CAPREIT Reports Continued Growth and Strong Operating Performance in Third Quarter of 2018
- 34
TORONTO, Nov. 06, 2018 (GLOBE NEWSWIRE) -- Canadian Apartment Properties Real Estate Investment Trust ("CAPREIT") (TSX: CAR.UN) announced today, continuing strong operating and financial results for the three and nine months ended September 30, 2018.
| HIGHLIGHTS: | ||||||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2018 | 2017 | 2018 | 2017 | |||||||||||||
| Portfolio Performance | ||||||||||||||||
| Overall Portfolio Occupancy(1) | 98.8 | % | 98.3 | % | ||||||||||||
| Overall Portfolio Net Average Monthly Rents(1)(2) | $ | 1,079 | $ | 1,029 | ||||||||||||
| Operating Revenues (000s) | $ | 172,298 | $ | 161,713 | $ | 510,918 | $ | 474,410 | ||||||||
| Net Rental Income ("NOI") (000s) | $ | 113,850 | $ | 102,655 | $ | 327,120 | $ | 292,958 | ||||||||
| NOI Margin | 66.1 | % | 63.5 | % | 64.0 | % | 61.8 | % | ||||||||
| Financial Performance | ||||||||||||||||
| Normalized Funds From Operations ("NFFO") (000s)(3) | $ | 77,933 | $ | 67,036 | $ | 218,857 | $ | 188,581 | ||||||||
| NFFO Per Unit – Basic(3) | $ | 0.540 | $ | 0.492 | $ | 1.539 | $ | 1.390 | ||||||||
| Cash Distributions Per Unit | $ | 0.333 | $ | 0.320 | $ | 0.977 | $ | 0.955 | ||||||||
| FFO Payout Ratio(3) | 62.9 | % | 68.4 | % | 65.2 | % | 71.3 | % | ||||||||
| NFFO Payout Ratio(3) | 62.3 | % | 66.0 | % | 64.6 | % | 69.7 | % | ||||||||
| Liquidity and Leverage | ||||||||||||||||
| Total Debt to Gross Book Value(1) | 40.48 | % | 44.76 | % | ||||||||||||
| Total Debt to Gross Historical Cost(1) | 53.15 | % | 56.02 | % | ||||||||||||
| Weighted Average Mortgage Interest Rate(1) | 3.08 | % | 3.00 | % | ||||||||||||
| Weighted Average Mortgage Term (years)(1) | 5.22 | 5.73 | ||||||||||||||
| Debt Service Coverage (times)(4) | 1.73 | 1.64 | ||||||||||||||
| Interest Coverage (times) | 3.40 | 3.21 | ||||||||||||||
| Available Liquidity – Acquisition and Operating Facility (000s)(1) | $ | 123,218 | $ | 58,169 | ||||||||||||
| (1 | ) | As at September 30. | ||||||||||||||
| (2 | ) | Net Average Monthly Rent ("Net AMR"), previously defined as "AMR", is defined as actual residential rents, net of vacancies, divided by the total number of suites in the property and does not include revenues from parking, laundry or other sources. | ||||||||||||||
| (3 | ) | 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 Financial Measures" and the reconciliations provided in this press release. | ||||||||||||||
| (4 | ) | Based on the trailing four quarters. | ||||||||||||||
| OTHER MEASURES | Three Months Ended | Nine Months Ended | ||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2018 | 2017 | 2018 | 2017 | |||||||||||||
| Weighted Average Number of Units - Basic (000s) | 144,431 | 136,295 | 142,224 | 135,671 | ||||||||||||
| Number of Suites and Sites Acquired | 362 | 980 | 498 | 1,312 | ||||||||||||
| Number of Suites Disposed | 264 | – | 264 | 31 | ||||||||||||
| Closing Price of Trust Units(1) | $ | 47.69 | $ | 33.73 | ||||||||||||
| Market Capitalization (millions)(1) | $ | 6,973 | $ | 4,671 | ||||||||||||
| (1 | ) | As at September 30. | ||||||||||||||
SUMMARY OF Q3-2018 RESULTS OF OPERATIONS
Strong Operating Results Supported by Strong Market Fundamentals
- Growth in revenue and NOI from stabilized properties driven by higher monthly rents and stronger occupancies compared to last year
- Monthly residential rents for the three months ended September 30, 2018 increased by 11.5% on suite turnovers of 7.2% of the portfolio, and for the nine months ended September 30, 2018 increased by 10.7% on suite turnovers of 16.8% of the portfolio
- Monthly residential rents for the three and nine months ended September 30, 2018 increased by 2.2% on suite renewals of 28.5% and 66.1% of the portfolio, respectively
- Net AMR for the stabilized residential suite portfolio as at September 30, 2018 increased by 5.2% compared to September 30, 2017, while occupancy increased to 99.2%
- Net AMR increased due to the strong rents on turnovers, higher rental guideline increases in Ontario and British Columbia, and above guideline increases
