Northview Apartment REIT reports $0.68 FFO for the third quarter of 2015

FFO per unit increases 1.5% from 2014

CALGARY, Nov. 4, 2015 /CNW/ - Northview Apartment Real Estate Investment Trust ("Northview") (NVU.UN – TSX), formerly Northern Property Real Estate Investment Trust ("NPR"), today announced financial results for the three and nine months ended September 30, 2015, including third quarter 2015 funds from operations ("FFO") per Trust Unit of $0.68, an increase of 1.5% from $0.67 in the third quarter of 2014.

Subsequent to the end of the third quarter of 2015, NPR and True North Apartment Real Estate Investment Trust ("TN") unit holders overwhelmingly approved a series of transactions in which NPR acquired all of the assets and properties of TN and a portfolio of multi-family properties from affiliates of Starlight Investments Ltd. and affiliates of the Public Sector Pension Investment Board ("Acquisition Portfolios").

The transactions closed on October 30, 2015, as announced via press release, at which time NPR changed its name to Northview Apartment Real Estate Investment Trust.

The following is for the financial results of NPR for the three and nine months ended September 30, 2015, and does not include any results of TN or the Acquisition Portfolios.

"In the third quarter, Northview continued to deliver positive financial results as new developments came online over the past twelve months, offsetting the increased vacancy in our resource based markets," said Todd Cook, President and CEO. "Sustained low natural resource prices continue to negatively impact vacancy and financial results in NPR's natural resource based markets. As a result, internal growth in the NPR portfolio will remain constrained until there is a recovery in the natural resource sector."

Mr. Cook continued, "The creation of Northview Apartment REIT, consisting of over 24,000 units located across eight provinces and two territories, will further diversify NPR's portfolio and enables near-term growth in our newly acquired portfolios. Additionally, we believe the more diversified portfolio will contribute to enhanced stability in the financial results. Our focus now turns to integrating our operations, maintaining the performance of the current portfolio, and executing on identified value creation opportunities as we continue our efforts to build long term value for unit holders."


Financial Performance Highlights







(thousands of dollars, except per unit amounts)

Three months ended September 30

Nine months ended September 30


2015

2014

Change

2015

2014

Change

Total revenue

48,621

48,240

0.8%

146,843

139,750

5.1%

Net operating income

30,965

30,649

1.0%

87,346

82,134

6.3%

Net and comprehensive income

(10,206)

18,136

(156.3%)

10,701

51,186

(79.1%)

FFO

21,561

21,482

0.4%

58,462

56,407

3.6%

FFO per Trust Unit, basic and diluted

$0.68

$0.67

1.5%

$1.84

$1.77

4.0%

FFO payout ratio

60.0%

58.6%

1.4%

66.4%

67.0%

(0.6%)

Distributions declared to Trust Unit holders

12,940

12,584

2.8%

38,819

37,794

2.7%

Distributions per Trust Unit

$0.41

$0.40

2.5%

$1.22

$1.19

2.5%

Net operating income ("NOI") and FFO 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.

FFO
FFO for the three months ended September 30, 2015, was $21.6 million, an increase of 0.4% compared to $21.5 million for the same period of 2014. On a per unit basis, FFO was $0.68 and $0.67 for the third quarters of 2015 and 2014, respectively, an increase of 1.5%. The increase in FFO was a result of higher NOI driven by the contribution from newly acquired and developed properties and lower utility costs throughout the portfolio. This was partially offset by higher than normal vacancy, mainly in Alberta, and an increase in financing costs due to the higher mortgage balance and operating facilities.

Following the completion of the transactions, Northview's annual FFO per unit will remain consistent with that of NPR's expectation for 2015.

NOI
For the three months ended September 30, 2015, Northview reported an NOI increase of 1.0% from the same period of 2014. Management has increased efforts to reduce certain controllable expenses and the results are showing in the current reporting period with positive NOI growth across all business segments. Multi-family NOI increased 0.3% for the three months ended September 30, 2015, driven mainly by developments and acquisitions, and partially offset by increased vacancy and property taxes. Developments and acquisitions added to the portfolio since the third quarter of 2014 contributed $1.6 million in incremental NOI in 2015. Commercial NOI increased by 3.7% for the third quarter compared to 2014 due mainly to the final Bristol Court building in St. John's, NL, being fully leased. As the lease up of most new developments and the lease renewals from 2014 have been in place for more than a year, the year over year growth trend for the commercial business segment going forward will be lower than experienced in recent years. Execusuites and hotel NOI increased by 3.2% compared to 2014, as the operating expenses for most of the business segment were considerably lower, partially offset by lower revenues. The extensive CAPEX and rebranding program ongoing in the execusuite properties in both Yellowknife, NT, and St. John's, NL, has negatively impacted revenues in the current year due to the number of suites that have been taken offline.

For the three and nine months ended September 30, 2015, same door NOI decreased 5.3% and 1.2% compared to the same period of 2014, respectively. The decrease in same door results in 2015 was attributable to the higher vacancy in Fort McMurray, AB; Lloydminster, AB; and northeastern British Columbia; coupled with decreased rental rates. This was partially offset by lower utility costs from more moderate weather and lower utility rates. Commercial same door NOI decreased due to timing of operating cost recoveries.

