CAP REIT Announces Solid Performance in 2005.TORONTO -- Canadian Canadian (kənā`dēən), river, 906 mi (1,458 km) long, rising in NE New Mexico. and flowing E across N Texas and central Oklahoma into the Arkansas River in E Oklahoma. Apartment Properties Real Estate Investment Trust ("CAP REIT CAP REIT Canadian Apartment Properties Real Estate Investment Trust ") (TSX TSX Toronto Stock Exchange (TSE before April, 2002) TSX Transfer from Stack Pointer to Index TSX True Space Extension :CAR.UN) announced today results for the three months and year ended December 31, 2005. HIGHLIGHTS: - Acquisitions, higher occupancies and increased rents drive revenue growth. - Achieved growth target by acquiring 2,239 suites for total investment of $156.7 million. - Average occupancy rises to 97.4% from 96.6% last year. - Disposal of non-core assets generates $0.204 per Unit gain and funds for future acquisitions. - Geographic diversification Diversification A risk management technique that mixes a wide variety of investments within a portfolio. It is designed to minimize the impact of any one security on overall portfolio performance. Notes: Diversification is possibly the greatest way to reduce the risk. of property portfolio enhanced. - Reduced overall leverage ratio to 62.72% and strengthened balance sheet to boost growth profile. - Effective tax deferral tax deferral The delay of a tax liability until a future date. For example, an IRA may result in a tax deferral on the amount contributed to the IRA and on any income earned on funds in the IRA until withdrawals are made. of 74.77% for distributions yields high after-tax return for Unitholders. - Distributable income ("DI") per Unit for 2005 was $1.160 and $1.364 including gain on property dispositions as compared to $1.250 per Unit and $1.312, respectively for 2004. "2005 was a solid year for CAP REIT, a testament to the experience and expertise of our people," commented Thomas (language) Thomas - A language compatible with the language Dylan(TM). Thomas is NOT Dylan(TM). The first public release of a translator to Scheme by Matt Birkholz, Jim Miller, and Ron Weiss, written at Digital Equipment Corporation's Cambridge Research Laboratory runs Schwartz, President and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. . "A number of important transactions during the year demonstrated how we are leveraging our skill and talent for the long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. benefit of our Unitholders." During 2005, CAP REIT acquired 2,239 suites in three of Canada's leading rental markets for a total cost of approximately $156.7 million, including the assumption of existing and new mortgages totalling $96.9 million. In June, CAP REIT acquired four low-rise apartment buildings in Quebec City containing 78 suites, and on September 1, a portfolio of 1,431 mid-tier residential suites was acquired in Montreal, Quebec. Following these transactions, on September 30, CAP REIT purchased 406 suites in two luxury and one mid-tier apartment properties in Vancouver, British Columbia British Columbia, province (2001 pop. 3,907,738), 366,255 sq mi (948,600 sq km), including 6,976 sq mi (18,068 sq km) of water surface, W Canada. Geography . Then, on December 30, 2005, it purchased the remaining interests owned by a third-party co-owner in two Montreal apartment complexes adding 324 suites to the portfolio. Subsequent to the year-end, CAP REIT acquired a cluster of six apartment buildings and six townhouse town·house or town house n. 1. A residence in a city. 2. A row house, especially a fashionable one. complexes in Etobicoke, Ontario Etobicoke (pronounced IPA: /əˈtoʊbɨkoʊ/ listen totalling 464 suites for approximately $43.9 million. To finance these purchases, CAP REIT raised approximately $60.1 million in August through the issuance of 4.1 million Trust Units in a successful bought deal equity offering. In addition, growth financing was provided by the disposition of thirteen smaller, non-core apartment complexes in Ontario totalling 797 suites for net cash proceeds of approximately $42.5 million. The disposition generated a gain of approximately $10.9 million or $0.204 per Unit. "The significant gain we generated on the disposition of these non-core Ontario properties demonstrated the success of our investment strategies. In addition, by recycling recycling, the process of recovering and reusing waste products—from household use, manufacturing, agriculture, and business—and thereby reducing their burden on the environment. these assets, we generated funds to strengthen our presence in some of Canada's strongest apartment markets and enhance the geographic diversification of our portfolio," Mr. Schwartz added. "As we invest the balance of the proceeds from this disposition