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CAPREIT Reports Continued Growth and Strong Operating Performance in Third Quarter of 2018

TORONTO, Nov. 06, 2018 (GLOBE NEWSWIRE) -- Canadian Apartment Properties Real Estate Investment Trust ("CAPREIT") (TSX: CAR.UN) announced today, continuing strong operating and financial results for the three and nine months ended September 30, 2018.

                                 
HIGHLIGHTS:
      Three Months Ended     Nine Months Ended
      September 30,     September 30,
      2018   2017     2018     2017
Portfolio Performance                    
Overall Portfolio Occupancy(1)             98.8 %     98.3 %
Overall Portfolio Net Average Monthly Rents(1)(2)           $ 1,079     $ 1,029  
Operating Revenues (000s) $ 172,298   $ 161,713     $ 510,918     $ 474,410  
Net Rental Income ("NOI") (000s) $ 113,850   $ 102,655     $ 327,120     $ 292,958  
NOI Margin   66.1 %   63.5 %     64.0 %     61.8 %
                     
Financial Performance                    
Normalized Funds From Operations ("NFFO") (000s)(3) $  77,933   $ 67,036     $  218,857     $ 188,581  
NFFO Per Unit – Basic(3) $ 0.540   $ 0.492     $ 1.539     $ 1.390  
Cash Distributions Per Unit $ 0.333   $ 0.320     $ 0.977     $ 0.955  
FFO Payout Ratio(3)   62.9 %   68.4 %     65.2 %     71.3 %
NFFO Payout Ratio(3)   62.3 %   66.0 %     64.6 %     69.7 %
                     
Liquidity and Leverage                    
Total Debt to Gross Book Value(1)             40.48 %     44.76 %
Total Debt to Gross Historical Cost(1)             53.15 %     56.02 %
Weighted Average Mortgage Interest Rate(1)             3.08 %     3.00 %
Weighted Average Mortgage Term (years)(1)             5.22       5.73  
Debt Service Coverage (times)(4)             1.73       1.64  
Interest Coverage (times)             3.40       3.21  
Available Liquidity – Acquisition and Operating Facility (000s)(1)           $ 123,218     $ 58,169  
                     
(1 ) As at September 30.
(2 ) Net Average Monthly Rent ("Net AMR"), previously defined as "AMR", is defined as actual residential rents, net of vacancies, divided by the total number of suites in the property and does not include revenues from parking, laundry or other sources.
(3 ) These measures are not defined by IFRS, do not have standard meanings and may not be comparable with other industries or companies. Please refer to the cautionary statements under the heading "Non-IFRS Financial Measures" and the reconciliations provided in this press release.
(4 ) Based on the trailing four quarters.                    
                       
OTHER MEASURES   Three Months Ended     Nine Months Ended
    September 30,     September 30,
      2018   2017     2018     2017
Weighted Average Number of Units - Basic (000s)    144,431     136,295       142,224       135,671  
Number of Suites and Sites Acquired   362     980       498       1,312  
Number of Suites Disposed   264           264       31  
Closing Price of Trust Units(1)           $ 47.69     $ 33.73  
Market Capitalization (millions)(1)           $ 6,973     $ 4,671  
                     
(1 ) As at September 30.
     

SUMMARY OF Q3-2018 RESULTS OF OPERATIONS

Strong Operating Results Supported by Strong Market Fundamentals

  • Growth in revenue and NOI from stabilized properties driven by higher monthly rents and stronger occupancies compared to last year
  • Monthly residential rents for the three months ended September 30, 2018 increased by 11.5% on suite turnovers of 7.2% of the portfolio, and for the nine months ended September 30, 2018 increased by 10.7% on suite turnovers of 16.8% of the portfolio
  • Monthly residential rents for the three and nine months ended September 30, 2018 increased by 2.2% on suite renewals of 28.5% and 66.1% of the portfolio, respectively
  • Net AMR for the stabilized residential suite portfolio as at September 30, 2018 increased by 5.2% compared to September 30, 2017, while occupancy increased to 99.2%
  • Net AMR increased due to the strong rents on turnovers, higher rental guideline increases in Ontario and British Columbia, and above guideline increases
  • NOI increased by 10.9% and 11.7% for the three and nine months ended September 30, 2018 respectively, compared to the same periods last year due to contributions from acquisitions and increased same property Net AMR 
  • NOI margin increased to 66.1% and 64.0% for the three and nine months ended September 30, 2018 respectively, due to higher monthly rents and lower vacancies, repair and maintenance (“R&M”) costs, wages and realty taxes as a percentage of operating revenues

