Canadian Apartment Properties Real Estate Investment Trust
("CAPREIT") (TSX: CAR.UN) announced today continued growth and
strong operating and financial results for the three months and
year ended December 31, 2022. Management will host a conference
call to discuss the financial results on Thursday, February 23,
2023 at 9:00 a.m. EST.
HIGHLIGHTS:
|
Three Months Ended |
Year Ended |
|
December 31, |
December 31, |
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
Portfolio Performance |
|
|
|
|
Overall portfolio occupancy(1) |
|
|
|
98.3 |
% |
|
98.1 |
% |
Overall portfolio Net Average Monthly Rents ("Net AMR")(1)(2) |
|
|
$ |
1,205 |
|
$ |
1,149 |
|
Operating revenues (000s) |
$ |
256,915 |
|
$ |
240,678 |
|
$ |
1,007,268 |
|
$ |
933,137 |
|
Net Operating Income ("NOI") (000s) |
$ |
164,500 |
|
$ |
153,429 |
|
$ |
650,409 |
|
$ |
609,993 |
|
NOI margin |
|
64.0 |
% |
|
63.7 |
% |
|
64.6 |
% |
|
65.4 |
% |
|
|
|
|
|
Financial Performance |
|
|
|
|
Normalized Funds from Operations ("NFFO")(3) (000s) |
$ |
99,922 |
|
$ |
100,353 |
|
$ |
406,977 |
|
$ |
402,194 |
|
NFFO per Unit – diluted(3) |
$ |
0.580 |
|
$ |
0.572 |
|
$ |
2.328 |
|
$ |
2.311 |
|
Cash distributions per Unit |
$ |
0.363 |
|
$ |
0.363 |
|
$ |
1.450 |
|
$ |
1.409 |
|
NFFO payout ratio(3) |
|
62.4 |
% |
|
63.4 |
% |
|
62.1 |
% |
|
61.0 |
% |
|
|
|
|
|
Liquidity and Leverage |
|
|
|
|
Total debt to gross book value(1)(3) |
|
|
|
39.4 |
% |
|
36.1 |
% |
Total debt to gross historical cost(1)(3) |
|
|
|
53.9 |
% |
|
52.3 |
% |
Weighted average mortgage interest rate(1) |
|
|
|
2.61 |
% |
|
2.47 |
% |
Weighted average mortgage term (years)(1) |
|
|
|
5.4 |
|
|
5.7 |
|
Debt service coverage (times)(3)(4) |
|
|
1.9x |
|
2.0x |
|
Interest coverage (times)(3)(4) |
|
|
3.7x |
|
4.0x |
|
Available liquidity – Acquisition and Operating Facility
(000s)(1) |
|
|
$ |
333,416 |
|
$ |
384,510 |
|
Cash and cash equivalents (000s)(1) |
|
|
$ |
47,303 |
|
$ |
73,411 |
|
(1) As at December 31.(2) Net Average
Monthly Rent ("Net AMR") is defined as actual residential rents,
excluding vacant units, divided by the total number of suites and
sites in the property and does not include revenues from parking,
laundry or other sources.(3) 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. (4) Based on the trailing four
quarters.
|
Three Months Ended |
Year Ended |
|
December 31, |
December 31, |
|
2022 |
2021 |
|
2022 |
|
2021 |
Other Measures |
|
|
|
|
Weighted average number of Units - diluted (000s) |
172,401 |
175,567 |
|
174,816 |
|
174,041 |
Number of residential suites and sites acquired |
— |
622 |
|
1,537 |
|
3,744 |
Number of suites disposed(1) |
— |
506 |
|
1,129 |
|
593 |
Net Asset Value per unit - diluted(2)(3) |
|
|
$ |
58.01 |
$ |
59.78 |
Closing price of Trust Units on the TSX(3) |
|
|
$ |
42.68 |
$ |
59.96 |
Market capitalization (millions)(3)(4) |
|
|
$ |
7,324 |
$ |
10,539 |
(1) Includes CAPREIT's 50% interest
in 370 apartment suites for the year ended December 31,
2022.(2) This measure is not defined by IFRS, does 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. (3) As at December
31.(4) Market capitalization is determined by taking all
units outstanding (including all unit-based compensation plans) and
multiplying by the closing price of the units of CAPREIT ("Trust
Units") at period end.
SUMMARY OF Q4 AND YEAR-END 2022 RESULTS OF
OPERATIONS
Key Transactions and Events
- CAPREIT continues to invest in
accretive opportunities, with total acquisitions for the year ended
December 31, 2022 amounting to $517.4 million comprised of 1,181
suites and sites located in Canada, and $128.2 million comprised of
356 suites located in the Netherlands. There were no property
acquisitions or dispositions for the three months ended December
31, 2022.
- Total dispositions for the year
ended December 31, 2022 amounted to $347.4 million, which included
1,128 suites located in Ontario and a single residential suite in
the Netherlands. CAPREIT will continue to consider opportunities
where it can strategically access attractive equity capital for
redeployment into more accretive growth opportunities, including
acquiring new build assets, repurchasing Trust Units for
cancellation under its current normal course issuer bid (“NCIB”)
program and repaying debt. Subsequent to year-end, on January 25,
2023, CAPREIT disposed of its remaining 50% interest in 1,150
apartment suites located in Ontario for a sale price of $136.3
million.
