Canadian Apartment Properties Real Estate Investment Trust
("CAPREIT") (TSX: CAR.UN) announced today strong operating and
financial results for the three months and year ended December 31,
2023. Management will host a conference call to discuss the
financial results on Friday, February 23, 2024 at 9:00 a.m.
ET.
HIGHLIGHTS
As at |
December 31, 2023 |
December 31, 2022 |
Total Portfolio Performance and Other
Measures |
|
|
Number of suites and sites(1) |
|
64,260 |
|
|
66,586 |
|
Investment properties fair value(2) (000s) |
$ |
16,532,096 |
|
$ |
17,153,709 |
|
Occupied
AMR(1)(3) |
|
|
Canadian Residential Portfolio(4) |
$ |
1,516 |
|
$ |
1,401 |
|
The Netherlands Portfolio |
€ |
1,063 |
|
€ |
992 |
|
Occupancy(1) |
|
|
Canadian Residential Portfolio(4) |
|
98.8 |
% |
|
98.9 |
% |
The Netherlands Portfolio |
|
98.5 |
% |
|
98.4 |
% |
Total Portfolio(5) |
|
98.2 |
% |
|
98.3 |
% |
(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. |
|
Three Months Ended |
Year Ended |
|
December 31, |
December 31, |
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
Financial Performance |
|
|
|
|
Operating revenues (000s) |
$ |
272,195 |
|
$ |
256,915 |
|
$ |
1,065,317 |
|
$ |
1,007,268 |
|
Net operating income ("NOI") (000s) |
$ |
176,711 |
|
$ |
164,500 |
|
$ |
692,786 |
|
$ |
650,409 |
|
NOI margin |
|
64.9 |
% |
|
64.0 |
% |
|
65.0 |
% |
|
64.6 |
% |
Same property NOI (000s) |
$ |
167,898 |
|
$ |
155,628 |
|
$ |
659,657 |
|
$ |
614,621 |
|
Same property NOI margin |
|
64.7 |
% |
|
64.5 |
% |
|
65.3 |
% |
|
65.0 |
% |
Net income (loss) (000s) |
$ |
9,212 |
|
$ |
155,523 |
|
$ |
(411,574 |
) |
$ |
13,637 |
|
FFO per unit – diluted (formerly known as "NFFO per unit –
diluted")(1) |
$ |
0.602 |
|
$ |
0.580 |
|
$ |
2.396 |
|
$ |
2.328 |
|
Distributions per unit |
$ |
0.363 |
|
$ |
0.363 |
|
$ |
1.450 |
|
$ |
1.450 |
|
FFO payout ratio (formerly known as "NFFO payout ratio")(1) |
|
60.4 |
% |
|
62.4 |
% |
|
60.5 |
% |
|
62.1 |
% |
(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 |
December 31, 2023 |
December 31, 2022 |
Financing Metrics and Liquidity |
|
|
Total debt to gross book value(1) |
|
41.6 |
% |
|
39.4 |
% |
Weighted average mortgage effective interest rate(2) |
|
2.80 |
% |
|
2.61 |
% |
Weighted average mortgage term (years)(2) |
|
4.9 |
|
|
5.4 |
|
Debt service coverage (times)(1)(3) |
|
1.8 |
x |
|
1.9 |
x |
Interest coverage (times)(1)(3) |
|
3.3 |
x |
|
3.7 |
x |
Cash and cash equivalents (000s) |
$ |
29,528 |
|
$ |
47,303 |
|
Available liquidity – Acquisition and Operating Facility
(000s) |
$ |
340,059 |
|
$ |
333,416 |
|
Capital |
|
|
Unitholders' equity (000s) |
$ |
9,278,595 |
|
$ |
10,003,695 |
|
Net asset value(1) (000s) |
$ |
9,212,594 |
|
$ |
9,954,566 |
|
Total number of units – diluted (000s) |
|
169,868 |
|
|
171,599 |
|
Net asset value per unit – diluted(1) |
$ |
54.23 |
|
$ |
58.01 |
|
(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. |
"After many proud years of increasing our size
and scale, we've entered a new era for CAPREIT in which we are
thrilled to be modernizing our portfolio and growing earnings per
unit, as opposed to growing suite count," commented Mark Kenney,
President and Chief Executive Officer. "We have a reinvigorated
strategy and team, focused on optimizing our properties to improve
quality and operational efficiencies, while also supporting the
alleviation of the Canadian housing crisis in all the ways that we
can. We're committed to the enhancement of value for our
Unitholders and our communities, and we'll continue to execute on
our strategic objectives going forward, as we effectively
demonstrated in 2023."
