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CAPREIT Reports Continued Growth and Strong Operating Performance in Third Quarter of 2017

Celebrating Twenty Years of Growth & Performance in 2017

/EIN News/ -- TORONTO, Nov. 06, 2017 (GLOBE NEWSWIRE) -- Canadian Apartment Properties Real Estate Investment Trust ("CAPREIT") (TSX:CAR.UN) announced today, continuing strong operating and financial results for the three and nine months ended September 30, 2017.

    Three Months Ended     Nine Months Ended
    September 30,     September 30,
    2017     2016       2017       2016  
Operating Revenues (000s) $ 161,713   $ 151,812     $ 474,410     $ 444,106  
Net Rental Income ("NOI") (000s)(1) $ 102,655   $ 96,274     $ 292,958     $ 271,737  
NOI Margin(1)   63.5 %   63.4 %     61.8 %     61.2 %
Normalized Funds From Operations ("NFFO") (000s)(1) $  67,036   $  62,201     $  188,581     $  172,948  
NFFO Per Unit – Basic(1) $ 0.492   $ 0.470     $ 1.390     $ 1.335  
Weighted Average Number of Units - Basic (000s)   136,295     132,246       135,671       129,520  
NFFO Payout Ratio(1)   66.0 %   67.5 %     69.7 %     70.4 %
(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-IFRS Financial Measures" and the reconciliations provided in this press release.
         
  • Accretive acquisitions of 1,312 suites further strengthens and diversifies property portfolio
  • Stabilized portfolio occupancy strengthens to 98.7% with solid 3.0% increase in average monthly rents
  • Portfolio growth and strong operating performance generates 6.5% and 6.8% increase in revenues for the three and nine months ended September 30, 2017
  • NOI up 6.6% and 7.8% in the third quarter and first nine months of 2017
  • Continuing strong organic growth as same property NOI up 3.1% and 3.6% for the three and nine months ended September 30, 2017
  • Net income increased to $215.9 million and $460.0 million for the three and nine months ended September 30, 2017, respectively, due primarily to the increase in NOI and an increase in the unrealized gain on the remeasurement of investment properties compared to the prior year
  • NFFO up 7.8% in third quarter, 9.0% for the nine months ended September 30, 2017
  • NFFO payout ratio strong at 69.7% for the nine months ended September 30, 2017
  • Continued accretive growth as NFFO per Unit up 4.7% and 4.1% for the three and nine months ended September 30, 2017 despite lower leverage and increase in the weighted average number of Units outstanding
  • Financial position continues to strengthen with conservative leverage, lower interest costs, increased growth capacity and $289.2 million in unencumbered assets
  • CAPREIT announced that David Ehrlich has been appointed President and Chief Executive Officer effective November 1, 2017. In conjunction with assuming this role, Mr. Ehrlich will step down as CEO of Irish Residential Properties REIT Plc (IRES) but will remain on the board of IRES as the nominee of its asset manager, a CAPREIT company.
  • Closed and committed mortgage refinancings and new financings for $631.0 million, including $266.6 million for renewals of existing mortgages and $364.4 million for additional top up financing and new acquisition financing with a weighted average term to maturity of 6.1 years, and a weighted average interest rate of 1.92%

Our growth and strong operating performance continued in the third quarter of 2017, driven by accretive acquisitions, increased average monthly rents, and ongoing high occupancies,” commented Michael Stein, Chairman. “We look for this progress to continue through the balance of the year and going forward.”

      Three Months Ended     Nine Months Ended
      September 30,     September 30,
      2017     2016       2017       2016  
Overall Portfolio Occupancy(1)               98.3 %     98.7 %
Overall Portfolio Average Monthly Rents(1),(2)             $ 1,029     $ 999  
Operating Revenues (000s)   $ 161,713   $ 151,812     $ 474,410     $ 444,106  
Annualized Net Rental Revenue Run-Rate (000s)(1),(3),(4)           $ 621,666     $ 581,575  
Operating Expenses (000s)   $ 59,058   $ 55,538     $ 181,452     $ 172,369  
NOI (000s)(4)    $ 102,655   $ 96,274     $ 292,958     $ 271,737  
NOI Margin(4)     63.5 %   63.4 %     61.8 %     61.2 %
Number of Suites and Sites Acquired     980     158       1,312       1,981  
Number of Suites Disposed     -     579       31        579  
(1)  As at September 30.
(2)  Average monthly rents are defined as actual rents, net of vacancies, divided by the total number of suites and sites in the portfolio and do not include revenues from parking, laundry or other sources.
(3)  For a description of net rental revenue run-rate, see the Results of Operations section in the MD&A for the nine months ended September 30, 2017.
(4)  Net rental revenue run-rate and NOI are measures used by Management in evaluating operating performance. Please refer to the cautionary statements under the heading "Non-IFRS Financial Measures" and the reconciliations provided in this press release.
       