- During the year ended December 31,
2022, CAPREIT purchased and cancelled approximately
5.2 million Trust Units under the NCIB program, at a weighted
average purchase price of $45.44 per Trust Unit, for a total cost
of $237.8 million, with approximately an additional 0.2 million
Trust Units settled for cancellation subsequent to year-end, for a
total cost of $7.8 million.
Strong Operating Results
- On turnovers, monthly residential
rents for the three months and year ended December 31, 2022
increased by 24.3% on 3.4% of the Canadian portfolio and increased
by 14.5% on 16.4% of the Canadian portfolio, respectively, compared
to an increase of 8.6% on 5.2% of the Canadian portfolio and 5.9%
on 21.8% of the Canadian portfolio, respectively, for the three
months and year ended December 31, 2021.
- Net Average Monthly Rent (“Net
AMR”) for the same property portfolio as at December 31, 2022
increased by 4.3% compared to December 31, 2021.
- NOI increased by 5.0% and 1.9%,
respectively, for the same property portfolio for the three months
and year ended December 31, 2022.
- Diluted NFFO per unit was up 1.4%
and 0.7%, respectively, for the three months and year ended
December 31, 2022 compared to the same periods last year.
Strong and Flexible Balance
Sheet
- CAPREIT's financial position
remains strong, with over $380.7 million of available liquidity,
comprising $47.3 million of cash and cash equivalents and $333.4
million of available capacity on CAPREIT's Acquisition and
Operating Facility.
- Based on the current property
portfolio, management expects to raise between $750 million and
$800 million in total mortgage renewals and refinancings for the
Canadian portfolio for 2023. In 2022, CAPREIT raised approximately
$932 million for the Canadian portfolio.
- CAPREIT closed consolidated
mortgage refinancings of $879.3 million for the year ended December
31, 2022, with top-ups net of discharges totalling
$361.7 million. The mortgages refinanced have a weighted
average term to maturity of 8.0 years and a weighted average
interest rate of 3.36%.
- For the year ended December 31,
2022, the overall carrying value of investment properties increased
by $51.8 million primarily due to acquisitions, property
capital investments and foreign currency translation, partially
offset by fair value losses, transfer to assets held for sale and
dispositions.
- Diluted NAV per unit as at December
31, 2022 decreased to $58.01 from $59.78 as at December 31, 2021,
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.
“CAPREIT's rent uplift on turnover exceeded 24%
for the final quarter of 2022, a positive trend that is a testament
to the increasingly favourable fundamentals of the Canadian
residential rental market,” commented Mark Kenney, President and
Chief Executive Officer. “In addition, this year we acquired over
$500 million of on-strategy, new build properties in Canada, and
disposed of almost $350 million in older, non-strategic properties.
This upgraded the quality of our portfolio while re-diversifying
into specifically targeted high-growth markets. We converted that
into immediate value for Unitholders by investing in our own
improved portfolio, through actively purchasing and cancelling over
$245 million worth of Trust Units at significantly discounted
pricing. We are pleased to be presenting this meaningful progress
on our strategic endeavours, culminating in the accretive results
we achieved in 2022, in spite of the economic and regulatory
challenges clouding the sector.”
“We surpassed $1 billion in annual operating
revenues for the first time in our history, attributable to our
many years of strong organic and acquisitive growth,” added Stephen
Co, Chief Financial Officer. “Augmenting that, we have been
extremely focused on cost control, which has been crucial during
this past year of high inflation and unexpected expenses. All in
all, compared to the prior year period, we were able to increase
our same property NOI margin to 64.3% this past quarter, a positive
trajectory that we expect to continue. We also fortified our
financial position in an unprecedented environment of equity and
debt volatility, having successfully secured over $1 billion in
favourable new and refinanced mortgage principal, supplementing
funding from disposition proceeds."
“We reached an amazing milestone in 2022 with
the marking of our 25 year anniversary, and we proudly look back
and celebrate the many accomplishments which got us here. That
said, we are now entering a new era of value creation for our
Unitholders, equipped with a rejuvenated executive management team
who are enthusiastically committed to delivering on this key
mission,” Mr. Kenney continued. “On that note, we are excited to
kick-start the new year with the disposition of $136 million in
non-core assets, evidencing our continued execution on
value-enhancing initiatives in 2023, and the pipeline of promising
strategic opportunities that we intend to capitalize on.”
OPERATIONAL AND FINANCIAL
RESULTS
Portfolio Net Average Monthly
Rents
|
Total Portfolio |
Same Property Portfolio(1) |
As at December 31, |
|
2022 |
|
2021 |
|
2022 |
|
2021 |
|
Net AMR |
Occ. % |
Net AMR |
Occ. % |
Net AMR |
Occ. % |
Net AMR |
Occ. % |
Average residential suites |
$ |
1,390 |
98.9 |
$ |
1,321 |
98.6 |
$ |
1,382 |
98.9 |
$ |
1,323 |
98.6 |
Average MHC sites |
$ |
407 |
95.6 |
$ |
396 |
95.8 |
$ |
404 |
95.6 |
$ |
396 |
95.8 |
Overall portfolio average |
$ |
1,205 |
98.3 |
$ |
1,149 |
98.1 |
$ |
1,195 |
98.3 |
$ |
1,146 |
98.1 |
(1) Same property net AMR includes all
properties held as at December 31, 2021, but excludes properties
disposed of or held for sale as at December 31, 2022.
