Mr. Mark Kenney reports

CAPREIT REPORTS FIRST QUARTER 2023 RESULTS

Canadian Apartment Properties Real Estate Investment Trust has released operating and financial results for the three months ended March 31, 2023. Management will host a conference call to discuss the financial results on Monday, May 15, 2023, at 9 a.m. ET.

"We have made solid advancements on the execution of our strategy so far in 2023, and it's still early in the year," commented Mark Kenney, president and chief executive officer. "To date, we have purchased $84-million in high-quality new build assets located in attractive Canadian markets, while divesting $160-million worth of our non-core portfolio. Our focus on new construction also extends to our re-envisioned development program. This past quarter, we finalized our first end-to-end entitlement and sale of underutilized land, which monetized the development value upfront without taking on the development risk and, importantly, contributes to the supply of new residential homes needed in a growing community."

"Net proceeds from our asset repositioning program enabled us to invest heavily in our NCIB program as well," added Stephen Co, chief financial officer. "This has delivered ongoing accretion since its inception approximately one year ago, with just over $338-million spent to date to repurchase approximately 7.4 million trust units at steeply discounted pricing. This supplemented our robust operational performance in the first quarter of 2023, driven by strong rent growth observed across the majority of our portfolio."

"Our uplifts on turnover have been entirely market driven, and simply demonstrate that the housing crisis continues to worsen in this country, which by no means lacks buildable land and yet does severely lack affordable homes," continued Mr. Kenney. "Going forward, as one of Canada's largest providers of residential housing, CAPREIT will continue to prioritize its active contribution to addressing this crisis, while we also continue to set the precedent for responsible and accountable property management."

Summary of Q1 2023 results of operations

Key transactions and events

• CAPREIT continues to invest in strategic opportunities that are accretive. For the three months ended March 31, 2023, CAPREIT acquired a building comprised of 143 suites located in Ontario for $56.6-million. Subsequent to March 31, 2023, CAPREIT acquired one property in Alberta for a purchase price of $27.2-million (excluding transaction costs).
• Dispositions of non-core properties for the three months ended March 31, 2023, amounted to $132.6-million across 1,196 suites and sites located in Ontario. CAPREIT also entitled and sold an underutilized parking lot site to an experienced developer for $17.3-million, thus monetizing the majority of the potential development profit upfront and contributing to the supply of housing in Canada. Subsequent to March 31, 2023, CAPREIT disposed of an additional property for a sale price of $27.8-million (excluding transaction costs).
• During the three months ended March 31, 2023, CAPREIT purchased and cancelled approximately 2.0 million trust units, under the normal course issuer bid (NCIB) program, at a weighted average purchase price of $46.43 per trust unit, for a total cost of $91.5-million, with approximately an additional 200,000 trust units settled for cancellation subsequent to March 31, 2023, for total cost of $9.4-million.
• In March, 2023, CAPREIT received the Toronto Stock Exchange's acceptance of its notice to proceed with an NCIB, following expiry of the previous NCIB on March 23, 2023.
• On May 9, 2023, CAPREIT renewed its base shelf prospectus that was set to expire in June, 2023.

Operating results

• On turnovers, monthly residential rents for the three months ended March 31, 2023, increased by 26.7 per cent on 2.6 per cent of the Canadian residential portfolio, compared with an increase of 10.2 per cent on 3.7 per cent of the Canadian residential portfolio for the three months ended March 31, 2022.
• Same property occupied AMR for the Canadian residential portfolio as at March 31, 2023, increased by 4.6 per cent compared with March 31, 2022, while same property occupancy for the Canadian residential portfolio remained stable at 98.6 per cent.
• NOI for the same property portfolio increased by 6.7 per cent for the three months ended March 31, 2023, compared with the same period last year. Additionally, NOI margin for the same property portfolio increased to 62.9 per cent, up 0.6 per cent compared with the same period last year.
• Net loss for the three months ended March 31, 2023, was $103.2-million. Included in net loss was a fair value loss of $185.4-million recorded against investment properties during the quarter, primarily relating to the European portfolio.
• Diluted FFO per unit (formerly known as diluted NFFO per unit) was up 2.2 per cent for the three months ended March 31, 2023, compared with the same period last year, primarily due to accretive NCIB purchases, supplemented by same property organic growth and $1.5-million of non-refundable deposits received on a property disposition that did not close. This was partially offset by $1.1-million of required maintenance costs on CAPREIT's septic systems, primarily at two MHC sites, of which one was disposed of on March 1, 2023. In addition, there were higher trust expenses primarily due to inflationary pressures, higher interest rates on larger debt balances and elevated CMHC amortization expense of future refinancings that are strategically beneficial to CAPREIT.