Continued Fair Value Increases in our Investment Properties

  • For the three months and nine months ended September 30, 2018, the fair value of investment properties increased by $50.5 million and $280.1 million respectively, driven by NOI growth and cap rate compression

Strong and Flexible Balance Sheet

  • CAPREIT’s financial position continues to strengthen with reduced leverage ratios
  • Debt to Gross Book Value (“GBV”) reduced to 40.48% as at September 30, 2018 from 43.57% at December 31, 2017, due to increases in fair value of investment properties
  • Debt Service Coverage (“DSC”) ratio improved to 1.73 compared to 1.63 as at December 31, 2017 mainly due to significant organic NOI growth
  • Liquidity available on our Credit Facilities is $123.2 million as at September 30, 2018, and committed and expected new financings for the remainder of 2018 is $63.3 million
  • Closed mortgage refinancing for $98.7 million year to date, with a weighted average term to maturity of 7.5 years, and a weighted average interest rate of 3.20%
  • CAPREIT’s mortgage weighted average term to maturity and the weighted average interest rate for the nine months ended September 30, 2018 are 5.2 years and 3.08% respectively compared to 5.7 years and 3.00% respectively for the same period last year. CAPREIT continues to fix long term mortgages to defend against the rising interest rate environment

Delivering Unitholder Value

  • NFFO up 16.3% and 16.1% respectively for the three and nine months ended September 30, 2018
  • NFFO payout ratio for the nine months ended September 30, 2018 improved to 64.6% from 69.7% for the same period last year

“We are on track to deliver another record year for CAPREIT in 2018,” commented David Ehrlich, President and CEO. “Our proven operating platform continues to generate high stable occupancies and steady increases in net average monthly rents across all of our target geographic markets, while our asset management programs are enhancing the overall quality and value of our growing property portfolio. We look for these positive trends to continue through the balance of the year and going forward.”

 
OPERATIONAL AND FINANCIAL RESULTS 
 
Portfolio Net Average Monthly Rents
    Total Portfolio  Properties Owned Prior to September 30, 2017 
As at September 30,   2018     2017     2018     2017 (1)
    AMR Occ. %   AMR Occ. %   AMR Occ. %   AMR Occ. %
Average Residential Suites $ 1,184 98.9 $ 1,127 98.3 $ 1,183 99.2 $ 1,125 98.3
Average MHC Land Lease Sites $ 394 97.7 $ 387 98.3 $ 394 97.7 $ 387 98.3
                         
Overall Portfolio Average $ 1,079 98.8 $ 1,029 98.3 $ 1,078 99.0 $ 1,027 98.3
(1) Prior period comparable Net AMR and occupancy have been restated for properties disposed of since September 30, 2017.
 

Overall Net AMR for the stabilized residential suite portfolio as at September 30, 2018 increased by approximately 5.2% (including the Netherlands), and 4.6% (excluding the Netherlands) compared to the same period last year, while occupancies increased to 99.2%. The rate of growth in Net AMR has been due to (i) the strong rental markets of British Columbia and Ontario, (ii) a higher rental guideline increase in Ontario and British Columbia for 2018 of 1.8% and 4.0% respectively, compared to the permitted guideline increases of 1.5% and 3.7% respectively in 2017, and (iii) increases due to above guideline increases (“AGI”) achieved in Ontario.