Operating Revenues

For the three and nine months ended September 30, 2017, total operating revenues increased by 6.5% and 6.8%, respectively, compared to the same periods last year primarily due to the contribution from acquisitions, higher same property average monthly rents, and continuing strong occupancies. For the three and nine months ended September 30, 2017, ancillary revenues, including parking, laundry and antenna income, increased by 6.9% and 6.3% for the three and nine months ended September 30, 2017, respectively, compared to the same periods last year. For the stabilized properties, operating revenues for the three and nine months ended September 30, 2017 increased by 3.1% and 3.6% respectively.

CAPREIT’s annualized net rental revenue run-rate as at September 30, 2017 rose to $621.7 million, up 6.9% from $581.6 million at the same period last year, primarily due to acquisitions completed over the last twelve months and strong increases in average monthly rents on properties owned prior to September 30, 2016. Net rental revenue run-rate net of dispositions for the twelve months ended September 30, 2017 was $593.9 million (September 30, 2016 – $551.6 million).

Portfolio Average Monthly Rents ("AMR")
    Total Portfolio     Properties Owned Prior to September 30, 2016  
As at September 30,   2017 (2)       2016     2017     2016 (1)    
    AMR   Occ. %   AMR   Occ. %   AMR   Occ. %   AMR   Occ. %
Average Residential
  Suites
$ 1,127 98.3   $ 1,097 98.8  $ 1,131 98.7 $ 1,098 98.8  
Average MHC Land 
  Lease Sites
$ 387 98.3   $ 377 98.2  $ 387 98.3 $ 377 98.2  
                         
Overall Portfolio
  Average
$ 1,029 98.3   $ 999 98.7  $ 1,029 98.7 $ 999 98.7  
(1)  Prior period comparable AMR and occupancy have been restated for properties disposed of since September 30, 2016.
(2)  Under the purchase agreements for a property acquired on May 3, 2017, CAPREIT received monthly escrow payments for the positive differences, if any, between: (a) 100.0% of the gross rent roll for such month less (b)  the actual rent earned for such month, with all applicable sales taxes. CAPREIT continues to receive escrow payments when the actual gross revenues were less than the threshold up to a maximum of $2.5 million for the property, after which rental revenue will be based on actual occupancy. The occupancy rates in the tables are reflected at 100.0% for this property.
     

Overall average monthly rents for the stabilized residential suite portfolio (properties owned prior to September 30, 2016) increased 3.0% to $1,131 as at September 30, 2017 from $1,098 at September 30, 2016. The increases were due primarily to a combination of ongoing successful sales and marketing strategies, above guideline rent increases, and continued strength in the residential rental sector in the majority of CAPREIT's markets. Occupancy for the stabilized residential suite portfolio remained stable at 98.7% as at September 30, 2017 compared to 98.8% for the same period last year.

For the MHC land lease portfolio, average monthly rents increased to $387 as at September 30, 2017, compared to $377 as at September 30, 2016 while occupancy strengthened to 98.3% compared to 98.2% for the same period last year. Management believes MHC land lease sites provide secure and stable cash flows due to long-term tenancies, high occupancies, steady increases in average monthly rents, and significantly lower capital and maintenance costs.

Suite Turnovers and Lease Renewals
For the Three Months Ended September 30, 2017 2016
  Change in AMR   % Turnovers Change in AMR   % Turnovers
  $ %   & Renewals(1) $ %   & Renewals(1) 
Suite Turnovers 92.3 8.5   8.2 25.8 2.4   9.4
Lease Renewals 21.7 2.0   28.0 20.7 2.0   27.7
Weighted Average of Turnovers and
Renewals
37.7 3.5     22.0 2.1    
                 
For the Nine Months Ended September 30, 2017 2016
  Change in AMR   % Turnovers Change in AMR   % Turnovers
  $ %   & Renewals(1) $ %   & Renewals(1)
Suite Turnovers 72.5 6.6   18.6 7.1 0.6   21.7
Lease Renewals 21.4 1.9   65.2 21.4 2.0   62.3
Weighted Average of Turnovers and
 Renewals
32.8 3.0     17.7 1.6    
(1)  Percentage of suites turned over or renewed during the period based on the total number of residential suites (excluding co-ownerships and the Netherland properties) held at the end of the period.
       

