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Press release from Marketwire

CAPREIT Announces Continued Strong Growth in Second Quarter 2010

Tuesday, August 10, 2010

CAPREIT Announces Continued Strong Growth in Second Quarter 201017:43 EDT Tuesday, August 10, 2010 TORONTO, ONTARIO--(Marketwire - Aug. 10, 2010) - Canadian Apartment Properties Real Estate Investment Trust ("CAPREIT") (TSX:CAR.UN) announced today very strong operating and financial results for the three and six months ended June 30, 2010. HIGHLIGHTS Three Months Ended Six Months Ended June 30 June 30 2010 2009 2010 2009 ---------------------------------------------------------------------------- Operating Revenues (000s) $ 82,618 $ 79,747 $ 163,828 $ 159,688 Net Operating Income ("NOI") (000s)(1) $ 49,085 $ 45,520 $ 91,788 $ 84,398 NOI Margin(1) 59.4% 57.1% 56.0% 52.9% Normalized Funds From Operations ("NFFO") Per Unit - Basic(1) $ 0.380 $ 0.351 $ 0.682 $ 0.602 NFFO Payout Ratio(1) 73.8% 79.7% 82.4% 92.8% ---------------------------------------------------------------------------- (1) NOI, NFFO and NFFO per Unit are measures used by management in evaluating operating performance. Please refer to the cautionary statements under the heading "Non-GAAP Financial Measures" and the reconciliations provided in this press release. -- Q2 operating revenues up 3.6% compared to prior year period on higher average monthly rents, increased occupancies, and contributions from acquisitions -- Average monthly rents rose 2.6% in the second quarter compared to prior year -- Occupancy improved to 98.0% from 97.5% in Q2 2009 -- Q2 NOI up 7.8% from last year with NOI margin increasing to 59.4% -- Organic growth continued with same property NOI up 6.1%, the 18th consecutive quarter of stable or improved same property NOI -- Q2 NFFO up 9.4% generating an improved NFFO payout ratio of 73.8% -- Q2 NFFO per Unit up 8.3% to $0.380 -- Expect to achieve debt refinancing and mortgage renewal targets for 2010, producing significant future interest rate savings -- Renewed credit facilities effective June 30, 2010, including an increase in capacity from $260 million to $280 million and amending certain covenants to address accounting changes that are expected to result from the changeover to IFRS PORTFOLIO OPERATING RESULTS Three Months Ended Six Months Ended June 30 June 30 2010 2009 2010 2009 ---------------------------------------------------------------------------- Overall Portfolio Occupancy(1) 98.0% 97.5% Overall Portfolio Average Monthly Rents(1)(2) $ 958 $ 934 Operating Revenues (000s)$ 82,618 $ 79,747 $ 163,828 $ 159,688 Operating Expenses (000s)$ 33,533 $ 34,227 $ 72,040 $ 75,290 NOI (000s)(3) $ 49,085 $ 45,520 $ 91,788 $ 84,398 NOI Margin 59.4% 57.1% 56.0% 52.9% Number of Suites and Sites Acquired 361 - 375 10 ---------------------------------------------------------------------------- (1) As at June 30. (2) Average monthly rents are defined as actual residential rents, net of vacancies, divided by the total number of suites in the portfolio and do not include revenues from parking, laundry or other sources. (3) NOI is a measure used by management in evaluating operating performance. Please refer to the cautionary statements under the heading "Non-GAAP Financial Measures" and the reconciliations provided in this press release. Operating RevenuesFor the three and six months ended June 30, 2010, total operating revenues increased by 3.6% and 2.6%, respectively, compared to the same periods last year primarily due to acquisitions completed in the current quarter as well as increased average monthly rents and higher occupancy levels. Average monthly rents increased in all sectors and geographic regions of the portfolio, with the exception of Alberta, resulting in a 2.6% increase in overall average monthly rents as at June 30, 2010 to $958, compared to $934 as at June 30, 2009. Overall occupancy improved to 98.0% at June 30, 2010 compared to 97.5% at the same time last year. The increases in average monthly rents and occupancy levels were due to a combination of the acquisition of two luxury properties during the quarter, successful sales and marketing strategies and continued strength in the residential rental sector in the majority of CAPREIT's regional markets.Suite turnovers in the residential suite portfolio (excluding co-ownerships) during the three months ended June 30, 2010 resulted in average monthly rents increases of approximately $3 or 0.3% per suite compared to a decrease of approximately $12 or 1.2% in the prior year. For the first six months of 2010, suite turnovers resulted in a $3 or 0.3% increase in average monthly rents compared to decreases of $3 or 0.3% in the prior year. Although the change in average monthly rents from