CALGARY, ALBERTA–(Marketwired – May 9, 2017) – Northview Apartment Real Estate Investment Trust (“Northview”) (TSX:NVU.UN), today announced financial results for the three months ended March 31, 2017. Diluted FFO per unit was $0.44 for the three months ended March 31, 2017, compared to $0.49 for the same period in 2016, excluding Non-recurring Items.
Todd Cook, President and CEO, commented, “We are pleased with the results for the quarter, particularly the return to same door NOI growth in the multi-family portfolio, led by Ontario. In Western Canada, we are starting to see stabilization in most markets for the first time in three years.”
Mr. Cook concluded, “The strengthening of our balance sheet in 2016 through non-core asset sales and the October equity raise leaves Northview well positioned to continue to deliver Unitholder value through execution of our 2017 strategic priorities. We are seeing many opportunities for capital recycling and are excited to be executing on our 2017 development program in the coming months.”
Financial Performance Highlights
| (thousands of dollars, except per unit amounts) | Three months ended March 31 | ||||
| 2017 | 2016 | Change | |||
| NOI | 42,338 | 42,964 | (1.5%) | ||
| Same door NOI change – multi-family | 0.5% | (3.5%) | 4.0% | ||
| NOI margin | 52.3% | 52.2% | 0.1% | ||
| FFO – diluted | 25,036 | 30,337 | (17.5%) | ||
| Excluding Non-recurring Items(i): | |||||
| FFO – diluted | 25,036 | 26,322 | (4.9%) | ||
| FFO per unit – diluted | $ | 0.44 | $ | 0.49 | (10.2%) |
| Distributions declared per Trust Unit(ii) | $ | 0.41 | $ | 0.41 | – |
| Net operating income (“NOI”) and funds from operations (“FFO”) are considered non-GAAP measures and do not have any standardized meaning as prescribed by generally accepted accounting principles (“GAAP”). See “Non-GAAP and Additional GAAP Measures” disclosure below. | |||||
| (i) Non-recurring Items in the three months ended March 31, 2016, are comprised of insurance proceeds of $4.0 million, which are excluded from NOI, same door NOI change, and NOI margin. | |||||
| (ii) Trust Unit refers to the publicly traded Northview Trust Unit and the Class B LP Unit. | |||||
Summary of Q1 2017
Funds From Operations
Diluted FFO per unit was $0.44 for the three months ended March 31, 2017, compared to $0.49 for the same period in 2016, excluding Non-recurring Items. The decrease in FFO on a per unit basis in the quarter was primarily driven by non-core asset sales, lower operating performance in natural resource based markets, and dilution from the equity offering completed in October 2016.
Positive Same Door NOI Growth of 0.5% in Multi-Family Residential Portfolio
During the first quarter of 2017, same door NOI increased 0.5% for the multi-family residential portfolio compared to the same door NOI decrease of 7.9% and 3.5% in 2016 and Q1 2016, respectively. The Value Creation Initiatives (“VCIs”) and property management internalization cost savings contributed to same door NOI growth in Ontario during the quarter, partially offset by higher property tax and utilities. Ontario same door NOI growth was 2.4%, or 4.7% excluding one-time headlease income in the first quarter of 2016. Atlantic Canada same door NOI increased by 11.1% compared to the same period of 2016 due to lower electricity expense in Nova Scotia. The increases were offset by same door NOI decline of 3.9% in Western Canada from higher lease incentives and reduced average occupied rents (“AMR”) to manage occupancy levels, and declines of 0.8% and 1.5% in Northern Canada and Quebec, respectively.
Higher AMR of 5.0% in Ontario from Proven VCI Success
The AMR in Ontario had an increase of 5.0% in Q1 2017 due to the successful execution of the VCIs and strong market conditions. In addition, Northern Canada had a slight increase in AMR from higher rents on lease renewals. These increases in AMR were partially offset by Western Canada, Atlantic Canada, and Quebec.
Occupancy Remains Stable with Balanced Conditions Across the Portfolio
The Ontario, Northern Canada, Atlantic Canada, and Quebec regions, along with southern British Columbia operations, continue to maintain stable high occupancy performance which contributed to overall occupancy of 90.6% for the three months ended March 31, 2017, compared to 90.7% in Q1 2016. These regions continue to offset the poor economic conditions throughout the resource based markets in Western Canada.
Future Growth From New Development Projects
During Q1 2017, Northview initiated new development plans in Regina, SK, Iqaluit, NU, and Canmore, AB.
