CALGARY, Alberta, Feb. 27, 2019 (GLOBE NEWSWIRE) -- Northview Apartment Real Estate Investment Trust (“Northview”) (NVU.UN – TSX), today announced financial results for the three months and year ended December 31, 2018.
HIGHLIGHTS
- Diluted FFO per unit of $2.11 for the year ended December 31, 2018, compared to $2.08 for the same period of 2017, both excluding Non-Recurring Items
- Same door NOI increase of 4.5%, including a 5.0% increase for the multi-family business segment for the year ended December 31, 2018
- NOI margin of 58.3% for the year ended December 31, 2018, an improvement of 110 bps compared to the same period of 2017
- Multi-family portfolio occupancy of 93.9% in the fourth quarter of 2018, 40 bps higher than the third quarter of 2018 and an improvement of 60 bps from the same period of 2017
- Annualized NOI increase from Value Creation Initiatives (“VCIs”) related to the 2015 Transaction was $3.7 million for 2018, bringing the cumulative progress to $10.5 million since November 1, 2015
- Total net fair value increase on investment properties of $167.3 million for the year ended December 31, 2018, including $126.5 million net fair value increases in Ontario resulting from higher NOI and reduction in Cap Rates
- Debt to gross book value was 53.8% as at December 31, 2018, a reduction of 260 bps from December 31, 2017, primarily as a result of the equity offering completed in June 2018 and fair value increases on investment properties
- Cash flow from operating activities was $139.1 million for the year ended December 31, 2018, a $47.7 million increase compared to the same period of 2017
- Net and comprehensive income was $289.6 million for the year ended December 31, 2018, a $77.3 million increase compared to the same period of 2017, primarily as a result of fair value increases on investment properties
Todd Cook, President and CEO, commented, “We are pleased that 2018 was a very successful year for Northview. Instrumental to the ongoing strong performance was the diversification of the portfolio into our stronger markets across the country, as evidenced by same door NOI growth and fair value increases.”
“Northview achieved almost $400 million of growth through acquisitions and developments completed during 2018. We also expect to commence construction on our developments in Kitchener and Nanaimo during the first half of this year,” continued Mr. Cook.
Mr. Cook concluded, “The fair value gains realized on our properties, combined with issuing $177 million of equity to fund acquisitions and developments, contributed to a decrease in leverage of 260 basis points, bringing our debt to gross book value to 53.8%, within our target range. With our improving balance sheet, experienced leadership team, and proven track record, Northview is well positioned to continue its strategy and to deliver unitholder value in 2019.”
FINANCIAL PERFORMANCE HIGHLIGHTS
| (thousands of dollars, except per unit amounts) | Three months ended December 31 | Year ended December 31 | |||||||||||||||
| 2018 | 2017 | Change | 2018 | 2017 | Change | ||||||||||||
| Total revenue | 94,041 | 84,692 | 11.0% | 363,968 | 330,999 | 10.0% | |||||||||||
| Total NOI | 53,708 | 47,357 | 13.4% | 212,126 | 189,264 | 12.1% | |||||||||||
| NOI margin | 57.1% | 55.9% | 120 bps | 58.3% | 57.2% | 110 bps | |||||||||||
| Same door NOI increase | 46,139 | 44,292 | 4.2% | 187,225 | 179,141 | 4.5% | |||||||||||
| Occupancy | 93.9% | 93.3% | 60 bps | 93.5% | 92.4% | 110 bps | |||||||||||
| Distributions declared per Trust Unit(i) | $0.41 | $0.41 | - | $1.63 | $1.63 | - | |||||||||||
| Measurement excluding Non-recurring Items(ii): | |||||||||||||||||
| FFO – diluted(iii) | 32,153 | 29,137 | 10.4% | 130,660 | 118,597 | 10.2% | |||||||||||
| FFO per unit – diluted(iii) | $0.50 | $0.51 | (2.0%) | $2.11 | $2.08 | 1.4% | |||||||||||
(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.
Q4 AND 2018 HIGHLIGHTS
FFO
Diluted FFO was $130.7 million for the year ended December 31, 2018, compared to $118.6 million for the same period in 2017. Diluted FFO per unit was $2.11 for the year ended December 31, 2018, compared to $2.08 for the same period in 2017. Same door NOI growth and NOI contributions from acquisitions and newly developed properties increased FFO per unit. These increases were partially offset by the equity issued to fund growth and the disposition of non-core assets.
SAME DOOR NOI GROWTH ACROSS ALL MULTI-FAMILY REGIONS
During the three months and year ended December 31, 2018, total same door NOI growth was 4.2% and 4.5%, respectively, compared to total same door NOI increase of 6.4% and 4.3% for the same periods in 2017.
The multi-family portfolio has generated same door NOI increases for eight consecutive quarters. Same door NOI increased 5.1% and 5.0% for the multi-family business segment during the three months and year ended December 31, 2018, respectively, compared to an increase of 6.8% and 4.9% for the same periods in 2017.
In 2018, all multi-family regions achieved positive same door NOI growth, led by Ontario with a same door NOI increase of 10.0%. The increase was due to improved overall economic conditions driving higher AMR across the portfolio and the successful execution of the VCIs in Ontario.
During the fourth quarter of 2018, same door NOI increased in Ontario, Western Canada, and Northern Canada compared to the same period in 2017. Ontario continued to deliver strong same door growth of 11.9% due to higher AMR from successful execution of VCIs and lower operating expenses. Western Canada same door NOI increased by 3.6% during the three months ended December 31, 2018, due to higher revenue from increased AMR and occupancy, partially offset by higher lease incentives, salaries, and utilities. Northern Canada same door NOI increased by 5.4% mainly due to higher AMR and lower utilities.