                 
Suite Turnovers & Lease Renewals - Total Portfolio          
           
For the Three Months Ended September 30, 2018 2017
  Change in monthly rent Turnovers & Renewals(1) Change in monthly rent Turnovers & Renewals(1)
  $ % % $ % %
Suite Turnovers 128.6 11.5 7.2 92.3 8.5 8.2
Lease Renewals 25.5 2.2 28.5 21.7 2.0 28.0
Weighted Average of Turnovers and Renewals 46.2 4.1   37.7 3.5  
             
For the Nine Months Ended September 30, 2018 2017
  Change in monthly rent Turnovers & Renewals(1) Change in monthly rent Turnovers & Renewals(1)
  $ % % $ % %
Suite Turnovers 121.8 10.7 16.8 72.5 6.6 18.6
Lease Renewals 25.6 2.2 66.1 21.4 1.9 65.2
Weighted Average of Turnovers and Renewals 45.1 3.9   32.8 3.0  
(1 ) Percentage of suites turned over or renewed during the period based on the total number of residential suites (excluding co-ownerships and the Netherlands properties) held at the end of the period.
   

Suite turnovers in the residential suite portfolio (excluding co-ownerships and the Netherlands properties) for the three months and nine months ended September 30, 2018 resulted in monthly rents increasing by approximately $129 or 11.5% and $122 or 10.7%, respectively, compared to an increase of approximately $92 or 8.5% and $73 or 6.6% for the same periods last year, primarily due to the strong rental markets of British Columbia and Ontario.

Estimated Net Rental Revenue Run-Rate

CAPREIT’s annualized net rental revenue run-rate as at September 30, 2018 grew to $662.2 million, up 6.5% from $621.7 million as at September 30, 2017, primarily due to higher monthly rents. Net rental revenue run-rate net of dispositions for the twelve months ended September 30, 2018 was $636.6 million (September 30, 2017 – $593.9 million). For a detailed description of net rental revenue run-rate, see Results of Operations in Section III of the MD&A.

                 
NOI for the Total Portfolio                
    Three Months Ended     Nine Months Ended  
    September 30,     September 30,  
($ Thousands)   2018 %(1)   2017 %(1)   2018 %(1) 2017 %(1)
Total Operating Revenues $ 172,298   100.0 $ 161,713   100.0   510,918   100.0 $ 474,410   100.0
Operating Expenses                        
Realty Taxes $ (17,539 ) 10.2 $ (17,200 ) 10.6 $ (52,015 ) 10.2 $ (49,947 ) 10.5
Utilities   (10,774 ) 6.2   (10,284 ) 6.4   (41,673 ) 8.1   (41,647 ) 8.8
Other(2)   (30,135 ) 17.5   (31,574 ) 19.5   (90,110 ) 17.7   (89,858 ) 18.9
Total Operating Expenses $ (58,448 ) 33.9 $ (59,058 ) 36.5 $ (183,798 ) 36.0 $ (181,452 ) 38.2
NOI $ 113,850   66.1 $ 102,655   63.5 $ 327,120   64.0 $ 292,958   61.8
(1)  As a percentage of total operating revenues.
(2)  Comprises R&M, wages, general and administrative, insurance, advertising, and legal costs.
 

Operating Revenues

For the three and nine months ended September 30, 2018, total operating revenues increased by 6.5% and 7.7%, respectively, compared to the same periods last year, due to the contribution from acquisitions, increased same-property Net AMR, and continuing higher occupancies.

Operating Expenses

Overall operating expenses as a percentage of operating revenues reduced to 33.9% and 36.0% for the three and nine months ended September 30, 2018 compared to 36.5% and 38.2% in the prior year, respectively, mainly as a result of lower utilities due to reduced consumption, positive impacts of energy saving initiatives and sub-metering, and lower operating expenses due to lower R&M, wages, and realty taxes as a percentage of operating revenues.

NOI Margin

For the three and nine months ended September 30, 2018, the NOI margin on the total portfolio were 66.1% and 64.0%, respectively, compared to 63.5% and 61.8% for the same periods last year. The increase in the NOI margin is due to (i) higher monthly rents on stabilized basis, (ii) lower vacancies, and (iii) lower R&M costs, wages and realty taxes as a percentage of operating revenues.

NON-IFRS FINANCIAL PERFORMANCE

For the nine months ended September 30, 2018, basic NFFO per Unit increased by 10.7% compared to the same period last year despite an approximate 4.8% increase in the weighted average number of Units outstanding, mainly as a result of the March 2018 equity offering offset by strong organic NOI growth and contributions from acquisitions. For the three months ended September 30, 2018, basic NFFO per Unit increased by 9.8% compared to the same period last year. Management expects per Unit FFO and NFFO and related payout ratios to strengthen further in the medium term as a result of NOI contributions from recent acquisitions.