Balance sheet highlights

• CAPREIT's financial position remains strong, with over $265.6-million of available liquidity, comprising $24.6-million of cash and cash equivalents, and $241.0-million of available capacity on CAPREIT's acquisition and operating facility.
• Based on the current property portfolio, management expects to raise between $600-million and $650-million in total mortgage renewals and refinancings in Canada for 2023, excluding financings on acquisitions.
• To date, CAPREIT completed or committed consolidated mortgage refinancings of $263.2-million, with a weighted average term to maturity of 5.6 years and a weighted average interest rate of 3.79 per cent.
• For the three months ended March 31, 2023, the overall carrying value of investment properties decreased by $32.5-million primarily due to a fair value loss of $185.4-million recorded during the quarter, which was partially offset by net acquisitions of $39.1-million, property capital investments, and direct leasing cost additions of $71.9-million and gain on foreign currency translation of $41.9-million. A total of $182.8-million of the fair value loss related to the European portfolio while the remaining $2.6-million fair value loss was attributed to the Canadian portfolio.
• Unitholders' equity as at March 31, 2023, decreased to $9.8-billion from $10.0-billion as at Dec. 31, 2022, primarily due to a net loss, the purchase and cancellation of trust units under the NCIB and distributions on trust units.
• Diluted NAV per unit as at March 31, 2023, decreased to $57.47 from $58.01 as at Dec. 31, 2022, reflecting a decrease in investment property values predominantly in CAPREIT's European portfolio, partially offset by the effects of accretive purchases of trust units for cancellation through the NCIB program.

Operational and financial results

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. Weighted average gross rent per square foot for Canadian residential suites was approximately $1.75 as at March 31, 2023, increased from $1.65 as at March 31, 2022.

As the Netherlands lease renewals occur once a year in July, there were no changes in lease renewals for the three months ended March 31, 2023, and March 31, 2022. For rent renewal increases due to indexation beginning on July 1, 2023, ERES served tenant notices to 6,659 suites, representing 97 per cent of the residential portfolio, across which the average rental increase due to indexation is 4.0 per cent.

Net operating income

Same properties for the three months ended March 31, 2023, are defined as all properties owned by CAPREIT continuously since Dec. 31, 2021, and therefore do not take into account the impact on performance of acquisitions or dispositions completed during 2023 and 2022.

Operating revenues

For the three months ended March 31, 2023, total operating revenues for the total and same property portfolios both increased by 5.8 per cent compared with the same periods last year, primarily due to increases in monthly rents on turnovers and renewals and decreases in rental vacancies. Furthermore, the impact of acquisitions, partially offset by dispositions, further contributed to higher operating revenues for the total portfolio.

Operating expenses

Operating expenses for the same property portfolio for the three months ended March 31, 2023, increased compared with the same period last year, primarily due to increases in other operating expenses. Increase in other operating expenses is primarily due to higher R&M costs, partially offset by lower insurance costs related to claim recoveries. The higher R&M costs were primarily due to (i) certain required maintenance costs for the operation of CAPREIT's septic systems at primarily two MHC sites, one of which was disposed of on March 1, 2023, for which CAPREIT is pro-actively working on solutions that would allow for the full septic bed replacements at the affected sites that would eliminate these costs; and (ii) general inflationary cost pressures on expenditures.

Property capital investments

During the three months ended March 31, 2023, CAPREIT made property capital investments (excluding development costs) of $63.6-million compared with $58.3-million for the same period last year.

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 and energy-saving initiatives, including energy-efficient boilers and lighting systems.

Development progress

On March 6, 2023, CAPREIT disposed of a parking lot site located in Montreal, Que., for $17.3-million (excluding disposition costs) to a developer. The underutilized land is located adjacent to an existing multiresidential building owned by CAPREIT. The site plan was approved by local planning authorities, the land was severed and building permits were issued following CAPREIT's undertaking of the end-to-end entitlement process, which provided for approximately 300,000 square feet of buildable gross floor area.

CAPREIT has partnered with development managers in undertaking the entitlement and severance or subdivision process to develop its underutilized land in certain high-growth and major transit station areas located in the Greater Toronto Area. Several planning applications have been submitted for the proposed new residential buildings, which, subject to municipal approval, will help to address the increased demand for high-rise residential intensifications in these neighbourhoods.

Subsequent events

The attached table summarizes the acquisition of an investment property completed subsequent to March 31, 2023.

The attached table summarizes the disposition of an investment property completed subsequent to March 31, 2023.

During the month of April, 2023, CAPREIT purchased and cancelled an additional 200,000 trust units under the NCIB program, at a weighted average purchase price of $47.57 per trust unit, for a total cost of $9.4-million.

On May 9, 2023, CAPREIT renewed its base shelf prospectus that was set to expire in June, 2023.

Additional information

More detailed information and analysis is included in CAPREIT's unaudited condensed consolidated interim financial statements and MD&A (management's discussion and analysis) for the three months ended March 31, 2023, which have been filed on SEDAR under CAPREIT's profile or on CAPREIT's website on the investor relations page.

Conference call

A conference call hosted by Mark Kenney, president and chief executive officer, Stephen Co, chief financial officer, and Julian Schonfeldt, chief investment officer, will be held on Monday, May 15, 2023, at 9 a.m. ET. The telephone numbers for the conference call are: international: 1-929-526-1599, Canadian toll-free: 833-950-0062. The conference call access code is 497373.

The call will also be webcast live and accessible through the CAPREIT website. A replay of the webcast will be available for one year after the webcast at the same site.

The slide presentation to accompany management's comments during the conference call will be available on the CAPREIT website an hour and a half prior to the conference call.

About Canadian Apartment Properties Real Estate Investment Trust

CAPREIT is Canada's largest publicly traded provider of quality rental housing. As at March 31, 2023, CAPREIT owns approximately 66,000 residential apartment suites, townhomes and manufactured home community sites well-located across Canada and the Netherlands, with approximately $17-billion of investment properties in Canada and Europe.

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