CAPREIT Reports Third Quarter 2024 Results
TORONTO, Nov. 07, 2024 (GLOBE NEWSWIRE) -- Canadian Apartment Properties Real Estate Investment Trust ("CAPREIT") (TSX:CAR) announced today strong operating and financial results for the three and nine months ended September 30, 2024. Management will host a conference call to discuss the financial results on Friday, November 8, 2024 at 9:00 a.m. ET.
HIGHLIGHTS
As at
September 30, 2024
December 31, 2023
September 30, 2023
Total Portfolio Performance and Other Measures
Number of suites and sites(1)
63,359
64,260
64,461
Investment properties fair value(2) (000s)
$
15,055,125
$
16,532,096
$
16,482,890
Assets held for sale (000s)
$
1,877,123
$
45,850
$
55,530
Occupied AMR(1)(3)
Canadian Residential Portfolio(4)
$
1,617
$
1,516
$
1,490
The Netherlands Portfolio
€
1,141
€
1,063
€
1,053
Occupancy(1)
Canadian Residential Portfolio(4)
98.0
%
98.8
%
98.9
%
The Netherlands Portfolio
95.1
%
98.5
%
98.7
%
Total Portfolio(5)
97.3
%
98.2
%
98.4
%
(1) Excludes commercial suites and includes assets held for sale. As at September 30, 2024, includes 15,427 suites and sites classified as assets held for sale (December 31, 2023, 272, September 30, 2023, 284).(2) Investment properties exclude assets held for sale, as applicable.(3) Occupied average monthly rent ("Occupied AMR") is defined as actual residential rents divided by the total number of occupied suites or sites in the property, and does not include revenues from parking, laundry or other sources.(4) Excludes MHC sites.(5) Includes MHC sites.
Three Months Ended
Nine Months Ended
September 30,
September 30,
2024
2023
2024
2023
Financial Performance
Operating revenues (000s)
$
282,439
$
268,377
$
836,381
$
793,122
Net operating income ("NOI") (000s)
$
189,382
$
178,432
$
552,712
$
516,075
NOI margin
67.1
%
66.5
%
66.1
%
65.1
%
Same property NOI (000s)
$
156,430
$
147,569
$
456,894
$
427,650
Same property NOI margin
66.1
%
65.8
%
65.1
%
64.6
%
Net income (loss) (000s)
$
47,370
$
(357,542
)
$
341,555
$
(420,786
)
Funds From Operations ("FFO") per unit, diluted(1)
$
0.659
$
0.638
$
1.912
$
1.795
Distributions per unit
$
0.371
$
0.362
$
1.096
$
1.087
FFO payout ratio(1)
56.2
%
56.8
%
57.3
%
60.5
%
(1) These measures are not defined by International Financial Reporting Standards ("IFRS"), do not have standard meanings and may not be comparable with other industries or companies. Please refer to the cautionary statements under the heading "Non-IFRS Measures" and the reconciliations provided in this press release.
As at
September 30, 2024
December 31, 2023
September 30, 2023
Financing Metrics and Liquidity
Total debt to gross book value(1)
40.9
%
41.6
%
41.4
%
Weighted average mortgage effective interest rate(2)
2.97
%
2.80
%
2.73
%
Weighted average mortgage term (years)(2)
4.7
4.9
5.0
Debt service coverage (times)(1)(3)
1.9x
1.8x
1.8x
Interest coverage (times)(1)(3)
3.3x
3.3x
3.5x
Cash and cash equivalents (000s)(4)
$
23,365
$
29,528
$
48,266
Available borrowing capacity, Canadian Credit Facilities (000s)(5)
$
294,999
$
340,059
$
257,875
Capital
Unitholders' equity (000s)
$
9,449,650
$
9,278,595
$
9,304,029
Net asset value ("NAV") (000s)(1)
$
9,461,781
$
9,212,594
$
9,228,233
Total number of units, diluted (000s)
169,638
169,868
169,777
NAV per unit, diluted(1)
$
55.78
$
54.23
$
54.36
(1) 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 Measures" and the reconciliations provided in this press release. (2) Excludes liabilities related to assets held for sale, as applicable.(3) Based on the trailing four quarters.(4) Consists of $9,264 and $14,101 in Canada and Europe, respectively (December 31, 2023, $17,616 and $11,912, respectively, September 30, 2023, $31,015 and $17,251, respectively). (5) Includes $228,674 available on the Canadian Acquisition and Operating Facility (December 31, 2023, $340,059, September 30, 2023, $257,875) and $66,325 available on the unsecured non-revolving construction and term credit facility to reduce greenhouse gas ("GHG") emissions ("GHG Reduction Facility") (December 31, 2023 and September 30, 2023, N/A).