From a business segment perspective, multi-family same door NOI decreased 5.0%, commercial decreased 8.9%, and the execusuites and hotel increased 3.2% for the three months ended September 30, 2015. The decrease in the commercial same door NOI is a result of timing of the operating cost recoveries as well as two Bristol Court office buildings not included in the same door calculation. For the nine months ended September 30, 2015, multi-family same door NOI decreased 3.0%, commercial increased 5.1%, and the execusuites and hotel increased 9.4%.

Stabilized Vacancy Loss
Stabilized vacancy for the three months ended September 30, 2015, was 9.2%, up from 7.6% for the same period of 2014, and up from 9.0% in the second quarter of 2015. With weak economic conditions in a number of regions, Northview has experienced a higher than normal amount of tenant move outs in 2015. Through dedicated leasing teams, select rental incentives, and the organization-wide focus on customer service, vacancy has remained stable throughout 2015. The efforts of the "Street to Suite" capital program have had a direct impact in lowering vacancy in Yellowknife, NT, and stabilizing vacancy in Fort McMurray, AB.

Residential Stabilized Vacancy Loss









Province and Territory

Q2
2014

Q3
2014

Q4
2014

2014

Q1
2015

Q2
2015

Q3
2015


Alberta

6.8%

7.7%

9.2%

7.6%

13.0%

14.0%

15.9%


British Columbia

11.2%

11.7%

11.1%

12.0%

12.3%

14.0%

12.5%


Newfoundland and Labrador and Québec

4.1%

3.7%

3.9%

4.2%

5.3%

6.2%

8.6%


Northwest Territories

12.2%

12.7%

11.4%

12.1%

11.2%

6.1%

3.6%


Nunavut

1.7%

2.4%

2.1%

2.0%

3.6%

2.1%

1.7%


Saskatchewan

5.6%

5.1%

6.9%

6.2%

7.8%

7.6%

5.8%


Overall

7.1%

7.6%

7.6%

7.5%

9.5%

9.0%

9.2%

Total vacancy loss for the third quarter of 2015 was 10.0%, compared to 10.1% in the second quarter of 2015 and 8.1% for the same period of 2014.

Portfolio Summary (including joint ventures at 100%) – September 30, 2015




(Commercial square footage rounded to the nearest thousand)





Province and Territory

Multi-family

Execusuites & Hotel

Total Residential
(units)

Commercial
(sq. ft.)



Alberta

3,157

-

3,157

83,000



British Columbia

2,819

-

2,819

86,000



Newfoundland and Labrador

1,728

142

1,870

225,000



Northwest Territories

1,327

160

1,487

537,000



Nunavut

1,096

117

1,213

243,000



Saskatchewan

429

-

429

-



Québec

161

-

161

-

Total

10,717

419

11,136

1,174,000

Developments
As a result of weaker economic conditions in markets where Northview has land available for development, management has reduced its development activities. Development is focused on larger centres, mostly in Calgary, AB, and the surrounding areas, with 401 multi-family units started in 2015.

As of September 30, 2015, Northview has 40.4 acres of land held for future development, which allows for approximately 1,450 units.

During the third quarter of 2015, Northview completed the first phase of a development in Bonnyville, AB, totalling 110 units, and it is leasing up slower than developments completed in recent years due to current economic conditions being experienced in Alberta. The development has approval for 181 multi-family units.

Projects under development – September 30, 2015






(thousands of dollars, except per unit amounts)







Property Type

Location

Units

Start Date

Expected
Completion Date

% Complete

Expected
Total Costs

Expected
Cap Rate

Multi-family

Airdrie, AB

140

Q1 2015

Q4 2015 – Q1 2016

65%

25,000

7.0% to 7.5%

Multi-family

Calgary, AB

261

Q3 2015

Q4 2016 – Q2 2017

5%

45,000

7.0% to 7.5%



401




70,000


The development in Airdrie, AB, is progressing on schedule, with the first building expected to come online late in 2015. The project consists of 140 units at an expected cost of approximately $180,000 per unit. The Airdrie project will be built with additional amenities to give a competitive edge in the larger rental market.

While the economic conditions in Calgary have weakened over the past year, management believes there is an opportunity to continue with developing suburban purpose built rental properties. Northview's first Calgary, AB, development commenced late in the third quarter of 2015. The total project is expected to have 419 units, with the first phase of development consisting of 261 units anticipated to be completed between Q4 2016 and Q2 2017, at a cost of approximately $175,000 per unit. Similar to the Airdrie development, the Calgary project will include additional amenities to give a competitive edge in the larger urban market.

Financial Strength





(thousands of dollars, except per unit amounts)

September 30, 2015

December 31, 2014

September 30, 2014


Total assets

1,722,156

1,666,171

1,605,915


Debt to gross book value

52.2%

48.6%

48.0%


Interest coverage ratio (times)

3.57

3.70

3.67


Debt service coverage ratio (times)

1.99

2.10

2.08


Weighted average mortgage interest rate

3.51%

3.67%

3.70%


Weighted average term to maturity (years)

5.8

5.0

5.0


Weighted average capitalization rate

7.96%

7.97%

7.99%

Debt to gross book value, debt service coverage ratio and interest coverage ratio are considered non-GAAP measures

and do not have any standardized meaning as prescribed by GAAP. See "Non-GAAP and Additional GAAP Measures"

disclosure below.

