David Mills - Independent Trustee Thomas Schwartz - President & CEO Scott Cryer - CFO

Frederic Blondeau - Dundee Capital Markets Heather Kirk - BMO Capital Markets Jonathan Kelcher - TD Securities Mario Saric - Scotiabank Matt Kornack - National Bank Financial Neil Downey - RBC Capital Markets

Thanks very much. 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 these 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 the Annual Information Form MD&A, which can be obtained at sedar.com.

I'll now turn things over to Mr. Thomas Schwartz, President and CEO.

Thanks, David. Good morning, everybody and thank you for joining us.

2014 was another record year for CAPREIT, one in which we achieved what I believe are quite remarkable results. And looking ahead, we are very confident that strong performance will continue.

For what is supposed to be a slow growth, but stable real estate sector, we have shown what can be done when you have the right assets, the right team, and the right strategies. It was a great year, but even greater things are to come.

As you can see on Slide 3, all of our key performance benchmarks were up substantially in 2014 compared to the prior year. And the most important metric NFFO per unit rose a very significant 7.2% to almost $1.68 per unit, from $1.56 in 2013.

And this accretive growth will continue going forward. Along with contributions from our acquisitions, the main factor driving our record performance in 2014 is our continuing track record of generating very strong organic growth.

Same property NOI was up a record 7.5% in 2014 and a significant 16.4% in the fourth quarter. I'd like to spend a few minutes this morning outlining how we are achieving our industry leading growth.

As you can see on Slide 4, we generated solid organic growth in all of our geographic regions in 2014. Overall, our operating revenues were up 2.8% for the year, while our operating cost declined 3.5% resulting in a very strong 7.5% increase in same property NOI.

For the fourth quarter of the year, stabilized NOI rose a remarkable 16.4% due in part to the much colder winter in November and December 2013, and lower R&M cost in 2014. Clearly our innovative sales and marketing programs are keeping our buildings full with solid increases in rent, while our property management initiatives are controlling our costs.

Importantly, our focus on geographic diversification is also driving real benefits for our Unitholders. For example, while Alberta saw some serious growth last year, their concerns with dropping oil price will affect this market.

At CAPREIT, only 7.7% of our total NOI comes from Alberta. Looking ahead, we believe our track record of same property NOI growth will continue.

As further proof that our business model is working, Slide 5, shows that our same property NOI has risen on average over 5% over the last five years. Through periods of low economic growth, as well as years with high inflationary cost pressures, CAPREIT continues to deliver strong NOI growth on a same-store basis, one of the key drivers of long-term sustainability.

Over the past five years we have delivered 26% cumulative NOI growth translating into significant net asset value increase in our portfolio and strong returns for our Unitholders. Another key factor in our ability to deliver strong accretive growth is how we are doing more with less.

As you can see on Slide 6, our total Canadian apartment suite and land lease sites has risen 46% over the last four years. Despite this portfolio growth, our team of experienced and dedicated professionals has only grown by 14% over the same period.

Looking ahead, we believe we can continue to manage our portfolio growth without adding in any material way to our headcount. Slide 7 shows that we are also continuing to capitalize on strong rental markets.

Overall, average monthly rents for the residential portfolio were up 1.5%, despite the very low rent guideline increases in Ontario and British Colombia, with occupancies remaining strong at 97.9%. Looking ahead, demand remained strong in all of our markets.

We see occupancy remaining stable at these early -- nearly full levels, and we believe average monthly rents will continue to increase over time. Our focus on resident satisfaction, and our innovative sales and marketing programs, continue to generate industry leading monthly rent in all of our markets.

As you can see on Slide 8, we consistently outperform our peers in each of the regions in which we operate. Slide 9 details how we continue to generate solid growth in average monthly rents, despite the lower 2014 rent guidelines in Ontario and British Colombia.

A key message here is how our strategy of geographic portfolio diversification has helped to mitigate the lower guideline increases in 2014. Another factor in our rental rate growth is our ongoing successful application for above guideline increases in Ontario.

