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CAPREIT Reports Another Year of Record Performance in 2018

GlobeNewswire - Tue Feb 26, 4:20PM CST

Canadian Apartment Properties Real Estate Investment Trust ("CAPREIT") (TSX:CAR-UN.TO) announced today continuing strong operating and financial results for the three months and year ended December 31, 2018.

HIGHLIGHTS:

For the Year Ended December 31,                                    2018                                2017
Portfolio Performance
Overall Portfolio Occupancy                                        98.9                           %    98.7                           %
Overall Portfolio Net Average Monthly Rents                      $ 1,103                             $ 1,044
Operating Revenues (000s)                                        $ 688,585                           $ 638,842
Net Rental Income ("NOI") (000s)                                 $ 439,056                           $ 393,258
NOI Margin                                                         63.8                           %    61.6                           %
Financial Performance
Normalized Funds From Operations ("NFFO") (000s)                 $ 289,335                           $ 250,474
NFFO per Unit - Basic                                            $ 2.024                             $ 1.842
Cash Distributions Per Unit                                      $ 1.313                             $ 1.275
FFO Payout Ratio                                                   66.7                           %    71.7                           %
NFFO Payout Ratio                                                  65.7                           %    70.3                           %
Liquidity and Leverage
Total Debt to Gross Book Value                                     39.37                          %    43.57                          %
Total Debt to Gross Historical Cost                                54.54                          %    56.24                          %
Weighted Average Mortgage Interest Rate                            3.05                           %    3.08                           %
Weighted Average Mortgage Term (years)                             5.10                                5.66
Debt Service Coverage (times)                                      1.75                                1.63
Interest Coverage (times)                                          3.44                                3.19
Available Liquidity - Acquisition and Operating Facility (000s)  $ 266,325                           $ 86,792
(1                    ) As at December 31.
(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                                                              2018                                2017
Weighted Average Number of Units - Basic (000s)                    142,974                             135,962
Number of Suites and Sites Acquired                                1,791                               1,924
Number of Suites Disposed                                          900                                 81
Closing Price of Trust Units                                     $ 44.30                             $ 37.32
Market Capitalization (millions)                                 $ 6,491                             $ 5,182
(1                    ) As at December 31.

SUMMARY OF YEAR END 2018 RESULTS OF OPERATIONS

Strong Operating Results Supported by Strong Market Fundamentals

Continued Fair Value Increases in Investment Properties

Strong and Flexible Balance Sheet

Delivering Unitholder Value

Other Key Highlights

"In 2017 we celebrated twenty years of profitable growth and delivering stable, sustaining and increasing cash distributions to our Unitholders. 2018 was yet another record year for CAPREIT as we delivered strong results in all of our key performance benchmarks," commented Mark Kenney, President and COO. "Looking ahead, we will continue to build and strengthen our future through programs and investments that ensure CAPREIT is the best place to work for our people, the best place to live for our residents, and the best place to invest for our Unitholders."

OPERATIONAL AND FINANCIAL RESULTS

Portfolio Net Average Monthly Rents
                      Total Portfolio                                       Properties Owned Prior
                                                                            to December 31, 2017
As at December 31,    2018                  2017                  2018                  2017
                      AMR       Occ. %      AMR       Occ. %      AMR       Occ. %      AMR       Occ. %
Average Residential $ 1,209     99.1      $ 1,142     98.8      $ 1,204     99.2      $ 1,146     98.8
Suites
Average MHC Land    $ 395       97.6      $ 388       98.3      $ 396       97.5      $ 388       98.3
Lease Sites
Overall Portfolio   $ 1,103     98.9      $ 1,044     98.7      $ 1,097     99.0      $ 1,046     98.7
Average
(1) Prior period comparable Net AMR and occupancy have been restated for properties disposed of since December 31, 2017.