Suite turnovers in the residential suite portfolio (excluding co-ownerships and the Netherlands properties) during the three months ended September 30, 2017 resulted in average monthly rents increasing by approximately $92 or 8.5% per suite compared to an increase of approximately $26 or 2.4% for the same period last year. For the nine months ended September 30, 2017, suite turnovers resulted in average monthly rent increasing by approximately $73 or 6.6% compared to an increase of approximately $7 or 0.6% in the same period last year due primarily to continuing strong rental markets in British Columbia and Ontario partially offset by strategically reduced rents in Alberta aimed at  increasing occupancy and reducing turnover in this region.

Pursuant to Management’s focus on increasing overall portfolio rents average monthly rents on lease renewals for the three months ended September 30, 2017 increased by approximately $22 or 2.0% per suite compared to an increase of approximately $21 or 2.0% for the same period last year. For the nine months ended September 30, 2017, average monthly rents on lease renewals increased by approximately $21 or 1.9%, compared to an increase of approximately $21 or 2.0% for the same period last year. The rate of growth in average monthly rents on lease renewals has been impacted by the strategically reduced rents in Alberta, changes to the mandated rental guideline increases in Ontario and British Columbia for 2017 (Ontario – 1.5%, British Columbia – 3.7%) compared to 2016 (Ontario – 2.0%, British Columbia - 2.9%), and by increases due to above guideline increases ("AGI") achieved in Ontario. Management continues to pursue applications in Ontario for AGIs where it believes increases above the annual guideline are supported by market conditions to raise average monthly rents on lease renewals. For 2018, the permitted guideline increase in Ontario and British Columbia has been set at 1.8% and 4.0% respectively, both increased from the 2017 guideline increases.

Operating Expenses                          
    Three Months Ended     Nine Months Ended    
    September 30,     September 30,    
($ Thousands)   2017 %(1)   2016 %(1)   2017 %(1)   2016 %(1)  
Operating Expenses                          
  Realty Taxes $ 17,200 10.6 $ 16,976 11.2 $ 49,947 10.5 $ 49,165 11.1  
  Utilities   10,284 6.4   12,361 8.1   41,647 8.8   44,747 10.1  
  Other(2)   31,574 19.5   26,201 17.3   89,858 18.9   78,457 17.6  
Total Operating Expenses $ 59,058 36.5 $ 55,538 36.6 $ 181,452 38.2 $ 172,369 38.8  
(1)  As a percentage of total operating revenues.  
(2)  Comprises R&M, wages, general and administrative, insurance, advertising, and legal costs.  
   

Operating Expenses

Overall operating expenses as a percentage of operating revenues improved to 36.5% and 38.2%, respectively, for the three and nine months ended September 30, 2017 compared to 36.6% and 38.8%, respectively, for the same periods last year, due primarily to lower realty taxes due to tax rebates of $1.6 million in 2017, and lower utilities as a percentage of total operating revenues.

NOI

For the three months ended September 30, 2017, NOI increased by $6.4 million or 6.6% and the NOI margin increased to 63.5% compared to 63.4% for the same period last year. For the nine months ended September 30, 2017, NOI increased by $21.2 million or 7.8%, and the NOI margin increased to 61.8% compared to 61.2% last year, showing the positive effects of CAPREIT’s geographic diversification and its proven property management programs.

Net Income

Net income for the three and nine months ended September 30, 2017 increased to $215.9 million and $460.0 million, respectively, compared to $130.7 million and $315.1 million in the same periods last year. The increase in 2017 is due primarily to the increase in NOI in the current year, as well as an increase in Unrealized Gain on Remeasurement of Properties, which rose to $153.6 million and $287.8 million for the three and nine months ended September 30, 2017 compared to $67.1 million and $162.0 million in the same respective periods in 2016 arising from higher net operating income and lower capitalization rates in 2017.  