We are very successful with these applications and will continue going forward. Looking ahead, the 2015 rent guidelines have been increased substantially from 0.8% to 1.6% in Ontario and from 2.2% to 2.5% in British Columbia.

We believe these increases will drive an even stronger top-line this year. Turning to Slide 10, CAPREIT was among the first landlords in Canada to really focus on how we could generate revenues from services other than monthly rents.

As you can see, we have been very successful in generating a strong 5.8% compound annual growth rate in ancillary revenues since 2009, with an 8.5% increase for a stabilized portfolio in 2014, and 12% growth when the contribution for our acquisitions is added. We continue to focus on this aspect of our business and always take a creative and innovative approach in generating new revenues for our Unitholders.

I want to now turn things over to Scott, to talk how this strong organic growth has resulted in another record year for CAPREIT.

Thanks, Tom. As you can see on Slide 12, our fourth quarter results benefited once again from the increase in size and scale of our portfolio, as well as continuing strong organic growth.

Revenues were up 3.3% in the quarter, and as a result of our proven operating program, NOI rose a very significant 16.3%, driven by lower R&M cost, realty taxes, and utility cost, as a percentage of revenue. NFFO rose 28% in Q4, primarily due to strong operating performance, and the contribution from acquisitions, while NFFO per unit rose a very accretive 25% compared to fourth quarter of 2013.

Slide 13 provides details of our record year in 2014. Operating revenues were up 6.2% with NOI rising 11% compared to last year.

Our NOI margin also strengthened to 60% from 57.4% last year. And as you can see, our growth was accretive, as NFFO per unit was up 7.2% for the year-ended December 31, 2014, despite the 7% increase in our units outstanding.

Turning to our balance sheet on Slide 14, 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 improved debt service ratios as well in our guideline.

It's also important to note that we have approximately $217 million of our properties not encumbered by mortgages at year-end. We plan to finance approximately $60 million of these unencumbered properties this year.

Our weighted average interest rate declined further at quarter-end and we have continued to focus on extending our debt maturities using primarily 10-year term mortgage debt, while more recently attempting to balance our maturity profile with the use of both five and 15 year money, both at very attractive rates. Looking ahead, we expect to complete the renewal of approximately $210 million in mortgages and refinancing with tops up of approximately $80 million on the new 2015 mortgages.

As you can see on Slide 15, 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 maturity between 2015 and 2020 representing a smaller portion of the portfolio in the next 10 years, we believe, we have a good balance between top up liquidity and reduced sensitivity to rising interest rates.

In addition, with 96% of our mortgages being CMHC insured, we have a large and diverse group of lenders willing to work with us at rates below conventional financing. On the liquidity front, as detailed on Slide 16, we remain very well positioned to continue our growth program.

Our liquidity position stood at approximately $150 million at year-end, providing continuing long-term liquidity and the resources for future acquisitions of approximately of $500 million, while still maintaining our conservative debt ratios. Strong top up potential, estimated at $100 million for 2015, has and will continue to provide significant liquidity to fund our CapEx program.

And as I mentioned earlier, once we have financed the $50 million in unencumbered properties this year, we will still have approximately $150 million to support future growth. Thanks for your time and I'll now turn things back to Tom to wrap it up.

Thanks, Scott. With our record results in 2014, I would like to take a minute to look back at our progress, since we went public in May 1997, almost 18 years ago.

From an initial portfolio of only 2,900 suites we have to grown to where we are now one of the dominant owners and operators of rental accommodation in Canada. Our total assets have risen more than 26 times, while our Market Cap has grown to over $3 billion, one of the largest among our peers as of December 31, 2014.

Most importantly, we now have the best team in the business operating out of eight regional offices from coast-to-coast across Canada. Local market knowledge, supported by head office expertise, is proving to be the right formula for growth.

In this growth, and our superior performance through good and bad times over the last 18 years, has resulted in remarkable returns for our Unitholders. Unitholders who invested in our IPO in November 1997 have received a total return of 937% to January 31, 2015.

And this compares to only 244% for the overall TSX index. In 2014 alone, our Unitholders saw a 24% total return, one of the highest in the Canadian REIT universe.

