest rates; 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 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 and information that is currently available to management, which are subject to change, management believes these statements have been prepared on a reasonable basis, reflecting CAPREIT's best estimates and judgements. 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, availability and cost of debt, acquisitions, dispositions and property development, valuation risk, liquidity and price volatility of units of CAPREIT ("Trust Units"), catastrophic events, climate change, taxation-related risks, energy costs, environmental matters, vendor management and third-party service providers, operating risk, talent management and human resources shortages, public health crises, other regulatory compliance risks, litigation risk, CAPREIT's investment in European Residential Real Estate Investment Trust ("ERES"), potential conflicts of interest, investment restrictions, lack of diversification of investment assets, geographic concentration, illiquidity of real property, capital investments, leasing risk, dependence on key personnel, adequacy of insurance and captive insurance, competition for residents, controls over disclosures and financial reporting, the nature of Trust Units, dilution, distributions 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 CAPREIT's 2023 Annual MD&A dated February 22, 2024. The information in this press release is based on information available to management as of May 8, 2024. 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
| CAPREIT Mr. Mark Kenney President & Chief Executive Officer (416) 861-9404 | CAPREIT Mr. Stephen Co Chief Financial Officer (416) 306-3009 | CAPREIT Mr. Julian Schonfeldt Chief Investment Officer (647) 535-2544 |
SELECTED NON-IFRS MEASURES
A reconciliation of net income (loss) to FFO is as follows:
| ($ Thousands, except per unit amounts) | ||||||
| For the Three Months Ended March 31, | 2024 | 2023 | ||||
| Net income (loss) | $ | 182,113 | $ | (103,227 | ) | |
| Adjustments: | ||||||
| Fair value adjustments of investment properties and assets held for sale | (71,319 | ) | 185,386 | |||
| Fair value adjustments of financial instruments | 573 | 48,195 | ||||
| Interest expense on Exchangeable LP Units | 603 | 597 | ||||
| Loss (gain) on non-controlling interest | (9,640 | ) | 21,110 | |||
| FFO impact attributable to ERES units held by non-controlling unitholders(1) | (4,716 | ) | (4,592 | ) | ||
| Deferred income tax recovery | (664 | ) | (46,952 | ) | ||
| Loss (gain) on foreign currency translation | 5,970 | (3,626 | ) | |||
| Net loss on transactions and other activities(2) | 5,324 | 1,791 | ||||
| Net gain on derecognition of debt | (2,279 | ) | (3,315 | ) | ||
| Lease principal repayments | (311 | ) | (287 | ) | ||
| Reorganization, senior management termination, and retirement costs(3) | — | 2,024 | ||||
| Unit-based compensation amortization recovery relating to ERES Unit Option Plan ("UOP") forfeitures(4) | (2,284 | ) | — | |||
| Amortization of losses from accumulated other comprehensive loss to interest and other financing costs | — | 49 | ||||
| FFO | $ | 103,370 | $ | 97,153 | ||
| Weighted average number of units (000s) ‑ diluted | 169,796 | 171,266 | ||||
| Total distributions declared | $ | 61,523 | $ | 61,828 | ||
| FFO per unit – diluted(5) | $ | 0.609 | $ | 0.567 | ||
| FFO payout ratio(6) | 59.5 | % | 63.6 | % | ||
| (1) | The adjustment is based on applying the 35% weighted average ownership held by ERES non-controlling unitholders (March 31, 2023 – 35%). |
| (2) | Primarily includes transaction costs and other adjustments on dispositions and amortization of property, plant and equipment ("PP&E") and right-of-use asset. For the three months ended March 31, 2024, includes $643 of current income taxes on the dispositions of ERES single residential suites. |