PROPERTY CAPITAL INVESTMENTS

During the nine months ended September 30, 2018, CAPREIT made property capital investments (excluding head office assets) of $118.3 million compared to $112.7 million in the same period last year. Management expects CAPREIT to complete property capital investments (excluding development and intensification) of approximately $191 million to $201 million in 2018.

Property capital investments include suite improvements, common areas and equipment, which generally tend to increase NOI more quickly. CAPREIT also continues to invest in environment-friendly energy-saving initiatives, including high-efficiency boilers, energy-efficient lighting systems and water-saving programs, which have permitted CAPREIT to mitigate potential increases in utility and R&M costs and has improved overall portfolio NOI.

SUBSEQUENT EVENTS

On October 11, 2018, CAPREIT completed the disposition of a 419 suite apartment, Carrefour des Erables, located on the south shore of Montreal, in Longueuil, Quebec for a sales price of approximately $35.8 million. The proceeds from the sale will be used to repay $20.6 million in outstanding mortgages on the property with a maturity date of June 1, 2024 and a stated interest rate of 3.61%, with the balance used to reduce CAPREIT’s acquisition and operating credit facility.

ADDITIONAL INFORMATION

More detailed information and analysis is included in CAPREIT's unaudited condensed consolidated interim financial statements and MD&A for the three and nine months ended September 30, 2018, which have been filed on SEDAR and can be viewed at www.sedar.com under CAPREIT’s profile or on CAPREIT’s website on the investor relations page at www.caprent.com or www.capreit.net.

Conference Call

A conference call hosted by David Ehrlich, President and CEO and the CAPREIT Management Team, will be held Wednesday, November 7, 2018 at 10:00 am EST. The telephone numbers for the conference call are: Local/International: (416) 340-2216, North American Toll Free: (866) 225-0198.

A slide presentation to accompany Management's comments during the conference call will be available an hour and a half prior to the conference call. To view the slides, access the CAPREIT website at www.caprent.com or www.capreit.net, click on "Investor Relations" and follow the link at the top of the page. Please log on at least 15 minutes before the call commences.

The telephone numbers to listen to the call after it is completed (Instant Replay) are local/international (905) 694-9451 or North American toll free (800) 408-3053. The Passcode for the Instant Replay is 5940734#. The Instant Replay will be available until midnight, December 7, 2018. The call and accompanying slides will also be archived on the CAPREIT website at www.caprent.com or www.capreit.net. For more information about CAPREIT, its business and its investment highlights, please refer to our website at www.caprent.com or www.capreit.net.

About CAPREIT

CAPREIT owns interests in multi-unit residential rental properties, including apartments, townhomes and manufactured home communities (“MHC”) primarily located in and near major urban centres across Canada. As at September 30, 2018, CAPREIT had owning interests in 50,869 residential units, comprised of 44,277 residential suites and 32 MHC comprising 6,592 land lease sites. For more information about CAPREIT, its business and its investment highlights, please refer to our website at www.caprent.com or www.capreit.net and our public disclosure which can be found under our profile at www.sedar.com.

Non-IFRS Financial Measures

CAPREIT prepares and releases unaudited consolidated interim financial statements and audited consolidated annual financial statements prepared in accordance with IFRS. In this and other earnings releases and investor conference calls, as a complement to results provided in accordance with IFRS, CAPREIT also discloses and discusses certain financial measures not recognized under IFRS and that do not have standard meanings prescribed by IFRS. These include stabilized net rental income (“Stabilized NOI”), Net Rental Revenue Run-Rate, Funds From Operations (“FFO”), Normalized Funds From Operations (“NFFO”), and Adjusted Cash Flow from Operations (“ACFO”), and applicable per Unit amounts and payout ratios (collectively, the “Non-IFRS Measures”). These Non-IFRS Measures are further defined and discussed in the MD&A released on November 6, 2018, which should be read in conjunction with this press release. Since Stabilized NOI, Net Rental Revenue Run-Rate, FFO, NFFO, and ACFO are not measures recognized under IFRS, they may not be comparable to similarly titled measures reported by other issuers. CAPREIT has presented the Non-IFRS measures because Management believes these Non-IFRS measures are relevant measures of the ability of CAPREIT to earn revenue and to evaluate CAPREIT’s performance and cash flows. A reconciliation of Net Income and these Non-IFRS measures is included in this press release below. The Non-IFRS measures should not be construed as alternatives to net income (loss) or cash flows from operating activities determined in accordance with IFRS as indicators of CAPREIT’s performance or sustainability of our distributions.