We are very proud of everything we have accomplished for our Unitholders and truly believe this growth will continue going forward. Turning to Slide 20, I've said this many times, in addition to the right assets and the right strategy, you can't generate such remarkable growth without the right people.

I believe we have the best operating team in the business and we have created a culture where our people enjoy their work, are engaged, and where their careers can flourish. We were very proud to have been selected as one of Canada's Top 50 employers for the second year in a row in 2015.

I'm pleased to see our ranking climb considerably from the prior year to 15th place. It is this high performance team that will continue to drive growth and record performance for years to come.

Looking ahead, while 2014 was yet another record year, we remain confident our track record of superior growth and operating performance will continue. First, the growth in our portfolio over the last few years is having a very positive impact on our performance, and we will opportunistically acquire strategic properties, if the price is right, and if they are immediately accretive to our NFFO.

Property revenue will also continue to benefit from our near full occupancy levels and consistent increases in our average monthly rents, driving very strong growth in our NOI. And our NOI margins continue to rise, as we realize the benefits of all of our state-of-the-art property management initiatives.

We are also enthusiastically investigating an important new avenue growth for CAPREIT, the development of new apartment properties, as discussed on Slide 22. We are looking at number of opportunities to partner with other real estate entities, including mixed-use developers to combine our expertise to develop new mixed-use properties.

Many of you have been on property tours where we have some commercial and retail space in our buildings and the combination can work extremely well. In addition, a number of our assets have sufficient excess land on which we can develop new apartment buildings.

We are also currently investigating zoning potential at some of these properties to determine the feasibility of such projects, and we are talking to residential developers who want to partner on new rental buildings. Because of this, we are beginning to expand our development expertise inside CAPREIT with new hires, adding to our already significant experience in this aspect of our business.

We look forward to keeping you posted on this new growth strategy as it unfolds. In conclusion, we believe CAPREIT has a very exciting future.

We have proven our ability to capitalize on continuing strong fundamental in the Canadian apartment business through all economic cycles. We believe, we have one of the strongest balance sheets in the business, and fiscal prudence will remain a key priority at CAPREIT.

We are very proud of our team. We have the right people in the right positions to manage our growth for years to come.

And finally, we have demonstrated that our business strategy is working and we will continue to build on the solid performance generated over the last 18 years. The main message once again today is that we are all very confident in our future and we look forward to sharing our results with you in the coming quarter.

Thanks again, and Scott and I will now be pleased to answer any questions you may have.

Thank you. Good morning and congrats on the nice quarter.

We've got a couple of questions here. You seem to be finding some value in Alberta, I was -- can you comment on the transaction environment there?

Sorry. Sorry, Frederic, I didn't get the question.

So it seems like you're finding some value in Alberta. I was just wondering if you could comment on the transaction environment.

The transaction environment, yes, I mean obviously with the price of oil going down things are slowing down in Alberta. At this point we're not seeing a dramatic effect in our portfolio, it's operating certainly on target, but we're watching it very closely.

There are more deals becoming available in Alberta because of that. So you're absolutely right the deal flow in Alberta do actually picked up, and stay tuned we could announce some interesting acquisitions in Alberta in the very near future.

Good. And how about those rents that were a bit softer in New Brunswick, Saskatchewan and Alberta?

Can you comment on these?

Yes, our softest area right now is actually Halifax; we have a couple of buildings there where we're seeing some challenges. Again and I think about a diversified portfolio, as it doesn't really hit the bottom-line because as you know, we are very well diversified across Canada.

But I would say our toughest areas today are Halifax, we're not seeing it yet in Calgary and Edmonton, but we expect to see some softness there coming into the year, and Saskatchewan again the same level. We have a very, very small portfolio in Saskatchewan.

Okay. And you recorded 474 units in 2014 and you still target that 1,500 units to 2,000 units in 2015, is that still --

Yes. The deal flow is looking a little better in 2015; we'll be announcing one acquisition very shortly.

