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Executives

Scott Cryer - Chief Financial Officer

Tom Schwartz - President and Chief Executive Officer

Mark Kenney - Chief Operating Officer

Analysts

Jonathan Kelcher - TD Securities

Frederic Blondeau - Dundee Capital Markets

Mario Saric - Scotia Bank

Alex Avery - CIBC

Jimmy Shan - GMP Securities

Michael Smith - Macquarie

Matt Kornack - National Bank Financial

Heather Kirk - BMO Capital Markets

Neil Downey - RBC Capital Markets

Canadian Apartment Properties REIT (OTC:CDPYF) Q3 2013 Earnings Conference Call November 6, 2013 10:00 AM ET

Operator

Good morning ladies and gentlemen. Welcome to the Canadian Apartment Properties Real Estate Investment Trust Third Quarter 2013 Conference Call. Please be advised this call is being recorded.

I would now like to turn the meeting over to Mr. Scott Cryer. Please go ahead.

Scott Cryer - Chief Financial Officer

Thank you, operator. Before we begin, let me remind everyone that the following discussion may include comments that constitute forward-looking statements about expected future events, and the financial and operating results of CAPREIT. Our actual results may differ materially from those forward-looking statements, as such statements are subject to certain risks and uncertainties, discussions concerning these risk factors, the forward-looking statements, and the factors and assumptions on which they are based can be found in CAPREIT’s regulatory filings, including our Annual Information Form and MD&A, which can be obtained at www.sedar.com.

I’ll now turn things over to Mr. Tom Schwartz, President and CEO.

Tom Schwartz - President and Chief Executive Officer

Thanks, Scott. Good morning everybody and thank you for joining us today. With me this morning are Mark Kenney, our Chief Operating Officer, Maria Amaral, our Chief Accounting Officer and of course Scott Cryer, our CFO.

As you can see on Slide 3 our strong and accretive growth continued through the third quarter of 2013. Record portfolio growth over the last two years as well as the continuing success of our property management programs is significantly benefiting our performance. Revenues were up 17.5% through the first nine months of 2013 generating an 18.6% increase in net operating income. Same property NOI was up 4.8% for the nine months and a very solid 3.7% in the third quarter. NOI margin also improved up to 58.9% from 58.4% last year. The third quarter NOI margin was a very strong 60.7%.

Normalized funds from operations a key measure of our performance rose 24.3% through the first nine months of 2013 and was highly accretive as NFFO per unit was up 8.5% despite the 15% increase in units outstanding. With this strong performance our NFFO payout ratio also improved significantly to 71% from 74.7% last year. We were also continuing to grow and further diversify our portfolio as you can see on Slide 14 highlighting our acquisitions to-date. We have now exceeded our target of acquiring between 152,000 suites and sites for the year and we continue revaluate what remains very strong deal flow. Importantly our recent purchases in Dublin, Ireland and in Prince Edward, Ireland we have entered into two new geographic markets further strengthening the diversification of our property portfolio and enhancing our overall risk profile. The Dublin and Prince Edward Ireland acquisitions have also been made at very solid CAPREITs well above 6% ensuring they will be immediately and significantly accretive to our NFFO.

Slide 5 shows that we are continuing to capitalize on our proven property management programs. Average monthly rates have risen across all segments of our property portfolio resulting in an overall 3.2% increase. And this increase is despite the lower rent guideline increase in Ontario and British Columbia this year. Occupancies remain very strong at 98.5% essentially full occupancy for the total portfolio and up from 98.2% last year. Looking ahead demand remain strong in all of our markets, we see occupancies remaining stable at these nearly full levels and we believe the average monthly rents will continue to increase over time.

Slide 6 details our average rents are performing on suite turnover and lease renewals. As you can see we continue to generate solid growth in average monthly rents although it is slightly lower pace from last year due to the lower 2013 rent guidelines in Ontario and British Columbia. One of the key reasons for our rental rate growth is our ongoing successful application for above guideline increases for properties where we have invested in capital improvements. As of September 30, 2013 we have filed above guideline increased applications for a total of 11,738 suites of which we have settled on 68 applications for average increases of 3.35% with another eight applications pending per average increases of 6.69%. Stabilized same property performance also continues to demonstrate the success of our property management programs as you can see detailed on Slide 7.