suite turnovers improved from the same periods in the prior year, they continue to be adversely impacted by aggressive rent discounting in the Alberta market of approximately $60 or 5.5% per suite ($54 or 5.1% per suite in the second quarter). Excluding the impact of the Alberta portfolio, residential suite turnovers would have resulted in average monthly rent increases of $9 or 0.9% ($8 or 0.8% per suite in the second quarter). Pursuant to Management's focus on increasing overall portfolio rents, average monthly rents on lease renewals increased by approximately $23 or 2.3% for the quarter ended June 30, 2010 compared to $22 or 2.3% for the same period last year. For the six months ended June 30, 2010, average monthly rents increased by $22 or 2.2%, which is relatively unchanged from the same period last year. Operating ExpensesFor the three and six months ended June 30, 2010, operating expenses as a percentage of operating revenues improved to 40.6% and 44.0%, respectively, compared to 42.9% and 47.1% for the same periods in 2009. The significant decrease in operating expenses through the first six months of 2010 was primarily due to lower utility and repairs and maintenance ("R&M") costs. The decrease in utility costs was primarily a result of CAPREIT's energy savings initiatives and a revised natural gas supply strategy combined with milder weather in 2010 compared to 2009. Lower R&M costs were the result of Management's capital investment programs as well as continued steady progress in mitigating the impact of a garbage levy introduced by the City of Toronto in late 2008 through improved resident education and the implementation of waste recycling programs. Subsequent to June 30, 2010, CAPREIT entered into a new floating-to-fixed natural gas financial instrument covering the period from November 2010 through March 2011. The financial instrument fixes the price of natural gas at $4.32 per Gigajoule for 2,700 Gigajoules per day, which represents approximately 75% of CAPREIT's anticipated natural gas delivery requirements during the five month period. The new fixed price will serve to protect CAPREIT from significant potential increases in natural gas market prices during the peak heating season.Net Operating IncomeIn the second quarter of 2010, NOI improved by $3.6 million or 7.8% while the NOI margin improved significantly to 59.4% as compared to 57.1% in the prior year quarter. For the six months ended June 30, 2010, overall NOI increased by $7.4 million or 8.8%, while the NOI margin improved to 56.0% from 52.9% for the same period in the prior year.As of June 30, 2010, CAPREIT has generated 18 consecutive quarters of stable or improved year-over-year NOI growth for stabilized properties. For the three and six months ended June 30, 2010, operating revenues for stabilized suites and sites increased 2.4% and 2.0%, respectively, while operating costs fell 2.5% and 4.3%, respectively. As a result, stabilized NOI increased by 6.1% and 7.6%, respectively, for the three and six months ended June 30, 2010. "The investments we have made in our properties, as well as in our operating structure and procedures, are now paying off in terms of higher revenues and lower operating and overhead costs," commented Thomas Schwartz, President and Chief Executive Officer. "Looking ahead, we are confident this trend of higher same property NOI will continue, augmented by contributions from our ongoing property acquisition and portfolio repositioning activities." NON-GAAP FINANCIAL MEASURES Three Months Ended Six Months Ended June 30 June 30 2010 2009 2010 2009 ---------------------------------------------------------------------------- NFFO (000s) $ 25,320 23,153 $ 45,342 $ 39,621 NFFO Per Unit - Basic $ 0.380 $ 0.351 $ 0.682 $ 0.602 Cash Distributions Per Unit $ 0.270 $ 0.270 $ 0.540 $ 0.540 NFFO Payout Ratio 73.8% 79.7% 82.4% 92.8% NFFO Effective Payout Ratio 62.7% 70.0% 70.5% 79.5% ---------------------------------------------------------------------------- Normalized Funds From Operations NFFO is not a financial measure determined by Canadian generally accepted accounting principles ("GAAP"), however, it is used by CAPREIT to assess overall operating performance. NFFO, which excludes from Funds From Operations ("FFO") the effect of changes in the fair value of derivative financial instruments and certain other non-recurring expenses, increased by 9.4% and 14.4%, respectively, for the three and six months ended June 30, 2010, compared to the same periods last year. The increase was primarily due to the strong progress in reducing operating costs including utility and R&M costs, higher average monthly rents and improved occupancy levels resulting from Management's sales and marketing programs, and