Canadian Apartment Properties Real Estate Investment Trust
("CAPREIT") (TSX: CAR.UN) announced today continued growth and
strong operating and financial results for the three and six months
ended June 30, 2023. Management will host a conference call to
discuss the financial results on Friday, August 4, 2023 at 9:00
a.m. ET.
HIGHLIGHTS:
As at |
June 30, 2023 |
|
December 31, 2022 |
|
June 30, 2022 |
|
Total Portfolio Performance and Other
Measures |
|
|
|
Number of suites and sites |
|
64,843 |
|
|
66,586 |
|
|
66,536 |
|
Investment properties fair value(1) (000s) |
$ |
17,015,631 |
|
$ |
17,153,709 |
|
$ |
16,874,572 |
|
Occupied
AMR(2) |
|
|
|
Canadian Residential Portfolio(3) |
$ |
1,460 |
|
$ |
1,401 |
|
$ |
1,371 |
|
The Netherlands Portfolio |
€ |
1,009 |
|
€ |
992 |
|
€ |
952 |
|
Change in monthly rent on suite
turnovers(4) |
|
|
|
Canadian Residential Portfolio(3) |
|
26.9 |
% |
|
24.3 |
% |
|
11.0 |
% |
The Netherlands Portfolio |
|
19.0 |
% |
|
23.1 |
% |
|
23.2 |
% |
Occupancy |
|
|
|
Canadian Residential Portfolio(3) |
|
98.8 |
% |
|
98.9 |
% |
|
98.8 |
% |
The Netherlands Portfolio |
|
98.6 |
% |
|
98.4 |
% |
|
98.3 |
% |
Total Portfolio(5) |
|
98.2 |
% |
|
98.3 |
% |
|
98.2 |
% |
(1) |
|
Investment properties exclude assets held for sale, as
applicable. |
(2) |
|
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. |
(3) |
|
Excludes MHC sites. |
(4) |
|
For the three months ended. |
(5) |
|
Includes MHC sites. |
|
Three Months Ended |
Six Months Ended |
|
June 30, |
June 30, |
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
Financial Performance |
|
|
|
|
Operating revenues (000s) |
$ |
263,798 |
|
$ |
251,693 |
|
$ |
524,745 |
|
$ |
498,321 |
|
Net operating income ("NOI") (000s) |
$ |
173,785 |
|
$ |
166,093 |
|
$ |
337,643 |
|
$ |
319,265 |
|
NOI margin |
|
65.9 |
% |
|
66.0 |
% |
|
64.3 |
% |
|
64.1 |
% |
Same property NOI (000s) |
$ |
167,436 |
|
$ |
157,247 |
|
$ |
325,587 |
|
$ |
304,708 |
|
Same property NOI margin |
|
66.4 |
% |
|
66.2 |
% |
|
64.9 |
% |
|
64.4 |
% |
Net income (loss) (000s) |
$ |
39,983 |
|
$ |
(250,354 |
) |
$ |
(63,244 |
) |
$ |
(205,045 |
) |
FFO per unit – diluted (formerly known as "NFFO per unit -
diluted")(1) |
$ |
0.590 |
|
$ |
0.583 |
|
$ |
1.157 |
|
$ |
1.138 |
|
Distributions per unit |
$ |
0.363 |
|
$ |
0.363 |
|
$ |
0.725 |
|
$ |
0.725 |
|
FFO payout ratio (formerly known as "NFFO payout ratio")(1) |
|
61.5 |
% |
|
61.9 |
% |
|
62.5 |
% |
|
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 |
June 30, 2023 |
|
December 31, 2022 |
|
June 30, 2022 |
|
Financing Metrics and Liquidity |
|
|
|
Total debt to gross book value(1) |
|
40.4 |
% |
|
39.4 |
% |
|
38.8 |
% |
Weighted average mortgage effective interest rate(2) |
|
2.69 |
% |
|
2.61 |
% |
|
2.60 |
% |
Weighted average mortgage term (years)(2) |
|
5.1 |
|
|
5.4 |
|
|
5.8 |
|
Debt service coverage (times)(1)(3) |
|
1.9x |
|
|
1.9x |
|
|
1.9x |
|
Interest coverage (times)(1)(3) |
|
3.6x |
|
|
3.7x |
|
|
3.8x |
|
Cash and cash equivalents (000s) |
$ |
33,351 |
|
$ |
47,303 |
|
$ |
228,110 |
|
Available liquidity – Acquisition and Operating Facility
(000s) |
$ |
264,789 |
|
$ |
333,416 |
|
$ |
443,213 |
|
Capital |
|
|
|
Unitholders' equity (000s) |
$ |
9,719,857 |
|
$ |
10,003,695 |
|
$ |
9,961,288 |
|
Net asset value(1) (000s) |
$ |
9,686,669 |
|
$ |
9,954,566 |
|
$ |
9,933,769 |
|
Total number of units - diluted (000s) |
