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Northview Apartment REIT Announces Q2 2018 Financial Results, Including Same Door NOI Growth of 3.3% and Continued Execution of Growth Strategy Through Strategic Acquisitions and Developments

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CALGARY, Alberta, Aug. 02, 2018 (GLOBE NEWSWIRE) -- Northview Apartment Real Estate Investment Trust ("Northview") (NVU.UN – TSX), today announced financial results for the three and six months ended June 30, 2018.

HIGHLIGHTS

  • Diluted FFO per unit of $0.55 for the second quarter of 2018, compared to $0.54 for the same period of 2017, excluding Non-recurring Items 

  • Same door NOI increase of 3.3%, including 4.0% increase for multi-family business segment for the second quarter of 2018

  • Multi-family portfolio occupancy of 93.3% in the second quarter of 2018, consistent with the first quarter of 2018, and an improvement of 100 basis points ("bps") from the same period of 2017

  • Annualized NOI increase from Value Creation Initiatives ("VCIs") related to the 2015 Transaction was $1.1 million for the second quarter of 2018, bringing the cumulative progress to $8.7 million since November 1, 2015

  • Total net fair value increase of $13.2 million on investment properties in the second quarter of 2018, including $12.5 million net fair value increase in Ontario driven by higher NOI

  • Debt to gross book value declined 190 bps from March 31, 2018, to 55.1%

  • Strategic acquisition of a 623 unit portfolio in Ontario and Nova Scotia for $151.8 million (the "Acquisition") in the second quarter of 2018 bringing total acquisitions to $194.6 million in 2018

  • Equity offering of $126.5 million and issuance of $15.0 million Class B LP Units, funding a portion of the Acquisition

Todd Cook, President and CEO, commented, "We are pleased to maintain the momentum of same door NOI growth across all our multi-family regions, combined with successful delivery on our value creation initiatives."

"The recent acquisitions in Ontario and Nova Scotia further geographic diversification, enhance the quality of our portfolio with 60% of the properties less than two years old, and will provide opportunities to expand our successful high-end renovation program which continues to generate strong returns," continued Mr. Cook.

Mr. Cook concluded, "Our development program continues to deliver quality assets and NAV creation for our Unitholders. The Canmore, AB, development will be completed in the fall and is experiencing strong demand. Planning for future developments on our Kitchener, ON, and Nanaimo, BC, land acquisitions is underway and further expands our program into strong and growing markets across Canada."


FINANCIAL PERFORMANCE HIGHLIGHTS

(thousands of dollars, except per unit amounts) Three months ended
June 30
Six months ended
June 30
    2018   2017 Change   2018   2017 Change
Total revenue   88,904   82,013 8.4%   176,908   162,962 8.6%
Total NOI   52,754   48,253 9.3%   100,282   90,591 10.7%
NOI margin   59.3%   58.8% 50bps   56.7%   55.6% 110bps
Same door NOI increase (decrease)   3.3%   3.9% (60bps)   4.6%   1.9% 270bps
Occupancy   93.3%   92.3% 100bps   93.3%   91.4% 190 bps
Distributions declared per Trust Unit(i)   $0.41   $0.41   $0.81   $0.81
             
Measurement excluding Non-recurring Items(ii):            
FFO – diluted   32,640   30,816 5.9%   61,308   55,857 9.8%
FFO per unit – diluted   $0.55   $0.54 1.9%   $1.03   $0.98 5.1%

Funds from operations ("FFO") is considered a non-GAAP measure and do not have any standardized meaning as prescribed by generally accepted accounting principles ("GAAP"). See "Non-GAAP and Other Financial Measures" disclosure below.

(i) Trust Unit refers to the publicly traded Northview Trust Unit and the Class B LP Unit.
(ii) See "Non-recurring Items" disclosure below.

Q2 2018 HIGHLIGHTS

FFO

Diluted FFO was $32.6 million for the three months ended June 30, 2018, compared to $30.8 million for the same period in 2017. Diluted FFO per unit was $0.55 for the three months ended June 30, 2018, an increase of 1.9%, compared to $0.54 for the same period in 2017. The increase in FFO and FFO per unit for the second quarter of 2018, compared to the same period in 2017, was due to same door NOI growth, NOI contributions from acquisitions and newly developed properties completed, partially offset by non-core asset sales completed since the second quarter of 2017.