Following the completion of the transactions, Northview's debt to gross book value will be approximately 58 - 59%. Northview's coverage ratios will remain among the best in the multi-family REIT sector in Canada.

During the three months ended September 30, 2015, Northview completed $36.5 million in mortgage financings and renewals with a weighted average interest rate of 2.70% and a term to maturity of 9.5 years compared to $51.3 million, 3.05%, and 8.7 years, respectively, in the same period of 2014. The majority of the funding in Q3 2015 was on multi-family residential properties, which qualify for Canada Mortgage and Housing Corporation ("CMHC") rates. The net proceeds were used to repay existing mortgages and operating facilities, and fund developments and acquisitions. Northview continues to extend the term on new and renewed mortgages, utilizing 10 year terms where possible. 

Sufficient liquidity exists through internal sources to complete the Northview value creation initiatives, CAPEX programs and development projects.

Normal Course Issuer Bid ("NCIB")
On July 31, 2014, the Toronto Stock Exchange ("TSX") approved Northview's notice of intention to renew the NCIB for its Trust Units. Northview's NCIB was made in accordance with the policies of the TSX. Northview was allowed to purchase Trust Units during the period from August 6, 2014, to August 5, 2015, or an earlier date had Northview completed its maximum purchases. As of September 30, 2015, the NCIB has expired and has not been renewed.

Northview would have paid the market price at the time of acquisition for any Trust Units in accordance with the rules and policies of the TSX and applicable securities laws. Purchases under the NCIB would have been funded out of Northview's working capital. 

During the nine months ended September 30, 2015, Northview did not purchase and subsequently cancel any Trust Units under its NCIB. Management allocated funds to the ongoing developments and CAPEX programs, rather than to repurchase its units under the NCIB.

Distributions to Trust Unit holders
During the three months ended September 30, 2015, Northview declared monthly cash distributions of $0.1358 per Trust Unit. For the third quarter of 2015, Northview declared distributions totaling $12.9 million (September 30, 2014$12.6 million).

The annual distribution per unit will remain at $1.63 and Northview will continue to have a low target FFO payout ratio of approximately 70%.

Financial Statements
Northview's unaudited condensed consolidated financial statements and the notes thereto and Management's Discussion and Analysis for three and nine months ended September 30, 2015, can be found on Northview's website at www.northviewreit.com or on www.sedar.com.

Cautionary/Forward-Looking Statements
This news release contains forwardlooking statements relating to our growth strategy, acquisition activity, expected costs and Cap Rates of our development project, completion of apartments for which development approvals have been obtained, prospects for long-term vacancy rates, continued extension or mortgage terms, and renewal of the NCIB. 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 associated with investment in and development of real property, competition, financing and refinancing risks, changes in economic conditions, changes in interest rates, changes in taxation rules, reliance on key personnel, environmental matters, tenant risks, fluctuations in commodity prices and utility rates, and other risk factors more particularly described in our 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. This statement also qualifies any predictions made regarding Northview's future funds from operations, debt to gross book value, coverage ratios, and FFO payout ratio. 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, forwardlooking 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 news 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 page 25 of our third quarter 2015 Management's Discussion & Analysis for definitions of non-GAAP and additional GAAP measures, including NOI, FFO, debt to gross book value, debt service coverage and interest coverage.

Results Conference Call
Northview's conference call will take place on Thursday, November 5, 2015, at 12:00 p.m. Mountain Time, 2:00 p.m. Eastern Time. Participating on the call will be Mr. Todd Cook (Chair), President and Chief Executive Officer, Leslie Veiner, Chief Operating Officer, and Mr. Robert Palmer, Chief Financial Officer. Investors and analysts are invited to participate in the call by calling 1-888-231-8191 or 647-427-7450. You will be required to provide the Conference Call Operator with the Conference ID #56056423 prior to being admitted to the call. A recorded playback of the call will be available from November 5, 2015 to November 12, 2015 by calling 416-849-0833 or 1-855-859-2056, passcode #56056423. The recording will also be available on our website on November 9, 2015.

Corporate Profile
Northview is Canada's third largest publicly traded multi-family REIT with a portfolio of more than 24,000 quality residential suites in more than 60 markets across eight provinces and two territories. Northview's portfolio spans markets characterized by expanding populations, growing economies, high occupancy levels, and rising rents, which provides Northview the means to deliver stable and growing profitability and cash distributions over time. As of November 5, 2015, Northview will trade on the TSX under the ticker symbol: NVU.UN. Additional information concerning Northview is available at www.sedar.com or www.northviewreit.com.

SOURCE Northview Apartment Real Estate Investment Trust

For further information: Contact Robert J. Palmer, CFO, at 403-531-3545.

RELATED LINKS
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