Increases in operating revenues combined with a decrease in our operating cost resulted in same property NOI of a strong 4.8% through the first nine months o 2013. In the third quarter same property NOI was up 3.7%. Looking ahead we are confident this strong organic growth will continue. Market fundamentals are sound across the country and our innovative energy and cost control programs are generating significant benefits. Not only are we seeing strong operating performance from our portfolio, we continue to maximize all opportunities to generate increased revenues in our properties.

As Slide 8 shows our ancillary revenues which include (resident) and commercial parking, laundry revenues, cable and Internet charges and rooftop antenna contracts increased 5.7% on stabilized properties through the first nine months of 2013 compared to last year. Since 2009 we have generated a very solid 5% compound annual growth rate in our ancillary revenues on stabilized properties and expect this to continue going forward. In addition to adding value most of these programs enhance lives of our residents further increasing our retention rates and building brand loyalty for CAPREIT.

I’m not going to turn things over to Scott to review our financial results today. Scott.

Scott Cryer - Chief Financial Officer

Thanks, Tom. As Tom mentioned the outset, our results this year have been very strong, driven by our portfolio growth and our successful operating initiatives. As you can see on Slide 10 operating revenues were up 10% in the third quarter primarily due to the contribution from our acquisitions in 2012 and 2013 and continuing strong organic growth. With this revenue growth our NOI increased to 11% in the quarter also driven by the solid 3.7% increase in same property NOI resulting from our proven operating initiatives such as our energy efficiency program. Our NOI margin strengthened significantly to 60.7% in the quarter up from 60.3% last year. You can also see that despite the 10% increase in weighted average number of units outstanding and some increases in one-time trust expenses, our growth was still accretive in the quarter while our NFFO payout ratio remains very healthy.

Slide 11 details the results for the nine months ended September 30, 2013 with operating revenues up 17.5%, NOI increasing 18.6% and the strong NOI margin of 58.9%. And despite not approximately 15% increase in weighted average number of units outstanding NFFO per unit was up 8.4% with our FFO payout ratio also improving at 71% from 74.7% last year. Turning to our balance sheet on Slide 12 you can see we continue to maintain a strong and flexible financial position. Coverage ratios remain very strong with interest coverage continuing to exceed 2.5 times and the improved debt service ratio is well within our guideline. It is also important to note that we have approximately $140 million of our properties that are not encumbered by mortgages used only to secure our acquisition than operating facility.

Our weighted average interest rate declined further at quarter end and we’ve continued to focus on extending our debt maturities using 10 year term mortgages debt while more recently attempting to balance our maturity profile with the use of various duration mortgages. Total mortgage refinancing excluding acquisitions of $487.8 million have been closed or committed so far this year including $282.6 million for renewals of existing mortgages and $205.2 million for additional top-up financing. This represents a large majority of our planned financings for 2013. The average term and maturity for these financings was 9.8 years with a weighted average interest rate of 3.15% considerably lower than the maturing rate. And we continue to expect the rate between $575 million and $625 million in total mortgage renewals and refinancing this year.

On the liquidity front as detailed on Slide 13 we remained very well positioned to continue our growth programs. Strong top-up potential estimated at $115 million for the fourth quarter on a mortgage portfolio will easily allow us to fund our CapEx program and should create incremental acquisition capacity throughout the year. With the completion of our $115 million equity offering in October our liquidity position now stands at approximately $200 million providing continuing long-term liquidity and the resources for future acquisitions of approximately $660 million while still maintaining our conservative debt ratios. And as I mentioned earlier we still have $140 million in unencumbered properties that could be tabbed for future growth initiatives at the appropriate time. Thanks for your time today.

I’ll now turn things back to Tom to wrap it up.