The rate of growth in same property Net AMR has
been primarily due to (i) rental increases on turnover in the
rental markets of most provinces across the Canadian portfolio,
(ii) rental increases on renewals, and (iii) strengthening
occupancy rates in most regions with larger improvements found in
Québec, Alberta, Prince Edward Island and Saskatchewan. Weighted
average gross rent per square foot for Canadian residential suites
was approximately $1.70 as at December 31, 2022, increased from
$1.65 as at December 31, 2021.
Canadian Portfolio
For the Three Months Ended December 31, |
2022 |
2021 |
|
Change in monthly rent |
Turnovers and Renewals(1) |
Change in monthly rent |
Turnovers and Renewals(1) |
|
$ |
% |
% |
$ |
% |
% |
Suite turnovers |
342 |
24.3 |
3.4 |
120 |
8.6 |
5.2 |
Lease renewals |
22 |
1.7 |
10.8 |
16 |
1.4 |
8.1 |
Weighted average of turnovers and renewals |
99 |
7.1 |
|
57 |
4.2 |
|
For the Year Ended December 31, |
2022 |
2021 |
|
Change in monthly rent |
Turnovers and Renewals(1) |
Change in monthly rent |
Turnovers and Renewals(1) |
|
$ |
% |
% |
$ |
% |
% |
Suite turnovers |
202 |
14.5 |
16.4 |
81 |
5.9 |
21.8 |
Lease renewals |
20 |
1.4 |
89.7 |
16 |
1.4 |
39.8 |
Weighted average of turnovers and renewals |
48 |
3.4 |
|
39 |
3.0 |
|
(1) Percentage of suites turned over or
renewed during the year based on the total weighted average number
of residential suites (excluding co-ownerships) held during the
year.
The Netherlands Portfolio
For the Three Months Ended December 31, |
2022 |
2021 |
|
Change in monthly rent |
Turnovers and Renewals(1) |
Change in monthly rent |
Turnovers and Renewals(1) |
|
€ |
% |
% |
€ |
% |
% |
Suite turnovers |
212 |
23.1 |
3.9 |
165 |
18.5 |
3.0 |
Lease renewals |
— |
— |
— |
— |
— |
— |
Weighted average of turnovers and renewals |
212 |
23.1 |
|
165 |
18.5 |
|
For the Year Ended December 31, |
2022 |
2021 |
|
Change in monthly rent |
Turnovers and Renewals(1) |
Change in monthly rent |
Turnovers and Renewals(1) |
|
€ |
% |
% |
€ |
% |
% |
Suite turnovers |
197 |
21.4 |
12.4 |
140 |
16.1 |
13.9 |
Lease renewals |
29 |
3.2 |
91.1 |
23 |
2.3 |
54.3 |
Weighted average of turnovers and renewals |
49 |
5.4 |
|
47 |
5.1 |
|
(1) Percentage of suites turned over or
renewed during the year based on the total weighted average number
of Dutch residential suites held during the year.
Overall, suite turnovers in the Canadian
residential suite portfolio (excluding co-ownerships) during the
three months and year ended December 31, 2022 resulted in monthly
rent increase of $342 or 24.3% and $202 or 14.5%, respectively,
compared to an increase of $120 or 8.6% and $81 or 5.9%,
respectively, for the same periods last year, primarily due to the
strong rental markets in most provinces across the Canadian
residential suite portfolio.
Monthly rents on lease renewals on the Canadian
residential suite portfolio (excluding co-ownerships) resulted in
monthly rent increasing by $22 or 1.7% for the three months ended
December 31, 2022, and $20 or 1.4%, for the year ended December 31,
2022, compared to an increase of $16 or 1.4% and $16 or 1.4%,
respectively, for both of the same periods last year. As a result
of the expiry of the regulatory rent freeze, CAPREIT has served
tenant notices to 96.0% and 91.7%, respectively, of its tenants in
Ontario and British Columbia, with rent increases of 1.2% and 1.5%,
respectively, during the year ended December 31, 2022.
For the Netherlands portfolio, suite turnovers
in the residential suite portfolio during the three months and year
ended December 31, 2022 resulted in monthly rent increasing by €212
or 23.1% and €197 or 21.4% respectively, compared to an increase of
€165 or 18.5% and €140 or 16.1%, respectively, for the same periods
last year. Our Netherlands team is proactively repositioning the
vacant suites to make available for leasing and to bring monthly
rents to market.
Lease renewals in the Netherlands's residential
suite portfolio resulted in an increase of €29 or 3.2% for the year
ended December 31, 2022 compared to an increase of €23 or 2.3% for
the same period last year.
For rent renewal increases due to indexation
beginning on July 1, 2022, European Residential Real Estate
Investment Trust (“ERES”) served tenant notices to 6,499 suites,
representing 96% of the residential portfolio, across which the
average rental increase due to indexation is 2.95%.
Estimated Net Rental Revenue
Run-Rate
CAPREIT’s annualized net rental revenue run-rate
as at December 31, 2022 grew to $975.3 million, up 5.2% from $927.2
million as at December 31, 2021. Actual net rental revenue for the
12 months ended December 31, 2022, excluding net rental revenue
from disposed or properties held for sale as at December 31, 2022,
was $939.0 million (12 months ended December 31, 2021 ‑ $873.4
million).
NOI
Same properties for the three months and year
ended December 31, 2022 are defined as all properties owned by
CAPREIT continuously since December 31, 2020, and therefore do not
take into account the impact on performance of acquisitions or
dispositions completed during 2022 and 2021, or properties that are
held for sale as at December 31, 2022.
