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CAP REIT to boost size of portfolio

Real estate trust to add apartments in bid to match banner year: 27% return in 2001

National Post - June 13, 2003
by Garry Marr

Tom Schwartz, president of Canadian Apartment Properties Real Estate Investment Trust, had a few words of caution yesterday to those who would flock to income trusts for a higher return.

"It is important to note that, unlike a number of other income trusts on the market today, an investment in CAP REIT is supported by a portfolio of high quality apartment properties -- hard assets that will appreciate in value," Mr. Schwartz told shareholders at the company's annual meeting.

REITs have been coming under increasing competition from income trusts created for such things as dog food and sardines, as investors have flocked to instruments with higher yields.

Mr. Schwartz also pointed to the favourable tax treatment REITs receive and said CAP REIT had a 77% tax deferral on income paid out in 2001.

"It's clear an investment in CAP REIT offers a much higher after-tax return," he said.

Like most in the sector, CAP REIT had a phenomenal 2001 with a total return of 27%.

CAP REIT's plan is to continue to grow the portfolio in 2002 by adding 1,500 to 2,000 apartment suites. It now has 11,238 suites.

But it's clear the REIT will walk away from any transaction it feels is not accretive. CAP REIT did exactly that last year, turning away at the last minute from buying part of the Acanthus apartment portfolio from a subsidiary of the Caisse de dépôt et placement du Québec.

The move contributed to 2 cent per unit reduction in distributable income in the first quarter of 2002.

Mr. Schwartz said there have been pressures on the apartment sector because of low interest rates, which have encouraged home buying and investor-owned condominiums. But he noted Cap REIT still has a 98.8% occupancy among its buildings.

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