|
169,691 |
|
|
171,599 |
|
|
175,319 |
|
Net asset value per unit - diluted(1) |
$ |
57.08 |
|
$ |
58.01 |
|
$ |
56.66 |
|
(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. |
“Our operational performance remained robust in
the second quarter of 2023, with near 99% occupancy on the Canadian
residential portfolio maintained alongside strong and stable
margins," commented Mark Kenney, President and Chief Executive
Officer. "We also continue to act on our asset management program,
and so far this year have sold $293 million worth of non-strategic
buildings, while reinvesting $208 million of net proceeds into
newly-built rental properties located in thriving regions
throughout Canada. These high-quality, modern buildings now
represent 10% of our Canadian portfolio value, and we will continue
to increase that allocation. Above all else, this serves a greater
purpose in supporting the supply of new construction rental housing
in Canada’s highest-density and fastest-growing cities."
“The CAPREIT 2.0 strategy has been well executed
and we have made sound progress to date,” added Stephen Co, Chief
Financial Officer. “We have accretively allocated $101 million into
our NCIB program this year in order to crystallize meaningful value
for our Unitholders. We also secured $368 million in total mortgage
refinancings at a weighted average interest rate of 4.1%. Our
diluted FFO per Unit increased by 1.2% this quarter compared to the
prior year period, primarily driven by our strong organic growth,
supplemented by NCIB repurchases. This was achieved despite
elevated interest costs which we're incurring on our credit
facilities. However, with $265 million in available capacity on our
Canadian credit facility and a strong capital recycling program, we
have ample liquidity to support our strategic priorities moving
forward."
SUMMARY OF Q2 - 2023 RESULTS OF
OPERATIONS
Strategic Initiatives
Update
- CAPREIT continues to invest in
strategic opportunities that are accretive. For the three months
ended June 30, 2023, CAPREIT acquired four properties comprised of
326 suites located in Canada for $151.6 million. For the six months
ended June 30, 2023, CAPREIT acquired five properties for a total
acquisition cost of $208.3 million.
- CAPREIT disposed of six non-core
properties, which were comprised of 1,013 suites and sites located
in Canada and the Netherlands for the three months ended June 30,
2023 for $139.9 million (excluding transaction costs and other
adjustments). For the six months ended June 30, 2023, CAPREIT
disposed of $293.7 million (excluding transaction costs and other
adjustments) worth of non-core property dispositions.
- During the three and six months
ended June 30, 2023, CAPREIT purchased and cancelled approximately
0.2 million and 2.2 million Trust Units under the normal
course issuer bid ("NCIB") program, at a weighted average purchase
price of $47.59 and $46.53 per Trust Unit, respectively, for a
total cost of $9.4 million and $100.9 million, respectively.
- 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
- On turnovers, monthly residential
rents for the three and six months ended June 30, 2023 increased by
26.9% on 3.3% and 26.8% on 5.8%, respectively, of the Canadian
portfolio, compared to an increase of 11.0% on 4.2% and 10.6% on
7.9%, respectively, of the Canadian portfolio, for the three and
six months ended June 30, 2022.