- NOI increased by 10.9% and 11.7% for the three and nine months ended September 30, 2018 respectively, compared to the same periods last year due to contributions from acquisitions and increased same property Net AMR
- NOI margin increased to 66.1% and 64.0% for the three and nine months ended September 30, 2018 respectively, due to higher monthly rents and lower vacancies, repair and maintenance (“R&M”) costs, wages and realty taxes as a percentage of operating revenues
Continued Fair Value Increases in our Investment Properties
- For the three months and nine months ended September 30, 2018, the fair value of investment properties increased by $50.5 million and $280.1 million respectively, driven by NOI growth and cap rate compression
Strong and Flexible Balance Sheet
- CAPREIT’s financial position continues to strengthen with reduced leverage ratios
- Debt to Gross Book Value (“GBV”) reduced to 40.48% as at September 30, 2018 from 43.57% at December 31, 2017, due to increases in fair value of investment properties
- Debt Service Coverage (“DSC”) ratio improved to 1.73 compared to 1.63 as at December 31, 2017 mainly due to significant organic NOI growth
- Liquidity available on our Credit Facilities is $123.2 million as at September 30, 2018, and committed and expected new financings for the remainder of 2018 is $63.3 million
- Closed mortgage refinancing for $98.7 million year to date, with a weighted average term to maturity of 7.5 years, and a weighted average interest rate of 3.20%
- CAPREIT’s mortgage weighted average term to maturity and the weighted average interest rate for the nine months ended September 30, 2018 are 5.2 years and 3.08% respectively compared to 5.7 years and 3.00% respectively for the same period last year. CAPREIT continues to fix long term mortgages to defend against the rising interest rate environment
Delivering Unitholder Value
- NFFO up 16.3% and 16.1% respectively for the three and nine months ended September 30, 2018
- NFFO payout ratio for the nine months ended September 30, 2018 improved to 64.6% from 69.7% for the same period last year
“We are on track to deliver another record year for CAPREIT in 2018,” commented David Ehrlich, President and CEO. “Our proven operating platform continues to generate high stable occupancies and steady increases in net average monthly rents across all of our target geographic markets, while our asset management programs are enhancing the overall quality and value of our growing property portfolio. We look for these positive trends to continue through the balance of the year and going forward.”
| OPERATIONAL AND FINANCIAL RESULTS | ||||||||||||
| Portfolio Net Average Monthly Rents | ||||||||||||
| Total Portfolio | Properties Owned Prior to September 30, 2017 | |||||||||||
| As at September 30, | 2018 | 2017 | 2018 | 2017 | (1) | |||||||
| AMR | Occ. % | AMR | Occ. % | AMR | Occ. % | AMR | Occ. % | |||||
| Average Residential Suites | $ | 1,184 | 98.9 | $ | 1,127 | 98.3 | $ | 1,183 | 99.2 | $ | 1,125 | 98.3 |
| Average MHC Land Lease Sites | $ | 394 | 97.7 | $ | 387 | 98.3 | $ | 394 | 97.7 | $ | 387 | 98.3 |
| Overall Portfolio Average | $ | 1,079 | 98.8 | $ | 1,029 | 98.3 | $ | 1,078 | 99.0 | $ | 1,027 | 98.3 |
| (1) Prior period comparable Net AMR and occupancy have been restated for properties disposed of since September 30, 2017. | ||||||||||||
Overall Net AMR for the stabilized residential suite portfolio as at September 30, 2018 increased by approximately 5.2% (including the Netherlands), and 4.6% (excluding the Netherlands) compared to the same period last year, while occupancies increased to 99.2%. The rate of growth in Net AMR has been due to (i) the strong rental markets of British Columbia and Ontario, (ii) a higher rental guideline increase in Ontario and British Columbia for 2018 of 1.8% and 4.0% respectively, compared to the permitted guideline increases of 1.5% and 3.7% respectively in 2017, and (iii) increases due to above guideline increases (“AGI”) achieved in Ontario.