We've a couple of others we're bidding on. So we're confident that at this stage in the year, we can do 1,500 units to 2,000 units for 2015.

And I can assure you that will be strategic and accretive.

Good. And lastly, can you add some color on the JV opportunities to develop?

Sure. The numbers are starting to work for residential development.

We've been waiting for this to happen for years. It's a combination of higher rents in the urban areas, very low interest rates, and again control of construction cost.

So we're really looking at three avenues. The first thing we're looking at obviously is our own portfolio.

We've got a lot of excess land a couple of years ago, I inventoried that land. So we're staring some residential rezonings on our own properties where we can build new buildings on land we already own, so that's very attractive.

Certainly mixed-use developers who are being asked by planters to put rental residential components in their properties are approaching us about joint ventures because they want to take advantage of the expertise that we have in the rental residential business. And a lot of straight residential developers, people that we're going to build condominiums on their site are rethinking the economics and we're looking at some very, very interesting joint ventures on sites that perhaps two years ago would have been condominiums, and today we're going to do a dedicated new rental residential project on those sites in combination with the developers.

So three great streams of opportunities and going into the future and more and more this is an important part of our business.

It was a great quarter on the margin front and I'm just looking to get a sense for, you've really pushed margins pretty substantially over the last several years. How much more legs does it have and can you talk a little bit about how your CapEx programs and the nature of the CapEx may tie into your outlook for margin?

Yes, I mean, I think definitely obviously the reduction in R&M was a big driver with over $1.5 billion acquisitions in last four years. We definitely had to spend more in both R&M and CapEx.

Really obviously the environment around wage growth and energy growth has been able to really improve those margins and our operating efficiencies on the R&M. So there is always uncertainty on the energy front.

I think that would be one of our areas that we have to continue to watch, but it looks pretty good in the short-term. So we don't see anything that would materially change where our margins are today.

In addition we have been spending money on the energy efficiency side and really trying to change our buildings from a marketability point within suite, common area which has proved to be beneficial from a rental growth side. So those are major contributors, we see this as fairly sustainable in the short-term.

Okay. So when you look out for the -- enter the go-forward to the CapEx I think you said $145 million to $155 million.

Yes.

Can you talk a little bit about what's the breakdown of that will be and how you -- how much of that is going to be that sort of more margin improving type of investments?

Right. So it would be -- really I mean it's very hard to estimate exactly what percentage of it is.

There is obviously a heavy amount or still a significant amount of more structural CapEx especially focused on the acquisitions completed in the last couple of years, Olympic Village for instance is one where we knew we had in excess of $20 million of CapEx to be spent structurally that doesn't necessarily create NOI margin. So ballpark you'd probably say at least 50% is going to be value enhancing and then its suite oriented, energy efficiency oriented, type of expenditure.

Okay. You made a comment in the outlook section with respect to other markets and I'm just wondering if that's a reference to Ireland or is there potential for CAPREIT to be looking elsewhere?

At this point we're focused on Canada, obviously the Irish initiative worked out well and I think it was structured in a way that it did work well for us and our shareholders. We're always opportunistic if the right opportunity came in, we're going to look at it, but as I've always said our primary focus is apartments in Canada.

So just one final question on Alberta, can you comment on whether you're seeing any signs of softening so far this year?

There I mean we're seeing a little bit, not enough to be worried about yet. But again our buildings are full there.

So at this point, we're not seeing anything. We're concerned, we're watching it closely.

We know there is a direct correlation between the price of oil and jobs. Certainly, I think there was an article on the Globe this morning, which I talked about higher unemployment in Calgary and Edmonton and so we will feel that at some point.

Just circling back to the R&M was there any one-time items in the quarter?

No, not any specific one-time items around R&M. I think 2013, obviously we did accelerate a lot of R&M initiatives as we discussed for the winter.

And then really we put out a target of 800 to 850 kind of per suite. And I think it's really that we've been able to execute and meet that number.

And I think part of it has to do a lot with just investing in our overall portfolio. And the other aspect is the acquisition side, where over the past three years there has been a significant acquisition cycle.