Cautionary Statements Regarding Forward-Looking Statements

Certain statements contained, or contained in documents incorporated by reference, in this press release constitute forward-looking information within the meaning of securities laws. Forward-looking information may relate to CAPREIT’s future outlook and anticipated events or results and may include statements regarding the future financial position, business strategy, budgets, litigation, projected costs, capital investments, financial results, taxes, plans and objectives of or involving CAPREIT. Particularly, statements regarding CAPREIT’s future results, performance, achievements, prospects, costs, opportunities and financial outlook, including those relating to acquisition and capital investment strategy and the real estate industry generally, are forward-looking statements. In some cases, forward-looking information can be identified by terms such as “may”, “will”, “should”, “expect”, “plan”, “anticipate”, “believe”, “intend”, “estimate”, “predict”, “potential”, “continue” or the negative thereof, or other similar expressions concerning matters that are not historical facts. Forward-looking statements are based on certain factors and assumptions regarding expected growth, results of operations, performance and business prospects and opportunities. In addition, certain specific assumptions were made in preparing forward-looking information, including: that the Canadian, Irish and Dutch economies will generally experience growth, however, may be adversely impacted by the global economy; that inflation will remain low; that interest rates will remain low in the medium term; that Canada Mortgage and Housing Corporation (“CMHC”) mortgage insurance will continue to be available and that a sufficient number of lenders will participate in the CMHC-insured mortgage program to ensure competitive rates; that the Canadian capital markets will continue to provide CAPREIT with access to equity and/or debt at reasonable rates; that vacancy rates for CAPREIT properties will be consistent with historical norms; that rental rates will grow at levels similar to the rate of inflation on renewal; that rental rates on turnovers will remain stable; that CAPREIT will effectively manage price pressures relating to its energy usage; and, with respect to CAPREIT’s financial outlook regarding capital investments, assumptions respecting projected costs of construction and materials, availability of trades, the cost and availability of financing, CAPREIT’s investment priorities, the properties in which investments will be made, the composition of the property portfolio and the projected return on investment in respect of specific capital investments. Although the forward-looking statements contained in this press release are based on assumptions, Management believes they are reasonable as of the date hereof; however there can be no assurance actual results will be consistent with these forward-looking statements, and they may prove to be incorrect. Forward-looking statements necessarily involve known and unknown risks and uncertainties, many of which are beyond CAPREIT’s control, that may cause CAPREIT or the industry’s actual results, performance, achievements, prospects and opportunities in future periods to differ materially from those expressed or implied by such forward-looking statements. These risks and uncertainties include, among other things, risks related to: reporting investment properties at fair value, real property ownership, leasehold interests, co-ownerships, investment restrictions, operating risk, energy costs and hedging, environmental matters, catastrophic events, insurance, capital investments, indebtedness, interest rate hedging, foreign operation and currency risks, taxation, harmonization of federal goods and services tax and provincial sales tax, land transfer tax, foreign tax, government regulations, controls over financial accounting, legal and regulatory concerns, the nature of units of CAPREIT (“Trust Units”), Preferred Units, and units of CAPREIT’s subsidiary, CAPREIT Limited Partnership (“Exchangeable Units”) (collectively, the “Units”), unitholder liability, liquidity and price fluctuation of Units, dilution, distributions, participation in CAPREIT’s distribution reinvestment plan, potential conflicts of interest, dependence on key personnel, general economic conditions, competition for residents, competition for real property investments, continued growth, risks related to acquisitions, and cybersecurity.  There can be no assurance that the expectations of CAPREIT’s Management will prove to be correct. These risks and uncertainties are more fully described in regulatory filings, including CAPREIT’s Annual Information Form, which can be obtained on SEDAR at www.sedar.com, under CAPREIT’s profile, as well as under Risks and Uncertainties section of the MD&A released on November 6, 2018. The information in this press release is based on information available to Management as of November 6, 2018. Subject to applicable law, CAPREIT does not undertake any obligation to publicly update or revise any forward-looking information.