The Regina, SK, development consists of 132 units, with construction to commence in the second quarter of 2017. Total development costs are estimated to be $22.3 million with an expected stabilized Cap Rate between 7.0% and 7.5%.
The developments in Iqaluit, NU, consist of 30 units and 11,400 square feet of commercial space, with construction to commence in the second quarter of 2017. Total development costs are estimated to be $9.4 million with the expected stabilized Cap Rate between 9.0% and 9.5%.
Northview was successful in its bid on a request for proposal issued by the Town of Canmore to develop rental housing in Canmore, AB. The development will consist of 140 units and 40 staff housing beds, with construction expected to commence in the second quarter of 2017. Total development costs are estimated to be $23.3 million with an expected stabilized Cap Rate between 7.0% and 7.5%.
Strong Coverage Ratios
Northview maintained strong interest coverage and debt service coverage ratios of 2.88 and 1.62, respectively, as at March 31, 2017. Northview continues to monitor interest rates to identify opportunities for the reduction of its weighted average interest rate. For the three months ended March 31, 2017, Northview completed $22.4 million in mortgage refinancing with a weighted average interest rate of 3.12% and an average term to maturity of 7.7 years.
2017 Strategic Priorities Progress
1. Organic Growth
Northview will continue to focus on improving occupancy, monthly rents and operating expense management, which would drive increases in same door NOI. Continued execution of the VCIs in 2017 is expected to contribute to organic growth.
Northview has achieved success in organic growth with same door NOI growth of 0.5% across the multi-family residential portfolio. Progress continues on VCIs with annualized NOI increase of $0.6 million in the first quarter of 2017, including $0.3 million from the high-end renovation program, bringing the cumulative progress to $3.3 million since November 1, 2015, excluding property management internalization.
2. Managing Leverage
Northview’s long-term target for debt to gross book value is 50% to 55%. With the significant reduction in leverage achieved in 2016, leverage reduction for the near to mid-term will be achieved through improvements in asset values driven by the successful execution of the VCIs and developments.
Debt to gross book value, excluding convertible debentures, was 57.8% as at March 31, 2017, compared to 57.5% as at December 31, 2016.
3. Capital Deployment in Support of External Growth
With significant progress on leverage reduction achieved in 2016 through the successful equity offering and asset sales, management is focused on organic growth, capital redeployment and external growth opportunities. Northview will continue to utilize its existing land investments for developments, in addition to redeployment of selected investments in land to expand the in-house development program to Ontario. Proceeds from the sale of non-core assets are expected to be redeployed for growth through developments and selected acquisitions in Northview’s stronger markets, primarily in Ontario.
During the first quarter of 2017, Northview completed $23.4 million of non-core asset sales, with a further $16.4 million in dispositions currently under contract. These sales bring the cumulative amount sold and under contract to $88.4 million since January 2016. Upon the completion of these sales, which were primarily directed to leverage reduction, future non-core asset sales are expected to support capital redeployment and external growth opportunities through developments and selected acquisitions.
Financial Information
Northview’s condensed consolidated financial statements and the notes thereto and Management’s Discussion and Analysis for the three months ended March 31, 2017, 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 2017 strategic priorities, including VCIs and organic growth within our portfolio, development and acquisition opportunities, closing of non-core asset dispositions completed and under contract, 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 Additional GAAP 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 reader’s 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 the first quarter 2017 Management’s Discussion and Analysis for definitions of non-GAAP and additional GAAP measures, including NOI, FFO, debt to gross book value, debt service coverage and interest coverage.
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. Please connect approximately 10 minutes before the beginning of the conference call and webcast.
| Webcast Information: |
| Date: Wednesday, May 10, 2017 |
| Time: 10:00 a.m. Mountain Time, 12:00 p.m. Eastern Time |
| Webcast: www.northviewreit.com/investor-relations/presentations. |
| Conference Call Information (Audio Only): |
| Dial In: 1-844-866-7032 or 1-414-238-9861 |
| Conference ID: 1531119. |
| 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 24,000 quality residential suites in more than 60 markets across eight provinces and two territories. Northview’s portfolio includes markets characterized by expanding populations, growing economies, high occupancy levels, and rising rents, which provides Northview the means to deliver stable and growing profitability and cash 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.
Mr. Todd Cook
President and Chief Executive Officer
(403) 531-0720
Northview Apartment Real Estate Investment Trust
Mr. Travis Beatty
Chief Financial Officer
(403) 531-0720
Northview Apartment Real Estate Investment Trust
Mr. Leslie Veiner
Chief Operating Officer
(403) 531-0720