| Suite Turnovers & Lease Renewals - Total Portfolio | ||||||||
| For the Three Months Ended September 30, | 2018 | 2017 | ||||||
| Change in monthly rent | Turnovers & Renewals(1) | Change in monthly rent | Turnovers & Renewals(1) | |||||
| $ | % | % | $ | % | % | |||
| Suite Turnovers | 128.6 | 11.5 | 7.2 | 92.3 | 8.5 | 8.2 | ||
| Lease Renewals | 25.5 | 2.2 | 28.5 | 21.7 | 2.0 | 28.0 | ||
| Weighted Average of Turnovers and Renewals | 46.2 | 4.1 | 37.7 | 3.5 | ||||
| For the Nine Months Ended September 30, | 2018 | 2017 | ||||||
| Change in monthly rent | Turnovers & Renewals(1) | Change in monthly rent | Turnovers & Renewals(1) | |||||
| $ | % | % | $ | % | % | |||
| Suite Turnovers | 121.8 | 10.7 | 16.8 | 72.5 | 6.6 | 18.6 | ||
| Lease Renewals | 25.6 | 2.2 | 66.1 | 21.4 | 1.9 | 65.2 | ||
| Weighted Average of Turnovers and Renewals | 45.1 | 3.9 | 32.8 | 3.0 | ||||
| (1 | ) | Percentage of suites turned over or renewed during the period based on the total number of residential suites (excluding co-ownerships and the Netherlands properties) held at the end of the period. | ||||||
Suite turnovers in the residential suite portfolio (excluding co-ownerships and the Netherlands properties) for the three months and nine months ended September 30, 2018 resulted in monthly rents increasing by approximately $129 or 11.5% and $122 or 10.7%, respectively, compared to an increase of approximately $92 or 8.5% and $73 or 6.6% for the same periods last year, primarily due to the strong rental markets of British Columbia and Ontario.
Estimated Net Rental Revenue Run-Rate
CAPREIT’s annualized net rental revenue run-rate as at September 30, 2018 grew to $662.2 million, up 6.5% from $621.7 million as at September 30, 2017, primarily due to higher monthly rents. Net rental revenue run-rate net of dispositions for the twelve months ended September 30, 2018 was $636.6 million (September 30, 2017 – $593.9 million). For a detailed description of net rental revenue run-rate, see Results of Operations in Section III of the MD&A.
| NOI for the Total Portfolio | ||||||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| ($ Thousands) | 2018 | %(1) | 2017 | %(1) | 2018 | %(1) | 2017 | %(1) | ||||||||
| Total Operating Revenues | $ | 172,298 | 100.0 | $ | 161,713 | 100.0 | 510,918 | 100.0 | $ | 474,410 | 100.0 | |||||
| Operating Expenses | ||||||||||||||||
| Realty Taxes | $ | (17,539 | ) | 10.2 | $ | (17,200 | ) | 10.6 | $ | (52,015 | ) | 10.2 | $ | (49,947 | ) | 10.5 |
| Utilities | (10,774 | ) | 6.2 | (10,284 | ) | 6.4 | (41,673 | ) | 8.1 | (41,647 | ) | 8.8 | ||||
| Other(2) | (30,135 | ) | 17.5 | (31,574 | ) | 19.5 | (90,110 | ) | 17.7 | (89,858 | ) | 18.9 | ||||
| Total Operating Expenses | $ | (58,448 | ) | 33.9 | $ | (59,058 | ) | 36.5 | $ | (183,798 | ) | 36.0 | $ | (181,452 | ) | 38.2 |
| NOI | $ | 113,850 | 66.1 | $ | 102,655 | 63.5 | $ | 327,120 | 64.0 | $ | 292,958 | 61.8 | ||||
| (1) As a percentage of total operating revenues. | ||||||||||||||||
| (2) Comprises R&M, wages, general and administrative, insurance, advertising, and legal costs. | ||||||||||||||||
Operating Revenues
For the three and nine months ended September 30, 2018, total operating revenues increased by 6.5% and 7.7%, respectively, compared to the same periods last year, due to the contribution from acquisitions, increased same-property Net AMR, and continuing higher occupancies.
Operating Expenses
Overall operating expenses as a percentage of operating revenues reduced to 33.9% and 36.0% for the three and nine months ended September 30, 2018 compared to 36.5% and 38.2% in the prior year, respectively, mainly as a result of lower utilities due to reduced consumption, positive impacts of energy saving initiatives and sub-metering, and lower operating expenses due to lower R&M, wages, and realty taxes as a percentage of operating revenues.
NOI Margin
For the three and nine months ended September 30, 2018, the NOI margin on the total portfolio were 66.1% and 64.0%, respectively, compared to 63.5% and 61.8% for the same periods last year. The increase in the NOI margin is due to (i) higher monthly rents on stabilized basis, (ii) lower vacancies, and (iii) lower R&M costs, wages and realty taxes as a percentage of operating revenues.