NON-IFRS FINANCIAL MEASURES                      
      Three Months Ended     Nine Months Ended
      September 30,     September 30,
      2017     2016       2017       2016  
NFFO (000s)   $ 67,036   $ 62,201     $ 188,581     $ 172,948  
NFFO Per Unit – Basic   $  0.492   $  0.470     $  1.390     $  1.335  
Cash Distributions Per Unit   $ 0.320   $  0.313     $  0.955     $  0.925  
NFFO Payout Ratio     66.0 %   67.5 %     69.7 %     70.4 %
NFFO Effective Payout Ratio     46.8 %   45.1 %     48.0 %     47.0 %
 

For the nine months ended September 30, 2017, basic NFFO per Unit increased by 4.1% compared to the same period last year despite the approximate 4.7% increase in the weighted average number of Units outstanding due to the successful equity offering in August 2016. For the three months ended September 30, 2017, basic NFFO per Unit increased by 4.7% compared to the same period last year despite the approximate 3.1% increase in the weighted average number of Units outstanding.

LIQUIDITY AND LEVERAGE

As at September 30,   2017   2016  
         
Total Debt to Gross Book Value   44.76 %   44.31 %
Total Debt to Gross Historical Cost(1)   56.02 %   54.17 %
Total Debt to Total Capitalization   45.38 %   45.05 %
         
Debt Service Coverage Ratio (times)(2)   1.64     1.63  
Interest Coverage Ratio (times)(2)   3.21     3.05  
         
Weighted Average Mortgage Interest Rate(3)   3.00 %   3.25 %
Weighted Average Mortgage Term to Maturity (years)   5.7     6.2  
(1) Based on the historical cost of investment properties.        
(2) Based on the trailing four quarters ended September 30, 2017
(3) Weighted average mortgage interest rate includes deferred financing costs and fair value adjustments on an effective interest basis. Including the amortization of the realized component of the loss on settlement of $32.5 million included in AOCL, the effective portfolio weighted average interest rate at September 30, 2017 would be 3.09% (September 30, 2016 - 3.37%).
     

Financial Strength

Management believes CAPREIT’s strong balance sheet and liquidity position will enable it to continue to take advantage of acquisition and property capital investment opportunities over the long term.

CAPREIT is achieving its financing goals as demonstrated by the following key indicators:

  • Total debt to gross book value ratio remained strong at 44.8% as at September 30, 2017 compared to 44.3% for the same period last year;
  • Debt service and interest coverage ratio remained stable at 1.64 times and increased to 3.21 times, respectively, compared to 1.63 times and 3.05 times for the same periods last year;
  • As at September 30, 2017, 97.0% (September 30, 2016 - 96.5%), of CAPREIT’s mortgage portfolio was insured by the Canada Mortgage and Housing Corporation (“CMHC”), excluding the mortgages on CAPREIT’s MHC land lease sites, US LIBOR borrowings and European financings resulting in improved spreads on mortgages and lower overall interest costs than conventional mortgages.
  • The effective portfolio weighted average interest rate on mortgages has steadily declined to 3.00% as at September 30, 2017 from 3.25% as at September 30, 2016, resulting in significant potential interest rate savings in future years;
  • Management expects to raise between $185 million and $225 million in total mortgage renewals and refinancings in 2017 excluding financings on acquisitions and financing on US LIBOR borrowings; Closed and committed mortgage refinancings and new financings for $631.0 million, including $266.6 million for renewals of existing mortgages and $364.4 million for additional top up financing and new acquisition financing with a weighted average term to maturity of 6.1 years, and a weighted average interest rate of 1.92%;
  • The weighted average term to maturity for the mortgage portfolio decreased to 5.7 years as at September 30, 2017 compared to 6.2 years as at September 30, 2016;
  • As at September 30, 2017, CAPREIT has investment properties with a fair value of $289.2 million not encumbered by mortgages and securing only the Acquisition and Operating Facility. CAPREIT intends to maintain unencumbered investment properties with an aggregate fair value in the range of $150 and $180 million over the long term.

Property Capital Investments

During the nine months ended September 30, 2017, CAPREIT made property capital investments (excluding head office assets) of $117.1 million compared to $124.3 million in the same period last year. For the full 2017 year, CAPREIT expects to complete property capital investments (excluding development and intensification) of approximately $175 million to $185 million, including approximately $70 million targeted at acquisitions completed since January 1, 2013, and approximately $17 million in high-efficiency boilers and other energy-saving initiatives. 

Property capital investments include suite improvements, common areas and equipment, which generally tend to increase NOI more quickly. CAPREIT also continues to invest in energy-saving initiatives, including boilers, energy-efficient lighting systems, and water-saving programs, which permit CAPREIT to mitigate potentially higher increases in utility and R&M costs and significantly improve overall portfolio NOI.