- Same property Occupied AMR for the
Canadian residential portfolio as at June 30, 2023 increased by
5.1% compared to June 30, 2022, while same property occupancy for
the Canadian residential portfolio remained stable at 98.8%.
- NOI increased by 6.5% and 6.9%,
respectively, for the same property portfolio for the three and six
months ended June 30, 2023, compared to the same periods last year.
Additionally, same property NOI margin increased to 66.4%, up 0.2%,
for the three months ended June 30, 2023 and increased to 64.9%, up
0.5%, for the six months ended June 30, 2023, compared to the same
periods last year.
- Diluted FFO per unit (formerly
known as "diluted NFFO per unit") increased by 1.2% and 1.7% for
the three and six months ended June 30, 2023, respectively,
compared to the same periods last year primarily due to same
property organic growth and supplemented by accretive NCIB
purchases.
Balance Sheet Highlights
- CAPREIT's financial position
remains strong with $264.8 million of available capacity on its
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 refinancings of $368.1 million. The
mortgages refinanced have a weighted average term to maturity of
6.0 years and a weighted average interest rate of 4.13%.
- For the three months and six months
ended June 30, 2023, the overall carrying value of investment
properties (excluding assets held for sale) decreased by $105.6
million and $138.1 million respectively. The decrease for the
three and six months ended June 30, 2023 was primarily attributed
to fair value losses and loss on foreign currency translation but
was partially mitigated by net acquisitions and property capital
investments.
- Diluted NAV per unit as at June 30,
2023 decreased to $57.08 from $57.47 as at March 31, 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
|
Total Portfolio |
Same Property Portfolio(1) |
As at June 30, |
|
2023 |
|
2022 |
|
2023 |
|
2022 |
|
Occupied AMR |
Occ. % |
Occupied AMR |
Occ. % |
OccupiedAMR |
Occ. % |
Occupied AMR |
Occ. % |
Average Canadian residential suites |
$ |
1,460 |
98.8 |
$ |
1,371 |
98.8 |
$ |
1,454 |
98.8 |
$ |
1,384 |
98.8 |
Average MHC sites |
$ |
435 |
96.0 |
$ |
423 |
95.9 |
$ |
435 |
96.0 |
$ |
423 |
95.8 |
Average Netherlands portfolio |
€ |
1,009 |
98.6 |
€ |
952 |
98.3 |
€ |
1,009 |
98.6 |
€ |
952 |
98.3 |
(1) |
|
Same property Occupied AMR and occupancy include all properties
held as at June 30, 2022, but exclude properties disposed of or
held for sale as at June 30, 2023. |
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 organic 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
June 30, 2023, increased from $1.70 as at June 30, 2022.
Canadian Portfolio
For the Three Months Ended June 30, |
2023 |
2022 |
|
Change in monthly rent |
Turnovers and Renewals(1) |
Change in monthly rent |
Turnovers and Renewals(1) |
|
% |
% |
% |
% |
Suite turnovers |
26.9 |
3.3 |
11.0 |
4.2 |
Lease renewals |
2.6 |
13.8 |
1.5 |
12.0 |
Weighted average of turnovers and renewals |
7.3 |
|
4.0 |
|
(1) |
|
Percentage of suites turned over or renewed during the period based
on the total weighted average number of residential suites
(excluding co-ownerships and MHC sites) held during the
period. |
For the Six Months Ended June 30, |
2023 |
2022 |
|
Change in monthly rent |
Turnovers and Renewals(1) |
Change in monthly rent |
Turnovers and Renewals(1) |
|
% |
% |
% |
% |
Suite turnovers |
26.8 |
5.8 |
10.6 |
7.9 |
Lease renewals |
2.5 |
59.2 |
1.3 |
61.4 |
Weighted average of turnovers and renewals |
4.7 |
|
2.4 |
|
(1) |
|
Percentage of suites turned over or renewed during the period 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 June 30, |
2023 |
2022 |
|
Change in monthly rent |
Turnovers and Renewals(1) |
Change in monthly rent |
Turnovers and Renewals(1) |
|
% |
% |
% |