And as you know, 2014 wasn't a big cycle for us as far as the acquisition front is concerned. So we're testing that R&M level and I think we are able to achieve those goals and hope to be able to keep that in line going forward.

Okay. And that was going to be my next question.

For 2015, the 800 to 850 is a target again?

Well we're certainly trying very hard to hold that number.

Okay. And then just secondly, on the acquisitions.

It sounds like you're seeing a lot more opportunities than you were -- when you guys reported in November. Can you remind us how you look at your cost of capital when you're looking at as to whether an acquisition is accretive to NFFO?

So the first thing we look at is NFFO in the 12-months forward. We do a fairly careful analysis.

We look at rents, we look at expenses. We apply all the CAPREIT efficiencies and economies of scale that we get in.

We create a pro forma income statement. We then get a very extensive CapEx report, you heard me talk about that now for 17 years.

CapEx is an important part of our business. We ask our engineers to look at life safety.

We look at cosmetics. We look at energy upgrades.

We build that and then we treat that as if it's spent on the acquisition. So it's price of the acquisition, plus price of the CapEx, plus obviously closing costs and the capital costs, and that has to be accretive based on those numbers.

We're modeling, we used to model debt at 60%, we now model debt at 50%, we use a 10-year rate, and as you know, 10-year rates are extremely effective today and that has to be accretive to our cost of capital.

Okay. So the amount you could pay now would be -- you would be able to pay a fairly low cap rate if you saw something that was strategic for you.

Strategic and with upside. I mean, we still won't buy a building that's maxed out I mean, we looked at something reasonably that was geographically perfect for us, but the existing landlord has done an incredible job of getting rents right up to the top of the market.

His expenses were well managed, and said, look; we can't do anything to these buildings. So even though they are well located they are not for CAPREIT, we've got to be able to add value and we generally add it through active management and spending the CapEx, to the people before us just weren't prepared to spend.

Okay. And that's 1,500 units to 2,000 units that's Canada only, right?

That doesn't include the Irish pipeline agreement?

No, that didn't include Irish and all that, strictly Canada.

Okay. Thanks, all right.

I'll turn it back.

May be just coming back to the margin discussion. Scott, you mentioned maintaining a 60% margin in the near-term sounds like a possibility and your key performance indicator is you've kind of kept the target margin range about 56% to 58%.

So should we view that as more of a longer-term target, acknowledging the utility cost can be very volatile, but should we think that as a longer-term target or should we think about that as being conservative?

I would definitely say it's conservative and it's hedging definitely on that utility side being a key component of it. So we do look at that and whether we're going to change that each quarter.

I would say it is conservative right now and we've just recently like in the last two years been starting to hit these levels of margin. So we will probably refocus that one for next year to see the sustainability there and but for now I would say conservative.

Okay. That's great.

And then may be just on the development side, Tom, you mentioned some rezoning underway at select properties. Can you give us any sense at this point as to how big of an opportunity that could be?

I mean, we're definitely rezoning now is in the hundreds. I think its way bigger than that and that again next quarter perhaps a quarter after and we're going to come forward with a bit of a better projection on that.

As I said we've done our land inventory, we know what our opportunities are. Certainly going to be look more closely and I think as we go forward, I can give you more color on that.

At this point, we are looking at three rezonings in major cities in Canada.

Okay. And then just last question with respect to the balance sheet, Scott, I think you mentioned about $150 million available on the line which I guess excludes the Rockbrook Portfolio.

Correct.

So when I'm thinking about how you view availability, do you think of that portfolio as something that you bought and ultimately you will sell, so you won't think about it in terms of availability or how should we factor that into that near-term capital allocation decision?

Yes. I mean we definitely don't look at that in our long-term equity that's really a short-term supporting growth from the CAPREIT side on the asset management platform and generating incremental fees.

So that's where that commitment comes from. But we do expect it to be quite short-term.

And don't really take that into account. I think really what is driving it.

We do have some deal flow in front of us as well as our top up this year not as significant. So we're comfortable with our liquidity right now.