Tom Schwartz - President and Chief Executive Officer

Thanks, Scott. Looking ahead we are confident 2013 will be another record year for CAPREIT. First a record portfolio growth in 2012 combined with our accretive acquisitions completed so far this year are having a very positive impact on our performance. Property revenues will also continue to benefit from our near full occupancy levels and consistent increases in our average monthly rents. Our ancillary revenues continue to grow as we introduce new and innovative programs at our new properties.

Our NOI margins will remain strong particularly as we realize the benefits of our state-of-the-art purchasing and energy management programs at our new properties and as Scott detailed with our recent equity offering and strong balance sheet. We have the flexibility in the resources to continue growing and diversifying our property portfolio. As all of you know the REIT sector has been recently impacted by a number of perceived issues. Now I’d like to spend a few minutes discussing how we believe we will continue to generate solid results in the years ahead. The first issue we hear is future increases in interest rates and how this volatility might impact our cash flow. As you can see on Slide 16 our mortgage maturity profile remains very conservative and well balanced as we continue to focus on extending our debt maturities in this low rate environment. With significant maturities and top-up potential over the next two years we should have the opportunity to take advantage of what we see as a continuing low interest rate environment for the foreseeable future.

In addition with over 92% of our mortgages being CMHC insured we have a large and diverse group of lenders willing to work with us and rates well below conventional financing. In short we don’t see any future interest rate volatility as a significant issue for CAPREIT. The second issue we hear about is portfolio diversification. We believe we are well positioned in all of Canada’s strongest rental markets as you can see on Slide 17. Our recent entry into the Prince Edward Ireland market has further diversified the portfolio and with very solid CAPREITs in this market, we are confident these acquisitions will make a very accretive contribution going forward. Our acquisitions in Dublin Ireland will also make a solid contribution going forward as CAPREITs there are also very strong. In addition these recent transactions have further enhanced our risk profile. However as I have stated in the past we don’t see our Irish portfolio growing substantially within CAPREIT and it will examine a number of alternatives for unitholders as these opportunities grow.

In addition to our geographic diversification our portfolio is also well balanced among the various types of rental properties. Over the past few years we have increased our presence in the luxury segment in the market. Apartment suites for average rents exceed $1160 per month. We’ve also reduced our exposure through the more volatile affordable sector. We’ve been increasing our presence in the manufactured housing community business and with the bridges of 500 suites – sites in Prince Edward Ireland last month this now represents almost 10% of our total business per unit count. As we continue to grow our portfolio we will remain mindful of maintaining a strong risk profile to ensure we are not overly exposed to any geographic or demographic segments. And with our continuing record performance we are very pleased with increased our monthly cash distributions in June to an annualized distribution of $1.15 per trust unit. The (candid) increase in our 15 year history as a public company.

Today this annualized distribution rate generates a very solid yield and a very compelling investment opportunity. And looking ahead we see our performance only getting stronger. In summary we believe CAPREIT has a very exciting future. We have proven our ability to capitalize on continuing strong fundamentals in the Canadian apartment business through all economic cycles. We believe we are one of the strongest balance sheets in the business and fiscal prudence will remain a key priority at CAPREIT. We are confident in our team and we have the right people in the right positions to manage our growth for years to come. Finally we have demonstrated that our business strategy is working and we will continue to build on the solid performance generated over the last 15 years. The main message today is that we are all very confident in our future and we look forward to sharing our results with you in the coming quarters.

Thanks again and we will now be pleased to answer any questions you may have.

Question-And-Answer Session

Operator

Thank you. We will now take questions from the telephone lines. (Operator Instructions) Our first question is from Jonathan Kelcher from TD Securities. Please go ahead.

Jonathan Kelcher - TD Securities

Thanks. Good morning.

Tom Schwartz

Good morning, Jonathan.

Jonathan Kelcher - TD Securities

First on the MHC portfolio I guess during Q4 with the stuff you’ve agreed to buy from (indiscernible) and the stuff you bought in PEI you’ve almost doubled the size at least by site count. Is that something that’s been opportunity driven or is that an asset class that’s becoming more of a focus for you?

