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Northview Apartment REIT Announces a $110 Million Bought Deal Equity Financing and a $152 Million Strategic Acquisition in Ontario and Nova Scotia

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CALGARY, Alberta, June 06, 2018 (GLOBE NEWSWIRE) -- Northview Apartment Real Estate Investment Trust ("Northview") (TSX:NVU) today announced that it has agreed to acquire a 623 unit portfolio of six apartment properties (the "Acquisition Properties" or the "Acquisition") from affiliates of Starlight Group Property Holdings Inc. ("Starlight"). The aggregate purchase price of the Acquisition Properties is $151.8 million (excluding closing costs), representing a weighted average capitalization rate of 4.5%.

Todd Cook, President and CEO of Northview, commented, "The Acquisition furthers Northview's strategy of growing its portfolio of high-quality multi-family assets in strong and growing markets. The four stabilized assets in the portfolio have an average occupancy of 97.3%. Four of the properties are recently constructed luxury rental apartments while the remaining two properties provide us with additional locations to expand our proven high-end renovation program. We are also excited to further grow our presence in the Ontario market which continues to generate significant same door NOI growth."

Summary of the Acquisition Properties

Property City Year Built Units
Ontario      
49 Queen Street East Cambridge 2017 153
325 Lakeview Drive Woodstock 2017 106
945 & 955 Huron Street London 1973 169
4 Treewood Street Toronto 1961 82
      510
Nova Scotia      
245 Innovation Drive Halifax 2016 58
200 Broad Street Halifax 2016 55
      113
Total     623

The aggregate purchase price for the Acquisition will initially be funded by:

  • Cash consideration of $80.1 million, funded from the Equity Offering described below;
  • Issuance of $15.0 million in Class B LP Units to Starlight at the Offer Price; and
  • New and assumed mortgage debt of $56.7 million.

Closing costs for the Acquisition and Equity Offering will be funded from the proceeds of the Equity Offering.

The new and assumed mortgage debt is expected to have an aggregate weighted average interest rate of approximately 3.1% per annum and a weighted average term to maturity of approximately six years. Following closing of the Acquisition, Northview expects to complete additional mortgage financing to provide increased liquidity. This increased liquidity will support current and future developments, value creation initiatives ("VCIs"), acquisitions, and working capital requirements.

The Acquisition is subject to customary closing conditions and is expected to close in June 2018, following completion of the Equity Offering. Although Northview has waived its due diligence conditions in relation to the Acquisition, no assurance can be given that the Acquisition will close as expected. The Equity Offering is not conditional on closing of the Acquisition.

Northview's Development Program

During late 2016 and in 2017, Northview completed developments in Calgary, AB (Phase I) and Cambridge Bay, NU totaling 297 units at a total cost of $56.8 million. These assets have reached stabilized occupancy and led to a cumulative fair value gain of $10.8 million, or 19%, relative to total development costs.

To date in 2018, Northview has completed development projects in Regina, SK and Iqaluit, NU, and is nearing completion of another project in Canmore, AB. Northview recently completed the acquisition of development land in Nanaimo, BC and expects that by the end of 2018 it will commence construction of multi-family apartments in Kitchener, ON, which will represent Northview's first development in Ontario, as well as the second phase of Northview's existing development in Calgary, AB.

Mr. Cook commented, "The development program is an integral part of Northview's three pronged growth strategy. Our development program allows Northview to enhance its portfolio by adding new assets with modern amenities that attract residents, allow for higher rental rate growth and require less ongoing maintenance capex in the near to medium term. Our developments typically yield 100 to 200 basis points higher than prevailing capitalization rates for assets that are available to acquire in their respective markets and continue to provide Northview with net asset value per unit accretion."

Summary of the Equity Offering

Northview has agreed to sell on a bought deal basis, subject to regulatory approval, 4,200,000 trust units (the "Trust Units") at a price of $26.20 per Trust Unit (the "Offer Price") for gross proceeds of approximately $110 million to a syndicate of underwriters co-led by CIBC Capital Markets and Scotiabank (the "Equity Offering").

The underwriters have been granted an over‐allotment option to purchase up to an additional 630,000 Trust Units at the Offer Price, exercisable up to 30 days after the closing of the Equity Offering. The Equity Offering is expected to close on or about June 25, 2018 and is subject to regulatory approval, including the approval of the Toronto Stock Exchange.

Northview intends to use the net proceeds from the Equity Offering to fund a portion of the Acquisition purchase price and to repay a portion of its credit facilities. These credit facilities were previously used to internally fund growth. Northview's increased borrowing capacity will support current and future developments, VCIs, acquisitions and working capital requirements.