NON-IFRS FINANCIAL PERFORMANCE
For the nine months ended September 30, 2018, basic NFFO per Unit increased by 10.7% compared to the same period last year despite an approximate 4.8% increase in the weighted average number of Units outstanding, mainly as a result of the March 2018 equity offering offset by strong organic NOI growth and contributions from acquisitions. For the three months ended September 30, 2018, basic NFFO per Unit increased by 9.8% compared to the same period last year. Management expects per Unit FFO and NFFO and related payout ratios to strengthen further in the medium term as a result of NOI contributions from recent acquisitions.
PROPERTY CAPITAL INVESTMENTS
During the nine months ended September 30, 2018, CAPREIT made property capital investments (excluding head office assets) of $118.3 million compared to $112.7 million in the same period last year. Management expects CAPREIT to complete property capital investments (excluding development and intensification) of approximately $191 million to $201 million in 2018.
Property capital investments include suite improvements, common areas and equipment, which generally tend to increase NOI more quickly. CAPREIT also continues to invest in environment-friendly energy-saving initiatives, including high-efficiency boilers, energy-efficient lighting systems and water-saving programs, which have permitted CAPREIT to mitigate potential increases in utility and R&M costs and has improved overall portfolio NOI.
SUBSEQUENT EVENTS
On October 11, 2018, CAPREIT completed the disposition of a 419 suite apartment, Carrefour des Erables, located on the south shore of Montreal, in Longueuil, Quebec for a sales price of approximately $35.8 million. The proceeds from the sale will be used to repay $20.6 million in outstanding mortgages on the property with a maturity date of June 1, 2024 and a stated interest rate of 3.61%, with the balance used to reduce CAPREIT’s acquisition and operating credit facility.
ADDITIONAL INFORMATION
More detailed information and analysis is included in CAPREIT's unaudited condensed consolidated interim financial statements and MD&A for the three and nine months ended September 30, 2018, which have been filed on SEDAR and can be viewed at www.sedar.com under CAPREIT’s profile or on CAPREIT’s website on the investor relations page at www.caprent.com or www.capreit.net.
Conference Call
A conference call hosted by David Ehrlich, President and CEO and the CAPREIT Management Team, will be held Wednesday, November 7, 2018 at 10:00 am EST. The telephone numbers for the conference call are: Local/International: (416) 340-2216, North American Toll Free: (866) 225-0198.
A slide presentation to accompany Management's comments during the conference call will be available an hour and a half prior to the conference call. To view the slides, access the CAPREIT website at www.caprent.com or www.capreit.net, click on "Investor Relations" and follow the link at the top of the page. Please log on at least 15 minutes before the call commences.
The telephone numbers to listen to the call after it is completed (Instant Replay) are local/international (905) 694-9451 or North American toll free (800) 408-3053. The Passcode for the Instant Replay is 5940734#. The Instant Replay will be available until midnight, December 7, 2018. The call and accompanying slides will also be archived on the CAPREIT website at www.caprent.com or www.capreit.net. For more information about CAPREIT, its business and its investment highlights, please refer to our website at www.caprent.com or www.capreit.net.
About CAPREIT
CAPREIT owns interests in multi-unit residential rental properties, including apartments, townhomes and manufactured home communities (“MHC”) primarily located in and near major urban centres across Canada. As at September 30, 2018, CAPREIT had owning interests in 50,869 residential units, comprised of 44,277 residential suites and 32 MHC comprising 6,592 land lease sites. For more information about CAPREIT, its business and its investment highlights, please refer to our website at www.caprent.com or www.capreit.net and our public disclosure which can be found under our profile at www.sedar.com.
Non-IFRS Financial Measures
CAPREIT prepares and releases unaudited consolidated interim financial statements and audited consolidated annual financial statements prepared 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 also discloses and discusses certain financial measures not recognized under IFRS and that do not have standard meanings prescribed by IFRS. These include stabilized net rental income (“Stabilized NOI”), Net Rental Revenue Run-Rate, Funds From Operations (“FFO”), Normalized Funds From Operations (“NFFO”), and Adjusted Cash Flow from Operations (“ACFO”), and applicable per Unit amounts and payout ratios (collectively, the “Non-IFRS Measures”). These Non-IFRS Measures are further defined and discussed in the MD&A released on November 6, 2018, which should be read in conjunction with this press release. Since Stabilized NOI, Net Rental Revenue Run-Rate, FFO, NFFO, and ACFO are not measures recognized under IFRS, they may not be comparable to similarly titled measures reported by other issuers. CAPREIT has presented the Non-IFRS measures because Management believes these Non-IFRS measures are relevant measures of the ability of CAPREIT to earn revenue and to evaluate CAPREIT’s performance and cash flows. A reconciliation of Net Income and 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 sustainability of our distributions.
