Scott Cryer - CFO Thomas Schwartz - President and CEO

Alex Avery - CIBC Heather Kirk - BMO Capital Markets Matt Kornack - National Bank Jimmy Shan - GMP Securities

Thank you, operator. Before we begin, let me remind everyone that the following discussions 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 on 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. Thomas Schwartz, President and CEO.

Good morning, and thank you for joining us today. 2014 was another record year for CAPREIT.

Looking ahead, we are very confident that the remarkable results we achieved in 2014, will continue in 2015. For what is supposed to be a stable real estate sector with limited growth, our strong performance demonstrates what can be done, when you have the right assets, the right team, and the right strategies in place.

As you can see on slide 4, 2014 was a great year, with each of our key performance benchmarks, up substantially compared to 2013. Our most important metric, NFFO per unit rose a very significant and accretive 7.2% to almost $1.60 per unit, from $1.56 in 2013.

Along with the contributions from acquisitions, the main factor driving our record performance was our continued strong organic growth, which is demonstrated by a record 7.5% same property NOI growth. Given our record performance in 2014 and our highly positive outlook for 2015, the Board of Trustees was pleased to announce at their annual meeting on Friday, a 3.4% increase in annual cash distributions, effective with the distribution that you will receive in June.

Annualized cash distributions, will now be $1.22 per unit. We have continually increased cash distributions over the last 18 years, and this is our 12th increase since our IPO in 1997.

We are proud of our track record of enhancing unitholder value, and look forward to further increase, in the years ahead. Now turning to our first quarter 2015 results, the stable sustainable and steady performance we have demonstrated over the last 18 years, continues.

Slide 7 shows that once again, all of our key performance benchmarks were up compared to the first quarter last year. Acquisitions continue to contribute to our growth, but the real catalyst driving our solid performance, continues to be our ability to keep generating strong organic growth, with same property NOI, up a very strong 5.6% in the quarter.

It is also important to note, that despite one of the coldest winters on record in 2015, utility costs, as a percentage of revenues, actually declined in the quarter to 13.8% from 14.3% in the first quarter last year, an indication that our cost control programs are working, and that our capital investments and new borrowers and other energy initiatives, are generating real benefits. This impressive organic growth, is largely due to our programs and to keeping our buildings full, with stable and steady increases in average rents, combined with a relentless focus on operating efficiency, and reduced costs.

Looking ahead, we believe our proven track record of overall same property NOI growth, will continue as we move into 2015. As you can see on slide 9, we are also continuing to capitalize on strong rental markets.

Overall, average monthly rents for the residential portfolio were up 2.4% in the first quarter, with occupancies increasing to 98.6% from 97.9% last year. Looking ahead, demand remains 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 10 details how we are generating solid growth in average monthly rents, as guidelines in Ontario and British Columbia have increased compared to last year. For 2015, rent increase guidelines in Ontario, have risen from 0.8% last year, to 1.6% this year, and from 2.2% last year to 2.5% in British Columbia.

We believe these increases will continue to drive a strong top line in 2015. Another factor in our rental rate growth, is our ongoing successful application for above guideline increases in Ontario.

We have had a lot of success with these applications, and we will continue to move them forward. I will now turn things over to Scott, to provide more detail on our first quarter results.

Scott?

Thanks Tom. To echo Tom's opening comments, 2014 was a record year for CAPREIT, with operating revenues up 6.2%, NOI rising 11%, and a strength in NOI margin of 60% compared to 57.4% in 2013.

As you can see, our growth is accretive, as NFFO per unit was up 7.2%, despite the 7% increase in units outstanding. While our payout ratio continued to trend towards the low end of our target range.

Turning to our Q1 results on slide 13, you can see we benefited once again from the increase in size and scale of our property portfolio, as well as our continued strong organic growth. Revenues were up in the quarter, and as a result of our proven operating programs, NOI increased -- driven by lower R&M costs, realty taxes and utility costs, as a percentage of operating revenues.

NFFO rose just under 2% in Q1, primarily due to the contribution from acquisitions, and our strong operating performance. We continue to maintain a strong and flexible financial position, as shown on slide 14.

