CALGARY, Alberta, Aug. 08, 2019 (GLOBE NEWSWIRE) -- Northview Apartment Real Estate Investment Trust ("Northview") (NVU.UN – TSX), today announced financial results for the three months and six months ended June 30, 2019.
HIGHLIGHTS
- Same door NOI increase of 2.9%, including a 3.3% increase for the multi-family business segment in the second quarter of 2019
- Multi-family portfolio occupancy of 93.4% in the second quarter of 2019, an improvement of 10 bps from the same period of 2018, and 20 bps lower than the first quarter of 2019
- Diluted FFO per unit of $0.52 for the second quarter of 2019, compared to $0.55 for the same period of 2018, both excluding Non-recurring Items
- Net fair value increase on investment properties of $27.9 million for the second quarter of 2019, including $20.8 million in Ontario resulting from continued improved operating performance
- Equity offering of $86.3 million, and issuance of $5.0 million Class B LP Units were completed in the second quarter of 2019
- Strategic acquisition of a newly built apartment complex comprising 161 suites in Guelph, ON for $52.7 million excluding closing costs was completed in the second quarter of 2019
- Debt to gross book value was 53.1% as at June 30, 2019, an improvement of 130 bps from March 31, 2019, primarily as a result of the equity offering and fair value increases on investment properties
- Cash flow from operating activities was $15.0 million for the second quarter of 2019, a $18.7 million decrease compared to the same period of 2018
- Net and comprehensive income was $78.3 million for the second quarter of 2019, a $41.3 million increase compared to the same period of 2018, primarily as a result of fair value increases on investment properties
Todd Cook, President and CEO, commented, "We are pleased with the continued revenue growth across the country and the Ontario portfolio which led all regions in generating 11.8% of same door NOI growth."
"The proceeds from our successful equity offering completed in June were used to acquire a newly constructed property in Guelph, ON and to reduce debt to gross book value to its lowest level since 2015. We continue to review opportunities to complete the deployment of the equity offering proceeds into high quality multi-family assets and land for future development," continued Mr. Cook.
"We are excited to have commenced two developments this quarter, including the first phase in Nanaimo, BC and our first concrete development in Kitchener, ON. These two projects will further enhance the quality of our portfolio in these regions and provide the opportunity to continue to drive Unitholder value through our successful development program," concluded Mr. Cook.
FINANCIAL PERFORMANCE HIGHLIGHTS
| (thousands of dollars, except per unit amounts) | Three months ended June 30 | Six months ended June 30 | ||||||||||||||
| 2019 | 2018 | Change | 2019 | 2018 | Change | |||||||||||
| Total revenue | 97,567 | 88,904 | 9.7 | % | 193,791 | 176,908 | 9.5 | % | ||||||||
| Total NOI | 58,226 | 52,754 | 10.4 | % | 109,456 | 100,282 | 9.1 | % | ||||||||
| NOI margin | 59.7 | % | 59.3 | % | 40 bps | 56.5 | % | 56.7 | % | (20 bps | ) | |||||
| Same door NOI increase | 2.9 | % | 3.3 | % | (40 bps | ) | 1.8 | % | 4.6 | % | (280 bps | ) | ||||
| Occupancy | 93.4 | % | 93.3 | % | 10 bps | 93.5 | % | 93.3 | % | 20 bps | ||||||
| Distributions declared per Trust Unit(i) | $ | 0.41 | $ | 0.41 | - | $ | 0.81 | $ | 0.81 | - | ||||||
| Measurement excluding Non-recurring Items(ii): | ||||||||||||||||
| FFO – diluted(iii) | 34,561 | 32,640 | 5.9 | % | 63,982 | 61,308 | 4.4 | % | ||||||||
| FFO per unit – diluted(iii) | $ | 0.52 | $ | 0.55 | (5.5 | %) | $ | 0.97 | $ | 1.03 | (5.8 | %) | ||||
(i) Trust Unit refers to the publicly traded Northview trust unit and the Class B LP units in the capital of Northview limited partnerships.
(ii) As further described under the heading "Non-recurring Items" below.