($ Thousands) |
Total NOI |
Same Property NOI |
For the Three Months Ended December 31, |
|
2022 |
|
|
2021 |
|
%(1) |
|
2022 |
|
|
2021 |
|
%(1) |
Total operating revenues |
$ |
256,915 |
|
$ |
240,678 |
|
6.7 |
$ |
232,946 |
|
$ |
223,000 |
|
4.5 |
Operating expenses |
|
|
|
|
|
|
Realty taxes |
|
(23,397 |
) |
|
(22,280 |
) |
5.0 |
|
(21,233 |
) |
|
(20,635 |
) |
2.9 |
Utilities |
|
(20,355 |
) |
|
(19,328 |
) |
5.3 |
|
(18,713 |
) |
|
(17,702 |
) |
5.7 |
Other(2) |
|
(48,663 |
) |
|
(45,641 |
) |
6.6 |
|
(43,156 |
) |
|
(41,991 |
) |
2.8 |
Total operating expenses |
$ |
(92,415 |
) |
$ |
(87,249 |
) |
5.9 |
$ |
(83,102 |
) |
$ |
(80,328 |
) |
3.5 |
NOI |
$ |
164,500 |
|
$ |
153,429 |
|
7.2 |
$ |
149,844 |
|
$ |
142,672 |
|
5.0 |
NOI margin |
|
64.0 |
% |
|
63.7 |
% |
|
|
64.3 |
% |
|
64.0 |
% |
|
($ Thousands) |
Total NOI |
Same Property NOI |
For the Year Ended December 31, |
|
2022 |
|
|
2021 |
|
%(1) |
|
2022 |
|
|
2021 |
|
%(1) |
Total operating revenues |
$ |
1,007,268 |
|
$ |
933,137 |
|
7.9 |
$ |
913,631 |
|
$ |
884,366 |
|
3.3 |
Operating expenses |
|
|
|
|
|
|
Realty taxes |
|
(93,912 |
) |
|
(87,698 |
) |
7.1 |
|
(84,746 |
) |
|
(82,997 |
) |
2.1 |
Utilities |
|
(77,565 |
) |
|
(68,901 |
) |
12.6 |
|
(70,549 |
) |
|
(64,056 |
) |
10.1 |
Other(2) |
|
(185,382 |
) |
|
(166,545 |
) |
11.3 |
|
(166,501 |
) |
|
(156,589 |
) |
6.3 |
Total operating expenses |
$ |
(356,859 |
) |
$ |
(323,144 |
) |
10.4 |
$ |
(321,796 |
) |
$ |
(303,642 |
) |
6.0 |
NOI |
$ |
650,409 |
|
$ |
609,993 |
|
6.6 |
$ |
591,835 |
|
$ |
580,724 |
|
1.9 |
NOI margin |
|
64.6 |
% |
|
65.4 |
% |
|
|
64.8 |
% |
|
65.7 |
% |
|
(1) Represents the year-over-year
percentage change. (2) Comprises repairs and maintenance
("R&M"), wages, insurance, advertising, legal costs and
expected credit losses.
Operating Revenues
For the three months and year ended December 31,
2022, total operating revenues for the total and same property
portfolios increased compared to the same periods last year,
primarily due to increases in monthly rents on turnovers and
renewals and decreases in rental vacancies. Contributions from
acquisitions, partially offset by dispositions, further contributed
to higher operating revenues for the total portfolio.
Operating Expenses
For the three months ended December 31, 2022,
other operating expenses for the total and same property portfolios
increased compared to the same period last year, primarily due to
higher R&M costs, partially offset by lower insurance costs
related to claim recoveries. The higher R&M costs were
primarily due to (i) certain required interim maintenance costs for
the operation of CAPREIT's septic tanks at some MHC sites; and (ii)
other in-suite maintenance related costs across the portfolio.
For the year ended December 31, 2022, other
operating expenses for the total and same property portfolios
increased compared to the same period last year, primarily due to
the same reasons noted above, and to a lesser extent, higher
R&M related costs incurred at the beginning of 2022 due to
certain maintenance projects that were deferred during the novel
coronavirus (“COVID-19”) pandemic lockdowns in 2021 and also higher
weather-related maintenance costs.
CAPREIT remains critically focused on cost
control and reduction and is proactively working on solutions that
would allow for the full septic replacements at the affected MHC
sites that would eliminate the interim maintenance costs described
above. Management also continues to proactively monitor natural gas
rates in order to optimize hedging as much as possible, and has
prioritized the refinement of its robust procurement practices to
contribute to cost-saving initiatives. With CAPREIT's strategic
re-positioning of its portfolio from older, value-add assets into
new build properties, its cost profile is additionally improved,
given the enhanced energy efficiency of the newer buildings along
with pass-through costs to tenants. Turnover is also incurring
lower costs to re-lease in the current market, as compared to the
pandemic, further reducing normalized property operating expenses
as compared to the previous few years.
NON-IFRS PERFORMANCE
For the three months ended December 31, 2022,
diluted NFFO per Unit increased by 1.4% compared to the same period
last year, including an approximate 1.8% decrease in the weighted
average number of units outstanding. For the year ended December
31, 2022, diluted NFFO per Unit increased by 0.7% compared to last
year, despite an approximate 0.4% increase in the weighted average
number of units outstanding. The increase in diluted NFFO per Unit
for the year was primarily driven by NOI contribution from
acquisitions and higher same properties NOI.
PROPERTY CAPITAL
INVESTMENTS
During the year ended December 31, 2022, CAPREIT
made property capital investments (excluding head office assets and
development) of $307.9 million compared to $297.7 million for last
year.