and our August equity financing Equity Financing The act of raising money for company activities by selling common or preferred stock to individual or institutional investors. In return for the money paid, shareholders receive ownership interests in the corporation. , we expect to generate further growth in distributable income and funds from operations Funds From Operations (FFO) Used by real estate and other investment trusts to define the cash flow from trust operations; earnings with depreciation and amortization added back. going forward." "Looking ahead, we hope to add between 1,500 and 2,000 suites annually to our portfolio. This ongoing expansion and repositioning repositioning Laparoscopic surgery The changing of a Pt's position during a procedure to improve access or visualization of the operative field, which may be linked to complications, as it changes anatomic planes of operation. Cf Laparoscopic surgery. of our portfolio will produce further value for our Unitholders over the long term," he continued. Revenues for the year ended December 31, 2005, increased 28.8% to $258.7 million from $200.9 million last year. The increase is due to acquisitions completed, higher occupancies and increased rents. Occupancy rose to 97.4% at the end of 2005 compared to 96.6% at the same time last year. For the year ended December 31, 2005, CAP REIT completed the renovation of 2,252 suites pursuant to its program to stabilize stabilize See peg. and enhance rental performance in certain targeted properties. Average rents increased across the majority of CAP REIT's portfolio due to targeted and highly effective sales and marketing strategies and suite renovation programs at specific properties Specific properties of a substance are derived from other intrinsic and extrinsic properties (or intensive and extensive properties) of that substance. For example, the density of steel (a specific and intrinsic property) can be derived from measurements of the mass of a steel bar . Excluding the lower average rents for the recently acquired Montreal portfolio, overall rents for the total portfolio increased at year end as compared to last year. Total operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. for the year ended December 31, 2005, were higher due to the increase in the size of the portfolio and increased energy costs compared to last year. Energy costs rose to 14.4% of revenues in 2005 compared to 13.4% in 2004. Primarily due to the increase in revenues, net operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. ("NOI NOI Net Operating Income NOI Notice of Intent NOI Nation of Islam NOI Notice of Inquiry NOI Neuro Orthopaedic Institute NOI New Organizing Institute NOI Notice of Interest NOI No Offense Intended NOI National Olympiad in Informatics ") for the year ended December 31, 2005 rose 26.3% to $133.3 million compared to $105.5 million last year. NOI for the year remained within CAP REIT's target range at 51.5% of revenues despite soft market conditions experienced through the first two quarters of the year and the increase in energy costs experienced in 2005. Trust expenses rose in 2005 due to various transition costs for the integration of the ResREIT portfolio including recruitment and staffing as well as increased other costs for legal and securities compliance and information technology. Management believes trust expenses increased by approximately $0.02 per Unit in 2005 compared with last year as a result of these higher than normal expenses. Management is confident these costs will help to build an operating platform on which further growth can be achieved. "As market conditions in the apartment business continue to strengthen, we are seeing the benefits of our innovative sales and marketing strategies and the results of our capital improvement and suite renovation programs," Mr. Schwartz stated. "We expect we will see further improvement in our operating performance over the long term." For the year ended December 31, 2005, distributable income ("DI") rose 18.1% to $61.8 million or $1.160 per Unit from $52.3 million or $1.250 per Unit last year. Included in DI last year was $0.046 per Unit for the add back of one-time deferred financing costs related to the ResREIT acquisition. Not including this amount, DI per Unit was $1.204 per Unit for the year ended December 31, 2004. The payout ratio Payout Ratio The percentage of earnings paid out in dividends. It is calculated by dividing dividends per share by earnings per share. Notes: The payout ratio indicates how well earnings support the dividend payments: the lower the ratio, the more secure the dividend. for the year ended December 31, 2005 was 93.2% compared to 86.3% in 2004. The effective payout ratio, after excluding from distributions the