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, projected costs, capital investments, 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 and capital investment strategy 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”, “should”, “expect”, “plan”, “anticipate”, “believe”, “intend”, “estimate”, “predict”, “potential”, “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, Irish and Dutch economies will generally experience growth, however, may be adversely impacted by the global economy; that inflation will remain low; that interest rates will remain low in the medium term; 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 will grow at levels similar to the rate of inflation on renewal; that rental rates on turnovers will remain stable; 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, Management believes they are reasonable as of the date hereof; however there can be no assurance actual results 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 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: reporting investment properties at fair value, real property ownership, leasehold interests, co-ownerships, investment restrictions, operating risk, energy costs and hedging, environmental matters, catastrophic events, insurance, capital investments, indebtedness, interest rate hedging, foreign operation and currency risks, taxation, harmonization of federal goods and services tax and provincial sales tax, land transfer tax, foreign tax, government regulations, controls over financial accounting, legal and regulatory concerns, the nature of units of CAPREIT (“Trust Units”), Preferred Units, and units of CAPREIT’s subsidiary, CAPREIT Limited Partnership (“Exchangeable Units”) (collectively, the “Units”), unitholder liability, liquidity and price fluctuation of Units, dilution, distributions, participation in CAPREIT’s distribution reinvestment plan, potential conflicts of interest, dependence on key personnel, general economic conditions, competition for residents, competition for real property investments, continued growth, risks related to acquisitions, and cybersecurity. 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.sedar.com, under CAPREIT’s profile, as well as under Risks and Uncertainties section of the MD&A released on November 6, 2018. The information in this press release is based on information available to Management as of November 6, 2018. Subject to applicable law, CAPREIT does not undertake any obligation to publicly update or revise any forward-looking information.
SOURCE: Canadian Apartment Properties Real Estate Investment Trust
CAPREIT CAPREIT CAPREIT
Mr. Michael Stein Mr. David Ehrlich Mr. Scott Cryer
Chairman President & CEO Chief Financial Officer
(416) 861-5788 (416) 861-9404 (416) 861-5771
| SELECTED FINANCIAL INFORMATION | ||||
| Condensed Balance Sheets | ||||
| As at | September 30, 2018 | December 31, 2017 | ||
| ($ Thousands) | ||||
| Investment properties | $ | 9,354,973 | $ | 8,886,556 |
| Total Assets | 9,727,847 | 9,187,170 | ||
| Mortgages payable | 3,554,014 | 3,581,501 | ||
| Bank indebtedness | 410,472 | 446,895 | ||
| Total Liabilities | 4,204,823 | 4,263,764 | ||
| Unitholders' Equity | 5,523,024 | 4,923,406 | ||
| Condensed Income Statements | ||||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||
| September 30, | September 30, | |||||||||||||
| 2018 | 2017 | 2018 | 2017 | |||||||||||
| Operating Revenues | ||||||||||||||
| Revenue from investment properties | $ | 172,298 | $ | 161,713 | $ | 510,918 | $ | 474,410 | ||||||
| Operating Expenses | ||||||||||||||
| Realty taxes | (17,539 | ) | (17,200 | ) | (52,015 | ) | (49,947 | ) | ||||||
| Property operating costs | (40,909 | ) | (41,858 | ) | (131,783 | ) | (131,505 | ) | ||||||
| (58,448 | ) | (59,058 | ) | (183,798 | ) | (181,452 | ) | |||||||
| Net Rental Income | 113,850 | 102,655 | 327,120 | 292,958 | ||||||||||
| Trust expenses | (8,658 | ) | (7,840 | ) | (26,682 | ) | (21,987 | ) | ||||||
| Unit-based compensation expenses | (10,853 | ) | (4,501 | ) | (27,070 | ) | (15,110 | ) | ||||||