"We're currently in one of the most transformational periods in CAPREIT's history, and we're pleased with the ground we've been covering on the execution of our strategy," commented Mark Kenney, President and Chief Executive Officer. "So far this year, we've completed over $1 billion worth of strategic transactions across Canada and Europe, and we've announced nearly $2 billion in additional non-core dispositions that are expected to close by early 2025. This activity is unprecedented for CAPREIT, but it speaks to our commitment to repositioning our diversified portfolio and our focus on high quality Canadian apartment properties. We're excited to be optimizing and evolving into an even better place to live, work and invest, and we're looking forward to CAPREIT's next chapter."
"Our Canadian apartment portfolio operationally performed well again this third quarter, with same property average monthly rent increasing by 6.4% versus the comparative period end, and our same property NOI margin expanding by 30 basis points to 66.1% for the current quarter," added Stephen Co, Chief Financial Officer. "This healthy organic growth was partly offset by higher interest costs, and our diluted FFO per Unit increased by 3.3% to $0.659 for the three months ended September 30, 2024. Our leverage remained low at 40.9% as of period end, and we continue to have ample access to capital, which puts us in a prime spot to execute quickly on strategic transactions. With the upcoming closing of announced ancillary dispositions, this competitive financial position is expected to further strengthen, thus supporting ongoing progress on our modernization strategy."
SUMMARY OF Q3 2024 RESULTS OF OPERATIONS
Strategic Initiatives Update
CAPREIT continues to invest in strategic opportunities that are accretive. For the three months ended September 30, 2024, CAPREIT acquired four properties with 435 suites in Canada for a total gross purchase price of $278.7 million (excluding transaction costs and other adjustments). For the nine months ended September 30, 2024, CAPREIT acquired seven properties with 972 suites in Canada for a total gross purchase price of $517.5 million (excluding transaction costs and other adjustments).
For the three months ended September 30, 2024, CAPREIT disposed of 764 suites which were comprised of four non-core properties located in Canada; land adjacent to an existing residential building owned by CAPREIT; multiple residential properties in the Netherlands with 464 suites; three single residential suites located in the Netherlands; one office building in the Netherlands and one commercial building in Germany, for a total gross sale price of $382.4 million (excluding transaction costs and other adjustments). For the nine months ended September 30, 2024, CAPREIT disposed of 1,877 suites for a total gross sale price of $570.3 million (excluding transaction costs and other adjustments) of non-core property dispositions. Subsequent to quarter-end, CAPREIT disposed of an additional 110 suites in Canada for a total gross sale price of $33.5 million (excluding transaction costs and other adjustments).
On July 15, 2024, CAPREIT announced that it has entered into an agreement to sell its MHC portfolio for a gross sale price of $740 million (excluding transaction costs and other adjustments). The gross sale price will be satisfied in part through an interest-only vendor takeback ("VTB") mortgage of $140 million, bearing interest at a rate of 3.0% per annum for a five-year term, with the remaining $600 million to be satisfied in cash. The transaction is subject to compliance with the Competition Act (Canada) and other closing conditions customary in transactions of this nature. Subject to the receipt of all regulatory approvals and satisfaction of customary closing conditions, closing is anticipated in the fourth quarter of 2024.
On September 16, 2024, CAPREIT announced that certain subsidiaries of ERES have entered into two separate agreements to sell a total of 3,179 residential suites in the Netherlands for gross proceeds (net of estimated adjustments) totalling approximately $1.1 billion. The gross sale price is expected to be settled in cash, with net proceeds expected to be used in part to repay approximately $635 million in associated mortgages outstanding. Remaining net proceeds are intended to be used for the repayment of amounts on the ERES Credit Facility, the prepayment of certain mortgages maturing in the near term and the payment of a special cash distribution by ERES. Subject to the satisfaction of closing conditions, closings are anticipated by early Q1 2025.