(iii) Funds from operations ("FFO") is considered a non-GAAP measure and does not have any standardized meaning as prescribed by generally accepted accounting principles ("GAAP"). See "Non-GAAP and Other Financial Measures" disclosure below.
Q2 2019 HIGHLIGHTS
FFO
Diluted FFO was $34.6 million for the three months ended June 30, 2019, compared to $32.6 million for the same period in 2018. The increase in diluted FFO was due to same door NOI growth of 2.9%, and NOI contributions from acquisitions and newly developed properties, partially offset by non-core assets sales since the second quarter of 2018.
Diluted FFO per unit was $0.52 for the three months ended June 30, 2019, compared to $0.55 for the same period in 2018. The 5.5% decrease was due to the 12.3% increase in the average number of units outstanding from equity issued over the past twelve months to fund growth and the disposition of non-core assets. This was offset by the NOI increase of 10.4% driven by the same door NOI growth and contributions from recent acquisitions and developments.
SAME DOOR NOI
During the three months ended June 30, 2019, same door NOI growth was 2.9%, compared to 3.3% for the same period in 2018. The multi-family portfolio generated same door NOI growth of 3.3% during the three months ended June 30, 2019, compared to an increase of 4.0% for the same period in 2018, the tenth consecutive quarter that the multi-family portfolio has generated same door NOI growth.
The same door NOI growth in the second quarter of 2019 was led by Ontario as it continued to deliver strong same door NOI growth of 11.8% due to higher revenue from increased AMR and lower operating expenses. The increase in AMR was due to the impact of acquisitions, the successful execution of the high-end renovation program and strong market conditions. AMR on suite turnover in Ontario increased by 15.2% in the second quarter of 2019, compared to 11.9% during the same period of 2018.
The same door NOI in Atlantic Canada, Quebec, and Western Canada increased by 6.0%, 5.1%, and 0.7%, respectively, from higher AMR in the second quarter of 2019. Northern Canada same door NOI decreased 7.8% during the second quarter due to higher utility and maintenance expenses partially as a result of the continued colder winter conditions. Higher utility expenses were due to increased rates and consumption of heating fuel oil, while higher maintenance expenses were due to increased levels of maintenance for the building heating systems.
STRONG REVENUE AND AMR GROWTH ACROSS THE PORTFOLIO
During the three months ended June 30, 2019, revenue increased 9.7% compared to the same period of 2018. Revenue in the multi-family business segment increased by 10.5% during the quarter compared to the same period of 2018. It was due to contributions from acquisitions and newly developed properties, higher AMR and occupancy, partially offset by the disposition of non-core assets. AMR growth on suite turnover was 6.6% during the three months ended June 30, 2019, an improvement of 90 bps compared to the same period in 2018.
Same door revenue increased by 3.1% for the three months ended June 30, 2019, compared to the same period of 2018. Same door revenue in the multi-family business segment increased 3.2% during the second quarter of 2019 compared to the same period of 2018, due to higher AMR and increased occupancy. AMR increased in all multi-family regions at 4.8%, led by a 6.5% increase in Ontario, in the second quarter of 2019, compared to the same period of 2018.
OCCUPANCY REMAINS STRONG
Occupancy was 93.4% in the second quarter of 2019, an improvement of 10 bps from the same period of 2018, versus 93.6% in the first quarter of 2019.
Ontario continued to experience strong occupancy of 96.4% during the second quarter of 2019. The improved economic conditions in Western Canada and Atlantic Canada resulted in increased occupancy by 70 bps and 110 bps, respectively, during the three months ended June 30, 2019, compared to the same period of 2018. In Western Canada, improving economic conditions in select markets combined with higher lease incentives led to increased occupancy throughout most of the portfolio. Northern Canada occupancy decreased by 20 bps to 96.9% from new supply of multi-family units in Yellowknife, NT, and the completion of a large infrastructure project, partially offset by tight supply conditions in Nunavut. Quebec occupancy decreased by 320 bps from the same period of 2018, attributable to units taken out of inventory for renovations in Montreal.
EXPANSION OF HIGH-END RENOVATION PROGRAM
The high-end renovation program expanded by 1,000 units since the first quarter of 2019 from additional properties identified. As at June 30, 2019, there are approximately 5,800 units remaining for the high-end renovation program. Northview expects to spend approximately $10 million on the program in 2019.