% |
Suite turnovers |
19.0 |
2.9 |
23.2 |
2.6 |
Lease renewals |
— |
— |
— |
— |
Weighted average of turnovers and renewals |
19.0 |
|
23.2 |
|
(1) |
|
Percentage of suites turned over or renewed during the period based
on the total weighted average number of Dutch residential suites
held during the period. |
For the Six Months Ended June 30, |
2023 |
2022 |
|
Change in monthly rent |
Turnovers and Renewals(1) |
Change in monthly rent |
Turnovers and Renewals(1) |
|
% |
% |
% |
% |
Suite turnovers |
19.6 |
6.8 |
22.2 |
5.1 |
Lease renewals |
— |
— |
— |
— |
Weighted average of turnovers and renewals |
19.6 |
|
22.2 |
|
(1) |
|
Percentage of suites turned over or renewed during the period 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
and six months ended June 30, 2023 and June 30, 2022. For rent
renewal increases due to indexation beginning on July 1, 2023, ERES
served tenant notices to 6,659 suites, representing 97% of the
residential portfolio, across which the average rental increase due
to indexation and household income adjustment is 4.0%. In the prior
year period, ERES served tenant notices to 6,499 suites,
representing 96% of the residential portfolio, across which the
average rental increase due to indexation and household income
adjustment is 3.0%.
Net Operating Income
Same properties for the three and six months
ended June 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 June 30, 2023.
($ Thousands) |
Total NOI |
Same Property NOI |
For the Three Months Ended June 30, |
|
2023 |
|
|
2022 |
|
%(1) |
|
2023 |
|
|
2022 |
|
%(1) |
Total operating revenues |
$ |
263,798 |
|
$ |
251,693 |
|
4.8 |
$ |
252,117 |
|
$ |
237,408 |
|
6.2 |
Operating expenses |
|
|
|
|
|
|
Realty taxes |
|
(24,047 |
) |
|
(23,806 |
) |
1.0 |
|
(22,896 |
) |
|
(22,508 |
) |
1.7 |
Utilities |
|
(17,933 |
) |
|
(17,825 |
) |
0.6 |
|
(17,409 |
) |
|
(16,806 |
) |
3.6 |
Other(2) |
|
(48,033 |
) |
|
(43,969 |
) |
9.2 |
|
(44,376 |
) |
|
(40,847 |
) |
8.6 |
Total operating expenses |
$ |
(90,013 |
) |
$ |
(85,600 |
) |
5.2 |
$ |
(84,681 |
) |
$ |
(80,161 |
) |
5.6 |
NOI |
$ |
173,785 |
|
$ |
166,093 |
|
4.6 |
$ |
167,436 |
|
$ |
157,247 |
|
6.5 |
NOI margin |
|
65.9 |
% |
|
66.0 |
% |
|
|
66.4 |
% |
|
66.2 |
% |
|
(1) |
|
Represents the
year-over-year percentage change. |
(2) |
|
Comprises repairs and maintenance ("R&M"), wages,
insurance, advertising, legal costs and expected credit
losses. |
($ Thousands) |
Total NOI |
Same Property NOI |
For the Six Months Ended June 30, |
|
2023 |
|
|
2022 |
|
%(1) |
|
2023 |
|
|
2022 |
|
%(1) |
Total operating revenues |
$ |
524,745 |
|
$ |
498,321 |
|
5.3 |
$ |
501,782 |
|
$ |
473,416 |
|
6.0 |
Operating expenses |
|
|
|
|
|
|
Realty taxes |
|
(48,084 |
) |
|
(47,253 |
) |
1.8 |
|
(45,601 |
) |
|
(44,811 |
) |
1.8 |
Utilities |
|
(42,092 |
) |
|
(41,984 |
) |
0.3 |
|
(40,655 |
) |
|
(39,482 |
) |
3.0 |
Other(2) |
|
(96,926 |
) |
|
(89,819 |
) |
7.9 |
|
(89,939 |
) |
|
(84,415 |
) |
6.5 |
Total operating expenses |
$ |
(187,102 |
) |
$ |
(179,056 |
) |
4.5 |
$ |
(176,195 |
) |
$ |
(168,708 |
) |
4.4 |
NOI |
$ |
337,643 |
|
$ |
319,265 |
|
5.8 |
$ |
325,587 |
|
$ |
304,708 |
|
6.9 |
NOI margin |
|
64.3 |
% |
|
64.1 |
% |
|
|
64.9 |
% |
|
64.4 |
% |
|
(1) |
|
Represents the
year-over-year percentage change. |
(2) |
|
Comprises repairs and maintenance ("R&M"), wages,
insurance, advertising, legal costs and expected credit
losses. |
Operating Revenues
For the three and six months ended June 30,
2023, total operating revenues for the total and same property
portfolios increased compared to the same periods last year,
primarily due to increases in monthly rents on turnovers and
renewals. Contributions from acquisitions, partially offset by
dispositions, further contributed to higher operating revenues for
the total portfolio.