Tom Schwartz

We like that asset class for a number of years, it’s been a difficult asset class to make acquisitions and we’ve been very fortunate this year that there were two strategic and highly accretive acquisitions available and we took advantage of them.

Jonathan Kelcher - TD Securities

Okay. What sort of spread is there in terms of CAPREITs between MHC and what you are seeing for more traditional apartment properties in Canada?

Tom Schwartz

At least 200 basis points.

Scott Cryer

And Jonathan we are utilizing a strategy where we will be taking CMHC insured assets out of our unencumbered pool which is effectively just a nice kicker to add close to 100 basis points by moving it from conventional financing to CMHC insured itself and added benefit of our balance sheet in the unencumbered pool.

Jonathan Kelcher - TD Securities

Okay. It sounds good. And then and just lastly on that is the – for either one of these portfolios that you bought on the MHC. Is there any potential for further build-out of pads?

Tom Schwartz

Yeah PEI has lots of potential in the Nova Scotia once there are certainly some good bits and pieces.

Jonathan Kelcher - TD Securities

Okay. Thanks. I’ll turn it back.

Tom Schwartz

Thanks, Jonathan.

Operator

Thank you. The following question is from Frederic Blondeau from Dundee Capital Markets. Please go ahead.

Frederic Blondeau - Dundee Capital Markets

Hi, good morning. Just a quick question on Ireland and just seen that the NOI margin was 71%, still very small but I was wondering is that sustainable and where do you see this venture going in the next couple of quarters?

Tom Schwartz

It’s more than sustainable. What we are learning because this is a very new market for us is there is lots of room for top-line growth there. So if anything in that margin will get better and again we see other opportunities in Ireland but as we’ve said from day one it will never be a significant portion of CAPREIT’s cash flow or portfolio.

Frederic Blondeau - Dundee Capital Markets

Of course. And where do you see the CAPREITs right now in Ontario and Toronto?

Tom Schwartz

They are ranging from mid 4s to probably just edging over 5. There hasn’t been a lot of CAPREIT movement in spite of the fact that interest rates have moved and frankly that’s stalled the market to a certain extent there is certainly less transactions right now for that reason.

Frederic Blondeau - Dundee Capital Markets

And where do you see your AMR trending in Toronto for the rest of the year?

Tom Schwartz

I let Mark Kenney give you an answer to that.

Mark Kenney

We continue to be delighted with the response the apartment market is strong here. We see no signs of weakness at all and we think our path of increases on turnover is going to continue into 2014.

Frederic Blondeau - Dundee Capital Markets

Okay, awesome. Thank you very much.

Tom Schwartz

Thank you.

Operator

Thank you. The following question is from Mario Saric from Scotia Bank. Please go ahead.

Mario Saric - Scotia Bank

Hi, good morning.

Tom Schwartz

Good morning, Mario.

Scott Cryer

Hi, Mario.

Mario Saric - Scotia Bank

Tom, you kind of briefly mentioned diversification is being something that you are hearing about. Specifically did that pertain to your exposure to the GTA and I know historically you’ve been a opportunistic buyer in the seller, but is there a specific kind of target as a percentage of NOI that you like to see the GTA comprise over time?

Tom Schwartz

No, as we said earlier Mario we continue to be opportunistic, we’d obviously like a little more in the West and the East that you saw last year and this year we are able to achieve that. So if the right opportunities come up in any of the major cities in Canada we’ll certainly take advantage of them and if MHC communities that suit us come up anywhere in Canada we’ll take advantage of those as well. We’re very comfortable with the portfolio I mean I think if you look at our results everything is performing beautifully.

Mario Saric - Scotia Bank

It looks like I know there is you’re probably tired of answering this question, but there is a big article in the globe today with especially condo market in Montreal and Toronto in your results at least for the quarter were very strong in both markets. So you’re asking that seen any impact at this point so that kind of rent spread, are you seeing the rent spread between condos and apartments to hold and is this sufficient so that one is certainly impact your results over the next 12 months?