Overall Net AMR for the stabilized residential suite portfolio as at December 31, 2018 increased by approximately 5.1% (including the Netherlands), and 4.5% (excluding the Netherlands) compared to last year, while occupancies increased to 99.2%. The rate of growth in Net AMR is due to (i) the strong rental markets in British Columbia, Ontario, and the Netherlands (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.

Canadian Portfolio
For the Three Months Ended December 31,    2018                                                 2017
                                           Change in                    Turnovers and           Change in                   Turnovers and
                                           monthly rent                 Renewals                monthly rent                Renewals
                                           $                       %    %                       $                       %   %
Suite Turnovers                            168.1                   14.1 4.4                     103.0                   9.1 5.4
Lease Renewals                             27.7                    2.3  18.2                    22.8                    2.0 17.7
Weighted Average of Turnovers and Renewals 55.1                    4.6                          41.5                    3.7
For the Year Ended December 31,            2018                                                 2017
                                           Change in                    Turnovers and           Change in                   Turnovers and
                                           monthly rent                 Renewals                monthly rent                Renewals
                                           $                       %    %                       $                       %   %
Suite Turnovers                            131.3                   11.4 21.5                    79.4                    7.2 24.0
Lease Renewals                             26.1                    2.2  85.4                    21.7                    1.9 82.9
Weighted Average of Turnovers and Renewals 47.2                    4.1                          34.6                    3.1
(1             ) Percentage of suites turned over or renewed during the year based on the total number of residential suites (excluding co-ownerships) held at the end of the year.
The Netherlands Portfolio
For the Three Months Ended December 31,    2018                                             2017
                                           Change in                  Turnovers and         Change in                  Turnovers and
                                           monthly rent               Renewals              monthly rent               Renewals
                                           EUR                   %    %                     EUR                   %    %
Suite Turnovers                            60.3                  7.5  2.6                   143.5                 19.7 1.7
Lease Renewals                             -                     -    -                     -                     -    -
Weighted Average of Turnovers and Renewals 60.3                  7.5                        143.5                 19.7
For the Year Ended December 31,            2018                                             2017
                                           Change in                  Turnovers and         Change in                  Turnovers and
                                           monthly rent               Renewals              monthly rent               Renewals
                                           EUR                   %    %                     EUR                   %    %
Suite Turnovers                            89.1                  11.4 7.6                   166.7                 27.2 4.4
Lease Renewals                             23.6                  3.1  54.4                  18.2                  2.7  25.2
Weighted Average of Turnovers and Renewals 31.6                  4.1                        40.1                  6.4
(1             ) Percentage of suites turned over or renewed during the year based on the total number of Netherlands residential suites held at the end of the year.

Suite turnovers in the Canadian residential suite portfolio (excluding co-ownerships) for the three months and year ended December 31, 2018 resulted in monthly rents increasing by approximately $168 or 14.1% and $131 or 11.4%, respectively, compared to an increase of approximately $103 or 9.1% and $79 or 7.2% for the same periods last year, primarily due to the strong rental markets in British Columbia and Ontario.

Monthly rents on lease renewals in the Canadian residential suite portfolio (excluding co-ownerships) for the three months and year ended December 31, 2018 resulted in monthly rents increasing by approximately $28 or 2.3% and $26 or 2.2% compared to an increase of approximately $23 or 2.0% and $22 or 1.9% last year.

For the Netherlands portfolio, suite turnovers in the residential suite portfolio for the three months and year ended December 31, 2018 resulted in monthly rents increasing by approximately EUR60 or 7.5% and EUR89 or 11.4% compared to an increase of approximately EUR144 or 19.7% and EUR167 or 27.2% for the same periods last year. Monthly rents on lease renewals for the Netherlands portfolio for the year ended December 31, 2018 increased by approximately EUR24 or 3.1%, compared to EUR18 or 2.7% for the same periods last year.