"This year, we achieved our target and completed
the disposition of over $400 million in non-core properties at a
premium to IFRS NAV, while reinvesting approximately $300 million
into new purpose-built rental properties located in Canada's most
attractive, highest-density markets, where long-term fundamentals
are strongest," said Julian Schonfeldt, Chief Investment Officer.
"Not only have we acquired these prime new buildings at prices that
are well below replacement cost, we've also reinvested
approximately $100 million in our NCIB program in 2023 at unit
prices that represent a significant discount to IFRS NAV. Our
value-creation strategy is working, and we're excited to continue
recycling our capital and repositioning our portfolio toward
high-quality, recently constructed rental apartment properties in
Canada."
"We're pleased with our operational performance
in 2023, with vacancies at a minimum and margins holding strong,"
added Stephen Co, Chief Financial Officer. "We're cognizant of the
tight Canadian rental market in which we're operating today, and in
response, we've actively scaled back on our in-suite and common
area capital expenditure initiatives, as we focus on maximizing our
cash returns. However, this strategy involves, to a lesser extent,
an intentional increase in repairs and maintenance, which
negatively affected our margins as compared to 2022. Despite this,
our same property NOI margin expanded by 30 basis points to 65.3%
in 2023, which highlights our strong rent growth and other
cost-mitigating measures. Our active management of debt financing
and leverage has maintained our conservative balance sheet
position, and we had up to $340 million in available liquidity on
our Acquisition and Operating Facility at year end, in place to
provide financial flexibility and support our strategic priorities
moving forward."
SUMMARY OF Q4 AND YEAR-END 2023 RESULTS OF
OPERATIONS
Strategic Initiatives
Update
- CAPREIT continues to invest in
strategic opportunities that are accretive. For the three months
ended December 31, 2023, CAPREIT acquired two properties with 162
suites in British Columbia for a total acquisition cost of $91.2
million. For the year ended December 31, 2023, CAPREIT acquired
seven properties with 631 suites primarily in British Columbia for
a total acquisition cost of $299.4 million.
- For the three months ended December
31, 2023, CAPREIT disposed of 372 suites which were comprised of
three non-core properties located in Canada and ten single
residential suites located in the Netherlands, for $69.6 million
(excluding transaction costs and other adjustments). For the year
ended December 31, 2023, CAPREIT disposed of 2,969 suites and sites
for $424.1 million (excluding transaction costs and other
adjustments) worth of non-core property dispositions.
- CAPREIT did not purchase any Trust
Units for cancellation during the three months ended December 31,
2023. During the year ended December 31, 2023, CAPREIT purchased
and cancelled approximately 2.2 million Trust Units under the
normal course issuer bid ("NCIB") program, at a weighted average
purchase price of $46.53 per Trust Unit, for a total cost of $100.9
million.
- Pursuant to CAPREIT's strategy to
upgrade the quality and diversification of the property portfolio
through repositioning and capital recycling initiatives to grow
earnings and cash flow potential, CAPREIT achieved its goal of
disposing between $400 million and $500 million of non-core
Canadian properties in 2023. CAPREIT is currently targeting the
disposition of over $400 million of non-core Canadian properties in
2024.
Operating Results
- Same property Occupied AMR for the
Canadian residential portfolio as at December 31, 2023 increased to
$1,509, up 6.2% compared to December 31, 2022, while same property
occupancy for the Canadian residential portfolio remained
relatively stable at 98.8%.
- Same property NOI increased by 7.9%
and 7.3%, respectively, for the three months and year ended
December 31, 2023 compared to the same periods last year.
Additionally, same property NOI margin increased to 64.7%, up 0.2%,
for the three months ended December 31, 2023 and increased to
65.3%, up 0.3%, for the year ended December 31, 2023 compared to
the same periods last year.