contributions from recent acquisitions. NFFO per Unit increased by 8.3% and 13.3% for the three and six months ended June 30, 2010 compared to the prior year periods. The payout ratio of distributions declared to NFFO improved for the three months ended June 30, 2010 to 73.8%, compared to 79.7% for the same period last year. For the first six months of 2010, the payout ratio improved to 82.4% compared to 92.8% last year.The effective NFFO payout ratio, which compares net distributions paid to Unitholders to NFFO, improved to 62.7% and 70.5%, respectively, for the three and six months ended June 30, 2010, from 70.0% and 79.5%, respectively, in the same periods last year, primarily due to significant operating cost reductions as well as higher reinvestments of distributions under the Distribution Reinvestment Plan ("DRIP"). The average participation rate in the DRIP increased to 15.0% from 12.1% and to 14.4% from 14.3%, respectively, for the three and six months ended June 30, 2010 and prior year periods. LIQUIDITY AND LEVERAGE As at June 30, 2010 2009 ---------------------------------------------------------------------------- Mortgage Debt to Gross Book Value 57.47% 57.09% Total Debt to Gross Book Value 63.84% 62.42% Total Debt to Total Capitalization 63.18% 64.27% Debt Coverage Ratio (times)(1) 1.32 1.29 Interest Coverage Ratio (times)(1) 2.09 2.07 Weighted Average Mortgage Interest Rate(2) 4.97% 5.15% Weighted Average Mortgage Term to Maturity (years) 4.7 4.9 ---------------------------------------------------------------------------- (1) For the four quarters ended June 30. (2) Effective weighted average interest rate including deferred financing costs and fair value adjustments but excluding CMHC premiums. Additionally, including the amortization of the realized component of the loss on settlement of $9.9 million included in Accumulated Other Comprehensive Loss, the effective portfolio weighted average interest rate at June 30, 2010 would be 0.09% higher (June 30, 2009 - 0.05%). Financial StrengthCAPREIT's strong balance sheet and financial position will enable Management to take advantage of the current low interest rate environment through the combination of refinancings as well as modest increases in overall leverage. CAPREIT is achieving its financing plan goals as demonstrated by the following key indicators: -- The ratio of total debt to gross book value as at June 30, 2010 remains conservative and increased modestly to 63.84% as compared to 62.42% last year -- Debt and interest coverage ratios improved for the four quarters ended June 30, 2010, compared to last year despite the impact of additional mortgage financing obtained in the last 12 months on principal and interest payments -- At June 30, 2010, 94.5% (June 30, 2009 - 95.3%) of CAPREIT's mortgage portfolio is insured by the Canada Mortgage and Housing Corporation ("CMHC") (excluding the mortgages on CAPREIT's manufactured home community land lease sites) -- The effective portfolio weighted average interest rate on mortgages has steadily declined from 5.15% as at June 30, 2009, to 4.97% as at June 30, 2010, which will result in significant interest rate savings in future years -- CAPREIT has also successfully renewed and amended its credit facilities aggregating to $280 million, which matured on June 30, 2010 to provide a revolving three-year acquisition and operating facility of $270 million. The available borrowing capacity under this facility was $83.1 million as at June 30, 2010. In addition, the Land Lease Facility of $10 million was also renewed for a one-year term maturing on June 30, 2011. The available borrowing capacity under the Land Lease Facility capacity was $7.9 million as at June 30, 2010 Despite the recent increased volatility in interest rates, Management does not anticipate any material difficulties in renewing mortgages maturing in 2010 and refinancing principal repayments in the year, with new mortgages at lower interest rates than those currently in place. Excluding the effect of acquisitions and dispositions, mortgage refinancings of $69.7 million, consisting of renewals of existing mortgages of $28.0 million, and additional top-up financings of $41.7 million, were completed in the second quarter for a weighted average term of 3.5 years and at a weighted average interest rate of 3.58%, which is significantly below the weighted average interest rate for the mortgages that mature in 2010 of 4.89%. Management expects to achieve its total mortgage renewal and refinancing plan for 2010 of between $285 million to $300 million (approximately $200 million for renewals and $100 million for additional top up financing), of which $96.3 million ($41.1 million for renewals and $55.2 million for top ups) has been closed