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 and energy-saving initiatives, including
energy-efficient boilers and lighting systems.
NORMAL COURSE ISSUER BID
("NCIB")
For the three months and year ended December 31,
2022, CAPREIT purchased and cancelled approximately 0.8 million and
5.2 million Trust Units, respectively, under the NCIB program,
at a weighted average purchase price of $42.38 and $45.44 per Trust
Unit, respectively, for a total cost of $36.0 million and $237.8
million, respectively, with approximately an additional 0.2 million
Trust Units settled for cancellation subsequent to year-end, for a
total cost of $7.8 million. For the year ended December 31, 2021,
the Trust did not have an NCIB program in place and as a result did
not purchase and cancel any Trust Units.
SUBSEQUENT EVENTS
The table below summarizes the disposition of
investment properties completed subsequent to December 31,
2022:
Disposition Date |
Suite Count |
Region |
Sale Price(1) |
January 25, 2023 |
1,150(2) |
Ottawa, ON |
$ 136 million |
(1) Sale price excludes disposition costs
and other adjustments.(2) CAPREIT disposed of its 50% interest
in 1,150 apartment suites.
On January 24, 2023, ERES amended the existing
ERES Credit Facility to extend the maturity date to January 26,
2026 and to provide for, among other things, (i) an increase in the
limit from €100 million to €125 million, (ii) an accordion feature
to increase the limit by a further €25 million upon satisfaction of
conditions set out in the agreement and the consent of applicable
lenders, (iii) the replacement of USD LIBOR with Adjusted Term SOFR
as a benchmark interest rate, and (iv) the addition of another
Canadian chartered bank to the lender base.
During the month of January 2023, CAPREIT
purchased and cancelled an additional 0.2 million Trust Units under
the NCIB, at a weighted average purchase price of $42.73 per Trust
Unit, for a total cost of $7.8 million.
ADDITIONAL INFORMATION
More detailed information and analysis is
included in CAPREIT's audited consolidated annual financial
statements and MD&A for the year ended December 31, 2022, 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.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 Thursday, February 23, 2023 at 9:00 am EST. The telephone
numbers for the conference call are: International: (929) 526-1599,
North American Toll Free: (844) 200-6205. The conference call
access code is 810142#.
A slide presentation to accompany Management's
comments during the conference call will be available prior to the
conference call. To view the slides, access the CAPREIT website at
www.capreit.ca, click on "For Investors" and follow the link at the
top of the page. Please log on at least 15 minutes before the
conference call commences.
The call and accompanying slides will also be
archived on the CAPREIT website at www.capreit.ca.
About CAPREIT
CAPREIT is Canada’s largest publicly-traded
provider of quality rental housing. As at December 31, 2022,
CAPREIT owns or has interests in approximately 67,000 residential
apartment suites, townhomes and manufactured home community sites
well-located across Canada and the Netherlands, with approximately
$17 billion of investment properties in Canada and Europe. For more
information about CAPREIT, its business and its investment
highlights, please visit our website at www.capreit.ca and our
public disclosure which can be found under our profile at
www.sedar.com.
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”), Normalized Funds From Operations (“NFFO”), Net
Asset Value ("NAV"), Total Debt, Gross Book Value, Gross Historical
Cost, 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 and diluted
NFFO per unit, Ratio of Total Debt to Gross Book Value, Ratio of
Total Debt to Gross Historical Cost, 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, 2023, which should be read in
conjunction with this press release. Since these measures and
related per unit amounts are not recognized under IFRS, they may
not be comparable to similar measures reported by other issuers.
CAPREIT presents the 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.
Cautionary Statements
Regarding Forward-Looking
Statements
Certain statements contained, or contained in
documents incorporated by reference, in this press release
constitute forward-looking information within the meaning of
securities laws. Forward-looking information may relate to
CAPREIT’s future outlook and anticipated events or results and may
include statements regarding the future financial position,
business strategy, budgets, litigation, occupancy rates, rental
rates, productivity, projected costs, capital investments,
development and development opportunities, financial results,
taxes, plans and objectives of, or involving, CAPREIT.