Subsequent Events

On October 12, 2017, CAPREIT completed the disposition of a mid-tier property consisting of 50 apartment suites located in Coquitlam, British Columbia for a sale price of approximately $19.8 million. The mortgage of approximately $3.6 million with a maturity date of December 1, 2022 and a stated interest rate of 2.81% was discharged as part of the disposition.

On October 24, 2017 CAPREIT announced that it had waived conditions and entered into a binding agreement to acquire a portfolio of 11 properties with a total of 540 residential suites well located in the Netherlands. Occupancy in the portfolio to be acquired stands at approximately 98%. The purchase price of approximately €82.6 million is expected to be financed with new mortgage financing of approximately €50 million with a term of approximately five years bearing an interest rate of approximately 1.4% (excluding financing costs), the balance with a Euro-based loan under CAPREIT’s credit facility. Closing of the transaction is expected to occur on or about December 1, 2017. With the completion of this acquisition CAPREIT’s Netherlands portfolio will grow to 2,088 residential suites well-located in key city centres in the country.

On November 1, 2017, CAPREIT announced that David Ehrlich has been appointed President and Chief Executive Officer. The appointment follows the loss of the CAPREIT’s founder and CEO, Thomas Schwartz, who passed away on August 15, 2017. In conjunction with assuming this role, Mr. Ehrlich will step down as CEO of Irish Residential Properties REIT Plc (IRES) but will remain on the board of IRES as the nominee of its asset manager, a CAPREIT company.

Additional Information

More detailed information and analysis is included in CAPREIT's unaudited condensed consolidated interim financial statements and MD&A for the three and nine months ended September 30, 2017, 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 the CAPREIT Management Team, will be held Tuesday, November 7, 2017 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 one 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 3315707#. The Instant Replay will be available until midnight, December 7, 2017. 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 primarily located in and near major urban centres across Canada. As at September 30, 2017, CAPREIT had owning interests in 50,058 residential units, comprised of 43,603 residential suites and 31 manufactured home communities (“MHC”) comprising 6,455 land lease sites. For more information about CAPREIT, its business and its investment highlights, please refer to our website at www.caprent.com or www.capreit.net and our public disclosure which can be found under our profile at www.sedar.com.

Non-IFRS Financial Measures

CAPREIT prepares and releases unaudited consolidated interim financial statements and audited consolidated annual financial statements prepared in accordance with IFRS. In this and other earnings releases and investor conference calls, as a complement to results provided in accordance with IFRS, CAPREIT also discloses and discusses certain financial measures not recognized under IFRS and that do not have standard meanings prescribed by IFRS. These include stabilized net rental income (“Stabilized NOI”), Net Rental Revenue Run-Rate, Funds From Operations (“FFO”), Normalized Funds From Operations (“NFFO”), and Adjusted Cash Flow from Operations (“ACFO”), and applicable per Unit amounts and payout ratios (collectively, the “Non-IFRS Measures”). These Non-IFRS Measures are further defined and discussed in the MD&A released on November 6, 2017, which should be read in conjunction with this press release. Since Stabilized NOI, Net Rental Revenue Run-Rate, FFO, NFFO, and ACFO are not measures recognized under IFRS, they may not be comparable to similarly titled measures reported by other issuers. CAPREIT has presented the Non-IFRS measures because Management believes these Non-IFRS measures are relevant measures of the ability of CAPREIT to earn revenue and to evaluate CAPREIT’s performance and cash flows. A reconciliation of Net Income and these Non-IFRS measures is included in this press release below. The Non-IFRS measures should not be construed as alternatives to net income (loss) or cash flows from operating activities determined in accordance with IFRS as indicators of CAPREIT’s performance or sustainability of our distributions.