- Diluted FFO per unit (formerly
known as "diluted NFFO per unit") increased by 3.8% and 2.9%,
respectively, for the three months and year ended December 31, 2023
compared to the same periods last year, primarily due to
contributions from acquisitions, same property operational growth
and lower trust expense, net of non-routine reorganization costs,
partially offset by dispositions and higher interest expense on
credit facilities payable and mortgages payable, supplemented by
accretive NCIB purchases.
Balance Sheet Highlights
- CAPREIT's financial position
remains strong with $340.1 million of available capacity on its
Canadian Acquisition and Operating Facility.
- In 2023, CAPREIT completed mortgage
financings of $552.5 million for the Canadian portfolio. To date,
CAPREIT completed consolidated mortgage financings of $662.3
million. The mortgages refinanced have a weighted average term to
maturity of 6.8 years and a weighted average interest rate of
4.41%.
- For the three months and year ended
December 31, 2023, CAPREIT recorded a fair value loss on investment
properties (including assets held for sale) of $111.4 million and
$914.6 million, respectively, primarily driven by capitalization
rate ("cap rate") expansion in both the Canadian and Netherlands
portfolio, as a reflection of the market conditions. The overall
carrying value of investment properties (excluding assets held for
sale) as at December 31, 2023 was $16.5 billion compared to $17.2
billion as at December 31, 2022.
- Diluted NAV per unit as at December
31, 2023 decreased to $54.23 from $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 December 31, |
|
2023 |
|
2022 |
|
2023 |
|
2022 |
|
Occupied AMR |
Occ. % |
Occupied AMR |
Occ. % |
Occupied AMR |
Occ. % |
Occupied AMR |
Occ. % |
Total Canadian residential suites |
$ |
1,516 |
98.8 |
$ |
1,401 |
98.9 |
$ |
1,509 |
98.8 |
$ |
1,421 |
98.9 |
Total MHC sites |
$ |
439 |
96.1 |
$ |
425 |
95.6 |
$ |
439 |
96.1 |
$ |
425 |
95.5 |
The Netherlands portfolio |
€ |
1,063 |
98.5 |
€ |
992 |
98.4 |
€ |
1,063 |
98.5 |
€ |
992 |
98.4 |
(1) |
Same property Occupied AMR and occupancy include all properties
held as at December 31, 2022, but exclude properties disposed of or
held for sale as at December 31, 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 operational growth.
The rate of growth in same property Occupied AMR has been primarily
due to (i) rental increases on turnover in the rental markets of
most provinces across the Canadian portfolio and (ii) rental
increases on renewals.
The weighted average gross rent per square foot
for total Canadian residential suites was approximately $1.80 as at
December 31, 2023, increased from $1.70 as at December 31,
2022.
Net Operating Income
Same properties for the three months and year
ended December 31, 2023 are defined as all properties owned by
CAPREIT continuously since December 31, 2021, and therefore do not
take into account the impact on performance of acquisitions or
dispositions completed during 2023 and 2022, or properties that are
classified as held for sale as at December 31, 2023.