| (3) | For the three months ended March 31, 2023, includes $86 of accelerated vesting of previously granted unit-based compensation. |
| (4) | Relates to the forfeiture of previously granted ERES unit options that expired during the three months ended March 31, 2024 (March 31, 2023 - nil). |
| (5) | FFO per unit – diluted is calculated using FFO during the period divided by weighted average number of units – diluted. |
| (6) | FFO payout ratio is calculated using total distributions declared during the period divided by FFO. |
Reconciliation of Total Debt and Total Debt Ratios:
| ($ Thousands) | |||||||||
| As at | March 31, 2024 | December 31, 2023 | March 31, 2023 | ||||||
| Mortgages payable – non-current | $ | 5,832,546 | $ | 6,002,617 | $ | 5,936,555 | |||
| Mortgages payable – current | 845,178 | 651,371 | 636,999 | ||||||
| Liabilities related to assets held for sale | 7,842 | 23,706 | — | ||||||
| Mortgage debt | $ | 6,685,566 | $ | 6,677,694 | $ | 6,573,554 | |||
| Credit facilities payable – non-current | 483,238 | 405,133 | 484,063 | ||||||
| Total Debt | $ | 7,168,804 | $ | 7,082,827 | $ | 7,057,617 | |||
| Total Assets | $ | 17,111,296 | $ | 16,968,640 | $ | 17,542,136 | |||
| Add: Accumulated amortization of PP&E | 46,569 | 45,217 | 41,073 | ||||||
| Gross Book Value(1) | $ | 17,157,865 | $ | 17,013,857 | $ | 17,583,209 | |||
| Total Debt to Gross Book Value | 41.8 | % | 41.6 | % | 40.1 | % | |||
| Total Mortgages Payable to Gross Book Value | 39.0 | % | 39.2 | % | 37.4 | % | |||
| (1) | Gross Book Value ("GBV") is defined by CAPREIT's Declaration of Trust. |
Reconciliation of Net Loss to Adjusted EBITDAFV:
| ($ Thousands) | |||||||||
| For The Trailing 12 Months Ended | March 31, 2024 | December 31, 2023 | March 31, 2023 | ||||||
| Net loss | $ | (126,234 | ) | $ | (411,574 | ) | $ | (134,899 | ) |
| Adjustments: | |||||||||
| Interest and other financing costs | 215,678 | 211,664 | 187,582 | ||||||
| Interest on Exchangeable LP Units | 2,388 | 2,382 | 2,423 | ||||||
| Total current income tax expense and deferred income tax recovery, net | (29,088 | ) | (76,479 | ) | (72,619 | ) | |||
| Amortization of PP&E and right-of-use asset | 6,138 | 6,206 | 7,145 | ||||||
| Total unit-based compensation amortization expense, net | 5,570 | 7,816 | 6,944 | ||||||
| EUPP unit-based compensation expense | (548 | ) | (551 | ) | (520 | ) | |||
| Fair value adjustments of investment properties and assets held for sale | 657,880 | 914,585 | 673,268 | ||||||
| Fair value adjustments of financial instruments | (13,249 | ) | 34,373 | 55,400 | |||||
| Net gain on derecognition of debt | (2,215 | ) | (3,251 | ) | (5,081 | ) | |||
| Gain on non-controlling interest | (75,959 | ) | (45,209 | ) | (125,656 | ) | |||
| Loss (gain) on foreign currency translation | 5,649 | (4,161 | ) | 5,077 | |||||
| Transaction costs and other adjustments on dispositions and other | 10,663 | 7,705 | 3,421 | ||||||
| Goodwill impairment loss | — | — | 14,278 | ||||||
| Adjusted EBITDAFV | $ | 656,673 | $ | 643,506 | $ | 616,763 | |||
Debt Service Coverage Ratio
| ($ Thousands) | |||||||||
| For The Trailing 12 Months Ended | March 31, 2024 | December 31, 2023 | March 31, 2023 | ||||||
| Contractual interest on mortgages payable(1)(2) | $ | 163,950 | $ | 161,178 | $ | 153,436 | |||
| Amortization of deferred financing costs, fair value adjustments and OCI hedge interest on mortgages payable(1) | 6,129 | 6,157 | 4,205 | ||||||
| Contractual interest on credit facilities payable(2) | 28,008 | 26,074 | 11,302 | ||||||
| Amortization of deferred financing costs on credit facilities payable | 906 | 902 | 685 | ||||||