Coverage ratios remain strong, with an intrepid coverage ratio at a solid 2.82 times, and improved debt service ratios well within our guidelines. It's also important to note, that we have approximately $251 million of our properties not encumbered by mortgages at quarter end.

We plan to finance a portion of these unencumbered properties through the balance of the year. Our weighted average interest rate declined further at the end of the quarter, and we continue to focus on maintaining an extended debt maturity profile, using mostly 10-year debt, while balancing maturity profile with the use of 5-year and 15-year money, both at attractive rates.

Looking ahead, we expect to complete the renewal, the remaining $189 million in mortgages, and refinancing another $60 million of principal repayments with new mortgages throughout the balance of the year. As you can see on slide 15, the rebalancing we have done, has resulted in a very conservative maturity profile.

We will continue to focus on extending our debt maturities in this continued low rate environment. With maturities 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, we remain well positioned to continue our growth programs.

With the completion of our March 2015 equity financing, our liquidity position stood at approximately $240 million on March 31st, providing continuing long-term liquidity and the resources for future acquisitions of approximately of $800 million, all while maintaining conservative debt ratios. Strong top up potential, estimated at $77 million for the balance of 2015, will continue to provide sufficient liquidity and allow us to fund our future CapEx programs.

And as I mentioned earlier, we plan to finance a portion of our unencumbered properties this year, while maintaining unencumbered properties in the range of $150 million and $180 million available for future growth. Thank you for your time, and I will now turn things back to Tom to wrap up.

Thanks Scott. With our record results in 2014 and continued success in the first quarter of 2015, I'd like to take a moment 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 grown into one of the dominant owners and operators of rental accommodation in Canada. Our total assets have risen substantially.

While our market cap has grown to just under $3.5 billion, one of the largest among our peers. Most importantly, we now have the best team in the business, operating out of eight regional officers from coast-to-coast across Canada.

Local market knowledge, supported by head office expertise, is proving to be the right formula for growth, and we are very proud to have been selected one of Canada's 50 best employers for two years running. This growth and our superior performance through the 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 924%, and this compares to only 254% for the overall Toronto Stock Exchange index. In 2014 alone, our unitholders saw a 24% total return, one of the highest in the Canadian REIT sector.

So far in 2015, unitholders saw a 14% total return. We are very proud of everything we have accomplished for our unitholders, and truly believe this growth and success will continue going forward.

We are also innovative and entrepreneurial in how we are growing our business, and the IRES transaction is a great example. We sold our Dublin assets in an initial public offering on the Irish Stock Exchange in April last year, generating a $700,000 gain on the sales of the new entity.

We are now receiving a stable and growing stream of recurring revenue from IRES, through asset and property management fees, that amounted to $1.2 million for the last eight months of 2014, and $0.5 million for the first quarter of 2015. We also entered into a pipeline agreement with IRES, to help finance and support their growth, and receive a 1% underwriters fee on any assets we buy on their behalf, and then transfer to IRES.

The recent Rockbrook portfolio sale to IRES, generated an $800,000 fee net of taxes for CAPREIT, and finally, we believe our ongoing retained interest in IRES, currently at 15.7% will generate long term capital appreciation for our unitholders. Looking ahead, we are enthusiastic reinvestigating the important new avenue of growth for CAPREIT.

The development of new apartment properties as discussed on slide 21. One aspect of this new strategy involves looking at a number of opportunities to partner with other real estate entities, including mixed use developers.

Many of you have been on property tours, where we have commercial and retail space in our buildings, and the combination has proved to work very well. Currently, we are exploring opportunities in three very solid joint venture relationships.

In addition, a number of our assets have sufficient excess land, on which we can develop new apartment buildings. We are now in the process of compiling land inventory, and investigating zoning potential to determine the feasibility of such projects.

We are also expanding our in-house development expertise, with new hires, adding to our already significant experience in this aspect of our business. We will keep you posted on this new growth strategy as it unfolds.

In conclusion, we believe the future is extremely bright at CAPREIT. We have proven our ability to capitalize on continuing strong fundamentals in the Canadian apartment business, through all economic cycles.