| Fair value adjustments of investment properties | 50,468 | 153,598 | 280,076 | 287,802 | ||||||||||
| Realized loss on disposition of investment | ||||||||||||||
| properties | (577 | ) | - | (577 | ) | (80 | ) | |||||||
| Amortization of property, plant and equipment | (1,278 | ) | (1,170 | ) | (3,674 | ) | (3,159 | ) | ||||||
| Fair value adjustments of exchangeable units | (272 | ) | (21 | ) | (896 | ) | (383 | ) | ||||||
| Fair value adjustments of Investments | 2,500 | - | 4,152 | - | ||||||||||
| Gain (loss) on derivative financial instruments | 2,597 | (8,794 | ) | 10,517 | (8,880 | ) | ||||||||
| Interest and other financing costs | (33,711 | ) | (30,418 | ) | (96,612 | ) | (90,193 | ) | ||||||
| Foreign currency translation | 5,928 | 9,160 | (6,478 | ) | 5,009 | |||||||||
| Other income | 4,141 | 3,325 | 28,086 | 14,012 | ||||||||||
| Net Income Before Income Taxes | 124,135 | 215,994 | 487,962 | 459,989 | ||||||||||
| Current and deferred income tax expense | (4,541 | ) | (161 | ) | (6,558 | ) | (138 | ) | ||||||
| Net Income | 119,594 | 215,833 | $ | 481,404 | $ | 459,851 | ||||||||
| Other Comprehensive (Loss) Income | $ | (9,446 | ) | $ | 2,906 | $ | (1,225 | ) | $ | 12,281 | ||||
| Comprehensive Income | $ | 110,148 | $ | 218,739 | $ | 480,179 | $ | 472,132 | ||||||
| Condensed Statements of Cash Flows | ||||||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2018 | 2017(1) | 2018 | 2017(1) | |||||||||||||
| Cash Provided By (Used In): | ||||||||||||||||
| Operating Activities | ||||||||||||||||
| Net income | $ | 119,594 | $ | 215,833 | $ | 481,404 | $ | 459,851 | ||||||||
| Items related to operating activities not affecting cash: | ||||||||||||||||
| Fair value adjustments - investment properties | (50,468 | ) | (153,598 | ) | (280,076 | ) | (287,802 | ) | ||||||||
| Fair value adjustments - exchangeable units | 272 | 21 | 896 | 383 | ||||||||||||
| Fair value adjustments - investments | (2,500 | ) | - | (4,152 | ) | - | ||||||||||
| Loss on disposition of investment properties | 577 | - | 577 | 80 | ||||||||||||
| Loss on derivative financial instruments | (2,597 | ) | 8,794 | (10,517 | ) | 8,880 | ||||||||||
| Amortization | 3,531 | 3,356 | 10,410 | 9,616 | ||||||||||||
| Unit-based compensation expenses | 10,853 | 4,501 | 27,070 | 15,110 | ||||||||||||
| Straight-line rent adjustment | (36 | ) | (20 | ) | (65 | ) | (220 | ) | ||||||||
| Deferred income tax expense | 4,467 | - | 6,544 | - | ||||||||||||
| Net profit from equity-accounted investments | (1,912 | ) | (1,424 | ) | (20,775 | ) | (8,564 | ) | ||||||||
| Foreign currency | (5,928 | ) | (9,160 | ) | 6,478 | (5,009 | ) | |||||||||
| 75,853 | 68,303 | 217,794 | 192,325 | |||||||||||||
| Net income items related to financing and | ||||||||||||||||
| investing activities | 30,997 | 24,782 | 88,807 | 74,733 | ||||||||||||
| Changes in non-cash operating assets and liabilities | 7,328 | 12,382 | (17,851 | ) | (16,636 | ) | ||||||||||
| Cash Provided by Operating Activities | 114,178 | 105,467 | 288,750 | 250,422 | ||||||||||||
| Investing Activities | ||||||||||||||||
| Acquisition of investment properties | (131,326 | ) | (264,668 | ) | (142,697 | ) | (331,758 | ) | ||||||||
| Capital investments | (49,891 | ) | (45,441 | ) | (119,762 | ) | (119,467 | ) | ||||||||
| Acquisition of investments | - | - | (25,443 | ) | - | |||||||||||
| Disposition of investment properties | 52,325 | - | 52,325 | 575 | ||||||||||||
| Change in restricted cash | 133 | 8 | (421 | ) | (39 | ) | ||||||||||
| Investment income received | 400 | 2,793 | 3,962 | 8,094 | ||||||||||||
| Cash Used in Investing Activities | (128,359 | ) | (307,308 | ) | (232,036 | ) | (442,595 | ) | ||||||||
| Financing Activities | ||||||||||||||||
| Mortgage financings | 139,672 | 435,576 | 163,405 | 631,006 | ||||||||||||
| Mortgage principal repayments | (29,220 | ) | (28,313 | ) | (87,172 | ) | (90,817 | ) | ||||||||
| Mortgages repaid on maturity | (75,316 | ) | (163,070 | ) | (98,661 | ) | (266,575 | ) | ||||||||
| Financing costs | (565 | ) | (970 | ) | (1,001 | ) | (2,475 | ) | ||||||||