For the six months ended June 30, 2019, 301 high-end renovation units were completed, which generated an AMR increase of $316 per unit and an annualized NOI increase of $1.1 million. The program achieved a rate of return of 25.4% with capital expenditures of $5.8 million during the first six months of 2019.
EQUITY OFFERING COMPLETED
On June 6, 2019, Northview completed a $86.3 million equity offering. The net proceeds of the equity offering were used to repay a portion of the credit facilities which were previously drawn to fund an acquisition and the development program. Northview’s increased borrowing capacity will support current and future developments, acquisitions, and working capital requirements.
ENHANCING PORTFOLIO THROUGH ACQUISITIONS AND NON-CORE ASSET SALES
On June 3, 2019, Northview completed the acquisition of a newly built three-building apartment complex comprising 161 suites in Guelph, ON, from Starlight for $52.7 million excluding closing costs, at a Cap Rate of approximately 4.4%. The acquisition continues to support Northview’s strategy of adding high-quality assets to the portfolio in strong and growing markets.
During the second quarter of 2019, Northview completed the disposition of its non-core portfolio consisting of 240 units located in Saskatoon, SK for $19.0 million.
GROWTH THROUGH NEW DEVELOPMENT PROJECTS
Northview completed the second phase of the successful Vista development project in Calgary, AB, during the second quarter of 2019 which is 59% leased as of August 2019.
Northview has development projects underway in Kitchener, ON and Nanaimo, BC, and the first phase of each project commenced in the second quarter of 2019.
The Kitchener, ON development is a two-phase project consisting of 363 units in two concrete mid-rise buildings. The estimated total cost is $115.0 million with an expected stabilized yield between 5.0% to 5.5%. The first phase consists of 233 units with an approximate cost of $73.0 million and initial occupancy in 2021. The first phase commenced in the second quarter of 2019, and 24.5% of costs have been incurred to date. The second phase consists of 130 units and is estimated to cost $42.0 million. Northview’s in-house development team, along with an experienced local third-party construction management company, will manage the project.
The Nanaimo, BC development is a two-phase project consisting of 251 units in three buildings with four storeys. The estimated total cost is $65.0 million with an expected stabilized yield between 5.8% to 6.3%. The first phase consists of 140 units with an approximate cost of $35.0 million and initial occupancy in 2021. The first phase commenced in the second quarter of 2019, and 21.4% of costs have been incurred to date. The second phase consists of 111 units and is estimated to cost $30.0 million.
During the second quarter of 2019, Northview purchased 0.6 acres of land for future development in Ajax, ON for $1.7 million excluding closing costs. The property is adjacent to land purchased in Ajax, ON in the first quarter of 2019, which has increased the land for future development in Ajax, ON to 3.4 acres.
LEVERAGE AND STRONG COVERAGE RATIOS
Debt to gross book value was 53.1% as at June 30, 2019, an improvement of 200 bps compared to 55.1% as at June 30, 2018, and an improvement of 130 bps compared to 54.4% as at March 31, 2019 due to the equity offering and fair value increases of investment properties. The long-term target for debt to gross book value ratio is 50% to 55%. Interest and debt service coverage ratios for the twelve months ended June 30, 2019 remained strong at 2.90 and 1.62, respectively.
During the three months ended June 30, 2019, Northview completed $49.0 million of mortgage refinancing, excluding short-term financing, for multi-family properties with a weighted average interest rate of 2.32% and an average term to maturity of 6.6 years.
NON-RECURRING ITEMS
During the three and six months ended June 30, 2019, Northview received insurance proceeds of $2.2 million and $2.8 million, respectively, relating to a fire in Lethbridge, AB. During the year ended December 31, 2018, Northview received total insurance proceeds of $2.7 million relating to a fire in Lethbridge, 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 INFORMATION
Northview’s consolidated financial statements, the notes thereto, and Management’s Discussion and Analysis for the three and six months ended June 30, 2019, 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 high-end renovation program and organic growth within our portfolio, development and acquisition opportunities, and completion and occupancy of development projects. 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.
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 9, 2019
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: 1796277
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 27,000 residential units 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