CALGARY, Alberta, Feb. 27, 2018 (GLOBE NEWSWIRE) — Northview Apartment Real Estate Investment Trust (“Northview”) (TSX:NVU.UN), today announced financial results for the three months and year ended December 31, 2017.
- Diluted FFO per unit of $0.51 and $2.08 for the three months and year ended December 31, 2017, compared to $0.48 and $2.14 for the same period of 2016, respectively
- Same door NOI increase of 6.4% and 4.3% for the three months and year ended December 31, 2017, respectively
- Annualized NOI increase from Value Creation Initiatives (“VCIs”) of $4.1 million in 2017, bringing the cumulative progress to $6.8 million since November 1, 2015
- Net fair value increase on investment properties of $56 million and $141 million for the three months and year ended December 31, 2017, respectively
- Debt to gross book value was 56.4% as at December 31, 2017, a reduction of 1.1% from December 31, 2016, from organic growth and rising property values
- Completed the largest Canadian multi-family acquisition transaction in 2017 of 1,250 multi-family units for $196.8 million during the fourth quarter
- First new development in Ontario expected to commence in 2018 for land recently acquired in Kitchener, ON
Todd Cook, President and CEO commented, “We are pleased with the significant progress the REIT has made on its 2017 strategic priorities. We delivered strong same door NOI growth of 6.4% in the fourth quarter and 4.3% for the year, led by continued strong operating performance in Ontario and Western Canada. This organic growth combined with fair value increases in our properties resulted in continued reduction in leverage by 1.1%. With $239 million of acquisitions and $82 million of non-core asset sales in 2017, we continued our strategic capital deployment to improve the quality and diversification of our portfolio.”
“We continued to make progress on our development program, with $56 million expected to come online during 2018. We expect to start construction on our first Ontario development in Kitchener, ON, later in 2018,” continued Mr. Cook.
Mr. Cook concluded, “With our solid balance sheet, strong coverage ratios, and experienced executive leadership team and Board of Trustees; Northview is well positioned to continue executing on its strategic priorities and creating value for our Unitholders in 2018.”
FINANCIAL PERFORMANCE HIGHLIGHTS
|(thousands of dollars, except per unit amounts)||Three months ended
|Measurement excluding Non-recurring Items(i):|
|NOI margin||55.9%||53.8%||2.1%||57.2%||55.5 %||1.7 %|
|Same door NOI change||6.4%||(5.7%||)||12.1%||4.3%||(5.9%||)||10.2%|
|FFO – diluted||29,137||26,994||7.9%||118,597||115,331||2.8%|
|FFO per unit – diluted||$||0.51||$||0.48||6.3%||$||2.08||$||2.14||(2.8%||)|
|AFFO – diluted||23,507||n/a||n/a||96,481||n/a||n/a|
|AFFO per unit – diluted||$||0.41||n/a||n/a||$||1.69||n/a||n/a|
|Distributions declared per Trust Unit(ii)||$||0.41||$||0.41||–||$||1.63||$||1.63||–|
Net operating income (“NOI”), funds from operations (“FFO”), and adjusted funds from operations (“AFFO”) 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) See “Non-recurring Items” disclosure below.
(ii) Trust Unit refers to the publicly traded Northview Trust Unit and the Class B LP Unit.
PROGRESS MADE ON 2017 STRATEGIC PRIORITIES
1. ORGANIC GROWTH
During the year ended December 31, 2017, Northview generated strong organic growth with same door NOI increasing 4.3%. This included same door multi-family increases of 7.1% in Ontario and 5.0% in Western Canada. All other multi-family regions also achieved positive same door NOI growth between 2.0% to 5.0%.
Progress continues on VCIs with an annualized NOI increase of $4.1 million for the year ended December 31, 2017. The high-end renovation program delivered an average rate of return of 23% in 2017, exceeding the targeted rate of return range of 15% to 20%. The cumulative progress on VCIs since November 1, 2015, is $6.8 million. In addition, Northview’s portfolio of over 25,000 units will be fully internally managed by the end of the first quarter in 2018 bringing the total cumulative annualized savings to $2.9 million.
2. MANAGING LEVERAGE
Debt to gross book value was 56.4% as at December 31, 2017, which is a reduction of 1.1% from December 31, 2016, and 3.8% from June 30, 2016. In 2017, improvements to leverage were the result of organic growth initiatives and increases in investment property values, particularly in Ontario.
3. STRATEGIC CAPITAL DEPLOYMENT IN SUPPORT OF EXTERNAL GROWTH
On August 1, 2017, Northview completed the acquisition of a portfolio consisting of 327 units in Moncton, NB, for $31.4 million. On December 7, 2017, Northview completed the acquisition of a portfolio consisting of 1,250 units for $196.8 million in British Columbia, Nova Scotia, Ontario, and Quebec, and the disposition of a non-core asset located in Kitchener, ON, for $37.7 million. This strategic capital redeployment has improved the geographic diversification and quality of the portfolio through investment in strong and growing markets.
Diluted FFO was $29.1 million and $118.6 million for the three months and year ended December 31, 2017, compared to $27.0 million and $115.3 million for the same periods in 2016, respectively. Diluted FFO per unit was $0.51 for the three months ended December 31, 2017, compared to $0.48 for the same period in 2016. The increases in FFO were due to same door NOI growth, NOI contributions from newly developed properties completed in 2017, and acquisitions that occurred during 2017, partially offset by non-core asset sales. During the fourth quarter of 2017, FFO included one-time financing costs of $0.7 million related to the disposition of a non-core asset located in Kitchener, ON.
