CALGARY, Alberta,– Northview Apartment Real Estate Investment Trust (“Northview”) (NVU.UN – TSX), today announced financial results for the three months ended March 31, 2019.
- Same door revenue growth of 2.9%, including a 3.4% increase for the multi-family business segment, for the first quarter of 2019
- Ontario and Western Canada achieved same door NOI growth of 10.2% and 3.9%, respectively; same door NOI increase of 0.6%, including a 0.8% increase for the multi-family business segment, for the first quarter of 2019
- Multi-family portfolio occupancy of 93.6% in the first quarter of 2019, an improvement of 30 bps from the same period of 2018, and 30 bps lower than the fourth quarter of 2018
- Completed 136 units under the high-end renovation program with an annualized NOI increase of $0.5 million and a rate of return of 25.8% during the first quarter of 2019
- NOI margin of 53.2% for the first quarter of 2019, a decrease of 80 bps compared to the same period of 2018
- Diluted FFO per unit of $0.45 for the first quarter of 2019, compared to $0.49 for the same period of 2018, both excluding Non-recurring Items
- Debt to gross book value was 54.4% as at March 31, 2019, an improvement of 260 bps compared to 57.0% as at March 31, 2018, and an increase of 60 bps from December 31, 2018 partially as a result of internally funded growth
- Cash flow from operating activities was $28.4 million for the first quarter of 2019, a $4.1 million increase compared to the same period of 2018
- Net and comprehensive loss was $13.2 million for the first quarter of 2019, compared to net and comprehensive income of $23.1 million for the same period of 2018, due to the fair value loss on Class B LP Units of $38.8 million, which was attributable to the Trust Unit price increasing from $24.48 to $29.02
Todd Cook, President and CEO, commented, “We are pleased with the strong performance and same door NOI growth in Ontario and Western Canada, and continued revenue growth in most regions. Our top line revenue growth was offset by higher operating costs due to the severe winter conditions in Atlantic and Northern Canada.”
“We are excited to break ground on our first concrete development in Kitchener, ON later this month and begin the first phase of our development in Nanaimo, BC later this quarter. These two projects will further enhance the quality of our portfolio and create value for our Unitholders,” concluded Mr. Cook.
FINANCIAL PERFORMANCE HIGHLIGHTS
|(thousands of dollars, except per unit amounts)||Three months ended
|NOI margin||53.2%||54.0%||(80 bps)|
|Same door NOI increase||0.6%||6.0%||(540 bps)|
|Distributions declared per Trust Unit(i)||$0.41||$0.41||–|
|Measurement excluding Non-recurring Items(ii):|
|FFO – diluted(iii)||29,421||28,669||2.6%|
|FFO per unit – diluted(iii)||$0.45||$0.49||(8.2%)|
(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.
Q1 2019 HIGHLIGHTS
Diluted FFO was $29.4 million for the three months ended March 31, 2019, compared to $28.7 million for the same period in 2018. The increase in diluted FFO was due to same door NOI growth of 0.6% and NOI contributions from acquisitions and newly developed properties, partially offset by non-core assets sales since the first quarter of 2018.
Diluted FFO per unit was $0.45 for the three months ended March 31, 2019, compared to $0.49 for the same period in 2018. The decrease was due to the 11.4% increase in the average number of units outstanding from the Trust Units and Class B LP Units issued in 2018 to fund growth and the disposition of non-core assets. This was partially offset by the NOI increase of 7.8% driven by the same door NOI growth and contributions from recent acquisitions and developments.
SAME DOOR NOI
During the three months ended March 31, 2019, same door NOI growth was 0.6%, compared to 6.0% for the same period in 2018. The multi-family portfolio generated a same door NOI increase of 0.8% during the three months ended March 31, 2019, compared to an increase of 6.9% for the same period in 2018.
The same door NOI growth in the first quarter of 2019 was led by Ontario and Western Canada. Ontario continued to deliver strong same door NOI growth of 10.2% due to higher revenue from increased AMR. The increase in AMR was due to the impact of acquisitions, the successful execution of the high-end renovation program and strong market conditions. In Ontario, AMR on suite turnover increased by 15.4% during the first quarter of 2019, compared to 12.4% during the same period of 2018. In Western Canada, same door NOI increased by 3.9% during the three months ended March 31, 2019, due to higher revenue from increased AMR and occupancy.