Cautionary Statements Regarding Forward-Looking Statements

Certain statements contained, or contained in documents incorporated by reference, in this press release constitute forward-looking information within the meaning of securities laws. Forward-looking information may relate to CAPREIT’s future outlook and anticipated events or results and may include statements regarding the future financial position, business strategy, budgets, litigation, projected costs, capital investments, financial results, taxes, plans and objectives of or involving CAPREIT. Particularly, statements regarding CAPREIT’s future results, performance, achievements, prospects, costs, opportunities and financial outlook, including those relating to acquisition and capital investment strategy and the real estate industry generally, are forward-looking statements. In some cases, forward-looking information can be identified by terms such as “may”, “will”, “should”, “expect”, “plan”, “anticipate”, “believe”, “intend”, “estimate”, “predict”, “potential”, “continue” or the negative thereof, or other similar expressions concerning matters that are not historical facts. Forward-looking statements are based on certain factors and assumptions regarding expected growth, results of operations, performance and business prospects and opportunities. In addition, certain specific assumptions were made in preparing forward-looking information, including: that the Canadian, Irish and Dutch economies will generally experience growth, however, may be adversely impacted by the global economy; that inflation will remain low; that interest rates will remain low in the medium term; that Canada Mortgage and Housing Corporation (“CMHC”) mortgage insurance will continue to be available and that a sufficient number of lenders will participate in the CMHC-insured mortgage program to ensure competitive rates; that the Canadian capital markets will continue to provide CAPREIT with access to equity and/or debt at reasonable rates; that vacancy rates for CAPREIT properties will be consistent with historical norms; that rental rates will grow at levels similar to the rate of inflation on renewal; that rental rates on turnovers will remain stable; that CAPREIT will effectively manage price pressures relating to its energy usage; and, with respect to CAPREIT’s financial outlook regarding capital investments, assumptions respecting projected costs of construction and materials, availability of trades, the cost and availability of financing, CAPREIT’s investment priorities, the properties in which investments will be made, the composition of the property portfolio and the projected return on investment in respect of specific capital investments. Although the forward-looking statements contained in this press release are based on assumptions, Management believes they are reasonable as of the date hereof; however there can be no assurance actual results will be consistent with these forward-looking statements, and they may prove to be incorrect. Forward-looking statements necessarily involve known and unknown risks and uncertainties, many of which are beyond CAPREIT’s control, that may cause CAPREIT or the industry’s actual results, performance, achievements, prospects and opportunities in future periods to differ materially from those expressed or implied by such forward-looking statements. These risks and uncertainties include, among other things, risks related to: reporting investment properties at fair value, real property ownership, leasehold interests, co-ownerships, investment restrictions, operating risk, energy costs and hedging, environmental matters, insurance, capital investments, indebtedness, interest rate hedging, foreign operation and currency risks, taxation, harmonization of federal goods and services tax and provincial sales tax, land transfer tax, government regulations, controls over financial accounting, legal and regulatory concerns, the nature of units of CAPREIT (“Trust Units”), Preferred Units, and units of CAPREIT’s subsidiary, CAPREIT Limited Partnership (“Exchangeable Units”) (collectively, the “Units”), unitholder liability, liquidity and price fluctuation of Units, dilution, distributions, participation in CAPREIT’s distribution reinvestment plan, potential conflicts of interest, dependence on key personnel, general economic conditions, competition for residents, competition for real property investments, continued growth and risks related to acquisitions.  There can be no assurance the expectations of CAPREIT’s Management will prove to be correct. These risks and uncertainties are more fully described in regulatory filings, including CAPREIT’s Annual Information Form, which can be obtained on SEDAR at www.sedar.com, under CAPREIT’s profile, as well as under Risks and Uncertainties section of the MD&A released on November 6, 2017. The information in this press release is based on information available to Management as of November 6, 2017. Subject to applicable law, CAPREIT does not undertake any obligation to publicly update or revise any forward-looking information.

CAPREIT 
Mr. Michael Stein
Chairman 
(416) 861-5788 
CAPREIT  
Mr. David Ehrlich 
President & CEO 
(416) 861-9404 
CAPREIT
Mr. Scott Cryer
Chief Financial Officer
(416) 861-5771
     

SELECTED FINANCIAL INFORMATION

Condensed Balance Sheets

         
As at September 30, 2017 December 31, 2016
 ($ Thousands)        
Investment properties $ 8,381,150 $ 7,642,017
Total Assets   8,678,593   7,892,994
Mortgages payable   3,767,137   3,492,923
Bank indebtedness   142,365   26,408
Total Liabilities   4,117,917   3,734,062
Unitholders' Equity   4,560,676   4,158,932