Diluted FFO per unit was $2.08 for the year ended December 31, 2017, compared to $2.14 in 2016. The decrease in FFO per unit was primarily driven by the dilution from the equity offering completed in October 2016 and the units issued to the vendors for the acquisitions completed in the fourth quarter of 2017, largely offset by the increase in total FFO as noted.
SAME DOOR NOI GROWTH of 6.4%
All regions achieved positive same door NOI growth for a total of 6.4% and 4.3% during the three months and year ended December 31, 2017, respectively, compared to total same door NOI decrease of 5.7% and 5.9%, in the same period of 2016. VCIs contributed approximately $2.3 million of NOI to same door results in 2017.
Multi-family in Western Canada same door NOI increased to 11.1% and 5.0% during the three months and year ended December 31, 2017, respectively, mainly due to higher revenue from occupancy increases, management of reducing controllable costs, and lower property taxes.
Ontario continued with same door growth of 6.4% and 9.3%, respectively, during the three months and year ended December 31, 2017, excluding revenue related to one-time head lease income in 2016. The increases were due to higher AMR from successful execution of the VCIs, higher occupancy, and electricity costs savings.
AMR improved in all regions compared to the third quarter of 2017 and higher occupancy across the portfolio resulted in same door NOI increases during the quarter of 11.4%, 5.6%, and 4.2% in Quebec, Northern Canada, and Atlantic Canada, respectively.
EFFECTIVELY MANAGING OPERATING EXPENSES
Operating expenses decreased by $3.6 million or 2.5% for the year ended December 31, 2017, compared to the prior year. Northview’s ongoing focus on reducing costs resulted in lower salaries and benefits and lower general operating expenses; including bad debts, telephone, travel costs, and reductions associated with non-core asset sales. These cost savings were achieved through negotiating new contracts and process improvements. The internalization of property management has resulted in additional opportunities for operating efficiencies.
Improvements in revenue and operating expense management resulted in NOI margin increasing to 57.2% for the year ended December 31, 2017, from 55.5% for 2016, excluding Non-recurring Items.
CONTINUED IMPROVED OCCUPANCY ACROSS THE PORTFOLIO
For the three months and year ended December 31, 2017, occupancy of 93.3% and 92.4% improved by 2.9% and 1.7%, compared to the same periods of 2016, respectively. Occupancy in all regions increased in 2017 compared to the same period of 2016 with Western Canada showing the largest improvement of 3.7% to 85.3%.
GROWTH THROUGH NEW DEVELOPMENT PROJECTS
Northview has development projects underway in Regina, SK, Iqaluit, NU, and Canmore, AB, with total estimated development costs of $57 million. During 2017, $33 million has been incurred in respect of these projects. The first of two buildings in the development project in Regina, SK, has been completed and initial occupancy commenced in January 2018. The development projects in Iqaluit, NU, will be completed in the first quarter of 2018 and the project in Canmore, AB, is expected to be completed in the second half of 2018.
In 2018, Northview’s first development in Ontario is planned for land recently acquired in Kitchener, ON, for $5.3 million. This acquisition supports Northview’s strategic goal of leveraging its in-house development expertise to the Ontario market.
STRONG COVERAGE RATIOS
Interest and debt service coverage ratios were 3.05 and 1.63, respectively, for the year ended December 31, 2017, which are stable compared to the prior year. Northview continues to monitor interest rates to identify opportunities for reducing its overall borrowing cost. During the three months ended December 31, 2017, Northview completed $164.9 million in mortgage financing with a weighted average interest rate of 2.77% and an average term to maturity of 5.4 years. For the year ended December 31, 2017, Northview completed $338.2 million in mortgage financing with a weighted average interest rate of 3.10% and an average term to maturity of 5.7 years.
Northview’s consolidated financial statements and the notes thereto and Management’s Discussion and Analysis for the year ended December 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 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 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 Northview’s most recent Management’s Discussion and Analysis for definitions of non-GAAP and additional GAAP measures, including NOI, FFO, AFFO, debt to gross book value, debt service coverage and interest coverage.
During the three months ended December 31, 2017, Northview received insurance proceeds of $0.5 million relating to the 2017 fire in Lethbridge, AB. During the year ended December 31, 2017, Northview received total insurance proceeds of $0.9 million relating to the Fort McMurray, AB, wildfires, and the 2017 fire in Lethbridge, AB. During the three months ended December 31, 2016, Northview received insurance proceeds of $0.4 million relating to the Fort McMurray, AB, wildfires. During the year ended December 31, 2016, Northview received total insurance proceeds of $7.1 million for the Fort McMurray, AB wildfires, 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 Fort McMurray, AB, wildfires. These items have been defined as “Non-recurring Items”, as they are not considered normal operating conditions, and management has presented revenue, operating expenses, NOI, same door NOI and NOI margin for the multi-family residential business segment and other specific 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.
Date: Wednesday, February 28, 2018
Time: 10:00 a.m. Mountain Time, 12:00 p.m. Eastern Time
Conference Call Information:
Dial In: 1-855-473-4527 or 1-661-378-9963
Conference ID: 9147978.
The webcast will be available for replay two hours after the conference call ends and will be available at:
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
Mr. Travis Beatty
Chief Financial Officer
Mr. Leslie Veiner
Chief Operating Officer