During the three months ended September 30, 2024, no Trust Units were purchased for cancellation under the Normal Course Issuer Bid ("NCIB") program. During the nine months ended September 30, 2024, CAPREIT purchased and cancelled approximately 0.6 million Trust Units, under the NCIB program, at a weighted average purchase price of $48.19 per Trust Unit, for a total cost of $27.1 million.
CAPREIT's strategy to upgrade the quality and diversification of the property portfolio through repositioning and capital recycling initiatives to grow earnings and cash flow potential continues for 2024. In light of dispositions that closed to date and the announced dispositions expected to close later this year, CAPREIT is on track to meet or exceed the disposition target of over $400 million of non-core Canadian properties during 2024 and will continue to look for opportunities to recycle non-core Canadian properties during the remainder of the year.
On August 7, 2024, the Board of Trustees approved an increase in monthly distributions from $0.1208 to $0.125 per Trust Unit, or from $1.45 to $1.50 per Trust Unit on an annualized basis. The increase was effective with the August 2024 distribution paid on September 16, 2024 to Unitholders of record as at August 30, 2024.
Operating Results
On turnovers and renewals, monthly residential rents for the three and nine months ended September 30, 2024 increased by 7.4% and 5.7%, respectively, for the Canadian residential portfolio, compared to 7.4% and 5.3%, respectively, for the three and nine months ended September 30, 2023.
Same property Occupied AMR for the Canadian residential portfolio as at September 30, 2024 increased by 6.4% compared to September 30, 2023, while same property occupancy for the Canadian residential portfolio decreased to 98.1% (September 30, 2023 - 98.9%).
NOI for the same property portfolio increased by 6.0% and 6.8%, respectively, for the three and nine months ended September 30, 2024, compared to the same periods last year. Additionally, NOI margin for the same property portfolio increased to 66.1%, up 0.3%, for the three months ended September 30, 2024, and increased to 65.1%, up 0.5%, for the nine months ended September 30, 2024, compared to the same periods last year.
Diluted FFO per unit was up 3.3% and 6.5%, respectively, for the three and nine months ended September 30, 2024, compared to the same period last year, primarily due to contributions from acquisitions and higher same property NOI, partially offset by dispositions, lower other income and higher interest expense on credit facilities payable and mortgages payable.
Balance Sheet Highlights
CAPREIT's financial position remains strong, with approximately $304.3 million of available Canadian liquidity, comprising $9.3 million of Canadian cash and cash equivalents, $228.7 million of available capacity on its Canadian Acquisition and Operating Facility and $66.3 million on its GHG Reduction Facility.
To date, CAPREIT completed or committed mortgage financings totalling $539.9 million, with a weighted average term to maturity of 7.4 years and a weighted average interest rate of 4.33%.
For the nine months ended September 30, 2024, $2.1 billion of investment properties from ERES and the MHC portfolio have been transferred to assets held for sale. The impact of the transfer on the carrying value of investment property was partially offset by net acquisitions of $255.4 million; property capital investments of $164.4 million; fair value gains of $156.7 million; and foreign exchange translation and other for $71.7 million. The overall carrying value of investment properties (excluding assets held for sale) as at September 30, 2024 was $15.1 billion compared to $16.5 billion as at December 31, 2023.
Diluted NAV per unit as at September 30, 2024 increased to $55.78 from $55.05 as at June 30, 2024, and from $54.23 as at December 31, 2023, primarily reflecting an increase in investment property values in CAPREIT's Canadian and European portfolio.
OPERATIONAL AND FINANCIAL RESULTS
Portfolio Occupied Average Monthly Rents
Total Portfolio
Same Property Portfolio(1)
As at September 30,
2024
2023
2024
2023
Occupied AMR
Occ. %
Occupied AMR
Occ. %
Occupied AMR
Occ. %
Occupied AMR
Occ. %
Total Canadian residential suites
$
1,617
98.0
$
1,490
98.9
$
1,593
98.1
$
1,497
98.9
Total MHC sites
$
455
95.7
$
437
96.0
$
—
—
$
—
—
The Netherlands portfolio
€
1,141
95.1
€
1,053
98.7
€
1,222
96.1
€
1,131
98.8
(1) Same property Occupied AMR and occupancy include all properties held as at September 30, 2023, but exclude properties disposed of or held for sale as at September 30, 2024.