or committed up to August 10, 2010. Based on current interest rates for CMHC-insured mortgages, Management expects to realize interest rate savings for mortgages maturing in 2010 that will benefit CAPREIT over the long term.Property Capital Investment PlanDuring the first six months of 2010, CAPREIT made property capital investments of $27.4 million as compared to $33.8 million for the same period in 2009. Property capital investments were lower compared to the prior year period primarily due to decreases associated with the timing of building improvement programs in the quarter, partly offset by higher investments in suite improvements and high-efficiency boilers. In addition, CAPREIT continues to invest in environment-friendly and energy saving initiatives, including the above-mentioned boilers, energy-efficient lighting systems, water saving and waste recycling programs, which have permitted CAPREIT to mitigate potentially higher increases in utility costs and have improved overall portfolio NOI significantly. Management expects to invest between $92.5 million to $97.5 million in its properties during 2010. Acquisitions and DispositionsOn April 12, 2010, CAPREIT completed the acquisition of a luxury property comprising 162 suites, located in Vancouver, British Columbia. Total acquisitions costs of $38.4 million were funded by the assumption of an existing CMHC-insured first mortgage of $22.7 million at an effective interest rate of 4.59% maturing on April 5, 2017, and the balance from the Acquisition and Operating Facility.On May 14, 2010, CAPREIT completed the acquisition of a luxury property comprising 199 suites, located in Mississauga, Ontario. Total acquisitions costs of $31.6 million were satisfied with a new CMHC-insured mortgage in the amount of $22.2 million at 3.37% for a five-year term and the balance from the Acquisition and Operating Facility. On June 3, 2010, CAPREIT sold a non-core property consisting of 88 suites in Montreal, Quebec for a total sales price of $3.0 million. In a separate transaction on June 9, 2010, CAPREIT sold an additional apartment complex comprising 250 suites in Montreal, Quebec for a total sales price of $11.8 million. After estimated closing costs, and the repayment of approximately $5.9 million in mortgages, the net cash proceeds from the sales were approximately $7.5 million. A gain of $1.3 million ($0.019 Per Unit) was recognized in the second quarter of 2010. On July 5, 2010, CAPREIT completed the sale of a 146-suite property located in London, Ontario, for a sales price of $7.6 million, excluding closing and transaction costs. The purchaser assumed $5.7 million of existing mortgages. The net cash proceeds from the sale were approximately $1.6 million, and a gain of $1.5 million is expected to be recognized in the third quarter of 2010. On July 29, 2010, CAPREIT acquired eight properties comprising 307 suites located in or near Victoria, British Columbia. The purchase price of approximately $46.7 million, excluding closing and transaction costs, was funded from (i) mortgage financings in the amount of $25.6 million; (ii) the assumption of an existing mortgage in the amount of $0.8 million; and (iii) funds drawn on the Acquisition and Operating Facility.On July 29, 2010, CAPREIT completed the sale of five properties comprising 570 suites located in Mississauga and Kitchener, Ontario, for a sales price of $45.9 million, excluding closing and transaction costs. The purchaser assumed none of the existing mortgages. After estimated closing costs, and the repayment of approximately $20.1 million in mortgages, the net cash proceeds from the sale were approximately $23.2 million. A gain of approximately $8.1 million will be recognized in the third quarter of 2010. "Our acquisitions are focused on building our presence in high growth markets where our proven property management and capital investment programs will enhance NOI through improved occupancies, higher average rents and lower operating costs," Mr. Schwartz continued. "We also continue to evaluate our portfolio to ensure all our properties meet our strategic and operating objectives. The sale of the eight non-core properties during and subsequent to the second quarter generated total net cash proceeds of approximately $32.3 million used to reduce bank debt and fund future growth opportunities. In addition, the aggregate capital gain of approximately $10.9 million on the sales is a clear indication that our capital investment and property management strategies are generating significant value for our Unitholders."Additional InformationMore detailed information and analysis is included in CAPREIT's unaudited consolidated interim financial statements and Management's Discussion and Analysis ("MD&A") for the three and six months ended June 30, 2010, 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.net. Additionally, supplemental information can be viewed at www.sedar.com under CAPREIT's profile and at www.capreit.net.Conference CallA conference call hosted by Thomas Schwartz, President and Chief Executive Officer and Richard J. Smith, Chief Financial Officer, will be held Wednesday, August 11, 2010 at 10.00 am ET. The telephone numbers for the conference call are: Local: (416) 340-8018, North American Toll Free: (800) 769-8320.A slide presentation to accompany Management's comments during the conference call will be available one hour and a half prior to the conference call. To view the slides, access the CAPREIT website at 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 (416) 695-5800 or toll free (800) 408-3053. The Passcode for the Instant Replay is 3807645#. The Instant Replay will be available until midnight, August 18, 2010. The call and accompanying slides will also be archived on the CAPREIT website at www.capreit.net. For more information about CAPREIT, its business and its investment highlights, please refer to our website at www.capreit.net. About CAPREITAs one of Canada's largest residential landlords, CAPREIT (TSX:CAR.UN) is a growth-oriented investment trust owning interests in 27,228 residential suites and two manufactured home communities comprising 1,316 land lease sites located in or near major urban centres from coast to coast. For more information about CAPREIT, its business and its investment highlights, please refer to our website at www.capreit.net and our public disclosure which can be found under our profile at www.sedar.com. Non-GAAP Financial Measures CAPREIT prepares and releases unaudited quarterly and audited consolidated annual financial statements prepared in accordance with Canadian generally accepted accounting principles ("GAAP"). In this and other earnings releases and investor conference calls, as a complement to results provided in accordance with GAAP, CAPREIT also discloses and discusses certain non-GAAP financial measures, including NOI, FFO, NFFO and applicable per Unit amounts and payout ratios. These non-GAAP measures are further defined and discussed in the August 10, 2010 MD&A, which should be read in conjunction with this news release. Since NOI, FFO and NFFO are not determined by GAAP, they may not be comparable to similar measures reported by other issuers. CAPREIT has presented such non-GAAP measures as Management believes these non-GAAP measures are relevant measures of the ability of CAPREIT to earn and distribute cash returns to Unitholders and to evaluate CAPREIT's performance. A reconciliation of Net Loss and such non-GAAP measures and Adjusted Funds From Operations ("AFFO") is included in this press release. These non-GAAP measures should not be construed as alternatives to net income (loss) or cash flow from operating activities determined in accordance with GAAP as an indicator of CAPREIT's performance. Cautionary Statements Regarding Forward-Looking StatementsCertain 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 capital investments, 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 economy will generally experience growth, however, with specific geographic areas of weakness including Alberta and parts of Ontario; that inflation will remain at historically low rates; that interest rates will rise in 2010; 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 conditions within the real estate market, including competition for acquisitions, will become favourable; 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 are reasonable as of the date hereof, there can be no assurance actual results will be consistent with these forward-looking statements; 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: real property ownership, leasehold interests, co-ownerships, investment restrictions, operating risk, energy costs, environmental matters, insurance, capital investments, indebtedness, interest rate hedging, taxation, harmonization of federal goods and services tax and provincial sales tax, government regulations, controls over financial accounting, International Financial Accounting Standards, legal and regulatory concerns, the nature of units of CAPREIT ("Trust Units") and of CAPREIT's subsidiary, CAPREIT Limited Partnership ("CAPLP 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 and risks related to acquisitions. 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 in Section VII of CAPREIT's MD&A for the three and six months ended June 30, 2010 and other SEDAR filings made by CAPREIT. The information in this press release is based on information available to Management as of August 10, 2010. 