Operating Expenses
For the three and six months ended June 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, partially offset by lower insurance
costs related to claim recoveries. 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 six months ended June 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 six months
ended June 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 Friday, August 4, 2023 at 9:00 am ET. The telephone numbers
for the conference call are: International: +1 (929) 526-1599,
Canadian Toll Free: (833) 950-0062. The conference call access code
is 960207.
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 June 30, 2023, CAPREIT
owns approximately 65,000 residential apartment suites, townhomes
and manufactured home community sites well-located across Canada
and the Netherlands, with approximately $17 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 disclosure 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 August 3, 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, 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”, “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,
including CAPREIT’s ability to enforce leases, perform capital
expenditure work, increase rents and apply for above guideline
increases, 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, including
current market conditions and management’s assessment of
acquisition, disposition and other opportunities that are or may
become available to CAPREIT, which is subject to change as
opportunities become available and management is able to better
assess their commercial viability, management believes they are
reasonable as of the date hereof; 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 "Risks
and Uncertainties" section of the MD&A released on August 3,
2023. The information in this press release is based on information
available to management as of August 3, 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
CAPREITMr. Mark KenneyPresident & Chief Executive Officer(416)
861-9404 |
CAPREITMr. Stephen CoChief Financial Officer(416) 306-3009 |
CAPREITMr. Julian SchonfeldtChief Investment Officer(647)
535-2544 |
SELECTED NON-IFRS MEASURES
A reconciliation of net
income (loss) to FFO (formerly known as
"NFFO") is as follows:
($ Thousands, except per unit amounts) |
Three Months Ended |
Six Months Ended |
|
June 30, |
June 30, |
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
Net income (loss) |
$ |
39,983 |
|
$ |
(250,354 |
) |
$ |
(63,244 |
) |
$ |
(205,045 |
) |
Adjustments: |
|
|
|
|
Fair value adjustments of investment properties |
|
110,815 |
|
|
466,663 |
|
|
296,201 |
|
|
447,108 |
|
Fair value adjustments of investments |
|
(2,940 |
) |
|
33,803 |
|
|
21,717 |
|
|
78,201 |
|
Fair value adjustments of derivative financial instruments |
|
(1,576 |
) |
|
(36,845 |
) |
|
10,027 |
|
|
(68,422 |
) |
Unit-based compensation remeasurement loss (gain) |
|
731 |
|
|
(7,196 |
) |
|
2,364 |
|
|
