Northview Residential REIT Announces Q3 2023 Financial Results, Including Successful Completion of the Recapitalization Event, Continued Strong Same Door Performance, and Improved FFO Payout Ratio
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CALGARY, Alberta, Nov. 13, 2023 (GLOBE NEWSWIRE) — Northview Residential REIT (“Northview” or the “REIT”, formerly Northview Fund) (NRR.UN – TSX), today announced financial results for the three and nine months ended September 30, 2023.
All amounts in this news release are in thousands of Canadian dollars unless otherwise indicated. In August 2023, Northview’s units were consolidated on a 1.75 to 1.00 basis. All references to the number of units and per unit amounts in this news release have been restated and are reflected on a post-consolidation basis.
| “We were pleased that occupancy and AMR continued to improve through the third quarter of 2023, emphasizing the strong fundamentals of the multi-residential real estate market. Northview’s third quarter FFO payout ratio of 63.9% provides for sustainable monthly Unitholder distributions,” noted Mr. Todd Cook, Chief Executive Officer of Northview. “The third quarter included a significant milestone as it was also our first quarter as Northview Residential REIT following the completion of our Recapitalization Event, including the acquisitions of three high-quality portfolios. Through enhanced flexibility, further portfolio diversification, and a stronger balance sheet, the Recapitalization Event, along with the reduction of the credit facilities, puts Northview in a strong position to drive Unitholder value in years to come,” concluded Mr. Cook. |
Q3 2023 HIGHLIGHTS
- On August 21, 2023, Northview completed the previously announced recapitalization transaction, which included the acquisitions of three high-quality portfolios consisting of 3,301 multi-residential suites and a transformation into Northview Residential REIT, an open-ended real estate investment trust. The Recapitalization Event provided Northview with further geographic diversification, grew total assets to $2.7 billion, and provided the foundation for future growth opportunities through a strengthened balance sheet and a reduction in overall leverage. The completion of the Recapitalization Event has enhanced Northview’s ability to broaden and deepen its access to capital.
- Same door net operating income (“NOI”)(1) grew by 0.3% from the third quarter of 2022 mainly due to multi-residential NOI offset by rental abatements provided to tenants evacuated due to the Yellowknife, NT wildfires. NOI from the acquired properties of $4.0 million in the third quarter of 2023, which reflected 41 days of operations, was consistent with management’s expectations.
- Occupancy(1) for the multi-residential segment increased for the sixth consecutive quarter. Multi-residential segment occupancy of 94.7% represented an increase of 260 basis points (“bps”) from the third quarter of 2022, which was driven by a 660-bps increase in Western Canada.
- Debt to gross book value(1) was 65.8% as at September 30, 2023, a decrease of 370 bps from 69.5% as at December 31, 2022, as the Recapitalization Event deleveraged and strengthened the balance sheet, driven by lower leverage ratios for the acquired portfolios.
- Distributions declared to Unitholders(1) of $8.0 million for the three months ended September 30, 2023 represented 63.9% of $12.5 million of funds from operations (“FFO”)(2) in the third quarter of 2023, which is in line with management’s expectations following the distribution reduction in June 2023.
- Credit facility repayments of $126.0 million were completed in the third quarter of 2023, bringing repayments for the nine months ended September 30, 2023 to $224.1 million. Northview increased its proportion of fixed-rate debt to 75% as at September 30, 2023, from 56% as at December 31, 2022.
- FFO was $12.5 million compared to $14.6 million for the three months ended September 30, 2022 as higher financing costs more than offset increased NOI. FFO per basic and diluted Unit(2) of $0.46 and $0.43 were lower than $0.71 and $0.71, respectively, for the comparative period due to lower FFO and additional Units issued for the Recapitalization Event.
- Net and comprehensive income of $155.5 million was higher than $52.7 million for the three months ended September 30, 2022, driven by a higher fair value gain on investment properties and lower distributions, partially offset by Recapitalization Event Costs. The fair value gain on investment properties primarily related to a higher fair value of the acquired portfolios compared to the lower accounting of the acquisition cost.
| (1) | See “Non-GAAP and Other Financial Measures” section of this news release. |
2023 YEAR-TO-DATE HIGHLIGHTS
- Same door NOI of $88.5 million in 2023 was higher than $84.2 million for 2022 as higher revenue more than offset higher operating expenses. The 5.2% increase was driven by the multi-residential segment due to a 260-bps increase in occupancy compared to the nine months ended September 30, 2022 and higher AMR across all regions.