SAME DOOR NOI GROWTH ACROSS ALL MULTI-FAMILY REGIONS

During the three months ended June 30, 2018, total same door NOI growth was 3.3%, compared to total same door NOI increase of 3.9% for the same period in 2017. Same door NOI increased 4.0% for the multi-family business segment during the three months ended June 30, 2018, compared to an increase of 4.1% for the same period in 2017. The multi-family same door NOI increase was attributable to higher AMR and occupancy across all regions.

Ontario delivered strong same door growth of $0.7 million or 5.8% during the quarter. Same door NOI increased due to an increase in AMR and electricity cost savings, partially offset by higher operating expenses.

In Western Canada, multi-family same door NOI increased 2.4% in the second quarter of 2018, mainly due to increased revenue from higher AMR while operating expenses remained flat.

AMR and occupancy improvements in Quebec, Northern Canada, and Atlantic Canada resulted in same door NOI increases during the quarter of 7.5%, 4.2%, and 0.2%, respectively. In addition, cost savings from the internalization of property management and lower utilities, largely offset by higher maintenance where Northview is in the process of establishing an in-house maintenance function to reduce reliance on external contractors, where applicable, to manage costs, contributed to the same door NOI growth in Quebec and Atlantic Canada.

NOI margin has improved to 59.3% as a result of revenue increase of 8.4% and effective management of controllable expenses in the second quarter of 2018, compared to NOI margin of 58.8% during the same period of 2017.

STRONG TRACTION ON VALUE CREATION INITIATIVES

VCIs resulted in approximately $1.1 million of additional annualized NOI in the second quarter of 2018. The cumulative progress on VCIs is $8.7 million since November 1, 2015, which is 61% of the initial five-year target of $14.3 million established in 2015.

The high-end renovation program continues to be successful, achieving an average rate of return of 26% year to date and 21% inception to date, exceeding the target rate of return of 15% to 20%. During the quarter, 157 units relating to the 2015 Transaction were completed with an AMR increase of approximately $283 per unit. For the six months ended June 30, 2018, 270 units have been completed along with an additional 39 units as part of the acquisitions completed in December 2017.

With the success of the program, management continues to evaluate additional properties and suites for high-end renovations to expand the program. As part of the acquisitions completed in December 2017 and June 2018, an additional 1,100 units have been identified suitable for the high-end renovation program. Management expects to complete approximately 500 units in total under the high-end renovation program in 2018.

OCCUPANCY REMAINS STRONG ACROSS THE PORTFOLIO

For the three months ended June 30, 2018, occupancy improved by 100 bps to 93.3%, compared to the same period of 2017 and remains consistent with the first quarter of 2018. Occupancy in all regions increased in the quarter compared to the same period of 2017, with Northern Canada showing the largest improvement increasing 260 bps to 97.1% as a result from higher market rents, combined with an increase in corporate leases.

STRATEGIC ACQUISITIONS OF $151.8 MILLION

During the second quarter of 2018, Northview acquired a 623 unit portfolio of six apartment properties in Ontario and Nova Scotia from affiliates of Starlight Group Properties Holdings Inc. for $151.8 million, representing a weighted average capitalization rate of 4.5%. In connection with the Acquisition, Northview closed a $126.5 million equity offering and issuance of $15.0 million Class B LP Units during the quarter. The net proceeds of the equity offering were used to fund a portion of the Acquisition and to repay a portion of the credit facilities which were previously drawn to fund the development program.

GROWTH THROUGH NEW DEVELOPMENT PROJECTS

Northview plans to commence development projects with total cost of approximately $50 to $100 million in 2018 in Calgary, AB, and on recently purchased land in Kitchener, ON.

The Calgary, AB, development consisting of 158 units, commenced in the second quarter of 2018 with initial occupancy expected in the second quarter of 2019. The development is phase two of the successful Vista project and is built on land owned by Northview. Total development costs are estimated to be $30.0 million with an expected stabilized Cap Rate between 6.0% and 6.5%.

The Kitchener, ON, development, expected to commence in late 2018, supports Northview's strategic goal of bringing in-house development expertise to the strong markets in Ontario which is expected to continue to drive growth in net asset value.

In the second quarter, Northview completed the acquisition of development land in Nanaimo, BC, for $6.3 million.

The Canmore, AB, development is nearing completion with initial occupancy expected in the third quarter of 2018 with total estimated development costs of $25.0 million. Demand has been strong and a short lease-up is expected.