SOURCE: Canadian Apartment Properties Real Estate Investment Trust

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

         
SELECTED FINANCIAL INFORMATION        
         
Condensed Balance Sheets        
         
As at September 30, 2018 December 31, 2017
($ Thousands)        
Investment properties $ 9,354,973 $ 8,886,556
Total Assets   9,727,847   9,187,170
Mortgages payable   3,554,014   3,581,501
Bank indebtedness   410,472   446,895
Total Liabilities   4,204,823   4,263,764
Unitholders' Equity   5,523,024   4,923,406
         


     
Condensed Income Statements    
    Three Months Ended Nine Months Ended
  September 30, September 30,
    2018     2017       2018     2017  
Operating Revenues                  
Revenue from investment properties $ 172,298   $ 161,713     $ 510,918   $ 474,410  
Operating Expenses                  
Realty taxes   (17,539 )   (17,200 )     (52,015 )   (49,947 )
Property operating costs   (40,909 )   (41,858 )     (131,783 )   (131,505 )
    (58,448 )   (59,058 )     (183,798 )   (181,452 )
Net Rental Income   113,850     102,655       327,120     292,958  
Trust expenses   (8,658 )   (7,840 )     (26,682 )   (21,987 )
Unit-based compensation expenses   (10,853 )   (4,501 )     (27,070 )   (15,110 )
Fair value adjustments of investment properties   50,468     153,598       280,076     287,802  
Realized loss on disposition of investment                  
properties   (577 )   -       (577 )   (80 )
Amortization of property, plant and equipment   (1,278 )   (1,170 )     (3,674 )   (3,159 )
Fair value adjustments of exchangeable units   (272 )   (21 )     (896 )   (383 )
Fair value adjustments of Investments   2,500     -       4,152     -  
Gain (loss) on derivative financial instruments   2,597     (8,794 )     10,517     (8,880 )
Interest and other financing costs   (33,711 )   (30,418 )     (96,612 )   (90,193 )
Foreign currency translation   5,928     9,160       (6,478 )   5,009  
Other income   4,141     3,325       28,086     14,012  
Net Income Before Income Taxes   124,135     215,994       487,962     459,989  
Current and deferred income tax expense   (4,541 )   (161 )     (6,558 )   (138 )
Net Income   119,594     215,833     $ 481,404   $ 459,851  
Other Comprehensive (Loss) Income $ (9,446 ) $ 2,906     $ (1,225 ) $ 12,281  
Comprehensive Income $ 110,148   $ 218,739     $ 480,179   $ 472,132  
                           


                                 
Condensed Statements of Cash Flows
         
        Three Months Ended     Nine Months Ended
        September 30,     September 30,
        2018   2017(1)     2018   2017(1)
Cash Provided By (Used In):                    
Operating Activities                    
Net income   $ 119,594   $ 215,833     $ 481,404   $ 459,851  
Items related to operating activities not affecting cash:                    
Fair value adjustments - investment properties     (50,468 )   (153,598 )     (280,076 )   (287,802 )
Fair value adjustments - exchangeable units     272     21       896     383  
Fair value adjustments - investments     (2,500 )   -       (4,152 )   -  
Loss on disposition of investment properties     577     -       577     80  
Loss on derivative financial instruments     (2,597 )   8,794       (10,517 )   8,880  
Amortization     3,531     3,356       10,410     9,616  
Unit-based compensation expenses     10,853     4,501       27,070     15,110  
Straight-line rent adjustment     (36 )   (20 )     (65 )   (220 )
Deferred income tax expense     4,467     -       6,544     -  
Net profit from equity-accounted investments     (1,912 )   (1,424 )     (20,775 )   (8,564 )
Foreign currency     (5,928 )   (9,160 )     6,478     (5,009 )
      75,853     68,303       217,794     192,325  
Net income items related to financing and                    
investing activities     30,997     24,782       88,807     74,733  
Changes in non-cash operating assets and liabilities     7,328     12,382       (17,851 )   (16,636 )
Cash Provided by Operating Activities     114,178     105,467       288,750     250,422  
                     