| Mortgage principal repayments | 157,046 | 158,803 | 162,458 | ||||||
| Debt service payments | $ | 356,039 | $ | 353,114 | $ | 332,086 | |||
| Adjusted EBITDAFV | $ | 656,673 | $ | 643,506 | $ | 616,763 | |||
| Debt service coverage ratio (times) | 1.8 | x | 1.8 | x | 1.9 | x | |||
| (1) | Includes liabilities related to assets held for sale. |
| (2) | Includes net cross-currency interest rate ("CCIR") and interest rate ("IR") swap interest, offsetting contractual interest. |
Interest Coverage Ratio
| ($ Thousands) | |||||||||
| For The Trailing 12 Months Ended | March 31, 2024 | December 31, 2023 | March 31, 2023 | ||||||
| Contractual interest on mortgages payable(1)(2) | $ | 163,950 | $ | 161,178 | $ | 153,436 | |||
| Amortization of deferred financing costs, fair value adjustments and OCI hedge interest on mortgages payable(1) | 6,129 | 6,157 | 4,205 | ||||||
| Contractual interest on credit facilities payable(2) | 28,008 | 26,074 | 11,302 | ||||||
| Amortization of deferred financing costs on credit facilities payable | 906 | 902 | 685 | ||||||
| Interest Expense | $ | 198,993 | $ | 194,311 | $ | 169,628 | |||
| Adjusted EBITDAFV | $ | 656,673 | $ | 643,506 | $ | 616,763 | |||
| Interest coverage ratio (times) | 3.3 | x | 3.3 | x | 3.6 | x | |||
| (1) | Includes liabilities related to assets held for sale, as applicable. |
| (2) | Includes net CCIR and IR swap interest, offsetting contractual interest. |
Reconciliation of Unitholders' Equity to NAV:
| ($ Thousands, except per unit amounts) | |||||||||
| As at | March 31, 2024 | December 31, 2023 | March 31, 2023 | ||||||
| Unitholders' equity | $ | 9,374,475 | $ | 9,278,595 | $ | 9,774,480 | |||
| Adjustments: | |||||||||
| Exchangeable LP Units | 76,578 | 80,383 | 78,093 | ||||||
| Unit-based compensation financial liabilities excluding ERES's UOP and Restricted Unit Plan | 22,926 | 23,150 | 19,634 | ||||||
| Deferred income tax liability | 50,114 | 49,481 | 80,391 | ||||||
| Deferred income tax asset | (20,837 | ) | (19,523 | ) | (11,469 | ) | |||
| Derivative assets – non-current | (36,441 | ) | (35,619 | ) | (53,132 | ) | |||
| Derivative assets – current | (8,167 | ) | (10,851 | ) | (3,523 | ) | |||
| Derivative liabilities – current | 1,227 | 7,001 | 15,484 | ||||||
| Adjustment to ERES non-controlling interest(1) | (172,242 | ) | (160,023 | ) | (139,002 | ) | |||
| NAV | $ | 9,287,633 | $ | 9,212,594 | $ | 9,760,956 | |||
| Diluted number of units | 169,501 | 169,868 | 169,831 | ||||||
| NAV per unit – diluted(2) | $ | 54.79 | $ | 54.23 | $ | 57.47 | |||
| (1) | CAPREIT accounts for the non-controlling interest in ERES as a liability, measured at the redemption amount, as defined by the ERES DOT, of ERES's units not owned by CAPREIT. The adjustment is made so that the non-controlling interest in ERES is measured at ERES's disclosed NAV, rather than the redemption amount. The table below summarizes the calculation of adjustment to ERES non-controlling interest as at March 31, 2024, December 31, 2023 and March 31, 2023: |
| ($ Thousands) | |||||||||
| As at | March 31, 2024 | December 31, 2023 | March 31, 2023 | ||||||
| ERES's NAV | € | 676,778 | € | 676,956 | € | 776,515 | |||
| Ownership by ERES non-controlling interest | 35 | % | 35 | % | 35 | % | |||
| Closing foreign exchange rate | 1.46162 | 1.46262 | 1.47186 | ||||||
| Impact to NAV due to ERES's non-controlling unitholders | $ | 346,217 | $ | 346,545 | $ | 400,022 | |||
| Less: ERES units held by non-controlling unitholders | $ | (173,975 | ) | $ | (186,522 | ) | $ | (261,020 | ) |
| Adjustment to ERES non-controlling interest | $ | 172,242 | $ | 160,023 | $ | 139,002 | |||
| (2) | NAV per unit – diluted is calculated using NAV as at period end divided by diluted number of units. |