During the first quarter of 2018, Northview completed the development of 132 units in Regina, SK, and 30 units along with approximately 11,000 square feet of commercial space in Iqaluit, NU. In Regina, SK, the property is 90% leased as at July 31, 2018, which is ahead of expectations, and the multi-family units in Iqaluit, NU, were 100% leased during the second quarter of 2018. On these two projects, Northview recorded a net fair value increase of $7.1 million or 22% relative to total development costs in the first quarter of 2018.

STRONG COVERAGE RATIOS

Debt to gross book value decreased by 190 bps from the prior quarter to 55.1% as at June 30, 2018, as a result of the equity offering. Interest and debt service coverage ratios for the twelve months ended June 30, 2018, remain strong at 3.03 and 1.63, respectively.

Northview continues to monitor interest rates to identify opportunities to reduce its overall borrowing costs. During the three months ended June 30, 2018, Northview completed $60.5 million of mortgage refinancing, excluding short-term financing, for multi-family properties with a weighted average interest rate of 3.27% and an average term to maturity of 4.3 years.

FINANCIAL INFORMATION

Northview's consolidated financial statements, the notes thereto, and Management's Discussion and Analysis for the three and six months ended June 30, 2018, can be found on Northview's website at www.northviewreit.com or www.sedar.com.

CAUTIONARY AND FORWARD-LOOKING STATEMENTS 

This media release contains forward-looking statements including, but not limited to, statements relating to execution of our strategic priorities, including VCIs and organic growth within our portfolio, development and acquisition opportunities, completion and occupancy of development projects, and opportunities for the reduction of weighted average interest rates. 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: 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 the most recent Annual Information Form 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, forward-looking statements speak only as of the date on which such statements are made. 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.

NON-GAAP AND OTHER FINANCIAL MEASURES

Certain measures in this media release do not have any standardized meaning as prescribed by GAAP and, therefore, are considered non-GAAP measures. These measures are provided to enhance the readers' overall understanding of our current financial condition. They are included to provide investors and management with an alternative method for assessing our operating results in a manner that is focused on the performance of our ongoing operations and to provide a more consistent basis for comparison between periods. These measures include widely accepted measures of performance for Canadian real estate investment trusts; however, the measures are not defined by GAAP. In addition, these measures are subject to the interpretation of definitions by the preparers of financial statements and may not be applied consistently between real estate entities. Please refer to Northview's most recent Management's Discussion and Analysis for definitions of non-GAAP and other financial measures, including FFO, debt to gross book value, debt service coverage and interest coverage.

NON-RECURRING ITEMS

During the six months ended June 30, 2018, Northview received insurance proceeds of $0.4 million relating to a fire in Lethbridge, AB. During the year ended December 31, 2017, Northview received total insurance proceeds of $0.9 million relating to the wildfires in Fort McMurray, AB, and the fire in Lethbridge, AB. During the year ended December 31, 2016, Northview received total insurance proceeds of $7.1 million for the wildfires in Fort McMurray, AB, the 2015 fire in Yellowknife, NT, and a property in Fort McMurray, AB. In addition, Northview had $1.6 million of lost revenue and $1.6 million of incremental costs relating to the wildfires in Fort McMurray, AB. These items have been defined as "Non-recurring Items", as they are not considered normal operating conditions, and management has presented some performance metrics adjusting for Non-recurring Items where appropriate.

FINANCIAL RESULTS CONFERENCE CALL AND WEBCAST

Participating on the conference call and webcast will be Mr. Todd Cook, President and Chief Executive Officer, Mr. Travis Beatty, Chief Financial Officer, and Mr. Leslie Veiner, Chief Operating Officer.

WEBCAST INFORMATION
Date: Friday, August 3, 2018
Time: 08:00 a.m. Mountain Time, 10:00 a.m. Eastern Time
Webcast: www.northviewreit.com/investor-relations/presentations

CONFERENCE CALL INFORMATION
Dial In: 1-855-473-4527 or 1-661-378-9963
Conference ID: 2897477

REPLAY INFORMATION
The webcast will be available for replay two hours after the conference call ends and will be available at:
www.northviewreit.com/investor-relations/presentations

CORPORATE PROFILE

Northview is one of Canada's largest publicly traded multi-family REITs with a portfolio of approximately 26,000 quality residential suites and 1.2 million square feet of commercial space in over 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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