Mr. Mark Kenney reports

CAPREIT REPORTS FOURTH QUARTER AND YEAR END 2023 RESULTS

Canadian Apartment Properties REIT had strong operating and financial results for the three months and year ended Dec. 31, 2023. Management will host a conference call to discuss the financial results on Friday, Feb. 23, 2024, at 9 a.m. ET.

"After many proud years of increasing our size and scale, we've entered a new era for CAPREIT in which we are thrilled to be modernizing our portfolio and growing earnings per unit, as opposed to growing suite count," commented Mark Kenney, president and chief executive officer. "We have a reinvigorated strategy and team, focused on optimizing our properties to improve quality and operational efficiencies, while also supporting the alleviation of the Canadian housing crisis in all the ways that we can. We're committed to the enhancement of value for our unitholders and our communities, and we'll continue to execute on our strategic objectives going forward, as we effectively demonstrated in 2023."

"This year, we achieved our target and completed the disposition of over $400-million in non-core properties at a premium to IFRS NAV, while reinvesting approximately $300-million into new purpose-built rental properties located in Canada's most attractive, highest-density markets, where long-term fundamentals are strongest," said Julian Schonfeldt, chief investment officer. "Not only have we acquired these prime new buildings at prices that are well below replacement cost, we've also reinvested approximately $100-million in our NCIB program in 2023 at unit prices that represent a significant discount to IFRS NAV. Our value-creation strategy is working, and we're excited to continue recycling our capital and repositioning our portfolio toward high-quality, recently constructed rental apartment properties in Canada."

"We're pleased with our operational performance in 2023, with vacancies at a minimum and margins holding strong," added Stephen Co, chief financial officer. "We're cognizant of the tight Canadian rental market in which we're operating today, and, in response, we've actively scaled back on our in-suite and common area capital expenditure initiatives, as we focus on maximizing our cash returns. However, this strategy involves, to a lesser extent, an intentional increase in repairs and maintenance, which negatively affected our margins as compared to 2022. Despite this, our same-property NOI margin expanded by 30 basis points to 65.3 per cent in 2023, which highlights our strong rent growth and other cost-mitigating measures. Our active management of debt financing and leverage has maintained our conservative balance sheet position, and we had up to $340-million in available liquidity on our acquisition and operating facility at year-end, in place to provide financial flexibility and support our strategic priorities moving forward."

Summary of Q4 and year-end 2023 results of operations

Strategic initiatives update:

1. Canadian Apartment continues to invest in strategic opportunities that are accretive. For the three months ended Dec. 31, 2023, Canadian Apartment acquired two properties with 162 suites in British Columbia for a total acquisition cost of $91.2-million. For the year ended Dec. 31, 2023, Canadian Apartment acquired seven properties with 631 suites primarily in British Columbia for a total acquisition cost of $299.4-million.
2. For the three months ended Dec. 31, 2023, Canadian Apartment disposed of 372 suites, which comprised three non-core properties located in Canada and 10 single residential suites located in the Netherlands, for $69.6-million (excluding transaction costs and other adjustments). For the year ended Dec. 31, 2023, Canadian Apartment disposed of 2,969 suites and sites for $424.1-million (excluding transaction costs and other adjustments) worth of non-core property dispositions.
3. Canadian Apartment did not purchase any trust units for cancellation during the three months ended Dec. 31, 2023. During the year ended Dec. 31, 2023, Canadian Apartment purchased and cancelled approximately 2.2 million trust units under the normal course issuer bid (NCIB) program, at a weighted average purchase price of $46.53 per trust unit, for a total cost of $100.9-million.
4. Pursuant to Canadian Apartment'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, Canadian Apartment achieved its goal of disposing between $400-million and $500-million of non-core Canadian properties in 2023. Canadian Apartment is currently targeting the disposition of over $400-million of non-core Canadian properties in 2024.