Tom Schwartz

It still holds, we’re still very comfortable, we’ve watched the condo market very closely, last year I did mention we were impacted slightly in Montreal and frankly that impact has gone away and our Montreal results have come back to where they’ve always been. So yeah we’ve monitored the condo market, we worry about the condo market, but at the end of the day the gap is wide enough that we fall with waiting (lesson) most of our buildings. The other thing we’ve learned where the condo market has actually helped us, in certain areas the (indiscernible) and being the most prominent we are doing condo quality renovations in our buildings and we are achieving condo quality rents. So they are actually pioneering a new market for us, it’s becoming very profitable for CAPREIT.

Mario Saric - Scotia Bank

And on those condo quality improvements, what types of returns are you generally seeing?

Tom Schwartz

Way into the double digits I mean we can spend $15,000, $18,000 on the renovation and generate $350 to $400 a month of rent increase and get perhaps a better quality tenant.

Mario Saric - Scotia Bank

Right, okay. And maybe last question just turning focus to the expense side, it looks like (R&M) was up a little bit during the quarter specifically in Alberta, (Virginia) and Victoria. Can you may be shed some color as to what’s going on there and what is that exactly…

Tom Schwartz

Mark can give you insight into that.

Mark Kenney

Hi, Mario. CAPREIT just continues to go down the path of pursuing quality. We’ve ramped our preventative maintenance measures and are committed to raising the bar on our customer experience. So we’ve got ourselves fully, fully committed to the portfolio being top tier quality.

Mario Saric - Scotia Bank

Okay. And so are these expenses primarily related to the building envelope or wages or what’s really driving it?

Tom Schwartz

Lot of it has to do with pushing our preventative maintenance programs and pushing just the in s suite quality and (indiscernible) issues.

Mario Saric - Scotia Bank

Okay. Thank you.

Tom Schwartz

Thanks, Mario.

Operator

Thank you. The following question is from Alex Avery from CIBC. Please go ahead.

Alex Avery - CIBC

Thank you. I’m just hoping you might provide a little bit of insight into 2014, you’ve got a lot of gives and takes, certainly sub-metering the continued I guess benefits from tenants turning over above guideline increases and strong market rental lifts on turnovers. But do you have the headwind of a lower guideline increase in Ontario, I guess you’re probably not going to want to provide any explicit guidance but just putting it in a context of this strong performance you’ve delivered in 2013, is that, do you think you can sort of continue that pace, increase that pace or is it going to be shed later in 2014?

Tom Schwartz

I think I can give you a one word answer, the one word answer is yes. We’re extremely optimistic, you’ve seen what’s happened in the past two years and we expect that to continue, we’ve got a very finally tuned business today that is operating, it is very profitable and we’ve seen no reason for that to not to continue.

Alex Avery - CIBC

Okay, okay. And then just turning to the MHC business, you talked a little bit about Dublin and how that business will never be a huge part of CAPREIT and may at some point end up standing on its own. Is the MHC business something that you see longer term ultimately maybe being a spin-off or is that a natural fit to continue to be a core part of CAPREIT for the long term?

Tom Schwartz

The core part of CAPREIT’s business when we got into this business we liked a couple of things. First of all it operates on the exact same platform as apartments and is regulated by the same legislation. So that’s a big plus. The end of the day CAPREIT’s mission is to provide a growing stream o stable income and we really like the stability in that business, there is less moving parts, there is no light, heat and power. As you’ve heard me say in the past you’ve got tremendous security your houses on my land, I’m never going to have a bad debt, you see our occupancies are going in excess of 99% there. So it’s a pretty perfect business, it’s a great fit for CAPREIT and the other thing we’re seeing is we can generate some top line growth in that business. So we like it a lot, its core to CAPREIT, it’s never going to be a significant part of the business because not that big an industry but I’m actually thrilled that we’ve gotten as large as we have and we’re today one of the largest MHC owners in Canada.

Alex Avery - CIBC

Okay. That’s great. Thank you.

Tom Schwartz

Thanks, Alex.

Operator

Thank you. The following question is from Jimmy Shan from GMP Securities. Please go ahead.