| CMHC premiums on mortgages payable | (2,351 | ) | (964 | ) | (2,438 | ) | (4,902 | ) | ||||||||
| Interest paid | (28,280 | ) | (27,508 | ) | (85,595 | ) | (82,707 | ) | ||||||||
| Bank indebtedness | 44,624 | 41,443 | (42,901 | ) | 115,957 | |||||||||||
| Proceeds on issuance of Units | 410 | 2,172 | 199,249 | 7,721 | ||||||||||||
| Net cash distributions to Unitholders | (34,296 | ) | (30,763 | ) | (99,699 | ) | (89,273 | ) | ||||||||
| Cash (Used) Provided by Financing Activities | 14,678 | 227,603 | (54,813 | ) | 217,935 | |||||||||||
| Changes in Cash and Cash Equivalents During the | ||||||||||||||||
| Period | 1,262 | 25,762 | 2,267 | 25,762 | ||||||||||||
| Effect of exchange rate changes on cash | (765 | ) | - | (366 | ) | - | ||||||||||
| Cash and Cash Equivalents, Beginning of the Period | 25,190 | - | 23,786 | - | ||||||||||||
| Cash and Cash Equivalents, End of the Period | $ | 25,687 | $ | 25,762 | $ | 25,687 | $ | 25,762 | ||||||||
| (1 | ) | Q3 2017 comparative balances have been restated to conform with current period presentation. | ||||||||||||||
| SELECTED NON-IFRS FINANCIAL MEASURES | |||||||||||||||
| A reconciliation of net income to NFFO is as follows: | |||||||||||||||
| Three Months Ended | Nine Months Ended | ||||||||||||||
| September 30, | September 30, | ||||||||||||||
| ($ Thousands, except per Unit amounts) | 2018 | 2017 | 2018 | 2017 | |||||||||||
| Net Income | $ | 119,594 | $ | 215,833 | $ | 481,404 | $ | 459,851 | |||||||
| Adjustments | |||||||||||||||
| Unrealized Gain on Remeasurement of Investment Properties | (50,468 | ) | (153,598 | ) | (280,076 | ) | (287,802 | ) | |||||||
| Realized Loss on Disposition of Investment Properties | 577 | - | 577 | 80 | |||||||||||
| Remeasurement of Exchangeable Units | 272 | 21 | 896 | 383 | |||||||||||
| Remeasurement of Investments(1) | (2,500 | ) | - | (4,152 | ) | - | |||||||||
| Remeasurement of Unit-based Compensation Liabilities | 9,459 | 1,396 | 23,177 | 9,196 | |||||||||||
| Interest on Exchangeable Units | 20 | 42 | 101 | 144 | |||||||||||
| Corporate and Deferred Income Taxes | 4,541 | 161 | 6,558 | 138 | |||||||||||
| Loss on Foreign Currency Translation | (5,928 | ) | (9,160 | ) | 6,478 | (5,009 | ) | ||||||||
| FFO Adjustment for Income from Equity Accounted Investments(2) | - | - | (15,504 | ) | (4,561 | ) | |||||||||
| Unrealized and Realized Loss on Derivative Financial Instruments | (2,597 | ) | 8,794 | (10,517 | ) | 8,880 | |||||||||
| Net FFO Impact Attributable to Non-Controlling Interest | 3,042 | 26 | 4,225 | 64 | |||||||||||
| Amortization of Property, Plant and Equipment | 1,278 | 1,170 | 3,674 | 3,159 | |||||||||||
| FFO | $ | 77,290 | $ | 64,685 | $ | 216,841 | $ | 184,523 | |||||||
| Adjustments: | |||||||||||||||
| Amortization of Loss from AOCL to interest and other | |||||||||||||||
| Financing Costs | 643 | 747 | 2,016 | 2,290 | |||||||||||
| Net Mortgage Prepayment Cost | - | - | - | 164 | |||||||||||
| Other Employee Costs(3) | - | 1,604 | - | 1,604 | |||||||||||
| NFFO | 77,933 | 67,036 | 218,857 | 188,581 | |||||||||||
| NFFO per Unit – Basic | 0.540 | 0.492 | 1.539 | 1.390 | |||||||||||
| NFFO per Unit – Diluted | 0.534 | 0.485 | 1.524 | 1.371 | |||||||||||
| Total Distributions Declared(4) | 48,583 | 44,261 | 141,453 | 131,524 | |||||||||||
| NFFO Payout Ratio(5) | 62.3 | % | 66.0 | % | 64.6 | % | 69.7 | % | |||||||
| Net Distributions Paid(4) | $ | 34,401 | $ | 31,382 | $ | 100,957 | $ | 90,587 | |||||||
| Excess NFFO over Net Distributions Paid | $ | 43,532 | $ | 35,654 | $ | 117,900 | $ | 97,994 | |||||||
| Effective NFFO Payout Ratio(6) | 44.1 | % | 46.8 | % | 46.1 | % | 48.0 | % | |||||||
| (1 | ) | Effective January 1, 2018, CAPREIT adopted IFRS 9 Financial Instruments. Under this standard, this investment has been designated as FVTPL whereas previously it was designated as available-for-sale. Under the guidance in this new standard, any mark-to-market gains or losses are recorded in the statement of income and comprehensive income whereas previously they were recorded through OCI. The cumulative mark to market gains/losses have also been reclassified from accumulated OCI to retained earnings on adoption of this standard. | |||||||||||||