Estimated Net Rental Revenue Run-Rate

CAPREIT's annualized net rental revenue run-rate as at December 31, 2018 grew to $685.8 million, up 7.5% from $637.8 million as at December 31, 2017, primarily as a result of acquisitions during the year and higher rents. Net rental revenue run-rate net of dispositions for the 12 months ended December 31, 2018 was $643.6 million (December 31, 2017 - $605.0 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                  Year Ended
                           December 31,                        December 31,
($ Thousands)              2018      %       2017      %       2018       %       2017       %
Total Operating Revenues $ 177,667   100.0 $ 164,432   100.0   688,585    100.0 $ 638,842    100.0
Operating Expenses
Realty Taxes             $ (16,473 ) 9.3   $ (17,131 ) 10.4  $ (68,488  ) 9.9   $ (67,078  ) 10.5
Utilities                  (15,240 ) 8.6     (15,097 ) 9.2     (56,913  ) 8.3     (56,744  ) 8.9
Other                      (34,018 ) 19.1    (31,904 ) 19.4    (124,128 ) 18.0    (121,762 ) 19.0
Total Operating Expenses $ (65,731 ) 37.0  $ (64,132 ) 39.0  $ (249,529 ) 36.2  $ (245,584 ) 38.4
NOI                      $ 111,936   63.0  $ 100,300   61.0  $ 439,056    63.8  $ 393,258    61.6
(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 months and year ended December 31, 2018, total operating revenues increased by 8.0% and 7.8%, respectively, compared to last year, due to the contribution from acquisitions, increased same-property monthly rents and continuing high occupancies.

Operating Expenses

Overall operating expenses as a percentage of operating revenues reduced to 37.0% and 36.2% for the three months and year ended December 31, 2018 compared to 39.0% and 38.4% 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 costs as a percentage of operating revenues.

NOI Margin

For the three months and year ended December 31, 2018, the NOI margin on the total portfolio was 63.0% and 63.8%, respectively, compared to 61.0% and 61.6% for the same periods last year. The increase in the NOI margin is due to (i) higher monthly rents on a 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 year ended December 31, 2018, basic NFFO per Unit increased by 9.9% compared to last year, despite an approximate 5.2% increase in the weighted average number of Units outstanding, due primarily to strong organic NOI growth and contributions from acquisitions. For the three months ended December 31, 2018, basic NFFO per Unit increased by 8.8% 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 year ended December 31, 2018, CAPREIT made property capital investments (excluding head office assets) of $193.5 million compared to $151.4 million for the last year. Management expects CAPREIT to complete property capital investments (excluding development and intensification) of approximately $198 million in 2019.

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 January 4, 2019, CAPREIT announced that it has closed on its previously announced issue and sale of 5,500,000 units for $45.50 per unit for aggregate gross proceeds of $250.3 million to a syndicate of underwriters led by RBC Capital Markets on a bought-deal basis. On January 11, 2019, CAPREIT announced that it has closed the issuance of an additional 825,000 units for $45.50 per unit for aggregate gross proceeds of $37.5 million (the "Over-Allotment Offering"), pursuant to the exercise of the over-allotment option. CAPREIT intends to use the net proceeds to partially repay the Acquisition and Operating Facility and the remainder, if any, for future acquisitions, capital expenditures and for general trust purposes.

On February 26, 2019, CAPREIT announced that it has completed the acquisition of a portfolio of 21 properties in six urban centres in the Netherlands, totalling 511 residential suites, for a purchase price of EUR98.0 million. The acquisition was funded by CAPREIT's Acquisition and Operating Facility.

On February 26, 2019, CAPREIT announced that its Board of Trustees had approved a 3.8% increase in monthly cash distributions to $0.1150 per Unit, or $1.38 per Unit on an annualized basis. The increase is effective with the March 2019 distribution payable on April 15, 2019 to Unitholders of record as at March 29, 2019.