Jimmy Shan - GMP Securities

Thanks. I notice that your Calgary portfolio had a 15% NOI growth in the quarter. I wonder if there was anything specific to the portfolio or if it’s just reflective of the market?

Tom Schwartz

Mark?

Mark Kenney

I think there Jimmy it’s the same story. We’ve had great rent growth in Alberta and again it’s the quality that’s paying off, the portfolio has really moved along in the last few years. And we expect to see that to continue, the market is quite stable actually as they are right now.

Jimmy Shan - GMP Securities

So was the portfolio or did the portfolio have below market rent and it was just a matter of catching up or…

Mark Kenney

I think we’ve moved rents, we’ve moved rents in tandem with the quality enhancements we made to the buildings, but the market I think has also stabilized, once you’ve been out of rough patch they are almost three years ago but it’s quite stable now.

Jimmy Shan - GMP Securities

Okay. So it’s safe to say then that if I look to the second half or to the next few quarters, the kind of 15% is not something we should be looking for?

Mark Kenney

I wouldn’t want to give guidance but things remain strong and we don’t see dramatic changes out there.

Jimmy Shan - GMP Securities

Okay. And then just turning to the MHC assets, I think you’ve been managing the AMC portfolio now for about a year and given your comment Tom about how excited you are about that asset class. Wondered if you are, you feel like you are in a better position to perhaps take a closer look at acquiring MHC assets in the United States, I wonder what’s your thoughts out there?

Tom Schwartz

Great question, Jim. We’ve said specifically this is a Canadian REIT, we will not be buying assets from the United States and AMC certainly gave us a good window into the U.S. but we have no intention of putting those assets on the books of CAPREIT.

Jimmy Shan - GMP Securities

(indiscernible) but just in general any MHC has in the U.S. not…

Tom Schwartz

We have no intention of putting any MHC or apartment assets from the U.S. on CAPREIT’s books.

Jimmy Shan - GMP Securities

Okay, okay. Thank you.

Tom Schwartz

Thanks.

Operator

Thank you. (Operator Instructions) The following question is from Michael Smith from Macquarie. Please go ahead.

Michael Smith - Macquarie

Thank you. Just on your same property NOI growth, you had a healthy 3.7 in the third quarter, 4.8% year-to-date. And this continues a trend that’s been going up for some time. Is it fair to say that over the next three to five years you would expect to get at least 3?

Tom Schwartz

Scott?

Scott Cryer

Yeah I mean I think obviously the math just margined 2% top line is a good place to start and we always found areas to really enhance that natural margin growth. So I can’t see into the future anymore than, anyone else online, but I think our track record say we’d at least be able to create continued strong growth.

Michael Smith - Macquarie

Okay. And Tom can you give us an update on your thoughts on new construction in the apartment sector?

Tom Schwartz

Sure. We’re getting a little more interested in it. The numbers are coming closer to working. I was pleased to see the article in the globe this morning talking about the condo market slowing down certainly fast, one of the fastest we need to make new rental construction work in our major cities. We’re certainly looking at it Michael, we haven’t done a deal yet, I’m not sure we’re going to do a deal in the short term but it’s something we see as an interesting alternative, we certainly see it’s a way to enhance the quality of our portfolio and as soon as we get the numbers working and the right deals are in front of us we will certainly be in that business.

Michael Smith - Macquarie

Okay. And short kind of related to that I guess is what you mentioned earlier if you spend 18,000 a unit if you get $3 to $350 of additional rents and very good returns. Do you see that program picking up?

Tom Schwartz

Yeah we – I mean we’ve done a lot of that, that’s really CAPREIT’s value-add, that’s our history and if you look at how we turned a lot of our affordable buildings into mid tier buildings over the years that’s exactly what we’ve been doing. So remember we study our markets very, very carefully and when we see there is a – there is room to raise the rents and change the quality and make a good return for our shareholders that’s been we do all the time, that’s our business.

Michael Smith - Macquarie

Okay. Thank you.

Tom Schwartz

Thanks, Michael.

Operator

Thank you. The following question is from Matt Kornack from National Bank Financial. Please go ahead.