(9,186 |
) |
Fair value adjustments of Exchangeable LP Units |
|
5,683 |
|
|
(14,827 |
) |
|
13,686 |
|
|
(25,423 |
) |
Interest expense on Exchangeable LP Units |
|
591 |
|
|
608 |
|
|
1,188 |
|
|
1,217 |
|
Gain on non-controlling interest |
|
(27,818 |
) |
|
(109,516 |
) |
|
(6,708 |
) |
|
(67,572 |
) |
Net FFO impact attributable to ERES units held by non-controlling
unitholders(1) |
|
(4,878 |
) |
|
(4,496 |
) |
|
(9,470 |
) |
|
(8,930 |
) |
Deferred income tax expense (recovery) |
|
(16,064 |
) |
|
(889 |
) |
|
(63,016 |
) |
|
15,575 |
|
Loss (gain) on foreign currency translation |
|
(8,022 |
) |
|
5,069 |
|
|
(9,349 |
) |
|
17,152 |
|
Loss on transactions and other activities(2) |
|
4,280 |
|
|
18,212 |
|
|
6,071 |
|
|
20,125 |
|
Lease principal repayment |
|
(297 |
) |
|
(169 |
) |
|
(584 |
) |
|
(446 |
) |
Former FFO |
$ |
100,488 |
|
$ |
100,063 |
|
$ |
198,883 |
|
$ |
194,354 |
|
Reorganization, senior management termination, and retirement
costs(3) |
|
— |
|
|
4,007 |
|
|
2,024 |
|
|
6,250 |
|
Amortization of losses from AOCL to interest and other financing
costs |
|
19 |
|
|
630 |
|
|
68 |
|
|
1,173 |
|
Net gain on derecognition of debt |
|
(431 |
) |
|
(2,763 |
) |
|
(3,746 |
) |
|
(2,763 |
) |
Mortgage prepayment cost |
|
— |
|
|
896 |
|
|
— |
|
|
1,342 |
|
Costs relating to transactions that were not completed |
|
— |
|
|
38 |
|
|
— |
|
|
137 |
|
FFO (formerly known as "NFFO") |
$ |
100,076 |
|
$ |
102,871 |
|
$ |
197,229 |
|
$ |
200,493 |
|
Weighted average number of units (000s) ‑ diluted |
|
169,664 |
|
|
176,322 |
|
|
170,461 |
|
|
176,159 |
|
FFO per unit – diluted (formerly known as "NFFO per unit -
diluted") |
$ |
0.590 |
|
$ |
0.583 |
|
$ |
1.157 |
|
$ |
1.138 |
|
|
|
|
|
|
Total distributions declared |
$ |
61,498 |
|
$ |
63,695 |
|
$ |
123,326 |
|
$ |
127,441 |
|
FFO payout ratio (formerly known as "NFFO payout ratio")(4) |
|
61.5 |
% |
|
61.9 |
% |
|
62.5 |
% |
|
63.6 |
% |
(1) |
|
For the three and six months ended June 30, 2023, the adjustment is
based on applying the 35% and 35%, respectively, weighted average
ownership held by ERES non-controlling unitholders (June 30, 2022 -
34% and 34%, respectively) to ERES's FFO of $14,098 (€9,652) and
$27,449 (€18,896), respectively (for the three and six months ended
June 30, 2022 - $13,536 or €9,881 and $27,480 or €19,655,
respectively) and adjusting for $nil of acquisition fees for the
three and six months ended June 30, 2023 (for the three and six
months ended June 30, 2022 - $312 and $1,215, respectively) charged
by CAPREIT to ERES, which are eliminated upon consolidation. |
(2) |
|
Includes amortization of
property, plant, and equipment and right-of-use asset and
impairment of goodwill. |
(3) |
|
For the three and six months
ended June 30, 2023, includes $nil and $86, respectively, of
accelerated vesting of previously granted unit-based compensation
(three and six months ended June 30, 2022 - $583 and $976,
respectively). |
(4) |
|
The payout ratio compares