Investing Activities                    
Acquisition of investment properties     (131,326 )   (264,668 )     (142,697 )   (331,758 )
Capital investments     (49,891 )   (45,441 )     (119,762 )   (119,467 )
Acquisition of investments     -     -       (25,443 )   -  
Disposition of investment properties     52,325     -       52,325     575  
Change in restricted cash     133     8       (421 )   (39 )
Investment income received     400     2,793       3,962     8,094  
Cash Used in Investing Activities     (128,359 )   (307,308 )     (232,036 )   (442,595 )
                     
Financing Activities                    
Mortgage financings     139,672     435,576       163,405     631,006  
Mortgage principal repayments     (29,220 )   (28,313 )     (87,172 )   (90,817 )
Mortgages repaid on maturity     (75,316 )   (163,070 )     (98,661 )   (266,575 )
Financing costs     (565 )   (970 )     (1,001 )   (2,475 )
CMHC premiums on mortgages payable     (2,351 )   (964 )     (2,438 )   (4,902 )
Interest paid     (28,280 )   (27,508 )     (85,595 )   (82,707 )
Bank indebtedness     44,624     41,443       (42,901 )   115,957  
Proceeds on issuance of Units     410     2,172       199,249     7,721  
Net cash distributions to Unitholders     (34,296 )   (30,763 )     (99,699 )   (89,273 )
Cash (Used) Provided by Financing Activities     14,678     227,603       (54,813 )   217,935  
Changes in Cash and Cash Equivalents During the                    
Period     1,262     25,762       2,267     25,762  
Effect of exchange rate changes on cash     (765 )   -       (366 )   -  
Cash and Cash Equivalents, Beginning of the Period     25,190     -       23,786     -  
Cash and Cash Equivalents, End of the Period   $ 25,687   $ 25,762     $ 25,687   $ 25,762  
                       
(1 ) Q3 2017 comparative balances have been restated to conform with current period presentation.
                       


                           
SELECTED NON-IFRS FINANCIAL MEASURES          
A reconciliation of net income to NFFO is as follows:          
        Three Months Ended     Nine Months Ended
        September 30,     September 30,
($ Thousands, except per Unit amounts)   2018     2017       2018     2017  
Net Income $ 119,594   $ 215,833     $ 481,404   $ 459,851  
Adjustments                  
Unrealized Gain on Remeasurement of Investment
  Properties
  (50,468 )   (153,598 )     (280,076 )   (287,802 )
Realized Loss on Disposition of Investment Properties   577     -       577     80  
Remeasurement of Exchangeable Units   272     21       896     383  
Remeasurement of Investments(1)   (2,500 )   -       (4,152 )   -  
Remeasurement of Unit-based Compensation Liabilities   9,459     1,396       23,177     9,196  
Interest on Exchangeable Units   20     42       101     144  
Corporate and Deferred Income Taxes   4,541     161       6,558     138  
Loss on Foreign Currency Translation   (5,928 )   (9,160 )     6,478     (5,009 )
FFO Adjustment for Income from Equity Accounted
 Investments(2)
  -     -       (15,504 )   (4,561 )
Unrealized and Realized Loss on Derivative
  Financial Instruments
  (2,597 )   8,794       (10,517 )   8,880  
Net FFO Impact Attributable to Non-Controlling Interest   3,042     26       4,225     64  
Amortization of Property, Plant and Equipment   1,278     1,170       3,674     3,159  
FFO $ 77,290   $ 64,685     $ 216,841   $ 184,523  
Adjustments:                  
Amortization of Loss from AOCL to interest and other                  
Financing Costs   643     747       2,016     2,290  
Net Mortgage Prepayment Cost   -     -       -     164  
Other Employee Costs(3)   -     1,604       -     1,604  
NFFO   77,933     67,036       218,857     188,581  
NFFO per Unit – Basic   0.540     0.492       1.539     1.390  
NFFO per Unit – Diluted   0.534     0.485       1.524     1.371  
Total Distributions Declared(4)   48,583     44,261       141,453     131,524  
NFFO Payout Ratio(5)   62.3 %   66.0 %     64.6 %   69.7 %
                       