We have one of the strongest balance sheets in the business, and fiscal prudence will remain a key priority of 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. Finally, we have demonstrated that our business strategy is succeeding and prospering, and we will continue to build on the solid performance generated over the last 18 years.

The main takeaway from today, is that we are all excited and confident about our future. We look forward to sharing our results with you in the coming quarters.

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

Thank you. Just on the increase in average monthly rent.

You saw, I guess a stronger performance this year in renewals and a little bit less strong on the suite turnovers. Can you talk a little bit about it, I guess, some of the geographic and other factors that might have resulted in that performance?

Alex, all of our markets are very strong today. I guess, the only weakness we are seeing, we have one building in Halifax that has been struggling a bit.

We are watching Alberta very closely, we have not seen weakness there today, but obviously we watch it closely. But Quebec, Ontario, BC, are very-very strong.

So relatively similar performance across the portfolio?

Ontario, BC, Quebec, are performing the best today. Alberta is performing on the same target.

But again we are watching it, and as I said, we have one property in Halifax that we are having some challenges with today.

Okay. And then on the sub-metering in Alberta and Ontario, you are up over 50% of the suites that you can meter, or that you can have the tenant pay the expense on -- you have got those in place.

Have you noticed, I guess, any change in the rate of turnover, or is it going to be the same sort of pace of progress?

Yeah, I mean it's very smooth. We are turning those meters on turnover.

We have had no pushback. Again, we will give a small rent increase, or even if we hold the rent and pass the meter on, that's better than the 5% increase.

So at 53%, the next couple of years will probably continue at a pretty quick pace, and then I would imagine, there is some sort of residual tenant base that is very sticky, and probably it will take longer, so the pace might slow down a little bit a couple of years from now?

That's exactly the analysis, and then maybe at that point, we will have the guts to go them on renewal, at the hydro meter in. But so far, we are just doing it on turnover.

And I guess, you could probably negotiate with them a little bit on that, if --?

Yeah, the last -- the others will do that.

Okay. That's great.

Thanks guys.

Thanks Alex.

You had a pretty notable decrease in leverage year-over-year, and I am just wondering what your thoughts are on that number going forward?

I mean, obviously, the impact of the equity offering, the timing of that had a more significant impact. We are fairly comfortable in the leverage range we are at right now.

We are not trying to drive that down, sub-40 or anything, but we just think, it’s a prudent position to be in right now, and provides for liquidity for acquisitions, as well as what we are seeing as more substantial development pipeline starting to develop. So we are comfortable where we are at.

In terms of the IRES, I think you recorded in the, sort of, other income section about 904 from that, and other investment income. How much of that, like where are the dividends going and how much -- I know that there was a special dividend that was supposed to be paid at the end of March, and I was just curious as to what the, sort of run rate of income that you're expecting from the dividend and fee side, would be for 2015?

Yeah the dividend, it was not that significant from CAPREIT's total position right now. I think, with the raise of the additional capital, on the asset management fee, we'd expect to double, given that it’s a percentage of net asset value, and then with the growth, we would expect increase in the total property management fee as well, as we deploy that capital.

As far as the equity investment, we obviously have diluted with the last raise, so it is going to be dependent on how quickly we grow, before I can really give you good insight into that. But if you look at the estimated total returns, and we do equity account for the investments, the total return is estimated -- a dividend yield of between 3% and 5%, so that's fairly representative on an annual return, without any capital appreciation in the stock value.

And that's consistent with a recent report that came out from one of the Irish analysts that was predicting over 3% dividend yield.

And just on a side-note, there was some accounting dilution, and there were some FX components that made its way through our financial statements, which weren't really representative of the economic realities, because we don't apply accounting for everything. So just to remind everyone, we are fully hedged on the balance sheet, we have full year of debt against both that Rockbrook transaction, as well as on the equity investments.

So where we see gains and losses in FX movement, those are largely just as a disconnect on the accounting to what the economic hedged reality is. So I just want to point that out.

Okay. Thanks, that's helpful.

In terms of Alberta, there was a decline in occupancy, but you certainly had very strong performance. I am just wondering, if there is something specific that was happening on the cost side, to drive that solid number?