A colder winter season through most of the first quarter of 2019 resulted in higher utilities and maintenance expenses in Atlantic Canada and Northern Canada, which led to a same door NOI decrease of 9.9% and 9.6%, respectively, during the three months ended March 31, 2019. The increase in utility costs was due to higher consumption and prices. Maintenance expenses were higher from increased levels of maintenance for the building heating systems and snow removal activities, both of which were impacted by the severe winter. In Quebec, same door NOI decreased due to lower occupancy as a result of units being taken out of inventory to complete renovations.
STRONG REVENUE AND AMR GROWTH ACROSS THE PORTFOLIO
During the three months ended March 31, 2019, revenue increased 9.3% compared to the same period of 2018. Revenue in the multi-family business segment increased by 10.3% 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 sale of non-core assets. AMR growth on suite turnover was 7.1% during the three months ended March 31, 2019, an improvement of 140 bps compared to the same period in 2018.
Same door revenue increased by 2.9% for the three months ended March 31, 2019, compared to the same period of 2018. Same door revenue in the multi-family business segment increased 3.4% during the first quarter of 2019 compared to the same period of 2018, due to higher AMR and occupancy. AMR increased in all multi-family regions at 4.9%, led by a 6.9% increase in Ontario.
OCCUPANCY REMAINS STRONG
Occupancy was 93.6% in the first quarter of 2019, versus 93.9% in the fourth quarter of 2018, and an improvement of 30 bps in occupancy compared to the same period of 2018.
Ontario continued to experience strong occupancy of 96.6% during the first quarter of 2019. The improved economic conditions in Western Canada, Atlantic Canada, and Northern Canada increased occupancy by 150 bps, 90 bps, and 40 bps, respectively, during the three months ended March 31, 2019, compared to the same period of 2018. In Western Canada, the improved economic conditions combined with higher lease incentives led to increased occupancy throughout most of the portfolio. Quebec occupancy decreased by 440 bps from the same period of 2018, attributable to units taken out of inventory for renovations in Montreal.
HIGH-END RENOVATION PROGRAM
The number of eligible units for the high-end renovation program includes units identified in acquisitions completed in the last two years. As at March 31, 2019, there are approximately 7,000 units suitable for the high-end renovation program. In 2019, Northview plans to spend approximately $10 to $15 million on the program.
For the three months ended March 31, 2019, 136 high-end renovation units were completed, which generated an AMR increase of approximately $329 per unit and an annualized NOI increase of $0.5 million. The program achieved a rate of return of 25.8% with capital expenditures of $2.6 million for the first quarter of 2019.
GROWTH THROUGH NEW DEVELOPMENT PROJECTS
Northview completed its development project in Calgary, AB, the second phase of the successful Vista project. The first and second buildings of the second phase were completed in April and May 2019, respectively, and the buildings are currently in lease up.
Northview has two development projects with multi-phases in Kitchener, ON and Nanaimo, BC, which are both commencing in 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 Cap Rate between 5.0% to 5.5%. The first phase consists of 233 units and the cost is approximately $73.0 million. The first phase is expected to commence in May 2019 with initial occupancy in 2021. The second phase will consist 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 Cap Rate between 5.8% to 6.3%. The first phase consists of 140 units and the cost is approximately $35.0 million. The first phase is expected to commence later in 2019 with initial occupancy in 2021. The second phase will consist of 111 units and is estimated to cost $30.0 million.
LEVERAGE AND STRONG COVERAGE RATIOS
Debt to gross book value was 54.4% as at March 31, 2019, an improvement of 260 bps compared to 57.0% as at March 31, 2018, and an increase of 60 bps from December 31, 2018 partially as a result of internally funded growth, which includes the acquisition of land in Ontario and the completion of the Vista development in Calgary. The long-term target for debt to gross book value ratio is 50% to 55%. Interest and debt service coverage ratios remained strong at 2.91 and 1.61, respectively, for the twelve months ended March 31, 2019.
During the three months ended March 31, 2019, Northview completed $28.6 million of mortgage refinancing, excluding short-term financing, for multi-family properties with a weighted average interest rate of 2.88% and an average term to maturity of 6.6 years.
During the three months ended March 31, 2019 and the year ended December 31, 2018, Northview received insurance proceeds of $0.7 million and $2.7 million, respectively, 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.
Northview’s consolidated financial statements, the notes thereto, and Management’s Discussion and Analysis for the three months ended March 31, 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, 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.
Date: Friday, May 10, 2019
Time: 12:00 p.m. Eastern Time
CONFERENCE CALL INFORMATION
Dial In: 1-855-473-4527 or 1-661-378-9963
Conference ID: 8593567
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 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