- 2023 FFO of $31.0 million was lower than $41.7 million for the nine months ended September 30, 2022 as higher financing costs exceeded higher NOI. FFO per basic Unit and diluted Unit of $1.36 and $1.34 were lower than $2.03 and $2.03, respectively, for the comparative period due to lower FFO and additional Units issued for the Recapitalization Event.
- Net and comprehensive income for the nine months ended September 30, 2023 of $143.0 million was higher than $45.7 million for 2022. The increase in net and comprehensive loss was driven by a higher fair value gain on investment properties, lower distributions, and NOI growth, partially offset by Recapitalization Event costs and higher financing costs.
- During the nine months ended September 30, 2023, Northview completed $446.6 million of mortgage financing with a weighted average interest rate of 4.27% and an average term to maturity of 7.48 years.
| (1) | See “Non-GAAP and Other Financial Measures” section of this news release. |
| (2) | Non-GAAP financial measure or non-GAAP ratio. See “Non-GAAP and Other Financial Measures” section of this news release. |
FINANCIAL CONDITIONS AND OPERATING RESULTS
| (thousands of dollars, except as indicated) | As at September 30, 2023 | As at December 31, 2022 | ||
| Total assets | 2,723,054 | 1,954,529 | ||
| Non-current liabilities | 1,538,756 | 562,433 | ||
| Credit facilities | 364,059 | 503,502 | ||
| Mortgages payable | 1,364,209 | 850,830 | ||
| Debt to gross book value(1) | 65.8 | % | 69.5 | % |
| Weighted average mortgage interest rate | 3.77 | % | 3.63 | % |
| Weighted average term to maturity (years) | 4.7 | 2.5 | ||
| Weighted average capitalization rate | 6.47 | % | 7.18 | % |
| Multi-residential occupancy(1) | 94.7 | % | 93.4 | % |
| AMR ($)(1) | 1,301 | 1,278 | ||
| Number of multi-residential suites | 14,422 | 11,121 | ||
| Number of execusuites | 200 | 200 | ||
| Commercial sq. ft. | 1,251,373 | 1,131,730 | ||
| Number of Units outstanding(1) | 36,056 | 20,524 | ||
| (1) | See “Non-GAAP and Other Financial Measures” section of this news release. |
| (2) | Non-GAAP financial measure or non-GAAP ratio. See “Non-GAAP and Other Financial Measures” section of this news release. |
| Nine Months Ended September 30 | Nine Months Ended September 30 | |||||||
| 2023 | 2022 | 2023 | 2022 | |||||
| Revenue | 57,402 | 49,703 | 160,607 | 147,241 | ||||
| NOI | 35,022 | 30,904 | 92,567 | 84,163 | ||||
| NOI margin(1) | 61.0 | % | 62.2 | % | 57.6 | % | 57.2 | % |
| Cash flows provided by operating activities | 10,128 | 9,443 | 23,628 | 31,365 | ||||
| Distributions declared to Unitholders(1) | 8,004 | 11,287 | 28,687 | 33,863 | ||||
| Distributions declared per Unit ($/Unit) | ||||||||
| Class A Unit | 0.2734 | 0.5500 | 1.2812 | 1.6500 | ||||
| Class C Unit | 0.2785 | 0.5804 | 1.3421 | 1.7413 | ||||
| Class F Unit | 0.2763 | 0.5674 | 1.3160 | 1.7021 | ||||
| FFO payout ratio – trailing twelve months(2),(3) | 98.6 | % | 78.2 | % | 98.6 | % | 78.2 | % |
| AFFO payout ratio – trailing twelve months(2),(3) | 139.5 | % | 99.5 | % | 139.5 | % | 99.5 | % |
| Net and comprehensive income | 155,476 | 52,707 | 142,955 | 45,683 | ||||
| Per basic Unit ($/Unit) | 5.66 | 2.57 | 6.25 | 2.23 | ||||
| Per diluted Unit ($/Unit) | 5.28 | 2.57 | 6.16 | 2.23 | ||||
| FFO(2) | 12,530 | 14,553 | 31,047 | 41,655 | ||||
| Per basic Unit ($/Unit)(2) | 0.46 | 0.71 | 1.36 | 2.03 | ||||
| Per diluted Unit ($/Unit)(2) | 0.43 | 0.71 | 1.34 | 2.03 | ||||
| AFFO(2) | 9,246 | 11,353 | 22,357 | 32,056 | ||||
| Per basic Unit ($/Unit)(2) | 0.34 | 0.55 | 0.98 | 1.56 | ||||
| Per diluted Unit ($/Unit)(2) | 0.31 | 0.55 | 0.96 | 1.56 | ||||
| Weighted average number of Units – basic (000’s)(1) | 27,446 | 20,524 | 22,857 | 20,524 | ||||
| Weighted average number of Units – diluted (000’s)(1) | 29,460 | 20,524 | 23,208 | 20,524 | ||||
| (1) | See “Non-GAAP and Other Financial Measures” section of this news release. |
| (2) | Non-GAAP financial measure or non-GAAP ratio. See “Non-GAAP and Other Financial Measures” section of this news release. |
| (3) | Calculated for the period from October 1, 2022 to September 30, 2023. |
NON-GAAP AND OTHER FINANCIAL MEASURES