We do have encumbered assets if we need to, but yes, that doesn't play into it.

On the Halifax properties, it was a bit weaker this quarter, is that asset specific, market specific, or what are you seeing there?

A little bit of both. Halifax is generally weaker than it was although we are all optimistic that the shipbuilding contract which could kick in at the end of 2015 is going to bring greater employment and more people into that market.

We only really have one asset where there is a disproportionate number of vacancies. And again, we're working on that now and I believe a couple of quarters from now that probably will go away.

Okay. And then in Montreal, I guess there has been a bit of purpose built rental and obviously a lot condo construction.

Are you seeing any of that ultimately funneling it through into operations there or is still strong on the rental?

Montreal and Quebec City have never been stronger. We're watching that -- as a matter of fact, I was there the other day, and I see there is no more surface parking lots, they are all condominiums.

So we've got to watch that very closely that's what happened in Toronto. At the end of the day as we learned in Toronto that condominium construction helps us because the small landlords buy condominiums and rent them out, create a market above the general market, leveling allows us to raise market rents.

As a matter of fact, we're looking at doing our Investor Day this year in Montreal to show up our property there because we're really proud of that portfolio.

Interesting. And then just finally with respect to Irish and how long you ultimately plan on holding some of these properties on the books and will you continue to account for them as property -- investment property is there you will ultimately look at that from an accounting standpoint?

I'll talk about how long we can hold them and Scott can talk about how we account for them. Its short-term it's a facility to allow Irish to grow as it needs to.

Again there's certainly not long-term investments for us.

Yes, I mean as far as the structure of it is concerned it is an asset acquisition it's just really the commitment side from Irish, the purchase goes once the appropriate funding is available for them. So its investment property and we really earn the returns from that, the income stream we're able to finance at very strong rates.

We basically have a euro based loan where we're paying 170 bps plus the LIBOR rate which is pretty much next to nothing. So attractive financing rates and then there is -- on sales there is the 1% acquisition fee which we would expect to earn.

So that's kind of how it impacts CAPREIT.

And that 1% fee that's flows through into FFO or will going forward, right?

Yes.

Okay. Great thanks guys and congrats on the quarter.

Yes. Thank you.

Scott, there is no requirement to classify those warehouse assets as designated held-for-sale or anything like that?

I mean we'll finalize our analysis for Q1. That is definitely a consideration.

It will go to ultimately certainty, but that is a consideration we're finalizing right now.

Okay. And from a readers perspective it might be valuable to have some indication as to the revenue and NOI impacts of those properties while they're warehoused that's the comment.

Right. I think --

I don't know. Go ahead, sorry.

I was just going to think Neil on that. Unlike CAPREIT on our acquisitions in the Irish environment, we do actually on acquisition present gross and net yields on the portfolio.

So that information is generally available just to get a sense of what assets are going for right now. And so that would be a good kind of starting point just to look at the NOI stream.

And then I think I just kind of laid out the cost of capital really 100% debt finance. So that should be able to give a reasonable run rate on what the investment will do over the very short, short whole period.

Sure. Okay, thank you.

You're welcome.

I may have missed it, but I know you commented on your 16-odd-percent same property NOI growth in the fourth quarter. The drivers of that in terms of revenue growth and change in operating costs, do you have those handy or they disclosed somewhere in the -- elsewhere?

Yes, no, so we've really focused consistent I think last year's. Our press release really becomes a source of most of our quarter-over-quarter information.

So we do have operating expenses as percentage of revenue and a lot of the turnover percentages et cetera in the press release. So focus there and then I think what we'll -- with that point I think what we'll do is we'll look next Q4 to really try and enhance some of the quarter data either through a supplemental or incorporate it back into the MD&A, so point taken.

Okay. Sorry is the same property revenue growth in the press release I must be missing it?

Sorry, same property. It is not, no.

So let me think of how we can get that out to you and to the general public. Yes.

Okay, well thank you very much. As always thank you for your interest in CAPREIT.

If anybody has any additional questions, please give Scott or I call at your convenience. Thank you very much and have a good day.