Net Distributions Paid(4) $ 34,401   $ 31,382     $ 100,957   $ 90,587  
Excess NFFO over Net Distributions Paid $ 43,532   $ 35,654     $ 117,900   $ 97,994  
Effective NFFO Payout Ratio(6)   44.1 %   46.8 %     46.1 %   48.0 %
(1 ) Effective January 1, 2018, CAPREIT adopted IFRS 9 Financial Instruments. Under this standard, this investment has been designated as FVTPL whereas previously it was designated as available-for-sale. Under the guidance in this new standard, any mark-to-market gains or losses are recorded in the statement of income and comprehensive income whereas previously they were recorded through OCI. The cumulative mark to market gains/losses have also been reclassified from accumulated OCI to retained earnings on adoption of this standard. 
(2 ) Relates to unrealized gain on remeasurement of investment properties.
(3 ) Expenses included in Unit-based compensation expenses relates to accelerated vesting of previously-granted RUR units.
(4 ) For the description of distributions declared and net distributions paid, see the Non-IFRS Financial Measures section in the MD&A for the nine months ended September 30, 2018. 
(5 ) The payout ratio compares distributions declared to NFFO.
(6 ) The effective payout ratio compares net distributions paid to NFFO.
                               


                                   
Reconciliation of cash generated from operating activities to Adjusted Cash Flows from Operations: 
               
      Three Months Ended   Nine Months Ended    
        September 30   September 30    
($ Thousands, except per Unit amounts)   2018     2017     2018     2017     Annual
2017
Cash Generated From Operating                    
Activities $  114,178   $ 105,467   $  288,750   $ 250,422   $ 358,941  
Adjustments:(1)(2)    -     -     -     -     -  
Interest expense included in cash flow   -     -     -     -     -  
from financing activities   (28,280 )   (27,508 )   (85,595 )   (82,707 )   (111,138 )
Non-Discretionary Property Capital   -     -     -     -     -  
Investments(3)   (14,004 )   (14,337 )   (41,983 )   (42,413 )   (38,724 )
Capitalized Leasing Costs(4)   (570 )   (1,080 )   (2,455 )   (2,003 )   (3,234 )
Amortization of Other Financing Costs(5)   (1,610 )   (1,439 )   (4,720 )   (4,167 )   (5,689 )
Non-controlling Interest   (75 )   (40 )   (144 )   (55 )   (184 )
Investment Income    400     2,793      3,962     8,094     8,478  
ACFO $  70,039   $ 63,856   $  157,815   $ 127,171   $ 208,450  
Total Distributions Declared $  48,583   $ 44,261   $  141,453   $ 131,524   $ 176,024  
Excess (Deficit) ACFO Over Distributions Declared $  21,456   $ 19,595   $  16,362   $ (4,353 ) $ 32,426  
ACFO Payout Ratio   69.4 %   69.3 %   89.6 %   103.4 %   84.4 %
(1 ) On a quarterly basis, a review of working capital is performed to determine whether changes in prepaids, receivable, deposits accounts payable and other liabilities, security deposits and other non-cash operating assets and liabilities were attributed to items which were not indicative of sustainable cash flows available for distribution in line with the ACFO guidance provided by REALPAC. Based on review, it was concluded no adjustments needed.
(2 ) Non-Discretionary Property Capital Investments for the three months ended September 30, 2018 and 2017 has been calculated as follows: Non-Discretionary Property Capital Investments per suite and site is based on the annual 2018 and 2017 forecasts respectively, divided by four for the quarter, and multiplied by the weighted average number of residential suites and sites during the period. The forecasted Non-Discretionary Property Capital Investments per suite and site for 2018 and 2017 on an annual basis is $1,130 and $1,177 respectively. The weighted average number of residential suites and sites for the nine months ended September 30, 2018 and 2017 is 49,538 and 48,048, respectively. For a reconciliation of actual non-discretionary property capital investments incurred during the period to forecast, please see Adjusted Cash Flows From Operations and Distributions Declared section of the MD&A.
(3 ) Comprises tenant inducements and direct leasing costs.
(4 ) Includes amortization of deferred financing costs, CMHC premiums, deferred loan costs and fair value adjustments.
     

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