($ Thousands) |
Total NOI |
Same Property NOI(1) |
For the Three Months Ended December 31, |
|
2023 |
|
|
2022 |
|
%(2) |
|
2023 |
|
|
2022 |
|
%(2) |
Operating revenues |
|
|
|
|
|
|
Net rental revenues |
$ |
257,175 |
|
$ |
243,552 |
|
5.6 |
|
$ |
245,157 |
|
$ |
228,611 |
|
7.2 |
|
Other(3) |
|
15,020 |
|
|
13,363 |
|
12.4 |
|
|
14,242 |
|
|
12,554 |
|
13.4 |
|
Total operating revenues |
$ |
272,195 |
|
$ |
256,915 |
|
5.9 |
|
$ |
259,399 |
|
$ |
241,165 |
|
7.6 |
|
Operating expenses |
|
|
|
|
|
|
Realty taxes |
|
(23,933 |
) |
|
(23,397 |
) |
2.3 |
|
|
(22,796 |
) |
|
(22,019 |
) |
3.5 |
|
Utilities |
|
(19,569 |
) |
|
(20,355 |
) |
(3.9 |
) |
|
(19,084 |
) |
|
(19,159 |
) |
(0.4 |
) |
Other(4) |
|
(51,982 |
) |
|
(48,663 |
) |
6.8 |
|
|
(49,621 |
) |
|
(44,359 |
) |
11.9 |
|
Total operating expenses(5) |
$ |
(95,484 |
) |
$ |
(92,415 |
) |
3.3 |
|
$ |
(91,501 |
) |
$ |
(85,537 |
) |
7.0 |
|
NOI |
$ |
176,711 |
|
$ |
164,500 |
|
7.4 |
|
$ |
167,898 |
|
$ |
155,628 |
|
7.9 |
|
NOI margin |
|
64.9 |
% |
|
64.0 |
% |
|
|
64.7 |
% |
|
64.5 |
% |
|
(1) |
Same property results exclude performance of acquisitions or
dispositions completed during 2023 and 2022, or properties that are
classified as held for sale as at December 31, 2023. For the three
months ended December 31, 2023, NOI contributions from acquisitions
or dispositions completed during 2023 and 2022, or properties that
are classified as held for sale as at December 31, 2023, were
$8,813 (for the three months ended December 31, 2022 –
$8,872). |
(2) |
Represents the year-over-year percentage change. |
(3) |
Comprises ancillary income such as parking, laundry and antenna
revenue. |
(4) |
Comprises repairs and maintenance ("R&M"), wages, insurance,
advertising, legal costs and expected credit losses. |
(5) |
Total operating expenses, on a constant currency basis, increased
by approximately 2.9% and 6.5%, respectively, for the total and
same property portfolio compared to the same periods last
year. |
($ Thousands) |
Total NOI |
Same Property NOI(1) |
For the Year Ended December 31, |
|
2023 |
|
|
2022 |
|
%(2) |
|
2023 |
|
|
2022 |
|
%(2) |
Operating Revenues |
|
|
|
|
|
|
Net rental revenues |
$ |
1,008,909 |
|
$ |
954,598 |
|
5.7 |
|
$ |
957,200 |
|
$ |
896,093 |
|
6.8 |
Other(3) |
|
56,408 |
|
|
52,670 |
|
7.1 |
|
|
53,390 |
|
|
49,612 |
|
7.6 |
Total operating revenues |
$ |
1,065,317 |
|
$ |
1,007,268 |
|
5.8 |
|
$ |
1,010,590 |
|
$ |
945,705 |
|
6.9 |
Operating expenses |
|
|
|
|
|
|
Realty taxes |
|
(96,408 |
) |
|
(93,912 |
) |
2.7 |
|
|
(90,940 |
) |
|
(87,910 |
) |
3.4 |
Utilities |
|
(77,365 |
) |
|
(77,565 |
) |
(0.3 |
) |
|
(74,473 |
) |
|
(72,604 |
) |
2.6 |
Other(4) |
|
(198,758 |
) |
|
(185,382 |
) |
7.2 |
|
|
(185,520 |
) |
|
(170,570 |
) |
8.8 |
Total operating expenses(5) |
$ |
(372,531 |
) |
$ |
(356,859 |
) |
4.4 |
|
$ |
(350,933 |
) |
$ |
(331,084 |
) |
6.0 |
NOI |
$ |
692,786 |
|
$ |
650,409 |
|
6.5 |
|
$ |
659,657 |
|
$ |
614,621 |
|
7.3 |
NOI margin |
|
65.0 |
% |
|
64.6 |
% |
|
|
65.3 |
% |
|
65.0 |
% |
|
(1) |
Same property results exclude performance of acquisitions or
dispositions completed during 2023 and 2022, or properties that are
classified as held for sale as at December 31, 2023. For the year
ended December 31, 2023, NOI contributions from acquisitions or
dispositions completed during 2023 and 2022, or properties that are
classified as held for sale as at December 31, 2023, were $33,129
(for the year ended December 31, 2022 – $35,788). |
(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 3.9% and 5.5%, respectively, for the total and
same property portfolio compared to the same periods last
year. |
Operating
Revenues
For the three months ended December 31, 2023,
same property operating revenues increased by $18.2 million,
primarily driven by increases in monthly rents on turnovers and
renewals. Total operating revenues increased by $15.3 million
during the same period, due to $18.3 million of operational growth,
primarily on the same property operating portfolio and to a lesser
extent on assets held for sale as at December 31, 2023 and a $3.7
million increase from acquisitions, partially offset by $6.7
million lower revenues due to dispositions.