Particularly, statements regarding CAPREIT’s future results,
performance, achievements, prospects, costs, opportunities and
financial outlook, including those relating to acquisitions,
dispositions and capital investment strategies and the real estate
industry generally, are forward-looking statements. In some cases,
forward-looking information can be identified by terms such as
“may”, “will”, “would”, “should”, “could”, “likely”, “expect”,
“plan”, “anticipate”, “believe”, “intend”, “estimate”, “predict”,
“potential”, “project”, “budget”, “continue” or the negative
thereof, or other similar expressions concerning matters that are
not historical facts. Forward-looking statements are based on
certain factors and assumptions regarding expected growth, results
of operations, performance, and business prospects and
opportunities. In addition, certain specific assumptions were made
in preparing forward-looking information, including: that the
Canadian and Dutch economies will generally experience growth,
which, however, may be adversely impacted by the global economy,
inflation and increasing interest rates, potential health crises
and their direct or indirect impacts on the business of CAPREIT,
including CAPREIT’s ability to enforce leases, perform capital
expenditure work, increase rents and apply for above guideline
increases, obtain financings at favourable interest rates; that
Canada Mortgage and Housing Corporation (“CMHC”) mortgage insurance
will continue to be available and that a sufficient number of
lenders will participate in the CMHC-insured mortgage program to
ensure competitive rates; that the Canadian capital markets will
continue to provide CAPREIT with access to equity and/or debt at
reasonable rates; that vacancy rates for CAPREIT properties will be
consistent with historical norms; that rental rates on renewals
will grow; that rental rates on turnovers will grow; that the
difference between in-place and market-based rents will be reduced
upon such turnovers and renewals; that CAPREIT will effectively
manage price pressures relating to its energy usage; and, with
respect to CAPREIT’s financial outlook regarding capital
investments, assumptions respecting projected costs of construction
and materials, availability of trades, the cost and availability of
financing, CAPREIT’s investment priorities, the properties in which
investments will be made, the composition of the property portfolio
and the projected return on investment in respect of specific
capital investments. Although the forward-looking statements
contained in this press release are based on assumptions,
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’s or the
industry’s actual results, performance, achievements, prospects and
opportunities in future periods to differ materially from those
expressed or implied by such forward-looking statements. These
risks and uncertainties include, among other things, risks related
to: rent control and residential tenancy regulations, general
economic conditions, privacy, cyber security and data governance
risks, talent management and human resources shortages,
taxation-related risks, energy costs, public health crises,
environmental matters, vendor management and third-party service
providers, operating risk, valuation risk, climate change, other
regulatory compliance risks, availability of debt, risks related to
acquisitions, dispositions and property development, catastrophic
events, litigation risk, liquidity and price volatility of Trust
Units, CAPREIT’s investment in ERES, potential conflicts of
interest, investment restrictions, lack of diversification of
investment assets, geographic concentration, illiquidity of real
property, capital investments, leasing risk, competition for real
property investments, dependence on key personnel, adequacy of
insurance and captive insurance, competition for residents,
controls over financial reporting, the nature of CAPREIT Trust
Units, Unitholder liability, dilution, distributions, participation
in CAPREIT’s distribution reinvestment plan ("DRIP") and foreign
operation and currency risks. There can be no assurance that the
expectations of CAPREIT’s management will prove to be correct.
These risks and uncertainties are more fully described in
regulatory filings, including CAPREIT’s Annual Information Form,
which can be obtained on SEDAR at www.sedar.com, under CAPREIT’s
profile, as well as under Risks and Uncertainties section of the
MD&A released on February 22, 2023. The information in this
press release is based on information available to management as of
February 22, 2023. Subject to applicable law, CAPREIT does not
undertake any obligation to publicly update or revise any
forward-looking information.
SOURCE: Canadian Apartment Properties Real
Estate Investment Trust
CAPREITMr. Mark KenneyPresident & Chief Executive Officer(416)
861-9404 |
CAPREITMr. Stephen CoChief Financial Officer(416) 306-3009 |
CAPREITMr. Julian SchonfeldtChief Investment Officer(647)
535-2544 |
SELECTED NON-IFRS MEASURES
A reconciliation of net
income to NFFO is as follows:
($ Thousands, except per Unit amounts) |
Three Months Ended |
Year Ended |
|
December 31, |
December 31, |