Certain measures in this earnings release do not have any standardized meaning as prescribed by generally accepted accounting principles (“GAAP”) and may, therefore, be considered non-GAAP financial measures, non-GAAP ratios, or other measures and may not be comparable to similar measures presented by other issuers. These measures are provided to enhance the readers’ overall understanding of Northview’s current financial condition and financial performance. 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. These measures include:
- Non-GAAP Financial Measures: Adjusted funds from operations (“AFFO”) and funds from operations (“FFO”)
- Non-GAAP Ratios: AFFO payout ratio; AFFO per Unit, FFO payout ratio; and FFO per Unit
- Capital Management Measures: Distributions declared to Unitholders and debt to gross book value
- Other Key Performance Indicators: AMR; NOI margin; occupancy; number of Units outstanding; same door revenue, expenses, net operating income, occupancy, and AMR; weighted average number of Units outstanding – basic; weighted average number of Units outstanding – diluted
For information on the most directly comparable GAAP measures, composition of the measures, a description of how Northview uses these measures, and an explanation of how these measures provide useful information to investors, refer to the “Non-GAAP and Other Financial Measures” section of Northview’s Management Discussion and Analysis as at and for the three months and nine months ended September 30, 2023 and 2022, available on Northview’s profile on SEDAR+ at www.sedarplus.com, which is incorporated by reference into this news release.
NON-GAAP RECONCILIATION
The following table reconciles FFO and AFFO from net and comprehensive income, the most directly comparable GAAP measure as presented in the unaudited condensed consolidated interim financial statements:
| Three Months Ended September 30 | Nine Months Ended September 30 | |||||||
| (thousands of dollars, except as indicated) | 2023 | 2022 | 2023 | 2022 | ||||
| Net and comprehensive income | 155,476 | 52,707 | 142,955 | 45,683 | ||||
| Adjustments: | ||||||||
| Distributions | 2,290 | 11,287 | 22,973 | 33,863 | ||||
| Depreciation | 736 | 751 | 2,275 | 2,289 | ||||
| Fair value gain on investment properties | (168,509 | ) | (50,249 | ) | (159,822 | ) | (40,309 | ) |
| Fair value gain on Exchangeable Units | (5,089 | ) | — | (5,089 | ) | — | ||
| Accretion on Redeemable Units | 954 | — | 954 | — | ||||
| Recapitalization Event costs | 26,600 | — | 26,600 | — | ||||
| Other(1) | 72 | 57 | 201 | 129 | ||||
| FFO | 12,530 | 14,553 | 31,047 | 41,655 | ||||
| Maintenance capex reserve – multi-residential | (3,103 | ) | (2,963 | ) | (8,177 | ) | (8,889 | ) |
| Maintenance capex reserve – commercial | (181 | ) | (237 | ) | (513 | ) | (710 | ) |
| AFFO | 9,246 | 11,353 | 22,357 | 32,056 | ||||
| FFO | ||||||||
| FFO per Unit – basic ($/Unit) | 0.46 | 0.71 | 1.36 | 2.03 | ||||
| FFO per Unit – diluted ($/Unit) | 0.43 | 0.71 | 1.34 | 2.03 | ||||
| FFO payout ratio – trailing twelve months(2) | 98.6 | % | 78.2 | % | 98.6 | % | 78.2 | % |
| AFFO | ||||||||
| AFFO per Unit – basic ($/Unit) | 0.34 | 0.55 | 0.98 | 1.56 | ||||
| AFFO per Unit – diluted ($/Unit) | 0.31 | 0.55 | 0.96 | 1.56 | ||||
| AFFO payout ratio – trailing twelve months(2) | 139.5 | % | 99.5 | % | 139.5 | % | 99.5 | % |
| Weighted average number of units | ||||||||
| Basic (‘000s) | 27,446 | 20,524 | 22,857 | 20,524 | ||||
| Diluted (‘000s) | 29,460 | 20,524 | 23,208 | 20,524 | ||||
| (1) | “Other” is comprised of non-controlling interest, amortization of other long-term assets, amortization of tenant inducements, and fair value adjustments for non-controlling interest and equity investments. |
| (2) | Calculated for the period from October 1, 2022 to September 30, 2023. |
FINANCIAL INFORMATION
Northview’s unaudited condensed consolidated interim financial statements, the notes thereto, and Management’s Discussion and Analysis for the three months and nine months ended September 30, 2023 and 2022, can be found on Northview’s website at www.rentnorthview.com and on SEDAR+ at www.sedarplus.com.