On the cost side, it was a combination of R&M, and utility was a major driver. Basically, the West, from a utilities point of view, was very positive to our portfolio.

Ontario was obviously much colder, and into Quebec, and then the East Coast was really dependent upon on whether you're running oil or natural gas. So the R&M and the utilities have played out slightly differently across the different region.

So that's going to be the driver of law that changes in the expense side. And then, I think we have talked to the revenue side, as far as where those markets are at.

Great. Thank you.

Good morning guys. Quickly on the MHC portfolio, looked like there was a fairly sizable uptick in occupancy on a sequential basis, is there something there, or is that just strong performance?

I think it’s the strong performance, and we have a program where we are putting homes on some of the empty lots, and we have been very successful with that.

Okay. And same with the -- I guess, this is, I think the first quarter that we have seen -- same property year-over-year results, about 100% increase in same property NOI isn't something we usually see.

Is that just the success and repositioning of that property?

That was new portfolio, that wasn't the market that we really targeted. We ended up with some apartments because of the MHC portfolio we bought out there, and we improved occupancy dramatically.

The expense side of that, also the -- we do have oilfuel in that region and the decline in the prices really affected us significantly, about a 35% decrease just in those costs.

Okay, that's helpful. And then lastly, in terms of the mortgage side, you did almost $80 million refinancing on a $20 million base mortgage.

Was that a property that was unlevered, and you were able to take out more on it, and also the rate was pretty attractive on a 10-year basis? Obviously bond yields have ticked up at similar spreads you're seeing at this point on the mortgage financing side?

Yeah. The spreads are fairly consistent, so that was a big top-up position.

We sometimes try and pull those forward, because the costs to move them forward, on a breakeven cost [ph] is attractive, when you got a huge top-up side. But yeah, great rate.

Mortgage spreads haven't really come in much with the recent spike in the bond price. I think if we look historically, when we are coming through 2.5% tenure, we started to see margin spreads kind of move out from what was, a 74 to 85 basis point environment, it peaked up from there.

So we would expect, if rate move up, that the spreads will come in, given that I think the banks and lenders ended up putting a floor and as kind of, as the bond really dropped below that 2.5%. So we will have to see what happens, but we haven't seen any movement quite yet.

And are there many properties within the portfolio? I know you have got an unencumbered asset pool, but there are many properties where you have got this sort of situation, where you are underlevered on the percent of the asset value basis, that you may be able to extract quite a bit of up-financing, or is it fairly typical of what we have seen in the past?

I would say, it's more typical, generally, where we do have those situations, they are smaller. And so it's not always something we go up to do in advance.

But on the bigger mortgage side, they will have material impacts. There is not very many situations like that.

It's really the unencumbered bullet, yeah.

Thanks. That's it for me.

Thanks. Just a couple of questions; so just going back to Alberta and Calgary specifically; so the 20% decline in expenses in Calgary, that was really to do with the utility and R&M, there was nothing unusual about the quarter?

Because the margin does look quite high for Q1?

The utilities had a very significant impact, and then, R&M as well was down for the quarter as well. So it was kind of the double impact of that.

Okay. So if we kind of extrapolate for the year, since you have achieved 66% margin encumbered for Q1, it's rather reasonable to assume that you could get something pretty meaningfully higher than that for the balance of the year, right?

Yeah, I mean that's tough to call. Obviously, utility starts to have less of an impact, as you move forward.

Q1 being our toughest on margin than we expect -- generally expect expansion, but utilities were very light. So it's hard to predict, but definitely, we could see something in line.

Okay. And then secondly, in terms of the rent growth on turnover rates.

I think last couple of years, that number was around $25 to $35 on turnover, and this quarter looks like, it ticked down to around $12. Wondering if there was any kind of mix issue here, or whether there are any other specific trends that are worth?

I think you will see, as we go through the year, it will be consistent with past years. I think more in terms of percentages, we are always going to average better than 2% on the top line, and we will do that again this year.

Okay. Thank you.

Okay. I want to thank everybody for their interest this morning, and continued interest in CAPREIT.

And as always, if you have any additional questions, please give Scott or I a call. Thank you very much.