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
Net income |
$ |
155,523 |
|
$ |
644,959 |
|
$ |
13,637 |
|
$ |
1,392,795 |
|
Adjustments: |
|
|
|
|
Remeasurement of unit-based compensation liabilities |
|
(16 |
) |
|
881 |
|
|
(10,670 |
) |
|
7,914 |
|
Fair value adjustments of investment properties |
|
(74,461 |
) |
|
(568,280 |
) |
|
468,327 |
|
|
(1,048,742 |
) |
Fair value adjustments of Exchangeable LP Units |
|
975 |
|
|
1,426 |
|
|
(29,016 |
) |
|
665 |
|
Fair value adjustments of investments |
|
3,261 |
|
|
(5,087 |
) |
|
101,261 |
|
|
(14,088 |
) |
Loss on disposition |
|
7 |
|
|
221 |
|
|
3,318 |
|
|
241 |
|
Amortization of property, plant and equipment |
|
1,749 |
|
|
2,106 |
|
|
7,462 |
|
|
8,250 |
|
Fair value mark-to-market adjustment on ERES units held by
non-controlling unitholders |
|
5,621 |
|
|
7,752 |
|
|
(117,740 |
) |
|
25,895 |
|
Net FFO impact attributable to ERES units held by non-controlling
unitholders(1) |
|
(4,459 |
) |
|
(3,955 |
) |
|
(18,026 |
) |
|
(17,138 |
) |
Interest expense on ERES units held by non-controlling
unitholders |
|
3,361 |
|
|
3,133 |
|
|
12,918 |
|
|
12,756 |
|
(Gain) loss on derivative financial instruments |
|
38,182 |
|
|
(15,428 |
) |
|
(55,488 |
) |
|
(50,282 |
) |
Interest expense on Exchangeable LP Units |
|
609 |
|
|
608 |
|
|
2,435 |
|
|
1,119 |
|
Lease principal repayment |
|
(286 |
) |
|
(307 |
) |
|
(1,007 |
) |
|
(1,207 |
) |
Loss on foreign currency translation |
|
1,176 |
|
|
194 |
|
|
22,128 |
|
|
6,095 |
|
FFO adjustment for income from investment in associate |
|
— |
|
|
(7,060 |
) |
|
— |
|
|
(9,271 |
) |
Impairment of goodwill |
|
— |
|
|
— |
|
|
14,278 |
|
|
— |
|
Deferred income tax (recovery) expense |
|
(32,064 |
) |
|
36,107 |
|
|
(14,877 |
) |
|
77,417 |
|
FFO |
$ |
99,178 |
|
$ |
97,270 |
|
$ |
398,940 |
|
$ |
392,419 |
|
Adjustments: |
|
|
|
|
Reorganization, senior management termination, and retirement
costs(2) |
|
418 |
|
|
— |
|
|
6,668 |
|
|
2,747 |
|
Costs relating to transactions that were not completed |
|
259 |
|
|
— |
|
|
420 |
|
|
899 |
|
Mortgage fair value adjustments, net of mortgage settlement costs
on dispositions |
|
— |
|
|
— |
|
|
(1,766 |
) |
|
— |
|
Mortgage prepayment cost |
|
— |
|
|
1,328 |
|
|
1,354 |
|
|
2,517 |
|
Amortization of losses from (AOCL) AOCI to interest and other
financing costs |
|
67 |
|
|
583 |
|
|
1,361 |
|
|
2,440 |
|
IRES internalization expense impact to CAPREIT's equity pickup |
|
— |
|
|
1,172 |
|
|
— |
|
|
1,172 |
|
NFFO |
$ |
99,922 |
|
$ |
100,353 |
|
$ |
406,977 |
|
$ |
402,194 |
|
NFFO per unit – diluted |
$ |
0.580 |
|
$ |
0.572 |
|
$ |
2.328 |
|
$ |
2.311 |
|
Total distributions declared(3) |
$ |
62,376 |
|
$ |
63,668 |
|
$ |
252,822 |
|
$ |
245,479 |
|
NFFO payout ratio(4) |
|
62.4 |
% |
|
63.4 |
% |
|
62.1 |
% |
|
61.0 |
% |
Net distributions paid in cash(3) |
$ |
61,044 |
|
$ |
42,826 |
|
$ |
209,797 |
|
$ |
168,728 |
|
Excess NFFO over net distributions paid in cash |
$ |
38,878 |
|
$ |
57,527 |
|
$ |
197,180 |
|
$ |
233,466 |
|
Effective NFFO payout ratio(5) |
|
61.1 |
% |
|
42.7 |
% |
|
51.6 |
% |
|
42.0 |
% |
(1) For the three months and year ended
December 31, 2022, the adjustment is based on applying the 34%
weighted average ownership held by ERES non-controlling unitholders
(December 31, 2021 - 34%) to ERES's FFO of $13.0 million (€9.3
million) and $53.8 million (€39.3 million), respectively, (for the
three months and year ended December 31, 2021 - $13.1 million or
€9.5 million and $52.5 million or €35.4 million, respectively) and
adjusting for $nil million and $1.2 million of acquisition fees for
the three months and year ended December 31, 2022 (for the three
months and year ended December 31, 2021 - $1.4 million and $2.1
million, respectively) charged by CAPREIT to ERES, which are
eliminated upon consolidation.(2) For the three months and
year ended December 31, 2022, includes $nil and $1.0 million,
respectively, of accelerated vesting of previously granted RUR
units.(3) For a description of distributions declared and net
distributions paid, see the Non-IFRS Measures section in the
MD&A for the year ended December 31, 2022.(4) The payout
ratio compares distributions declared to NFFO.(5) The
effective payout ratio compares net distributions paid to NFFO.
Reconciliation of Unitholders' Equity to
NAV:
($ Thousands, except per unit amounts) |
As at |
December 31, 2022 |
December 31, 2021 |
Unitholders' equity |
$ |
10,003,695 |
|
$ |
10,399,886 |
|
Adjustments: |
|
|
Exchangeable LP Units |
|
71,668 |
|
|
100,684 |
|
Unit-based compensation financial liabilities excluding ERES’s unit
options plan |
|
17,455 |
|
|
33,994 |
|
Net deferred income tax liability(1) |
|
114,351 |
|
|
128,964 |
|
Net derivative financial asset(2) |
|
(51,974 |
) |
|
(26,953 |
) |
Goodwill |
|
— |
|
|
(15,133 |
) |
Adjustment to ERES non-controlling interest(3) |
|
(200,629 |
) |
|
(114,716 |
) |
NAV |
$ |
9,954,566 |
|
$ |
10,506,726 |
|
Diluted number of units |
|
171,599 |
|
|
175,761 |
|
NAV per Unit - diluted |
$ |
58.01 |
|
$ |
59.78 |
|
(1) Represents deferred income tax
liability of $120.5 million net of deferred income tax asset of
$6.2 million (December 31, 2021 - deferred income tax liability of