distributions declared to FFO (formerly known as "NFFO"). |
Reconciliation of Unitholders' Equity to
NAV:
($ Thousands, except per unit amounts) |
|
As at |
June 30, 2023 |
|
December 31, 2022 |
|
June 30, 2022 |
|
Unitholders' equity |
$ |
9,719,857 |
|
$ |
10,003,695 |
|
$ |
9,961,288 |
|
Adjustments: |
|
|
|
Exchangeable LP Units |
|
83,776 |
|
|
71,668 |
|
|
75,261 |
|
Unit-based compensation financial liabilities excluding ERES’s unit
options plan |
|
22,856 |
|
|
17,455 |
|
|
18,699 |
|
Deferred income tax liability |
|
65,123 |
|
|
120,524 |
|
|
140,232 |
|
Deferred income tax asset |
|
(13,453 |
) |
|
(6,173 |
) |
|
(4,414 |
) |
Derivative assets - non-current |
|
(56,440 |
) |
|
(62,599 |
) |
|
(64,289 |
) |
Derivative assets - current |
|
(5,758 |
) |
|
— |
|
|
(23,102 |
) |
Derivative liabilities - current |
|
10,555 |
|
|
10,625 |
|
|
— |
|
Adjustment to ERES non-controlling interest(1) |
|
(139,847 |
) |
|
(200,629 |
) |
|
(169,906 |
) |
NAV |
$ |
9,686,669 |
|
$ |
9,954,566 |
|
$ |
9,933,769 |
|
Diluted number of units |
|
169,691 |
|
|
171,599 |
|
|
175,319 |
|
NAV per unit - diluted |
$ |
57.08 |
|
$ |
58.01 |
|
$ |
56.66 |
|
(1) |
|
CAPREIT accounts for the
non-controlling interest in ERES as a liability, measured at the
trading value 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 ERES’s trading value. The table
below summarizes the calculation of adjustment to ERES
non-controlling interest as at June 30, 2023, December 31, 2022 and
June 30, 2022: |
|
($ Thousands) |
|
|
|
|
|
|
|
|
As at |
June 30, 2023 |
|
December 31, 2022 |
|
June 30, 2022 |
|
|
ERES’s NAV |
€ |
733,688 |
|
€ |
899,166 |
|
€ |
992,362 |
|
|
Ownership by ERES non-controlling interest |
|
35 |
% |
|
34 |
% |
|
34 |
% |
|
Closing foreign exchange rate |
|
1.4422 |
|
|
1.4498 |
|
|
1.3473 |
|
|
Impact to NAV due to ERES’s non-controlling unitholders |
$ |
370,349 |
|
$ |
443,228 |
|
$ |
454,583 |
|
|
Less: ERES units held by non-controlling unitholders |
$ |
230,502 |
|
$ |
242,599 |
|
$ |
284,677 |
|
|
Adjustment to ERES non-controlling interest |
$ |
139,847 |
|
$ |
200,629 |
|
$ |
169,906 |
|
Reconciliation for Total Debt and Total
Debt Ratios:
($ Thousands) |
|
As at |
June 30, 2023 |
|
December 31, 2022 |
|
June 30, 2022 |
|
Mortgages payable - non-current |
$ |
5,993,448 |
|
$ |
5,963,820 |
|
$ |
6,113,263 |
|
Mortgages payable - current |
|
598,041 |
|
|
613,277 |
|
|
454,321 |
|
Liabilities related to assets held for sale |
|
3,224 |
|
|
38,116 |
|
|
— |
|
Mortgage debt |
|
6,594,713 |
|
|
6,615,213 |
|
|
6,567,584 |
|
Bank Indebtedness - non-current |
|
480,763 |
|
|
388,975 |
|
|
260,220 |
|
Total Debt |
$ |
7,075,476 |
|
$ |
7,004,188 |
|
$ |
6,827,804 |
|
|
|
|
|
Total Assets |
$ |
17,451,329 |
|
$ |
17,741,888 |
|
$ |
17,557,997 |
|
Add: Total accumulated amortization and depreciation |
|
42,525 |
|
|
42,100 |
|
|
38,525 |
|
Gross Book Value(1) |
$ |
17,493,854 |
|
$ |
17,783,988 |
|
$ |
17,596,522 |
|