Operating results:

1. Same-property occupied average monthly rent (AMR) for the Canadian residential portfolio as at Dec. 31, 2023, increased to $1,509, up 6.2 per cent compared with Dec. 31, 2022, while same-property occupancy for the Canadian residential portfolio remained relatively stable at 98.8 per cent.
2. Same-property net operating income (NOI) increased by 7.9 per cent and 7.3 per cent, respectively, for the three months and year ended Dec. 31, 2023, compared with the same periods last year. Additionally, same-property NOI margin increased to 64.7 per cent, or 0.2 per cent, for the three months ended Dec. 31, 2023, and increased to 65.3 per cent, or 0.3 per cent, for the year ended Dec. 31, 2023, compared with the same periods last year.
3. Diluted funds from operations (FFO) per unit (formerly known as diluted NFFO per unit) increased by 3.8 per cent and 2.9 per cent, respectively, for the three months and year ended Dec. 31, 2023, compared with the same periods last year, primarily due to contributions from acquisitions, same-property operational growth and lower trust expense, net of non-routine reorganization costs, partially offset by dispositions and higher interest expense on credit facilities payable and mortgages payable, supplemented by accretive NCIB purchases.

Balance sheet highlights:

1. Canadian Apartment's financial position remains strong, with $340.1-million of available capacity on its Canadian acquisition and operating facility.
2. In 2023, Canadian Apartment completed mortgage financings of $552.5-million for the Canadian portfolio. To date, Canadian Apartment completed consolidated mortgage financings of $662.3-million. The mortgages refinanced have a weighted average term to maturity of 6.8 years and a weighted average interest rate of 4.41 per cent.
3. For the three months and year ended Dec. 31, 2023, Canadian Apartment recorded a fair value loss on investment properties (including assets held for sale) of $111.4-million and $914.6-million, respectively, primarily driven by capitalization rate (cap rate) expansion in both the Canadian and Netherlands portfolio, as a reflection of the market conditions. The overall carrying value of investment properties (excluding assets held for sale) as at Dec. 31, 2023, was $16.5-billion, compared with $17.2-billion as at Dec. 31, 2022.
4. Diluted net asset value (NAV) per unit as at Dec. 31, 2023, decreased to $54.23 from $58.01 as at Dec. 31, 2022, primarily due to fair value losses recognized in investment properties, 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 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.

The weighted average gross rent per square foot for total Canadian residential suites was approximately $1.80 as at Dec. 31, 2023, increased from $1.70 as at Dec. 31, 2022.

Net operating income

Same properties for the three months and year ended Dec. 31, 2023, are defined as all properties owned by Canadian Apartment 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, or properties that are classified as held for sale as at Dec. 31, 2023.

Operating revenues

For the three months ended Dec. 31, 2023, same-property operating revenues increased by $18.2-million, primarily driven by increases in monthly rents on turnovers and renewals. Total operating revenues increased by $15.3-million during the same period, due to $18.3-million of operational growth, primarily on the same-property operating portfolio and to a lesser extent on assets held for sale as at Dec. 31, 2023, and a $3.7-million increase from acquisitions, partially offset by $6.7-million lower revenues due to dispositions.

For the year ended Dec. 31, 2023, same-property operating revenues increased by $64.9-million, primarily driven by increases in monthly rents on turnovers and renewals. Total operating revenues increased by $58.0-million during the same period, due to $65.1-million of operational growth, primarily on the same-property operating portfolio and to a lesser extent on assets held for sale as at Dec. 31, 2023, and a $16.8-million increase from acquisitions, partially offset by $23.9-million lower revenues due to dispositions.

Operating expenses

For the three months and year ended Dec. 31, 2023, operating costs increased for the same-property portfolio compared with the same periods last year, primarily due to increase in other operating expenses. Other operating expenses increased primarily due to higher repairs and maintenance (R&M) costs and higher insurance costs. The higher R&M costs in both periods are due to general inflationary pressures, as well as higher maintenance costs that correspond with a reduction in suite and common area capital improvements, reflecting Canadian Apartment's strategic reallocation of capital in response to the tight rental market in Canada.