Condensed Income Statements

  Three Months Ended   Nine Months Ended
  September 30,   September 30,
($ Thousands)   2017     2016       2017     2016  
NOI   102,655     96,274       292,958     271,737  
Trust expenses   (8,001 )   (6,301 )     (22,125 )   (23,246 )
Unrealized Gain on Remeasurement of Investment                  
  properties   153,598     67,130       287,802     161,967  
Realized loss on disposition of investment                  
 properties   -     (1,485 )     (80 )   (1,485 )
Remeasurement of Exchangeable Units   (21 )   409       (383 )   (610 )
Unit-based compensation (expenses) recoveries   (4,501 )   5,417       (15,110 )   (15,073 )
Interest on mortgages payable and other financing                  
costs   (29,290 )   (28,868 )     (87,375 )   (83,701 )
Interest on bank indebtedness   (1,019 )   (1,074 )     (2,554 )   (3,932 )
Interest on Exchangeable Units   (42 )   (51 )     (144 )   (149 )
Other income   3,325     2,908       14,012     11,873  
Amortization   (1,170 )   (725 )     (3,159 )   (2,645 )
Loss on derivative financial instruments   (8,794 )   (464 )     (8,880 )   (1,315 )
Foreign currency translation   9,160     (2,507 )     5,009     1,721  
Net Income   215,900     130,663       459,971     315,142  
Other Comprehensive Income $ 2,906   $ 3,520     $ 12,281   $ 3,782  
Comprehensive Income $ 218,806   $ 134,183     $ 472,252   $ 318,924  


Condensed Statements of Cash Flows

    Three Months Ended     Nine Months Ended
    September 30,     September 30,
    2017     2016       2017     2016  
($ Thousands)                  
Cash Provided By Operating Activities:                  
Net Income $ 215,900   $ 130,663     $ 459,971   $ 315,142  
Items in Net Income Not Affecting Cash:                  
Changes in Non-cash Operating Assets and                  
  Liabilities   12,382     7,260       (16,636 )   (2,810 )
Realized and Unrealized Gain on                  
  Remeasurements   (144,783 )   (65,590 )     (278,459 )   (158,557 )
Gain on Sale of Investments   -     -       -     -  
Unit-based Compensation Expenses (Recoveries)   4,501     (5,417 )     15,110     15,073  
Items Related to Financing and Investing                  
  Activities   24,715     27,510       74,613     77,497  
Other   (7,248 )   4,024       (4,177 )   (199 )
Cash Provided By Operating Activities   105,467     98,450       250,422     246,146  
Cash Used In Investing Activities                  
Acquisitions   (264,668 )   (36,669 )     (331,758 )   (288,154 )
Capital Investments   (45,441 )   (56,044 )     (119,467 )   (133,328 )
Dispositions   -     31,648       575     31,648  
Other   2,801     446       8,055     3,185  
Cash Used In Investing Activities   (307,308 )   (60,619 )     (442,595 )   (386,649 )
Cash Provided (Used) By Financing Activities                  
Mortgages, Net of Financing Costs   242,259     11,778       266,237     248,024  
Bank Indebtedness   41,443     (152,067 )     115,957     (106,616 )
Interest Paid   (27,508 )   (27,839 )     (82,707 )   (81,689 )
Proceeds on Issuance of Units   2,172     157,710       7,721     161,541  
Distributions, Net of DRIP and Other   (30,763 )   (27,413 )     (89,273 )   (80,757 )
Cash Provided (Used) By Financing Activities   227,603     (37,831 )     217,935     140,503  
Changes in Cash and Cash Equivalents During the Period    25,762       * 1    25,762     -  
Cash and Cash Equivalents, Beginning of Period   -       * 1   -     -  
Cash and Cash Equivalents, End of Period $  25,762   $   1 $  25,762   $ -  


SELECTED NON-IFRS FINANCIAL MEASURES  

A reconciliation of net income to NFFO is as follows:          
                   
    Three Months Ended     Nine Months Ended
    September 30,     September 30,
($ Thousands, except per Unit amounts)   2017     2016       2017     2016  
Net Income $ 215,900   $ 130,663     $ 459,971   $ 315,142  
Adjustments                  
  Unrealized Gain on Remeasurement of Investment Properties   (153,598 )   (67,130 )     (287,802 )   (161,967 )
  Realized Loss on Disposition of Investment Properties   -     1,485       80      1,485  
  Remeasurement of Exchangeable Units   21     (409 )     383     610  
  Remeasurement of Unit-based Compensation Liabilities   1,396     (6,933 )     9,196     11,080  
  Interest on Exchangeable Units   42     52       144     150  
  Corporate Income Taxes   161     -       138     -  
  (Gain) Loss on Foreign Currency Translation   (9,160 )   2,507       (5,009 )   (1,721 )
  Unrealized and Realized Loss on Derivative Financial Instruments   8,794     464       8,880     1,315  
  Net Income Attributable from Non-Controlling Interest   (67 )   -       (120 )   -  
  Net FFO Impact Attributable from Non-Controlling Interest   26     -       64     -  
  Amortization of Property, Plant and Equipment   1,170     725       3,159     2,645  
FFO $ 64,685   $ 61,424     $ 184,523   $ 165,144  
Adjustments:                  
  Amortization of Loss from AOCL to Interest and Other                  
    Financing Costs   747     777       2,290     2,330  
  Acquisition Research Costs(4)   -     -       -     5,474  
  Net Mortgage Prepayment Cost   -     -       164     -  
  Other Employee Costs(5)   1,604     -       1,604     -  
NFFO   67,036     62,201       188,581     172,948  
  NFFO per Unit – Basic   0.492     0.470       1.390     1.335  
  NFFO per Unit – Diluted   0.485     0.464       1.371     1.318  
  Total Distributions Declared(1)   44,261     41,987       131,524     121,737  
  NFFO Payout Ratio(2)   66.0 %   67.5 %     69.7 %   70.4 %
                   