Matt Kornack - National Bank Financial

Good morning guys.

Tom Schwartz

Good morning.

Scott Cryer

Good morning.

Matt Kornack - National Bank Financial

Quickly on Nova Scotia was a bit weaker and some of it was due to escrow payments. What are you seeing just in that market and is weaker results there you just bought a few more East Coast properties. Will that translate or where do you see in relationship to other Canadian…

Tom Schwartz

I’m going to give you a quick answer and then Mark is going to give you some details. We just bought MHCs out there, the MHCs aren’t effective at all by this, but Mark will talk with you perfect.

Mark Kenney

Yep. There has been a lot of new development in Halifax so we’ve seen a little bit of challenge but not really, the real driver of challenge for us there is the Harbourview acquisition and this has been a dramatic turnaround, it’s one of our most proud turnaround we will see in the history of CAPREIT because it’s really looking phenomenal and it’s got a bright, bright future. But in the short term we’ve got – we’re almost back to full stabilization, that’s just filled the results a little bit.

Tom Schwartz

I think the other thing about that particular assets after we bought it from TransGlobe last year we emptied 200 units, we had the wrong tenants living there and Mark’s team put an incredible program in place I mean we are down to about 20 units available, Mark…

Mark Kenney

Yeah, with the turnover we are able to rent well in excess of almost 380 units at that site. So it’s been a dramatic turnaround and the quality as you said Tom is growing tremendous for us.

Tom Schwartz

So that’s a good example of one of our successes and we had to take a little bit of short term pain but in spite of that it didn’t really impact results much and long term that’s going to be a great asset.

Matt Kornack - National Bank Financial

Okay. That’s really helpful. And just switching over to the balance sheet side of things. You got a fairly sizable maturities in 2014, have you started to look at renewing those essentially?

Scott Cryer

Yeah, so we’ve looked at the 2014 portfolio, we’re looking to potentially pull some of those mortgages forward. We did that earlier, this year we pulled about $130 million of mortgages forward, paid some break fees, but it’s worked out very well, we have financed to about $250 million on those and saved well in excess of $10 million long term for the company by doing that. So I think we’ll continue that where we have significant top-up, the ultimate hedge cost of breaking some of those is pretty reasonably priced. So I think that will be a continuing program we undertake.

Matt Kornack - National Bank Financial

Great. Thanks guys.

Tom Schwartz

Thanks.

Operator

Thank you. The following question is from Heather Kirk from BMO Capital Markets. Please go ahead.

Heather Kirk - BMO Capital Markets

Just wanted to follow-up on the comments with respect to the reinvestment in the existing assets. You said that you’ve been doing quite a bit of it. How much – what do you see is the potential in terms of bringing this forward and what kind of CapEx could we expect in terms of your 2014 outlook as you presume more of these value-add investments?

Mark Kenney

As it relates to the in-suite we don’t see that moving so much, Heather. We’ve got part of it what we manage is we look at specific unit opportunity and we don’t do every single unit, we look at you, we look at the opportunity, but I don’t see that changing dramatically. With the new acquisitions that we’ve just done we are doing a little bit more in those buildings, but the stabilized CAPREIT portfolio is in amazing condition, the (indiscernible) are done. We’ve never looked and been stronger.

Heather Kirk - BMO Capital Markets

So how many just what percentage like what number of units would you typically be doing per year or as you sort of mentioned that maybe or is this more related to the investments that you are doing in recently acquired properties?

Mark Kenney

If you look at our historical turns rate in the apartment portfolio is a 35%. We’re probably addressing about 20% of those units in a significant kind of upgrade, not to the level that tom is talking about but that would be sort of at the higher end of the turnover scale.

Heather Kirk - BMO Capital Markets

And I guess as you look at development as a potential opportunity. How do you view that vis-à-vis because the returns clearly that you are achieving on these in-suites are sizable. And how do you view that versus deploying capital to a potential development program?