The first cash distribution which purchasers of Trust Units under the Equity Offering will be entitled to receive will be for the month of June 2018, with an expected record date of June 29, 2018 and an expected payment date of July 16, 2018. Northview's current monthly cash distribution is $0.1358 per Trust Unit.

The Trust Units will be offered by way of a short form prospectus to be filed with the securities commissions and other similar regulatory authorities in each of the provinces and territories of Canada. The securities offered have not been registered under the U.S. Securities Act of 1933, as amended, and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements. This news release shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of the securities in any jurisdiction in which such offer, solicitation or sale would be unlawful.

Related Party Transaction

The Acquisition Properties are being acquired from Starlight for total consideration of $151.8 million (excluding closing costs), where such consideration will include the issuance of $15.0 million in Class B LP Units to Starlight. There is no fee payable to Starlight in relation to the Acquisition under the Transitional Services Agreement. Starlight will provide a one year head lease to Northview on one of the Halifax, NS properties, and the Cambridge, ON property, both of which are in the final stages of lease-up. The Acquisition and related issuance of Class B LP Units were unanimously approved by the independent trustees of Northview. Pro forma closing of the Equity Offering and the Acquisition, Daniel Drimmer, President & CEO of Starlight, together with his affiliates, will hold Trust Units and Class B LP Units of Northview representing approximately 13.9% of the total Trust Units and Class B LP Units outstanding (prior to any exercise of the underwriters' over-allotment option).

CAUTIONARY AND FORWARD-LOOKING STATEMENTS

This media release contains forward-looking statements including, but not limited to, statements relating to the Acquisition, the impact of the Acquisition on Northview, including its financial position, obtaining additional mortgage financing and the use of the proceeds therefrom, the Equity Offering and the use of the proceeds therefrom, the use of proceeds from the future draw-downs of our credit facilities, execution of our strategic priorities, including VCIs, development opportunities and initiatives, completion and occupancy of development projects, and the financial returns from our development program. These statements are not guarantees of future events, performance or results and will not necessarily be accurate indications of whether, or the times at which, such events, performance or results will be achieved.

Forward-looking statements are based on information available at the time they are made, underlying estimates and assumptions made by management and management's good faith belief with respect to future events, performance and results, and are subject to inherent risks and uncertainties surrounding future expectations generally, which could cause actual results to differ materially from what is currently expected. Such risks and uncertainties include, but are not limited to, risks related to: the failure to complete the Acquisition; real property ownership; availability of cash flow and mortgage financing; demand for rental accommodation and commercial space; natural resource prices; development and construction risks; reliance on key personnel; concentration of tenants; capital requirements; interest rate risk; credit risk; liquidity risk; general uninsured losses; government regulation; environmental risk; utility costs; potential conflicts of interest; integration of acquired properties; income tax related risk factors; and other risk factors more particularly described in Northview's most recent Annual Information Form and MD&A, both of which are available on SEDAR at www.sedar.com. Additional risks and uncertainties not presently known to Northview or that Northview currently believes to be less significant may also adversely affect Northview.

Readers are cautioned that the above list of factors is not exhaustive and that should certain risks or uncertainties materialize, or should underlying estimates or assumptions prove incorrect, actual events, performance and results may vary significantly from those expected. There can be no assurance that the actual results, performance, events or activities anticipated by Northview will be realized or, even if substantially realized, that they will have the expected consequences to, or effect on, Northview. Readers, therefore, should not place undue importance on forward-looking information. Further, these forward-looking statements speak only as of the date of this media release. Northview disclaims any intention or obligation to update or revise any forward-looking information, whether as a result of new information, future events or otherwise, except as required under applicable securities laws.

CORPORATE PROFILE

Northview is one of Canada's largest publicly traded multi-family REITs with a portfolio of approximately 25,000 quality residential suites and 1.2 million square feet of commercial space in more than 60 markets across eight provinces and two territories. Northview's well-diversified portfolio includes markets characterized by expanding populations and growing economies, which provides Northview the means to deliver stable and growing profitability and distributions to Unitholders of Northview over time. Northview currently trades on the TSX under the ticker symbol: NVU.UN. Additional information concerning Northview is available at www.sedar.com or www.northviewreit.com.

Northview Apartment Real Estate Investment Trust

Mr. Todd Cook
President and Chief Executive Officer
(403) 531-0720

Mr. Travis Beatty
Chief Financial Officer
(403) 531-0720

Mr. Leslie Veiner
Chief Operating Officer
(403) 531-0720

 

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