STRONG PROGRESS ON THE VALUE CREATION INITIATIVES
As of December 31, 2018, the cumulative progress in annualized NOI increases from VCIs was $10.5 million, or 73% of the initial five-year target of $14.3 million set in 2015. The Cap Rate in Ontario has declined by approximately 110 bps since the 2015 Transaction, which has increased the estimated value creation of $191 million by approximately $48 million.
For the year ended December 31, 2018, 573 high-end renovation units relating to the 2015 Transaction were completed with an AMR increase of approximately $291 per unit. Capital expenditures on the program for the year ended December 31, 2018, were $11.0 million. The program achieved an average rate of return of 23.0% in 2018, exceeding the initial target of 15% to 20%.
Management has identified an additional 1,600 units suitable for the high-end renovation program from recently completed acquisitions. In 2018, 123 units were completed with capital expenditures of $2.1 million. The returns generated are comparable to those being achieved in connection with the 2015 Transaction.
CONTINUED OCCUPANCY IMPROVEMENT AND HIGHEST OCCUPANCY SINCE 2013
Occupancy was 93.9% in the fourth quarter of 2018, an improvement of 40 bps compared to the third quarter of 2018 and 60 bps compared to the same period of 2017. Occupancy in Ontario and Northern Canada remained strong at 97.0% and 96.8%, respectively, during the fourth quarter of 2018. Western Canada occupancy was 88.2% in the fourth quarter of 2018, a 160 bps increase compared to the third quarter of 2018, and a 170 bps increase compared to the same period of 2017. The occupancy increase in the fourth quarter occurred throughout the portfolio in Western Canada compared to the same period of 2017. In Atlantic Canada, improved economic conditions combined with higher lease incentives resulted in increased occupancy. Quebec occupancy decreased due to units taken out of inventory for renovations.
FAIR VALUE INCREASE ON INVESTMENT PROPERTIES
During the three months and year ended December 31, 2018, net fair value increases of $121.7 million and $167.3 million, respectively, were achieved on investment properties including a $126.5 million increase in Ontario driven by strong same door NOI growth and Cap Rate reduction. The weighted average Cap Rate for the portfolio was 5.92% as at December 31, 2018, a reduction of 32 bps from December 31, 2017.
IMPROVEMENT OF NOI MARGINS
NOI margin improved by 120 bps and 110 bps for the three months and year ended December 31, 2018, respectively, compared to the same periods in 2017. The increase in NOI margin was due to contributions from new acquisitions and developments which generated higher margins than the rest of the portfolio. This was combined with improvements in revenue from higher AMR, increased occupancy, and cost savings from the internalization of property management.
GROWTH THROUGH NEW DEVELOPMENT PROJECTS
During 2018, Northview completed three development projects in Regina, SK, Iqaluit, NU, and Canmore, AB, with a total cost of $59.6 million and a recorded total fair value increase of $12.6 million.
Northview has a development project underway in Calgary, AB, and development projects in the advanced planning stages in Kitchener, ON and Nanaimo, BC. The development project in Calgary, AB is the second phase of the successful Vista project with initial occupancy expected in the second quarter of 2019. The development projects in Kitchener, ON and Nanaimo, BC are expected to commence in the first half of 2019.
ACQUISITION GROWTH IN ONTARIO OF $132 MILLION
In December 2018, Northview acquired a portfolio consisting of 644 units in six apartment properties for $131.9 million, excluding closing costs, with a weighted average Cap Rate of 4.2%. These acquisitions complete the deployment of the equity raised in June 2018, as well as the redeployment of the proceeds from the non-core asset sale in the third quarter of 2018. This acquisition expands Northview’s presence in Ontario with opportunities to generate growth through identified high-end renovation units.
DEMONSTRATED SUCCESS IN STRATEGIC RELATIONSHIP
Northview has a strategic relationship with Starlight Group Property Holdings Inc. and affiliates (“Starlight”), which is controlled by a significant unitholder who is also a member of the board of trustees of Northview. Northview has acquired $480.5 million of investment properties through this relationship since 2016.
Northview has demonstrated success in adding value to properties acquired pursuant to the strategic relationship with Starlight. Northview has increased AMR by 5.6% and 3.4% for assets acquired in December 2017, and June 2018, respectively. A net fair value increase of $17.4 million or 9% was recorded in the third quarter of 2018 for assets acquired in December 2017.
IMPROVED LEVERAGE WITHIN TARGET RANGE AND STRONG COVERAGE RATIOS
Debt to gross book value was 53.8% as at December 31, 2018, a decrease of 260 bps and 370 bps from December 31, 2017, and December 31, 2016, respectively. This improvement was primarily the result of fair value increases on investment properties and the equity offering completed in June 2018. The long-term target for debt to gross book value ratio is 50% to 55%. Interest and debt service coverage ratios remained strong at 2.96 and 1.64, respectively, for the year ended December 31, 2018.
During the year ended December 31, 2018, Northview completed $431.3 million of mortgage refinancing, excluding short-term financing, for multi-family properties with a weighted average interest rate of 3.20% and an average term to maturity of 8.2 years.
NON-RECURRING ITEMS
During the year ended December 31, 2018, Northview received total insurance proceeds of $2.7 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. 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 INFORMATION
Northview’s consolidated financial statements, the notes thereto, and Management’s Discussion and Analysis for the year ended December 31, 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.
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: Thursday, February 28, 2019
Time: 12:00 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: 9836709
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