Tom Schwartz

That’s the key, that’s why I keep saying the numbers have to work I mean it’s not that we couldn’t build a new rental building today is that it wouldn’t give us a solid accretive enough return to justify going through the effort. So when we can get a decent return with some decent growth that’s when we will be building new rentals. But the numbers are a lot closer today than they’ve ever been in the past.

Heather Kirk - BMO Capital Markets

There is also been some talk of Toronto wanting to provide some incentives to developers, to ad rental stock. I’m just wondering whether you think that, that will move forward?

Tom Schwartz

I can’t speak for our politicians, we’re certainly encouraging those initiatives, they’re very helpful and it’s probably enough to kick-start the industry I mean development charges are great example I mean if the city were prepared say Toronto and perhaps some other cities were prepared to give an abatement of development charges for purpose build rental that could make the difference.

Heather Kirk - BMO Capital Markets

And just one more specific question in terms of the G&A it’s similar but higher than we had expected. And I’m just wondering if there was any one-time items that either came in this quarter or that were last quarter that would have accounted for the large spread?

Scott Cryer

Yeah I think it’s a combination of both. So in the three months this most recent quarter in the prior period we had an insurance provision that got reversed that we ended up not needing, so it actually boosted last year by about $0.5 million. And we have some additional consulting and other type fees that are higher than our normal run rate in the quarter. And then as far as the full nine months is concerned we also had a specific legal provision that was set up in Q2 on one of our properties that was in the reasonable size and have to make it a difference for the G&A run rate. So it’s definitely running slightly higher than it would be on a go forward basis.

Heather Kirk - BMO Capital Markets

So if you had to ballpark what would have been maybe a one-time item that we should be ignoring, what would that quantum be?

Scott Cryer

I’d probably say about a $0.01 on the quarter and probably closer to $2 as far as the nine months is concerned.

Heather Kirk - BMO Capital Markets

Great. Thank you very much.

Tom Schwartz

Thanks, Heather.

Operator

Thank you. The following question is from Neil Downey from RBC Capital Markets. Please go ahead.

Neil Downey - RBC Capital Markets

Good morning. Tom, I think you’ve been very unequivocal in your comments about Ireland not being a large piece of CAPREIT. You got about $60 million investment in 338 suites there. One might argue that however that’s not a sufficient critical operating mass for an individual market. So should we actually expect that in the near term you may well continue to grow the investment?

Tom Schwartz

Yeah, so if we can find a significant accretive assets to add to the portfolio we certainly would do that and you are absolutely right we don’t have the critical mass we need to operate efficiently. But we’ve also said it won’t stay on CAPREIT’s books for a long period of time, at that point we want to maintain ourselves as a pure-play Canadian REIT. So we would spend it and can do a separate entity.

Neil Downey - RBC Capital Markets

Okay. And in that regard in terms of longer term structure I mean how would you regard or how would you characterize the status of that today. Is there nothing being done, is there some preliminary work being done or are you at all advanced in terms of the specific structure, strategy and timing that you might pursue for shall we say segregating the Irish assets?

Tom Schwartz

We’re certainly looking at our alternatives citing very carefully today as we did the minute we look to going into Ireland. We certainly want to make sure that whatever we do is going to have significant benefit for CAPREIT shareholders and I can assure you that’s one of the paramount considerations. And again we are opportunistic if the right assets come up in Ireland and they are accretive and safe at this point for CAPREIT shareholders we will add them to the portfolio. But in terms of our asset base I mean we’re talking about very, very small numbers I mean we’re not talking about 100s of millions of Euros worth of assets.

Neil Downey - RBC Capital Markets

Okay. Thank you.

Tom Schwartz

Thanks, Neil.

Operator

Thank you. (Operator Instructions) There are no further questions registered at this time. I would like to return the meeting to Mr. Schwartz.

Tom Schwartz - President and Chief Executive Officer

Okay. Well thank you very much everybody and we certainly appreciate your continued interest in CAPREIT. And if anybody has any additional questions please give us a call at your convenience. Thank you very much.

Operator

Thank you. That concludes today’s conference call. Please disconnect your lines at this time and we thank you for your participation.

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