For the year ended December 31, 2023, same
property operating revenues increased by $64.9 million, primarily
driven by increases in monthly rents on turnovers and renewals.
Total operating revenues increased by $58.0 million during the same
period, due to $65.1 million of operational growth, primarily on
the same property operating portfolio and to a lesser extent on
assets held for sale as at December 31, 2023 and a $16.8 million
increase from acquisitions, partially offset by $23.9 million lower
revenues due to dispositions.
Operating Expenses
For the three months and year ended December 31,
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 and higher insurance costs.
The higher R&M costs in both periods are due to general
inflationary pressures, as well as higher maintenance costs that
correspond with a reduction in suite and common area capital
improvements, reflecting CAPREIT's strategic reallocation of
capital in response to the tight rental market in Canada.
For the three months and year ended December 31,
2023 operating costs increased for the total property portfolio
compared to the same periods last year primarily for the same
reasons described above. Additionally, for the year ended December
31, 2023, other operating expenses increased for the total
portfolio 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.
SUBSEQUENT EVENTS
The table below summarizes the disposition of an
investment property completed subsequent to December 31, 2023:
Disposition Date |
Suite Count |
Region |
Sale Price(1) |
January 15, 2024 |
32 |
Victoria, BC |
$12.3 million |
(1) |
Sale price excludes disposition costs and other adjustments. |
AT-THE-MARKET ("ATM")
PROGRAM
On February 22, 2024, CAPREIT will file a
prospectus supplement to establish an ATM Program that would allow
CAPREIT to issue Trust Units up to an aggregate sale price of
$400.0 million from treasury to the public from time to time, at
its discretion. The ATM Program is designed to provide CAPREIT with
additional financing flexibility, should it be required in the
future. CAPREIT intends to use the net proceeds from the ATM
Program, if any, for future acquisitions, repayment of
indebtedness, and for general trust purposes.
“We are excited to launch our inaugural ATM
program that will allow CAPREIT to cost-effectively raise equity,
from time to time, when favourable market conditions exist,
providing CAPREIT with added financial flexibility to execute on
its capital allocation strategy,” commented Stephen Co, Chief
Financial Officer.
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
TD Securities Inc. (the “Agent”). Any Trust Units sold in the ATM
Program will be distributed through the Toronto Stock Exchange 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.
Given that Trust Units sold in the ATM Program,
if any, will be distributed at the market prices prevailing at the
time of sale, prices may vary among purchasers during the period of
the distribution. Distributions of Trust Units through the ATM
Program, if any, will be made pursuant to the terms of the Equity
Distribution Agreement. In connection with the establishment of the
ATM Program, CAPREIT will file a prospectus supplement dated
February 22, 2024 (the “Prospectus Supplement”) to the final base
shelf prospectus dated May 9, 2023 (the “Shelf Prospectus”). The
Prospectus Supplement, the Equity Distribution Agreement and the
Shelf Prospectus will be available on SEDAR+ at www.sedarplus.ca
under CAPREIT’s profile. Alternatively, the Agent will send copies
of the Prospectus Supplement, the Equity Distribution Agreement and
the Shelf Prospectus, as applicable, to investors upon request to
TD Securities Inc., attn: Symcor, NPM, 1625 Tech Avenue,
Mississauga, Ontario, L4W 5P5, by email at sdcconfirms@td.com or by
phone at (289) 360-2009
This press release does not constitute an offer
to sell securities, nor is it a solicitation of an offer to buy
securities, in any jurisdiction in which such offer or solicitation
is unlawful. This press release is not an offer of securities for
sale in the United States (“U.S.”). The securities being offered
have not been and will not be registered under the U.S. Securities
Act of 1933, as amended, and accordingly are not being offered for
sale and may not be offered, sold or delivered, directly or
indirectly within the U.S., its possessions and other areas subject
to its jurisdiction or to, or for the account or for the benefit of
a U.S. person, except pursuant to an exemption from the
registration requirements of that Act.
