CALGARY, Alberta, Nov. 07, 2019 (GLOBE NEWSWIRE) -- Northview Apartment Real Estate Investment Trust (“Northview”) (NVU.UN – TSX), today announced financial results for the three and nine months ended September 30, 2019.
HIGHLIGHTS
- Same door NOI increase of 3.4%, including a 4.4% increase for the multi-family business segment, with increases in all regions in the third quarter of 2019
- Multi-family portfolio occupancy of 93.5% in the third quarter of 2019, an improvement of 10 bps from the second quarter of 2019, and consistent with the same period of 2018
- Diluted FFO per unit of $0.57 for the third quarter of 2019, compared to $0.58 for the same period of 2018, both excluding Non-recurring Items
- Net fair value increase on investment properties of $122.1 million for the third quarter of 2019, as a result of strong operating performance and Cap Rate reduction in Ontario
- Debt to gross book value was 51.9% as at September 30, 2019, 120 bps lower than at June 30, 2019
- Cash flow from operating activities was $45.2 million for the third quarter of 2019, a $4.3 million increase compared to the same period of 2018
- Net and comprehensive income was $139.5 million for the third quarter of 2019, a $71.7 million increase compared to the same period of 2018
Todd Cook, President and CEO, commented, “We are pleased with the sustained momentum of same door NOI growth across the portfolio led by Ontario with 8.3%. The ongoing strong performance in Ontario generated $122 million in fair value gains on our properties in the quarter and further reduced the REIT’s leverage to its lowest level since 2015.”
“We continue to enhance the quality of our portfolio with the recent disposition of non-core assets in Moncton and Medicine Hat, and acquisitions in Halifax and Langford. We are well-positioned to execute on our proven external growth strategy as we deploy the remaining proceeds from our June equity offering,” continued Mr. Cook.
“Our current developments in Kitchener, Nanaimo, and Iqaluit are progressing according to plan. Our focused development program will continue to deliver quality assets to our portfolio and generate NAV growth for our Unitholders,” concluded Mr. Cook.
FINANCIAL PERFORMANCE HIGHLIGHTS
| (thousands of dollars, except per unit amounts) | Three months ended September 30 | Nine months ended September 30 | ||||||||
| 2019 | 2018 | Change | 2019 | 2018 | Change | |||||
| Total revenue | 98,921 | 93,019 | 6.3% | 292,712 | 269,927 | 8.4% | ||||
| Total NOI | 62,550 | 58,136 | 7.6% | 172,006 | 158,418 | 8.6% | ||||
| NOI margin | 63.2% | 62.5% | 70 bps | 58.8% | 58.7% | 10 bps | ||||
| Same door NOI increase | 3.4% | 3.6% | (20 bps) | 2.4% | 4.1% | (170 bps) | ||||
| Occupancy | 93.5% | 93.5% | - | 93.5% | 93.4% | 10 bps | ||||
| Distributions declared per Trust Unit(i) | $0.41 | $0.41 | - | $1.22 | $1.22 | - | ||||
| Measurement excluding Non-recurring Items(ii): | ||||||||||
| FFO – diluted(iii) | 39,649 | 37,198 | 6.6% | 103,631 | 98,506 | 5.2% | ||||
| FFO per unit – diluted(iii) | $0.57 | $0.58 | (1.7%) | $1.54 | $1.61 | (4.3%) | ||||
(i) Trust Unit refers to the publicly traded Northview trust units 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.
Q3 2019 HIGHLIGHTS
FFO
Diluted FFO was $39.6 million for the three months ended September 30, 2019, compared to $37.2 million for the same period in 2018. The increase in diluted FFO was due to same door net operating income (“NOI”) growth of 3.4%, NOI contributions from acquisitions and newly developed properties, partially offset by non-core assets sales since the third quarter of 2018.
Diluted FFO per unit was $0.57 for the three months ended September 30, 2019, compared to $0.58 for the same period in 2018. NOI growth of 7.6% increased FFO per unit. These were more than offset by a 7.2% increase in the average number of units outstanding from equity issued over the past twelve months with proceeds used to fund acquisitions and developments that enhance the overall quality of the REIT’s portfolio, as well as from the disposition of non-core assets.
SAME DOOR NOI GROWTH ACROSS ALL MULTI-FAMILY REGIONS
During the three months ended September 30, 2019, same door NOI growth was 3.4%, compared to 3.6% for the same period in 2018. Positive trends continue for the multi-family portfolio which generated 4.4% of same door NOI growth during the three months ended September 30, 2019, compared to an increase of 4.0% for the same period in 2018.
All multi-family regions achieved positive same door NOI growth during the third quarter of 2019, led by Ontario as it delivered a same door NOI increase of 8.3% due to higher revenue from increased average monthly rent (“AMR”) and a one-time property tax refund. The increase in AMR was due to the impact of acquisitions, successful execution of the high-end renovation program, and strong market conditions. AMR on suite turnover in Ontario was 16.4% in the third quarter of 2019, compared to 12.6% during the same period of 2018. Same door NOI was positively impacted by a one-time property tax refund of $0.3 million as a result of successful property tax appeals in Ontario. Northern Canada achieved 4.6% same door NOI growth due to higher revenue and lower operating expenses as utility and maintenance expenses returned to normal seasonal levels in the current quarter. Atlantic Canada, Western Canada, and Quebec same door NOI increased by 2.9%, 0.8%, and 0.8%, respectively, due to higher revenue from increased AMR.
ONTARIO GENERATES FAIR VALUE INCREASE ON INVESTMENT PROPERTIES
During the third quarter of 2019, fair value increases on investment properties was $122.1 million. Of the total fair value increases, $88.2 million was related to ongoing strong operating performance and $33.9 million from capitalization rate (“Cap Rate”) compression primarily in Ontario. The weighted average Cap Rate for the portfolio was 5.76% as at September 30, 2019, a reduction of 16 bps from December 31, 2018.