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, 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 Mark Kenney, President and Chief Operating Officer ("COO") and the CAPREIT Management Team, will be held Wednesday, February 27, 2019 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 2963952#. The Instant Replay will be available until midnight, March 29, 2019. 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 December 31, 2018, CAPREIT had owning interests in 51,528 residential units, comprised of 44,935 residential suites and 32 MHC comprising 6,593 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 discloses financial measures not recognized under IFRS which do not have standard meanings prescribed by IFRS. These include stabilized net rental income ("Stabilized NOI"), Funds From Operations ("FFO"), Normalized Funds From Operations ("NFFO"), Adjusted Cash Flow from Operations ("ACFO"), FFO and NFFO per Unit amounts and FFO, NFFO and ACFO payout ratios, and Adjusted Cash Generated from Operating Activities (collectively, the "Non-IFRS Measures"). These Non-IFRS Measures are further defined and discussed in the MD&A released on February 26, 2019, which should be read in conjunction with this press release. Since these measures are not recognized under IFRS, they may not be comparable to similar measures reported by other issuers. CAPREIT presents the Non-IFRS measures because Management believes these Non-IFRS measures are relevant measures of the ability of CAPREIT to earn revenue and to evaluate its performance and cash flows. 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, productivity, 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 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", "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, which, 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 on renewals will grow at levels similar to the rate of inflation; 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, investment restrictions, operating risk, energy costs, environmental matters, catastrophic events, insurance, capital investments, indebtedness, taxation-related risks, government regulations, controls over financial reporting, other legal and regulatory risks, the nature of units of CAPREIT ("Trust 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, risks related to acquisitions, cyber security risk 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 26, 2019. The information in this press release is based on information available to Management as of February 26, 2019. 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. Mark Kenney Mr. Scott Cryer

Chairman President & COO Chief Financial Officer

(416) 861-5788 (416) 861-9404 (416) 861-5771

SELECTED FINANCIAL INFORMATION

Condensed Balance Sheets

As at                 December 31, 2018   December 31, 2017
($ Thousands)
Investment properties $        10,473,544 $        8,886,556
Total Assets                   10,842,263          9,187,170
Mortgages payable              3,728,333           3,581,501
Bank indebtedness              567,365             446,895
Total Liabilities              4,525,563           4,263,764
Unitholders' Equity            6,316,700           4,923,406

Condensed Income Statements

Three Months Ended               Year Ended
                                                 December 31,                     December 31,
                                                     2018            2017            2018            2017
Operating Revenues
Revenue from investment properties               $   177,667     $   164,432      $  688,585      $  638,842
Operating Expenses
Realty taxes                                         (16,473 )       (17,131 )       (68,488   )     (67,078  )
Property operating costs                             (49,258 )       (47,001 )       (181,041  )     (178,506 )
                                                     (65,731 )       (64,132 )       (249,529  )     (245,584 )
Net Rental Income                                    111,936         100,300         439,056         393,258
Trust expenses                                       (12,833 )       (10,582 )       (39,515   )     (32,569  )
Unit-based compensation expenses                     (7,602  )       (10,964 )       (34,672   )     (26,074  )
Fair value adjustments of investment properties      710,453         339,151         990,529         626,953
Realized loss on disposition of investment
properties                                           (2,017  )       (408    )       (2,594    )     (488     )
Amortization of property, plant and equipment        (1,302  )       (1,275  )       (4,976    )     (4,434   )
Fair value adjustments of exchangeable units         56              (469    )       (840      )     (852     )
Fair value adjustments of Investments                (412    )       -               3,740           -
Gain (loss) on derivative financial instruments      2,624           (2,986  )       13,141          (11,866  )
Interest and other financing costs                   (38,599 )       (35,951 )       (135,211  )     (126,144 )
Foreign currency translation                         (28,011 )       (1,494  )       (34,489   )     3,515
Other income                                         14,224          8,909           42,310          22,921
Net Income Before Income Taxes                       748,517         384,231         1,236,479       844,220
Current and deferred income tax expense              (12,250 )       (7,271  )       (18,808   )     (7,409   )
Net Income                                           736,267         376,960      $  1,217,671    $  836,811
Other Comprehensive (Loss) Income                $   32,414      $   6,820        $  31,189       $  19,101
Comprehensive Income                             $   768,681     $   383,780      $  1,248,860    $  855,912