ADDITIONAL INFORMATION
More detailed information and analysis is
included in CAPREIT's consolidated annual financial statements and
MD&A for the year ended December 31, 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, February 23, 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 504875.
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 December 31, 2023,
CAPREIT owns approximately 64,300 residential apartment suites,
townhomes and manufactured home community sites that are
well-located across Canada and the Netherlands, with approximately
$16.5 billion of investment properties in Canada and Europe. For
more information about CAPREIT, its business and its investment
highlights, please visit our website at www.capreit.ca and our
public disclosures which can be found under our profile at
www.sedarplus.ca.
Non-IFRS Measures
CAPREIT prepares and releases unaudited
condensed consolidated interim financial statements and audited
consolidated annual financial statements in accordance with IFRS.
In this and other earnings releases and investor conference calls,
as a complement to results provided in accordance with IFRS,
CAPREIT discloses measures not recognized under IFRS which do not
have standard meanings prescribed by IFRS. These include Funds From
Operations ("FFO"), Net Asset Value ("NAV"), Total Debt, Gross Book
Value, and Adjusted Earnings Before Interest, Tax, Depreciation,
Amortization and Fair Value ("Adjusted EBITDAFV") (the "Non-IFRS
Financial Measures"), as well as diluted FFO per unit, diluted NAV
per unit, FFO payout ratio, 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 February
22, 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 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 relabelled 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
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 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 ("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, 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, 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 the MD&A
released on February 22, 2024. The information in this press
release is based on information available to management as of
February 22, 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
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 |
Year Ended |
|
December 31, |
December 31, |
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
Net income (loss) |
$ |
9,212 |
|
$ |
155,523 |
|
$ |
(411,574 |
) |
$ |
13,637 |
|
Adjustments: |
|
|
|
|
Fair value adjustments of investment properties and assets held for
sale |
|
111,381 |
|
|
(74,461 |
) |
|
914,585 |
|
|
468,327 |
|
Fair value adjustments of financial instruments |
|
3,494 |
|
|
44,434 |
|
|
34,373 |
|
|
7,440 |
|
Interest expense on Exchangeable LP Units |
|
597 |
|
|
609 |
|
|
2,382 |
|
|
2,435 |
|
Loss (gain) on non-controlling interest |
|
(8,959 |
) |
|
8,982 |
|
|
(45,209 |
) |
|
(104,822 |
) |
Net FFO impact attributable to ERES units held by non-controlling
unitholders(1) |
|
(4,689 |
) |
|
(4,459 |
) |
|
(18,992 |
) |
|
(18,026 |
) |
Deferred income tax recovery |
|
(15,268 |
) |
|
(32,064 |
) |
|
(85,368 |
) |
|
(14,877 |
) |
Loss (gain) on foreign currency translation |
|
(2,345 |
) |
|
(856 |
) |
|
(4,161 |
) |
|
20,775 |
|
Loss on transactions and other activities(2) |
|
3,809 |
|
|
1,756 |
|
|
13,911 |
|
|
25,058 |
|
Lease principal repayments |
|
(308 |
) |
|
(286 |
) |
|
(1,190 |
) |
|
(1,007 |
) |