The rate of growth in total portfolio Occupied AMR has been primarily driven by (i) new acquisitions completed over the past 12 months; and (ii) same property operational growth. The rate of growth in same property Occupied AMR has been primarily due to (i) rental increases on turnover in the rental markets of most provinces across the Canadian portfolio; and (ii) rental increases on renewals.
Occupancy for the total portfolio as at September 30, 2024 decreased by 1.1% to 97.3% compared to September 30, 2023. Occupancy for the total Canadian residential portfolio as at September 30, 2024 decreased by 0.9% to 98.0% compared to September 30, 2023. CAPREIT views this as a transitory vacancy trend influenced by market conditions. As part of CAPREIT's strategic approach, CAPREIT aims to manage vacancies in high-demand and high velocity markets in order to grow Occupied AMR to align with prevailing market conditions. Occupancy for the Netherlands portfolio as at September 30, 2024 decreased by 3.6% to 95.1% compared to September 30, 2023, primarily due to suites intentionally held vacant to maximize value and for property and unit dispositions.
The weighted average gross rent per square foot for total Canadian residential suites was approximately $1.94 as at September 30, 2024, increased from $1.81 as at September 30, 2023.
Canadian Portfolio
For the Three Months Ended September 30,
2024
2023
Change in Monthly Rent
Turnovers and Renewals(1)
Change in Monthly Rent
Turnovers and Renewals(1)
%
%
%
%
Suite turnovers
18.9
4.4
27.2
4.1
Lease renewals
4.3
19.0
3.1
18.7
Weighted average of turnovers and renewals
7.4%
7.4
(1) Percentage of suites turned over or renewed during the period based on the total weighted average number of residential suites (excluding MHC sites) held during the period.
For the Nine Months Ended September 30,
2024
2023
Change in Monthly Rent
Turnovers and Renewals(1)
Change in Monthly Rent
Turnovers and Renewals(1)
%
%
%
%
Suite turnovers
20.7
10.2
27.0
9.9
Lease renewals
3.5
78.4
2.6
78.1
Weighted average of turnovers and renewals
5.7%
5.3
(1) Percentage of suites turned over or renewed during the period is based on the total weighted average number of residential suites (excluding MHC sites) held during the period.
The Netherlands Portfolio
For the Three Months Ended September 30,
2024
2023
Change in Monthly Rent
Turnovers and Renewals(1)
Change in Monthly Rent
Turnovers and Renewals(1)
%
%
%
%
Suite turnovers(2)
14.7
1.2
20.4
3.5
Lease renewals
5.5
94.0
4.0
96.6
Weighted average of turnovers and renewals
5.6%
4.6
(1) Percentage of suites turned over during the period based on the total weighted average number of Dutch residential suites held during the period. Percentage of suites renewed during the period is based on number of Dutch residential suites on July 1, as lease renewals due to indexation occur only once a year. (2) On turnover, rents increased by 14.7% on 2.5% of the Netherlands same property residential portfolio for the three months ended September 30, 2024 compared to an increase of 21.7% on 4.2% of the Netherlands same property residential portfolio for the three months ended September 30, 2023. Same property residential portfolio for turnover purposes includes all properties continuously owned since December 31, 2022, and excludes properties disposed of or held for sale as at September 30, 2024.
For the Nine Months Ended September 30,
2024
2023
Change in Monthly Rent
Turnovers and Renewals(1)
Change in Monthly Rent
Turnovers and Renewals(1)
%
%
%
%
Suite turnovers(2)
15.9
6.3
20.4
10.3
Lease renewals
5.5
94.0
4.0
96.6
Weighted average of turnovers and renewals
6.2%
5.6
(1) Percentage of suites turned over during the period is based on the total weighted average number of Dutch residential suites held during the period. Percentage of suites renewed during the period is based on number of Dutch residential suites on July 1, as lease renewals due to indexation occur only once a year. (2) On turnover, rents increased by 16.4% on 9.2% of the Netherlands same property residential portfolio for the nine months ended September 30, 2024 compared to an increase of 21.1% on 11.9% of the Netherlands same property residential portfolio for the nine months ended September 30, 2023.
Net Operating Income
Same properties for the three and nine months ended September 30, 2024 are defined as all properties owned by CAPREIT continuously since December 31, 2022, and therefore do not take into account the impact on performance of acquisitions or dispositions completed during 2024 and 2023, or properties that are classified as held for sale as at September 30, 2024.
($ Thousands)
Total NOI