  Net Distributions Paid(1)  $ 31,382   $ 28,036     $ 90,587   $ 81,226  
  Excess NFFO over Net Distributions Paid $ 35,654   $ 34,165     $ 97,994   $ 91,722  
  Effective NFFO Payout Ratio(3)   46.8 %   45.1 %     48.0 %   47.0 %
(1)  For the description of distributions declared and net distributions paid, see the Non-IFRS Financial Measures section in the MD&A for the nine months ended September 30, 2017.
(2)  The payout ratio compares distributions declared to NFFO.
(3)  The effective payout ratio compares net distributions paid to NFFO.
(4)  Expenses incurred relates to transactions that were not completed included in trust expenses.
(5)  Expenses included in Unit-based compensation expenses relates to accelerated vesting of previously-granted RUR Units.
 

Reconciliation of cash generated from operating activities to Adjusted Cash Flows from Operations: 

      Three Months Ended   Nine Months Ended      
        September 30   September 30   Annual
2016(5)
 
($ Thousands, except per Unit amounts)     2017     2016     2017     2016      
Cash Generated From Operating                        
  Activities   $  105,467   $  98,450   $  250,422   $  246,146   $  357,360    
Adjustments(1)                        
  Interest expense included in cash flow                      
  from financing activities   (27,508 )   (27,839 )   (82,707 )   (81,689 )   (109,097 )  
  Non-Discretionary Property Capital                        
 Investments(2)   (14,337 )   (14,808 )   (42,413 )   (43,783 )   (58,501 )  
  Capitalized Leasing Costs(3)   (1,072 )   (1,135 )   (1,918 )   (2,871 )   (3,679 )  
  Tenant improvements   (8 )   (106 )   (85 )   (388 )   (559 )  
  Amortization of Other Financing Costs(4)   (1,439 )   (1,246 )   (4,167 )   (3,435 )   (4,674 )  
  Non-controlling Interest   (40 )   -     (55 )   -     (1 )  
  Investment income    2,793      329      8,094      4,192      4,519    
ACFO     $  63,856   $  53,645   $  127,171   $  118,172   $  185,368    
Total Distributions Declared $  44,261   $  41,987   $  131,524   $  121,737   $  164,413    
Excess (Deficit) ACFO Over Distributions Declared $  19,595   $  11,658   $ (4,353 ) $ (3,565 ) $  20,955    
ACFO Payout Ratio     69.3 %   78.3 %   103.4 %   103.0 %   88.7 %  
(1)  Changes in working capital has not been adjusted in the ACFO calculation on the basis that changes in prepaids, receivables,
  deposits, accounts payables and other liabilities, security deposits, and other non-cash operating assets and liabilities are
  considered normal course of operating the company. In the first two quarters on 2017, changes in non-cash operating assets and
  liabilities were adjusted in the calculation of ACFO. Accordingly, the comparative periods have been adjusted to conform to
  this method of the calculation.
(2)  Based on the forecasted 2017 and actual 2016 Non-Discretionary Property Capital Investments per suite and site multiplied
  by the weighted average number of residential suites and sites during the period. The Non-Discretionary Property Capital
  Investment per suite and site for 2017 and 2016 on an annual basis is $1,177 and $1,251, respectively applied equally
  throughout the year. The weighted average number of residential suites and sites for nine months ended September 30, 2017
  and 2016 is 48,048, and 46,664, respectively.
(3)  Comprises tenant inducements and direct leasing costs.
(4)  Includes amortization of deferred financing costs, CMHC premiums, deferred loan costs and fair value adjustments.
(5)  Amounts presented for the three and nine months ended September 30, 2016 and year ended December 31, 2016, have been
  presented in accordance with the calculation of ACFO described above and are not comparable to other measures such as
  adjusted FFO presented in prior periods.