cash reinvested by investors in the Distribution Reinvestment Plan reinvestment plan See dividend reinvestment plan (DRIP). ("DRIP"), was 78.8% for the year ended December 31, 2005 compared to 77.4% last year. During 2005, CAP REIT invested approximately $40.9 million in capital improvements, including $21.9 million in the ResREIT portfolio to ensure these properties achieve targeted synergies and economies of scale. During 2005, the performance of the ResREIT portfolio improved significantly with increased occupancies and average rents compared to the prior year, resulting in a 4.2% increase in NOI for the six months ended December 31, 2005 compared to the same period last year. Management expects capital expenditures for its existing property portfolio will be reduced in 2006 to approximately $38 million. Funds from operations ("FFO FFO See: Funds from operations ") in 2005 rose to $61.3 million or $1.151 per Unit from $50.3 million or $1.204 per Unit last year. FFO was reduced in the first quarter of 2005 by approximately $0.01 per Unit for Long-Term Incentive Plan compensation cost for Units granted to executives, employees and trustees. Per Unit amounts in 2005 were also impacted by the 27.4% increase in the weighted average number of Units outstanding compared to the prior year and the fact that the funds from CAP REIT's $60.1 million equity offering completed in August were not fully invested in income properties through the period. For the three months ended December 31, 2005, operating revenues operating revenue Revenue from any regular source. Revenue from sales is adjusted for discounts and returns when calculating operating revenue. Compare other revenue. rose 7.4% to $67.9 million, generating a 3.7% increase in net operating income. Net income in the fourth quarter was $10.0 million, and included the $10.9 million gain on the Ontario portfolio disposition. Distributable income was $14.9 million or $0.268 per Unit compared to $15.0 million or $0.295 per Unit in the same quarter last year. Funds from Operations for the three months ended December 31, 2005 were $14.9 million or $0.269 per Unit compared to $14.9 million or $0.292 per Unit last year. Per Unit amounts in fourth quarter 2005 were impacted by the 8.9% increase in the weighted average number of Units outstanding compared to the same period last year, and the fact that the proceeds from the August equity offering were not fully invested in the quarter. CAP REIT's balance sheet strengthened as at December 31, 2005 compared to the prior year end as the overall leverage ratio of mortgage debt and borrowings on the acquisition and operating facilities to gross book value was reduced to 62.72% as compared to 63.58% as at December 31, 2004. In addition, the effective weighted average interest rate for the total mortgage portfolio was reduced to 5.38% at December 31, 2005 and the average term to maturity was extended to 8.1 years (including the impact of interest rate forward contracts) compared to 5.42% and 7.4 years, respectively, at December 31, 2004. At December 31, 2005, CAP REIT had the capacity to acquire approximately $504 million in new properties if leverage was increased to the maximum allowed under its Declaration of Trust. Mr. Schwartz concluded: "The fundamentals in the residential rental industry are beginning to strengthen, driven by a rising interest rate environment, the high cost of home ownership, improved youth job growth, and rising immigration immigration, entrance of a person (an alien) into a new country for the purpose of establishing permanent residence. Motives for immigration, like those for migration generally, are often economic, although religious or political factors may be very important. to our key Ontario and GTA GTA Grand Theft Auto (legal) GTA Grand Theft Auto (video game) GTA Greater Toronto Area (Canada) GTA Graduate Teaching Assistant markets. This optimism, combined with the successful steps we are taking to grow and reposition our property portfolio, will contribute to enhanced Unitholder value going forward. In addition, we are confident our strong balance sheet and reduced leverage will enable us to continue producing sustainable cash distributions over the long term." Financial Highlights: --------------------------------------------------------------------- Period Ended December 31, Three Months Year ($ Thousands, except per Unit amounts) 2005 2004 2005 2004 --------------------------------------------------------------------- --------------------------------------------------------------------- Operating Revenues $ 67,934 $ 63,269 $ 258,666 $ 200,901 Net Operating Income (NOI)(1) $ 33,949 $ 32,748 $ 133,300 $ 105,505 NOI Margin 50.0% 51.8% 51.5% 52.5% Discontinued Operations $ 10,956 $ 2,723 $ 11,470 $ 3,439 Gain on Property Dispositions $ 10,867 $ 2,559 $ 10,867 $ 2,559 Net Income $ 9,973 $ 2,836 $ 12,809 $ 10,222 Net Income per Unit - Basic & Diluted $ 0.179 $ 0.056 $ 0.240 $ 0.244 --------------------------------------------------------------------- Distributable Income (DI)(2)(3) $ 14,871 $ 15,035 $ 61,770 $ 52,283 Distributable Income per Unit - Basic $ 0.268 $ 0.295 $ 1.160 $ 1.250 Distributions Declared per Unit $ 0.270 $ 0.270 $ 1.080 $ 1.080 Payout Ratio 100.7% 91.6% 93.2% 86.3% Effective Payout Ratio(4) 84.5% 84.3% 78.8% 77.4% --------------------------------------------------------------------- Funds from Operations (FFO)(5) $ 14,911 $ 14,892 $ 61,303 $ 50,334 Funds from Operation per Unit - Basic $ 0.269 $ 0.292 $ 1.151 $ 1.204 --------------------------------------------------------------------- Distributable Income Including Gain on Disposition(6) $ 25,738 $ 17,594 $ 72,637 $ 54,842 DI per Unit - Basic - Including Gain on Disposition(6) $ 0.464 $ 0.345 $ 1.364 $ 1.312 Funds from Operations Including Gain on Disposition(6) $ 25,778 $ 17,451 $ 72,170 $ 52,893 FFO per Unit - Basic - Including Gain on Disposition(6) $ 0.464 $ 0.342 $ 1.355 $ 1.265 --------------------------------------------------------------------- Number of Suites 25,252 24,132 Income Properties $1,907,315 $1,763,280 --------------------------------------------------------------------- Weighted Average Number of Units (000's) - Basic 55,517 50,980 53,255 41,816 Weighted Average Number of Units (000's) - Diluted 55,567 51,156 53,304 41,899 --------------------------------------------------------------------- (1) NOI is defined as operating revenues less operating expenses. (2) Includes $1.9 million ($0.046 per Unit) in the year ended December 31, 2004 for the add-back of one-time deferred financing costs related to the ResREIT acquisition. (3) DI is defined in its Declaration of Trust dated May 26, 2005. (4) Excludes cash reinvested through the DRIP. (5) FFO is calculated in accordance with the recommendations of the Real Property Association of Canada (RealPac) dated November 30, 2004. (6) Management considers DI and FFO including gain on property disposition to be a meaningful measure of performance as the continued realization of capital investments is a fundamental component of CAP REIT's business strategy and demonstrates the success of its real estate investment activity. NOI, FFO and DI are not defined by generally accepted accounting principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting (GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). ), do not have standard meanings and may not be comparable with other industries or companies. For a reconciliation to net income, see pages 10 and 18 of the Management's Discussion and Analysis Management's discussion and analysis (MD&A) A report from management to shareholders that accompanies the firm's financial statements in the annual report. It explains the period's financial results and enables management to discuss topics that may not be apparent in the financial dated February 22, 2006. All statements in this press release that do not relate to historical facts constitute forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. . These statements represent CAP REIT's intentions, plans, expectations and beliefs and are subject to certain risks and uncertainties that could result in actual results differing materially from these forward-looking statements. These risks and uncertainties are more fully described in regulatory filings that can be obtained on SEDAR SEDAR System for Electronic Document Analysis and Retrieval SEDAR Southeast Data, Assessment, and Review at www.sedar.com. CAP REIT's Annual 2005 Consolidated Financial Statements Consolidated Financial Statements The combined financial statements of a parent company and its subsidiaries. Notes: Because consolidated financial statements present an aggregated look at the financial position of a parent and its subsidiaries, they enable you to gauge including Management's Discussion and Analysis can be found on the investor relations Investor relations The process by which the corporation communicates with its investors. page at www.capreit.net. As one of Canada's largest residential landlords, CAP REIT (TSX:CAR.UN) is a growthoriented investment trust owning interests in 25,716 residential suites located in major urban centres from coast to coast. Since its Initial Public Offering in May 1997, CAP REIT has grown monthly cash distributions per Unit by 51%. For more information about CAP REIT, its business and its investment highlights, please refer to our web site at www.capreit.net. Canadian Apartment Properties Real Estate Investment Trust (TSX:CAR.UN) |
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