Former FFO |
$ |
96,924 |
|
$ |
99,178 |
|
$ |
398,757 |
|
$ |
398,940 |
|
Reorganization, senior management termination, and retirement
costs(3) |
|
4,900 |
|
|
418 |
|
|
11,760 |
|
|
6,668 |
|
Amortization of losses from accumulated other comprehensive loss to
interest and other financing costs |
|
273 |
|
|
67 |
|
|
341 |
|
|
1,361 |
|
Net loss (gain) on derecognition of debt |
|
56 |
|
|
— |
|
|
(3,251 |
) |
|
(1,766 |
) |
Mortgage prepayment cost |
|
— |
|
|
— |
|
|
55 |
|
|
1,354 |
|
Costs relating to transactions that were not completed |
|
— |
|
|
259 |
|
|
— |
|
|
420 |
|
FFO (formerly known as "NFFO") |
$ |
102,153 |
|
$ |
99,922 |
|
$ |
407,662 |
|
$ |
406,977 |
|
Weighted average number of units (000s) ‑ diluted |
|
169,828 |
|
|
172,401 |
|
|
170,117 |
|
|
174,816 |
|
FFO per unit – diluted (formerly known as "NFFO per unit –
diluted") |
$ |
0.602 |
|
$ |
0.580 |
|
$ |
2.396 |
|
$ |
2.328 |
|
|
|
|
|
|
Total distributions declared |
$ |
61,672 |
|
$ |
62,376 |
|
$ |
246,534 |
|
$ |
252,822 |
|
FFO payout ratio (formerly known as "NFFO payout ratio")(4) |
|
60.4 |
% |
|
62.4 |
% |
|
60.5 |
% |
|
62.1 |
% |
(1) |
The adjustment is based on applying the 35% weighted average
ownership held by ERES non-controlling unitholders (December 31,
2022 – 34%). |
(2) |
Primarily includes loss on dispositions,amortization of property,
plant, and equipment and right-of-use asset and impairment of
goodwill. |
(3) |
For the three months and year ended December 31, 2023, includes
$nil and $765, respectively, of accelerated vesting of previously
granted unit-based compensation (three months and year ended
December 31, 2022 – $nil and $976, respectively). |
(4) |
The payout ratio compares distributions declared to FFO (formerly
known as "NFFO"). FFO payout ratio is calculated using total
distributions declared during the period divided by FFO. |
Reconciliation of Total Debt and Total
Debt Ratios:
($ Thousands) |
|
As at |
December 31, 2023 |
December 31, 2022 |
Mortgages payable – non-current |
$ |
6,002,617 |
|
$ |
5,963,820 |
|
Mortgages payable – current |
|
651,371 |
|
|
613,277 |
|
Liabilities related to assets held for sale |
|
23,706 |
|
|
38,116 |
|
Mortgage debt |
|
6,677,694 |
|
|
6,615,213 |
|
Credit facilities payable – non-current |
|
405,133 |
|
|
388,975 |
|
Total Debt |
$ |
7,082,827 |
|
$ |
7,004,188 |
|
|
|
|
Total Assets |
$ |
16,968,640 |
|
$ |
17,741,888 |
|
Add: Total accumulated amortization and depreciation |
|
45,217 |
|
|
42,100 |
|
Gross Book Value(1) |
$ |
17,013,857 |
|
$ |
17,783,988 |
|
Ratio of Total Debt to Gross Book Value |
|
41.6 |
% |
|
39.4 |
% |
Ratio of Mortgage debt to Gross Book Value |
|
39.2 |
% |
|
37.2 |
% |
(1) |
Gross Book Value ("GBV") is defined by CAPREIT's Declaration of
Trust. |
Debt Service Coverage Ratio
($ Thousands) |
|
For the years ended |
December 31, 2023 |
December 31, 2022 |
Contractual interest on mortgages payable(1) |
$ |
161,178 |
|
$ |
150,320 |
Amortization of deferred financing costs, fair value adjustments
and OCI hedge interest on mortgages payable(1) |
|
6,157 |
|
|
4,147 |
Contractual interest on credit facilities payable |
|
26,074 |
|
|
7,677 |
Amortization of deferred financing costs on credit facilities
payable |
|
902 |
|
|
615 |
Mortgage principal repayments |
|
158,803 |
|
|
162,048 |
Debt service payments |
$ |
353,114 |
|
$ |
324,807 |
Adjusted EBITDAFV |
$ |
643,506 |
|
$ |
608,451 |
Debt Service Coverage Ratio (times) |
1.8x |
1.9x |
(1) |