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. SELECTED UNAUDITED FINANCIAL INFORMATION Condensed Balance Sheets June 30, 2010 December 31, 2009 As at ($ Thousands) ---------------------------------------------------------------------------- Income properties $ 2,211,715 $ 2,154,125 Total assets 2,330,331 2,279,779 Mortgages payable 1,576,729 1,512,715 Bank indebtedness 177,787 146,891 Total liabilities 1,903,505 1,822,595 Unitholders' Equity 426,826 457,184 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Condensed Statements of Income and Comprehensive Income Three Months Ended Six Months Ended June 30 June 30 ($ Thousands, except per Unit amounts) 2010 2009 2010 2009 ---------------------------------------------------------------------------- Net Operating Income $ 49,085 $ 45,520 $ 91,788 $ 84,398 Less: Trust Expenses 3,651 4,030 6,599 7,602 Mortgage Interest 19,071 18,545 37,913 37,021 Interest on Bank Indebtedness 1,738 623 3,156 1,396 Net Loss on Natural Gas Contracts - - 4,497 - Other Income (463) (462) (925) (927) Depreciation 20,406 18,829 40,379 37,271 Amortization 873 775 1,763 1,591 Restructuring Costs 382 - 532 - ---------------------------------------------------------------------------- Income (Loss) from Continuing Operations Before Gains (Losses) and Income Taxes 3,427 3,180 (2,126) 444 Unrealized Gain (Loss) on Derivative Financial Instruments 4 3,748 (50) 3,437 Realized Gain on Derivative Financial Instruments - 1,859 - 1,325 Recovery of (Provision for) Future Income Taxes 173 6 970 (829) ---------------------------------------------------------------------------- Income (Loss) From Continuing Operations 3,604 8,793 (1,206) 4,377 Income From Discontinued Operations 1,939 280 1,959 197 ---------------------------------------------------------------------------- Net Income $ 5,543 $ 9,073 $ 753 $ 4,574 Other Comprehensive Income (Loss) $ 730 $ 5,513 $ (38)$ 6,406 ---------------------------------------------------------------------------- Comprehensive Income $ 6,273 $ 14,586 $ 715 $ 10,980 ---------------------------------------------------------------------------- Basic Net Income (Loss) Per Unit Continuing Operations $ 0.054 $ 0.134 $ (0.018)$ 0.066 Discontinued Operations $ 0.029 $ 0.004 $ 0.029 $ 0.003 ---------------------------------------------------------------------------- Basic Net Income Per Unit $ 0.083 $ 0.138 $ 0.011 $ 0.069 ---------------------------------------------------------------------------- Diluted Net Income (Loss) Per Unit Continuing Operations $ 0.054 $ 0.133 $ (0.018)$ 0.066 Discontinued Operations $ 0.029 $ 0.004 $ 0.029 $ 0.003 ---------------------------------------------------------------------------- Diluted Net Income Per Unit $ 0.083 $ 0.137 $ 0.011 $ 0.069 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Weighted Average Number of Units (000s) - Basic 66,585 65,938 66,504 65,855 Weighted Average Number of Units (000s) - Diluted 66,921 66,002 66,794 65,929 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Condensed Statements of Cash Flows Three Months Ended Six Months Ended June 30, June 30, 2010 2009 2010 2009 ($ Thousands) --------------------------------------------------------------------------- Cash Provided By Operating Activities: Net Income $ 5,543 $ 9,073 $ 753 $ 4,574 Items in Net Income Not Affecting Cash: Changes in Non-cash Operating Assets and Liabilities (4,435) (9,485) (13,659) (11,129) Depreciation and Amortization 22,037 20,245 43,776 39,981 (Recovery of) Provision for Future Income Taxes (648) (141) (1,598) 662 Other (958) (5,212) 3,886 (3,662) --------------------------------------------------------------------------- Cash Provided By Operating Activities 21,539 14,480 33,158 30,426 --------------------------------------------------------------------------- Cash Used In Investing Activities (50,724) (22,301) (65,856) (32,638) --------------------------------------------------------------------------- Cash Provided By Financing Activities Mortgages and Other Liabilities 45,535 23,894 33,447 28,594 Bank indebtedness, net (741) 14,969 30,896 19,403 Settlement of Derivative Financial Instruments - (14,916) - (14,916) Distributions, Net of DRIP and Other Equity Issuances (15,609) (16,126) (31,645) (30,869) --------------------------------------------------------------------------- Cash Provided By Financing Activities 29,185 7,821 32,698 2,212 --------------------------------------------------------------------------- Changes in Cash and Cash Equivalents During the Year - - - - Cash and Cash Equivalents, Beginning of Year - - - - --------------------------------------------------------------------------- Cash and Cash Equivalents, End of Year $ - $ - $ - $ - --------------------------------------------------------------------------- --------------------------------------------------------------------------- Reconciliation of Net Income to FFO and to NFFO Three Months Ended Six Months Ended June 30 June 30 2010 2009 2010 2009 ($ Thousands, except per Unit amounts) ---------------------------------------------------------------------------- Net Income $ 5,543 $ 9,073 $ 753 $ 4,574 Adjustments: (Recovery of) Provision for Future Income Taxes (648) (141) (1,598) 662 Depreciation 20,904 19,375 41,475 38,350 Amortization of Tenant Improvements 66 80 135 150 Amortization of Intangible Assets 115 284 264 619 Amortization of Above and Below Market Leases (25) (41) (27) (102) Gain on Sale of Assets (1,291) - 1,291 - ---------------------------------------------------------------------------- FFO $ 24,664 $ 28,630 $ 39,711 $ 44,253 Adjustments: Restructuring Costs 382 - 532 - Unrealized (Gain) Loss on Derivative Financial Instruments (4) (3,748) 50 (3,437) Realized Gain on Derivative Financial Instruments - (1,859) - (1,325) Loss on Natural Gas Contracts - - 4,497 - Amortization of Loss on Derivative Financial Instruments included in Mortgage Interest 278 130 552 130 ---------------------------------------------------------------------------- NFFO $ 25,320 $ 23,153 $ 45,342 $ 39,621 NFFO - Continuing Operations $ 24,638 $ 22,462 $ 44,185 $ 38,512 NFFO - Discontinued Operations $ 682 $ 691 $ 1,157 $ 1,109 ---------------------------------------------------------------------------- NFFO per Unit - Basic $ 0.380 $ 0.351 $ 0.682 $ 0.602 NFFO per Unit - Diluted $ 0.378 $ 0.351 $ 0.679 $ 0.601 ---------------------------------------------------------------------------- Distributions Declared (1) $ 18,681 18,444 37,356 36,775 ---------------------------------------------------------------------------- NFFO Payout Ratio (2) 73.8% 79.7% 82.4% 92.8% ---------------------------------------------------------------------------- Net Distributions Paid (3) $ 15,887 $ 16,204 $ 31,965 $ 31,502 Excess NFFO over Net Distributions Paid $ 9,433 $ 6,949 $ 13,377 $ 8,119 ---------------------------------------------------------------------------- Effective NFFO Payout Ratio (4) 62.7% 70.0% 70.5% 79.5% ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- (1)For a description of distributions declared, see the Non-GAAP Financial Measures section in the MD&A for the three and six months ended June 30, 2010. (2)The payout ratio compares distributions declared to NFFO. (3)For a description of net distributions paid, see the Non-GAAP Financial Measures section in the MD&A for the three and six months ended June 30, 2010. (4)The effective payout ratio compares net distributions paid to NFFO. Reconciliation of NFFO to AFFO Three Months Ended Six Months Ended June 30 June 30 2010 2009 2010 2009 ($ Thousands, except per Unit amounts) ---------------------------------------------------------------------------- NFFO $ 25,320 23,153 $ 45,342 39,621 Adjustments: Maintenance Capital Investment Provision (1) (2,987) (2,976) (5,974) (5,953) Non-Cash Compensation for LTIP, SELTIP and DUP 400 379 720 987 ---------------------------------------------------------------------------- AFFO $ 22,733 20,556 $ 40,088 34,655 AFFO per Unit - Basic $ 0.341 0.312 $ 0.603 0.526 AFFO per Unit - Diluted $ 0.340 0.311 $ 0.600 0.526 ---------------------------------------------------------------------------- Distributions Declared (2) $ 18,681 18,444 $ 37,356 36,775 ---------------------------------------------------------------------------- AFFO Payout Ratio (3) 82.2 % 89.7 % 93.2 % 106.1 % ---------------------------------------------------------------------------- Net Distributions Paid (4) $ 15,887 16,204 $ 31,965 31,502 Excess AFFO over Net $ Distributions Paid 6,846 4,352 $ 8,123 3,153 ---------------------------------------------------------------------------- Effective AFFO Payout Ratio (5) 69.9 % 78.8 % 79.7 % 90.9 % ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- (1)An industry based estimate (see the Non-GAAP Measures section in the MD&A for the three and six months ended June 30, 2010). (2)For a description of distributions declared, see the Non-GAAP Financial Measures section in the MD&A for the three and six months ended June 30, 2010. (3)The payout ratio compares distributions declared to AFFO. (4)For a description of net distributions paid, see the Non-GAAP Financial Measures section in the MD&A for the three and six months ended June 30, 2010. (5)The effective payout ratio compares net distributions paid to AFFO. FOR FURTHER INFORMATION PLEASE CONTACT: CAPREIT Mr. Michael Stein Chairman (416) 861-5788 or CAPREIT Mr. Thomas Schwartz President & CEO (416) 861-9404 or CAPREIT Mr. Richard J. Smith Chief Financial Officer (416) 861-5771