| (2 | ) | Relates to unrealized gain on remeasurement of investment properties. | |||||||||||||
| (3 | ) | Expenses included in Unit-based compensation expenses relates to accelerated vesting of previously-granted RUR units. | |||||||||||||
| (4 | ) | For the description of distributions declared and net distributions paid, see the Non-IFRS Financial Measures section in the MD&A for the nine months ended September 30, 2018. | |||||||||||||
| (5 | ) | The payout ratio compares distributions declared to NFFO. | |||||||||||||
| (6 | ) | The effective payout ratio compares net distributions paid to NFFO. | |||||||||||||
| Reconciliation of cash generated from operating activities to Adjusted Cash Flows from Operations: | |||||||||||||||||||
| Three Months Ended | Nine Months Ended | ||||||||||||||||||
| September 30 | September 30 | ||||||||||||||||||
| ($ Thousands, except per Unit amounts) | 2018 | 2017 | 2018 | 2017 | Annual 2017 | ||||||||||||||
| Cash Generated From Operating | |||||||||||||||||||
| Activities | $ | 114,178 | $ | 105,467 | $ | 288,750 | $ | 250,422 | $ | 358,941 | |||||||||
| Adjustments:(1)(2) | - | - | - | - | - | ||||||||||||||
| Interest expense included in cash flow | - | - | - | - | - | ||||||||||||||
| from financing activities | (28,280 | ) | (27,508 | ) | (85,595 | ) | (82,707 | ) | (111,138 | ) | |||||||||
| Non-Discretionary Property Capital | - | - | - | - | - | ||||||||||||||
| Investments(3) | (14,004 | ) | (14,337 | ) | (41,983 | ) | (42,413 | ) | (38,724 | ) | |||||||||
| Capitalized Leasing Costs(4) | (570 | ) | (1,080 | ) | (2,455 | ) | (2,003 | ) | (3,234 | ) | |||||||||
| Amortization of Other Financing Costs(5) | (1,610 | ) | (1,439 | ) | (4,720 | ) | (4,167 | ) | (5,689 | ) | |||||||||
| Non-controlling Interest | (75 | ) | (40 | ) | (144 | ) | (55 | ) | (184 | ) | |||||||||
| Investment Income | 400 | 2,793 | 3,962 | 8,094 | 8,478 | ||||||||||||||
| ACFO | $ | 70,039 | $ | 63,856 | $ | 157,815 | $ | 127,171 | $ | 208,450 | |||||||||
| Total Distributions Declared | $ | 48,583 | $ | 44,261 | $ | 141,453 | $ | 131,524 | $ | 176,024 | |||||||||
| Excess (Deficit) ACFO Over Distributions Declared | $ | 21,456 | $ | 19,595 | $ | 16,362 | $ | (4,353 | ) | $ | 32,426 | ||||||||
| ACFO Payout Ratio | 69.4 | % | 69.3 | % | 89.6 | % | 103.4 | % | 84.4 | % | |||||||||
| (1 | ) | On a quarterly basis, a review of working capital is performed to determine whether changes in prepaids, receivable, deposits accounts payable and other liabilities, security deposits and other non-cash operating assets and liabilities were attributed to items which were not indicative of sustainable cash flows available for distribution in line with the ACFO guidance provided by REALPAC. Based on review, it was concluded no adjustments needed. | |||||||||||||||||
| (2 | ) | Non-Discretionary Property Capital Investments for the three months ended September 30, 2018 and 2017 has been calculated as follows: Non-Discretionary Property Capital Investments per suite and site is based on the annual 2018 and 2017 forecasts respectively, divided by four for the quarter, and multiplied by the weighted average number of residential suites and sites during the period. The forecasted Non-Discretionary Property Capital Investments per suite and site for 2018 and 2017 on an annual basis is $1,130 and $1,177 respectively. The weighted average number of residential suites and sites for the nine months ended September 30, 2018 and 2017 is 49,538 and 48,048, respectively. For a reconciliation of actual non-discretionary property capital investments incurred during the period to forecast, please see Adjusted Cash Flows From Operations and Distributions Declared section of the MD&A. | |||||||||||||||||
| (3 | ) | Comprises tenant inducements and direct leasing costs. | |||||||||||||||||
| (4 | ) | Includes amortization of deferred financing costs, CMHC premiums, deferred loan costs and fair value adjustments. | |||||||||||||||||
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