The properties acquired through the strategic relationship with Starlight represented 29% or $35.1 million of the fair value increases in the third quarter bringing the cumulative net fair value increase of these properties to $54.0 million. This demonstrates Northview’s success in adding value to the properties acquired through the strategic relationship with Starlight.
STRONG REVENUE AND AMR GROWTH
During the three months ended September 30, 2019, revenue increased by 6.3% compared to the same period of 2018. Revenue in the multi-family business segment increased by 7.4% during the quarter compared to the same period of 2018. The increase was due to contributions from acquisitions and newly developed properties, higher AMR and strong occupancy, partially offset by the disposition of non-core assets. AMR growth on suite turnover was 7.1% during the third quarter, an improvement of 210 bps compared to the same period in 2018.
Same door revenue increased by 2.2% for the three months ended September 30, 2019, compared to the same period of 2018. Same door revenue in the multi-family business segment increased by 2.8% during the third quarter compared to the same period of 2018, due to higher AMR. AMR increased in all multi-family regions resulting in an average of 4.7%, led by Ontario and Western Canada at 5.3% and 5.6%, respectively, in the third quarter of 2019, compared to the same period of 2018.
OCCUPANCY REMAINS STRONG
Occupancy was 93.5% in the third quarter of 2019, consistent with the same period of 2018, and an improvement of 10 bps from the second quarter of 2019. Ontario continued to experience strong occupancy of 96.6% during the third quarter of 2019. Northern Canada occupancy increased by 30 bps to 97.4% from tight supply conditions in Nunavut and corporate leases in Inuvik, NT to accommodate construction crews working on local infrastructure projects. Quebec occupancy decreased by 120 bps from the same period of 2018 due to higher turnover in the third quarter of 2019. Occupancy in Western Canada and Atlantic Canada was 86.7% and 95.6%, respectively, consistent with the same period of 2018.
HIGH-END RENOVATION PROGRAM
The high-end renovation program involves substantive suite improvements with complete bathroom and kitchen renovations and may involve upgrades to the properties’ common areas to increase rents. As at September 30, 2019, there are approximately 5,700 units remaining for the high-end renovation program. Northview expects to spend approximately $13 million on the program in 2019.
For the nine months ended September 30, 2019, 514 high-end renovation units were completed, generating an AMR increase of $314 per unit and an annualized NOI increase of $1.9 million. The program achieved a rate of return of 26.5% with capital expenditures of $9.8 million during the first nine months of 2019.
STRATEGIC ACQUISITION AND NON-CORE ASSET SALES
Northview completed the acquisition of a mixed-use property in Halifax, NS for $12.5 million during the third quarter of 2019. Subsequently, Northview acquired a property in Langford, BC for $17.6 million in October 2019. Northview has completed $94.8 million of acquisitions year to date, excluding closing costs. Acquisitions continue to support Northview’s strategy of adding high-quality assets to the portfolio in growing markets.
During the third quarter of 2019, Northview completed the disposition of a non-core portfolio consisting of 112 units located in Moncton, NB for $5.3 million. In October 2019, Northview completed the disposition of a non-core property in Medicine Hat, AB for $10.4 million. Northview has disposed $36.4 million of non-core assets year to date.
GROWTH THROUGH DEVELOPMENT
Northview commenced a new development in Iqaluit, NU in the third quarter of 2019. Northview has three development projects underway in Kitchener, ON, Nanaimo, BC, and Iqaluit, NU.
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 commenced in the second quarter of 2019 with initial occupancy in 2021. It consists of 233 units with an approximate cost of $73.0 million. As at September 30, 2019, 30% of the approximate cost have been incurred to date for the first phase. The second phase consists of 130 units and is estimated to cost $42.0 million.
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 commenced in the second quarter of 2019 with initial occupancy in 2021. It consists of 140 units with an approximate cost of $35.0 million. As at September 30, 2019, 27% of the approximate cost have been incurred to date for the first phase. The second phase consists of 111 units and is estimated to cost $30.0 million.
The Iqaluit, NU development consists of 30 units and approximately 5,900 sq. ft. of commercial space with an estimated total cost of $10.0 million and an expected stabilized yield between 9.0% to 9.5%. Initial occupancy is expected to be in the first quarter of 2020. As at September 30, 2019, 54% of the estimated total cost have been incurred to date.
Northview has recorded a total fair value increase of $7.4 million or 27% of cost on the development project in Canmore, AB. The second phase of the successful Vista development project in Calgary, AB, was completed in the second quarter of 2019, is currently 70% leased. The development project consists of 158 units at a cost of $30.0 million.
REDUCED LEVERAGE AND STRONG COVERAGE RATIOS
Debt to gross book value was 51.9% as at September 30, 2019, an improvement of 270 bps compared to 54.6% as at September 30, 2018, and an improvement of 120 bps compared to 53.1% as at June 30, 2019 due to fair value increases on 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 September 30, 2019 remained strong at 2.88 and 1.60, respectively.
During the three months ended September 30, 2019, Northview completed $223.5 million of mortgage financing, excluding short-term financing, for multi-family properties with a weighted average interest rate of 2.41% and an average term to maturity of 8.1 years. Northview continues to monitor interest rates to identify opportunities for reducing its overall borrowing cost.
NON-RECURRING ITEMS
During the three and nine months ended September 30, 2019, Northview received insurance proceeds of $0.2 million and $3.0 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 nine months ended September 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, November 8, 2019
Time: 2:00 p.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: 4267667
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