Condensed Statements of Cash Flows

Three Months Ended         Year Ended
                                                             December 31,               December 31,
                                                             2018         2017          2018          2017
Cash Provided By (Used In):
Operating Activities
Net income                                                 $ 736,267    $ 376,960     $ 1,217,671   $ 836,811
Items related to operating activities not affecting cash:
Fair value adjustments - investment properties               (710,453 )   (339,151 )    (990,529  )   (626,953 )
Fair value adjustments - exchangeable units                  (56      )   469           840           852
Fair value adjustments - investments                         412          -             (3,740    )   -
Loss on disposition of investment properties                 2,017        408           2,594         488
(Gain) Loss on derivative financial instruments              (2,624   )   2,986         (13,141   )   11,866
Amortization                                                 3,690        3,530         14,100        13,146
Unit-based compensation expenses                             7,602        10,964        34,672        26,074
Straight-line rent adjustment                                (22      )   (11      )    (87       )   (231     )
Deferred income tax expense                                  12,250       7,263         18,794        7,263
Net profit from equity-accounted investments                 (11,859  )   (6,780   )    (32,634   )   (15,344  )
Foreign currency translation                                 28,011       1,494         34,489        (3,515   )
                                                             65,235       58,132        283,029       250,457
Net income items related to financing and
investing activities                                         27,843       32,829        116,650       107,562
Changes in non-cash operating assets and liabilities         49,349       17,558        31,498        922
Cash Provided by Operating Activities                        142,427      108,519       431,177       358,941
Investing Activities
Acquisition of investment properties                         (339,455 )   (139,572 )    (482,152  )   (471,330 )
Capital investments                                          (84,022  )   (44,261  )    (203,784  )   (163,728 )
Acquisition of investments                                   -            -             (25,443   )   -
Disposition of investment properties                         29,547       16,159        81,872        16,734
Change in restricted cash                                    (624     )   (82      )    (1,045    )   (121     )
Investment income received                                   3,480        384           7,442         8,478
Cash Used in Investing Activities                            (391,074 )   (167,372 )    (623,110  )   (609,967 )
Financing Activities
Mortgage financings                                          227,829      (166,490 )    391,234       464,516
Mortgage principal repayments                                (29,705  )   (28,641  )    (116,877  )   (119,458 )
Mortgages repaid on maturity                                 (5,073   )   -             (103,734  )   (266,575 )
Financing costs                                              (1,411   )   (453     )    (2,412    )   (2,928   )
CMHC premiums on mortgages payable                           (1,031   )   -             (3,469    )   (4,902   )
Interest paid                                                (28,676  )   (28,431  )    (114,271  )   (111,138 )
Bank indebtedness                                            128,882      311,968       85,981        427,925
Settlement of redemption liability                           (16,611  )   -             (16,611   )   -
Proceeds on issuance of Units                                9,699        400           208,948       8,121
Net cash distributions to Unitholders                        (35,230  )   (31,476  )    (134,929  )   (120,749 )
Cash (Used) Provided by Financing Activities                 248,673      56,877        193,860       274,812
Changes in Cash and Cash Equivalents During the
Year                                                         (2,540   )   (1,976   )    (273      )   23,786
Effect of exchange rate changes on cash                      2,566        -             2,200         -
Cash and Cash Equivalents, Beginning of the Year             25,687       25,762        23,786        -
Cash and Cash Equivalents, End of the Year                 $ 25,713     $ 23,786      $ 25,713      $ 23,786
(1                  ) Q4 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           Year Ended
                                                          December 31,                 December 31,
($ Thousands, except per Unit amounts)                    2018          2017           2018          2017
Net Income                                              $ 736,267     $ 376,960      $ 1,217,671   $ 836,811
Adjustments
Unrealized Gain on Remeasurement of Investment            (710,453  )   (339,151  )    (990,529  )   (626,953  )
Properties
Realized Loss on Disposition of Investment Properties     2,017         408            2,594         488
Remeasurement of Exchangeable Units                       (56       )   469            840           852
Remeasurement of Investments                              412           -              (3,740    )   -