$134.0 million net of deferred income tax asset of $5.0
million).(2) Represents non-current and current derivative
financial assets of $62.6 million and $nil, respectively, net of
non-current and current derivative financial liabilities of $nil
and $10.6 million, respectively (December 31, 2021 - non-current
and current derivative financial assets of $22.4 million and $8.5
million, respectively, net of non-current and current derivative
financial liabilities of $1.2 million and $2.8 million,
respectively).(3) CAPREIT accounts for the non-controlling
interest in ERES as a liability, measured at the trading value of
ERES’s units not owned by CAPREIT. The adjustment is made so that
the non-controlling interest in ERES is measured at ERES’s
disclosed NAV, rather than ERES’s trading value. The table below
summarizes the calculation of adjustment to ERES non-controlling
interest as at December 31, 2022 and December 31, 2021:
($ Thousands) |
As at |
December 31, 2022 |
December 31, 2021 |
ERES’s NAV |
€ |
899,166 |
|
€ |
963,452 |
|
Ownership by ERES non-controlling interest |
|
34 |
% |
|
34 |
% |
Closing foreign exchange rate |
|
1.4498 |
|
|
1.4391 |
|
Impact to NAV due to ERES’s non-controlling unitholders |
$ |
443,228 |
|
$ |
471,411 |
|
Less: ERES units held by non-controlling unitholders |
$ |
242,599 |
|
$ |
356,695 |
|
Adjustment to ERES non-controlling interest |
$ |
200,629 |
|
$ |
114,716 |
|
Reconciliation for Total Debt and Total
Debt Ratios:
($ Thousands) |
As at |
December 31, 2022 |
December 31, 2021 |
Mortgages payable - non-current |
$ |
5,963,820 |
|
$ |
5,456,605 |
|
Mortgages payable - current |
|
613,277 |
|
|
643,460 |
|
Liabilities related to assets held for sale |
|
38,116 |
|
|
— |
|
Bank Indebtedness |
|
388,975 |
|
|
310,866 |
|
Total Debt |
$ |
7,004,188 |
|
$ |
6,410,931 |
|
|
|
|
Total Assets |
$ |
17,741,888 |
|
$ |
17,712,973 |
|
Add: Total accumulated amortization and depreciation |
|
42,100 |
|
|
35,280 |
|
Gross Book Value(1) |
$ |
17,783,988 |
|
$ |
17,748,253 |
|
Ratio of Total Debt to Gross Book Value |
|
39.4 |
% |
|
36.1 |
% |
Ratio of Mortgage debt to Gross Book Value(2) |
|
37.2 |
% |
|
34.4 |
% |
|
|
|
Gross Book Value(1) |
$ |
17,783,988 |
|
$ |
17,748,253 |
|
Less: Cumulative investment properties fair value adjustments |
|
(4,793,210 |
) |
|
(5,480,670 |
) |
Gross historic cost(3) |
$ |
12,990,778 |
|
$ |
12,267,583 |
|
Ratio of Total Debt to Gross Historical Cost |
|
53.9 |
% |
|
52.3 |
% |
(1) Gross Book Value ("GBV") is defined by
CAPREIT's Declaration of Trust.(2) Includes liabilities
related to assets held for sale. (3) Based on the historical
cost of investment properties, calculated as CAPREIT's assets, as
disclosed under IFRS, plus accumulated amortization on property,
plant and equipment, and deferred loan costs, minus fair value
adjustment on investment properties.
Reconciliation of Net Income to Adjusted
EBITDAFV:
($ Thousands) |
|
|
For the Year Ended |
December 31, 2022 |
December 31, 2021 |
Net income |
$ |
13,637 |
|
$ |
1,392,795 |
|
Adjustments: |
|
|
Interest and other financing costs |
|
182,869 |
|
|
160,463 |
|
Current and deferred income tax (recovery) expense |
|
(10,034 |
) |
|
81,181 |
|
Amortization of property, plant and equipment |
|
7,462 |
|
|
8,250 |
|
Fair value adjustments of investment properties |
|
468,327 |
|
|
(1,048,742 |
) |
Fair value adjustments of Exchangeable LP Units |
|
(29,016 |
) |
|
665 |
|
Fair value adjustments of investments |
|
101,261 |
|
|
(14,088 |
) |
FFO adjustment for income from investment in associate(1) |
|
— |
|
|
(9,271 |
) |
Unit-based compensation (recovery) expense |
|
(3,414 |
) |
|
15,111 |
|
EUPP unit-based compensation expense |
|
(514 |
) |
|
(496 |
) |
Loss on dispositions |
|
3,318 |
|
|
241 |
|
(Gain) loss on non-controlling interest |
|
(104,822 |
) |
|
38,651 |
|
Gain on derivative financial instruments |
|
(54,135 |
) |
|
(50,282 |
) |
Mortgage fair value adjustments, net of mortgage settlement costs
on dispositions |
|
(1,766 |
) |
|
— |
|
Loss on foreign currency translation |
|
21,000 |
|
|
6,095 |
|
Goodwill impairment loss |
|
14,278 |
|
|
— |
|
Adjusted EBITDAFV |
$ |
608,451 |
|
$ |
580,573 |
|
(1) Relates to CAPREIT's share of IRES's
investment property fair value gain.
Debt Service Coverage Ratio
($ Thousands) |
For the Year Ended |
December 31, 2022 |
December 31, 2021 |
Interest on mortgages payable and liabilities related to assets
held for sale |
$ |
154,467 |
$ |
138,293 |
Interest on bank indebtedness and other deferred costs |
|
8,292 |
|
6,110 |
Mortgage principal repayments |
|
162,048 |
|
149,996 |
Debt service payments |
$ |
324,807 |
$ |
294,399 |
Adjusted EBITDAFV |
$ |
608,451 |
$ |
580,573 |
Debt Service Coverage Ratio (times) |
1.9x |
2.0x |
Interest Coverage Ratio
($ Thousands) |
For the Year Ended |
December 31, 2022 |
December 31, 2021 |
Interest on mortgages payable and liabilities related to assets
held for sale |
$ |
154,467 |
$ |
138,293 |
Interest on bank indebtedness and other deferred costs |
|
8,292 |
|
6,110 |
Interest Expense |
$ |
162,759 |
$ |
144,403 |
Adjusted EBITDAFV |
$ |
608,451 |
$ |
580,573 |
Interest coverage ratio (times) |
3.7x |
4.0x |
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