ABOUT NORTHVIEW RESIDENTIAL REIT
Northview is a publicly-traded real estate investment trust established pursuant to a declaration of trust under the laws of the province of Ontario for the primary purpose of indirectly acquiring, owning, and operating a portfolio of income-producing rental properties in secondary markets within Canada.
CAUTIONARY AND FORWARD-LOOKING INFORMATION
Certain information contained in this news release constitutes forward-looking information within the meaning of applicable securities laws. Statements that reflect Northview’s objectives, plans, goals, and strategies are subject to risks, uncertainties, and other factors which could cause actual results to differ materially from future results expressed, projected, or implied by such forward-looking information. In some instances, forward-looking information can be identified by the use of terms such as “may”, “should”, “expect”, “will”, “anticipate”, “believe”, “intend”, “estimate”, “predict”, “potentially”, “starting”, “beginning”, “begun”, “moving”, “continue”, or other similar expressions concerning matters that are not historical facts. Forward-looking information in this news release includes, but is not limited to, future maintenance expenditures, financing and the availability of financing and the terms thereof, the replacement of floating-rate debt with fixed-rate debt, future economic conditions, the expected distributions of Northview, liquidity and capital resources, market trends, future operating efficiencies, tenant incentives, and occupancy levels. Such statements involve significant risks and uncertainties and are not meant to provide guarantees of future performance or results. These cautionary statements qualify all of the statements and information contained in this news release incorporating forward-looking information.
Forward-looking information is made as of November 13, 2023 and is based on information available to management as of that date. Management believes that the expectations reflected in forward-looking information are based upon reasonable assumptions; however, management can give no assurance that the actual results will be consistent with this forward-looking information. Factors that could cause actual results, performance, or achievements to differ materially from those expressed or implied by forward-looking information include, but are not limited to the risks identified in Northview’s Management’s Discussion and Analysis for the three months and nine months ended September 30, 2023 and 2022 and Northview’s Management’s Discussion and Analysis for the years ended December 31, 2022 and 2021 and those discussed in Northview’s other materials filed with the Canadian securities regulatory authorities from time to time, general economic conditions; the availability of a new competitive supply of real estate which may become available through construction; Northview’s ability to maintain distributions at their current level; Northview’s ability to maintain occupancy and the timely lease or re-lease of multi-residential suites, execusuites, and commercial space at current market rates; tenant defaults; changes in interest rates, which continue to be volatile and have trended upward since Northview’s formation in 2020; changes in inflation rates, including increased expenses as a result thereof; Northview’s qualification as a real estate investment trust; changes in operating costs; governmental regulations and taxation; fluctuations in commodity prices; and the availability of financing. Additional risks and uncertainties not presently known to Northview, or those risks and uncertainties that Northview currently believes to not be material, may also adversely affect Northview. Northview cautions readers that this 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 materially from those expected. Except as specifically required by applicable Canadian law, Northview assumes no obligation to update or revise publicly any forward-looking information to reflect new events or circumstances.
To learn more about Northview, visit www.rentnorthview.com or contact:
| Todd Cook, Chief Executive Officer Northview Residential REIT Tel: (403) 531-0720 Email: tcook@nvreit.ca | Sarah Walker, Chief Financial Officer Northview Residential REIT Tel: (403) 531-0720 Email: swalker@nvreit.ca |
| (1) | “Other” is comprised of non-controlling interest, amortization of other long-term assets, amortization of tenant inducements, and fair value adjustments for non-controlling interest and equity investments. |
| (2) | Calculated for the period from October 1, 2022 to September 30, 2023. |