For the three months and year ended Dec. 31, 2023, operating costs increased for the total property portfolio compared with the same periods last year, primarily for the same reasons described above. Additionally, for the year ended Dec. 31, 2023, other operating expenses increased for the total portfolio due to certain required maintenance costs for the operation of Canadian Apartment's septic systems at primarily two (manufactured housing community) (MHC) properties, one of which was disposed of on March 1, 2023, while the other was disposed of on June 30, 2023.

Subsequent events

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

At-the-market (ATM) program

On Feb. 22, 2024, Canadian Apartment will file a prospectus supplement to establish an ATM program that would allow Canadian Apartment to issue trust units up to an aggregate sale price of $400.0-million from treasury to the public from time to time, at its discretion. The ATM program is designed to provide Canadian Apartment with additional financing flexibility, should it be required in the future. Canadian Apartment intends to use the net proceeds from the ATM program, if any, for future acquisitions, repayment of indebtedness, and for general trust purposes.

"We are excited to launch our inaugural ATM program that will allow CAPREIT to cost-effectively raise equity, from time to time, when favourable market conditions exist, providing CAPREIT with added financial flexibility to execute on its capital allocation strategy," commented Mr. Co.

In connection with the establishment of the ATM program, Canadian Apartment has entered into an equity distribution agreement dated Feb. 22, 2024, with TD Securities Inc. Any trust units sold in the ATM program will be distributed through the Toronto Stock Exchange or any other permitted marketplace at the market prices prevailing at the time of sale. The volume and timing of distributions under the ATM program, if any, will be determined at Canadian Apartment's sole discretion. There is no certainty that any trust units will be offered or sold under the ATM program. The ATM program will be effective until June 9, 2025, unless terminated prior to such date by Canadian Apartment or otherwise in accordance with the terms of the equity distribution agreement.

Given that trust units sold in the ATM program, if any, will be distributed at the market prices prevailing at the time of sale, prices may vary among purchasers during the period of the distribution. Distributions of trust units through the ATM program, if any, will be made pursuant to the terms of the equity distribution agreement. In connection with the establishment of the ATM program, Canadian Apartment will file a prospectus supplement dated Feb. 22, 2024, to the final base shelf prospectus dated May 9, 2023. The prospectus supplement, the equity distribution agreement and the shelf prospectus will be available on SEDAR+ under Canadian Apartment's profile. Alternatively, the agent will send copies of the prospectus supplement, the equity distribution agreement and the shelf prospectus, as applicable, to investors upon request to TD Securities, attention: Symcor, NPM, 1625 Tech Ave., Mississauga, Ont., L4W 5P5, by e-mail at sdcconfirms@td.com or by phone at 289-360-2009.

Additional information

More detailed information and analysis is included in Canadian Apartment's consolidated annual financial statements and management's discussion and analysis (MD&A) for the year ended Dec. 31, 2023, which have been filed on SEDAR+ and can be viewed on SEDAR+ under Canadian Apartment's profile or on Canadian Apartment's website on the investor relations page.

Conference call

A conference call hosted by Mr. Kenney, Mr. Co and Mr. Schonfeldt will be held on Friday, Feb. 23, 2024, at 9 a.m. ET. The telephone numbers for the conference call are:

• Canadian toll-free at 833-950-0062;
• International at 1-929-526-1599.

The conference call access code is 504875.

The call will also be webcast live and accessible through the Canadian Apartment website. A replay of the webcast will be available for one year after the webcast. The slide presentation to accompany management's comments during the conference call will be available on the Canadian Apartment website 1.5 hours prior to the conference call.

About Canadian Apartment Properties REIT

Canadian Apartment is Canada's largest publicly traded provider of quality rental housing. As at Dec. 31, 2023, Canadian Apartment owns approximately 64,300 residential apartment suites, townhomes and manufactured home community sites that are well located across Canada and the Netherlands, with approximately $16.5-billion of investment properties in Canada and Europe.

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