Remeasurement of Unit-based Compensation Liabilities      6,251         9,738          29,428        18,934
Interest on Exchangeable Units                            (6        )   42             95            186
Corporate and Deferred Income Taxes                       12,250        7,271          17,872        7,409
(Gain) Loss on Foreign Currency Translation               28,011        1,494          34,489        (3,515    )
FFO Adjustment for Income from Equity Accounted           (9,655    )   (5,146    )    (25,159   )   (9,707    )
Investments
(Gain) Loss on Derivative Financial Instruments           (2,624    )   2,986          (13,141   )   11,866
Net FFO Impact Attributable to Non-Controlling Interest   5,596         4,654          9,821         4,718
Amortization of Property, Plant and Equipment             1,302         1,275          4,976         4,434
FFO                                                     $ 69,312      $ 61,000       $ 285,217     $ 245,523
Adjustments:
Amortization of losses from AOCL to interest and other
financing costs                                           643           733            2,659         3,023
Net Mortgage Prepayment Cost                              1,459         160            1,459         324
Other Employee Costs                                      -             -              -             1,604
NFFO                                                      71,414        61,893         289,335       250,474
NFFO per Unit - Basic                                     0.492         0.452          2.024         1.842
NFFO per Unit - Diluted                                   0.490         0.446          2.007         1.817
Total Distributions Declared                              48,671        44,497         190,124       176,024
NFFO Payout Ratio                                         68.2      %   71.9      %    65.7      %   70.3      %
Net Distributions Paid                                  $ 34,770      $ 31,366       $ 135,727     $ 121,953
Excess NFFO over Net Distributions Paid                 $ 36,644      $ 30,527       $ 153,608     $ 128,521
Effective NFFO Payout Ratio                               48.7      %   50.7      %    46.9      %   48.7      %
(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 year ended December 31, 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                                                                           Year Ended
                                                  December 31,                                                                                 December 31,
                                                                               2018                             2017                                                        2018                             2017
Cash Generated From Operating
Activities                                        $                            142,427                        $ 108,519                        $                            431,177                        $ 358,941
Adjustments:
Interest expense included in cash flow
from financing activities                                                      (28,676                      )   (28,431                      )                              (114,271                     )   (111,138                     )
Non-Discretionary Property Capital
Investments                                                                    (12,255                      )   (9,836                       )                              (51,252                      )   (38,724                      )
Capitalized Leasing Costs                                                      1,409                            (1,231                       )                              (1,046                       )   (3,234                       )
Amortization of Other Financing Costs                                          (1,744                       )   (1,522                       )                              (6,464                       )   (5,689                       )
Non-controlling Interest                                                       (72                          )   (129                         )                              (216                         )   (184                         )
Investment Income                                                              3,480                            384                                                         7,442                            8,478
ACFO                                              $                            104,569                        $ 67,754                         $                            265,370                        $ 208,450
Total Distributions Declared                      $                            48,671                         $ 44,497                         $                            190,124                        $ 176,024
Excess (Deficit) ACFO Over Distributions Declared $                            55,898                         $ 23,257                         $                            75,246                         $ 32,426
ACFO Payout Ratio                                                              46.5                         %   65.7                         %                              71.6                         %   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 years ended December 31, 2018 and 2017 are based on the actual annual 2018 and annual 2017, 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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