Ratio of Total Debt to Gross Book Value |
|
40.4 |
% |
|
39.4 |
% |
|
38.8 |
% |
Ratio of Mortgage debt to Gross Book Value |
|
37.7 |
% |
|
37.2 |
% |
|
37.3 |
% |
(1) |
|
Gross Book
Value ("GBV") is defined by CAPREIT's Declaration of Trust. |
Reconciliation of Net
Income (Loss) to Adjusted EBITDAFV:
($ Thousands) |
|
|
|
For the trailing 12 months ended |
June 30, 2023 |
|
December 31, 2022 |
|
June 30, 2022 |
|
Net income |
$ |
155,438 |
|
$ |
13,637 |
|
$ |
630,127 |
|
Adjustments: |
|
|
|
Interest and other financing costs |
|
193,850 |
|
|
180,434 |
|
|
173,176 |
|
Interest on Exchangeable LP Units |
|
2,406 |
|
|
2,435 |
|
|
2,107 |
|
Current and deferred income tax expense (recovery) |
|
(87,170 |
) |
|
(10,034 |
) |
|
84,763 |
|
Amortization of property, plant and equipment and right-of-use
asset |
|
6,888 |
|
|
7,462 |
|
|
7,943 |
|
Unit-based compensation amortization expense |
|
6,976 |
|
|
7,256 |
|
|
7,411 |
|
EUPP unit-based compensation expense |
|
(531 |
) |
|
(514 |
) |
|
(508 |
) |
Fair value adjustments of investment properties |
|
317,420 |
|
|
468,327 |
|
|
(244,146 |
) |
Fair value adjustments of financial instruments |
|
80,064 |
|
|
7,440 |
|
|
(46,902 |
) |
Net gain on derecognition of debt |
|
(2,749 |
) |
|
(1,766 |
) |
|
(2,763 |
) |
Gain on non-controlling interest |
|
(43,958 |
) |
|
(104,822 |
) |
|
(48,747 |
) |
Loss (gain) on foreign currency translation |
|
(5,501 |
) |
|
21,000 |
|
|
22,478 |
|
Loss on dispositions and other |
|
4,024 |
|
|
3,318 |
|
|
2,406 |
|
Adjusted EBITDAFV adjustment for income from investment in
associate(1) |
|
— |
|
|
— |
|
|
(7,060 |
) |
Goodwill impairment loss |
|
— |
|
|
14,278 |
|
|
14,278 |
|
Adjusted EBITDAFV |
$ |
627,157 |
|
$ |
608,451 |
|
$ |
594,563 |
|
(1) |
|
Relates to
CAPREIT's share of Irish Residential Properties REIT plc investment
property fair value gain. |
Debt Service Coverage Ratio
($ Thousands) |
|
For the trailing 12 months ended |
June 30, 2023 |
December 31, 2022 |
June 30, 2022 |
Interest on mortgages payable and liabilities related to assets
held for sale |
$ |
158,766 |
$ |
154,467 |
$ |
148,301 |
Interest on bank indebtedness |
|
17,056 |
|
8,292 |
|
7,026 |
Mortgage principal repayments |
|
162,248 |
|
162,048 |
|
156,791 |
Debt service payments |
$ |
338,070 |
$ |
324,807 |
$ |
312,118 |
Adjusted EBITDAFV |
$ |
627,157 |
$ |
608,451 |
$ |
594,563 |
Debt Service Coverage Ratio (times) |
1.9x |
1.9x |
1.9x |
Interest Coverage Ratio
($ Thousands) |
|
For the trailing 12 months ended |
June 30, 2023 |
December 31, 2022 |
June 30, 2022 |
Interest on mortgages payable and liabilities related to assets
held for sale |
$ |
158,766 |
$ |
154,467 |
$ |
148,301 |
Interest on bank indebtedness |
|
17,056 |
|
8,292 |
|
7,026 |
Interest Expense |
$ |
175,822 |
$ |
162,759 |
$ |
155,327 |
Adjusted EBITDAFV |
$ |
627,157 |
$ |
608,451 |
$ |
594,563 |
Interest coverage ratio (times) |
3.6x |
3.7x |
3.8x |
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