Includes liabilities related to assets held for sale. |
Interest Coverage Ratio
($ Thousands) |
|
For the years ended |
December 31, 2023 |
December 31, 2022 |
Contractual interest on mortgages payable(1) |
$ |
161,178 |
|
$ |
150,320 |
Amortization of deferred financing costs, fair value adjustments
and OCI hedge interest on mortgages payable(1) |
|
6,157 |
|
|
4,147 |
Contractual interest on credit facilities payable |
|
26,074 |
|
|
7,677 |
Amortization of deferred financing costs on credit facilities
payable |
$ |
902 |
|
$ |
615 |
Interest Expense |
$ |
194,311 |
|
$ |
162,759 |
Adjusted EBITDAFV |
$ |
643,506 |
|
$ |
608,451 |
Interest coverage ratio (times) |
3.3x |
3.7x |
(1) |
Includes liabilities related to assets held for sale. |
Reconciliation of Net
Income (Loss) to Adjusted EBITDAFV:
($ Thousands) |
|
|
For the years ended |
December 31, 2023 |
December 31, 2022 |
Net income (loss) |
$ |
(411,574 |
) |
$ |
13,637 |
|
Adjustments: |
|
|
Interest and other financing costs |
|
211,664 |
|
|
180,434 |
|
Interest on Exchangeable LP Units |
|
2,382 |
|
|
2,435 |
|
Total current income tax expense and deferred income tax recovery,
net |
|
(76,479 |
) |
|
(10,034 |
) |
Amortization of property, plant and equipment and right-of-use
asset |
|
6,206 |
|
|
7,462 |
|
Unit-based compensation amortization expense |
|
7,816 |
|
|
7,256 |
|
EUPP unit-based compensation expense |
|
(551 |
) |
|
(514 |
) |
Fair value adjustments of investment properties and assets held for
sale |
|
914,585 |
|
|
468,327 |
|
Fair value adjustments of financial instruments |
|
34,373 |
|
|
7,440 |
|
Net gain on derecognition of debt |
|
(3,251 |
) |
|
(1,766 |
) |
Gain on non-controlling interest |
|
(45,209 |
) |
|
(104,822 |
) |
Loss (gain) on foreign currency translation |
|
(4,161 |
) |
|
21,000 |
|
Net loss on dispositions and other |
|
7,705 |
|
|
3,318 |
|
Goodwill impairment loss |
|
— |
|
|
14,278 |
|
Adjusted EBITDAFV |
$ |
643,506 |
|
$ |
608,451 |
|
Reconciliation of Unitholders' Equity to
NAV:
($ Thousands, except per unit amounts) |
|
As at |
December 31, 2023 |
December 31, 2022 |
Unitholders' equity |
$ |
9,278,595 |
|
$ |
10,003,695 |
|
Adjustments: |
|
|
Exchangeable LP Units |
|
80,383 |
|
|
71,668 |
|
Unit-based compensation financial liabilities excluding ERES's unit
options plan |
|
23,150 |
|
|
17,455 |
|
Deferred income tax liability |
|
49,481 |
|
|
120,524 |
|
Deferred income tax asset |
|
(19,523 |
) |
|
(6,173 |
) |
Derivative assets – non-current |
|
(35,619 |
) |
|
(62,599 |
) |
Derivative assets – current |
|
(10,851 |
) |
|
— |
|
Derivative liabilities – current |
|
7,001 |
|
|
10,625 |
|
Adjustment to ERES non-controlling interest(1) |
|
(160,023 |
) |
|
(200,629 |
) |
NAV |
$ |
9,212,594 |
|
$ |
9,954,566 |
|
Diluted number of units |
|
169,868 |
|
|
171,599 |
|
NAV per unit – diluted |
$ |
54.23 |
|
$ |
58.01 |
|
(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 December 31, 2023 and December 31,
2022: |
($ Thousands) |
|
As at |
December 31, 2023 |
December 31, 2022 |
ERES's NAV |
€ |
676,956 |
|
€ |
899,166 |
|
Ownership by ERES non-controlling interest |
|
35 |
% |
|
34 |
% |
Closing foreign exchange rate |
|
1.46262 |
|
|
1.44982 |
|
Impact to NAV due to ERES's non-controlling unitholders |
$ |
346,545 |
|
$ |
443,228 |
|
Less: ERES units held by non-controlling unitholders |
$ |
186,522 |
|
$ |
242,599 |
|
Adjustment to ERES non-controlling interest |
$ |
160,023 |
|
$ |
200,629 |
|
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