Diversified National Platform Positioned for Continued Profitable...
Transcript of Diversified National Platform Positioned for Continued Profitable...
165 Ontario Street, St. Catharines, ON
120 Dundas Street East, Mississauga, ON Azure, Fort St. John, BC
Diversified National Platform
Positioned for Continued Profitable Growth
Cobble Hill, Airdrie, AB
August 2016
Disclaimer
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This presentation may contain forward-looking information. All information included in this presentation other than statements of historical fact, is
forward-looking information. When used in this presentation, words “expect”, “estimate”, “project”, “potential” or other similar expressions identify
forward-looking information. The forward-looking information included in this presentation relates to, among other things, current expectations of
future results, performance, prospects and opportunities, including with respect to the benefits of the acquisition of True North Apartment REIT
and properties from affiliates of Starlight Investments Ltd. and affiliates of the Public Sector Pension Investment Board, growth opportunities,
payout ratio, market capitalization, mitigation of impact of commodity prices, population growth, results from the high-end renovation program,
above guideline increases, opportunities to increase below market rents, results from the sub-metering program, cost savings from management
internalization, development and acquisition opportunities, and debt management.
This presentation reflects Northview’s current beliefs and is based on information currently available to senior management. Forward-looking
information is provided for the purpose of presenting information about senior management’s current expectations and plans relating to the future
and readers are cautioned that such statements may not be appropriate for other purposes. This information is not a guarantee of future
performance and is based on Northview’s estimates and assumptions, which include, but are not limited to market growth, the general economy,
interest rates and real estate conditions are each stable, occupancy rates, results of operations, performance, prospects and opportunities.
The forward-looking information is subject to a variety of known and unknown risks and uncertainties, which could cause actual events, results
and performance to differ materially from the forward-looking information. Such risks and uncertainties include, but are not limited to, availability
of cash flow, risks of unexpected operating results, risks of 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 other risk factors. Northview cautions that this list of factors is not exhaustive.
Although the forward-looking information contained in this presentation is based on what Northview believes are reasonable assumptions, there
can be no assurance that actual results will be consistent with this forward-looking information. The forward-looking information is provided only
as of the date of such information, and Northview, except as required by applicable law, assumes no obligation to update or revise this
information to reflect new information or the occurrence of future events or circumstances.
Certain measures contained in this presentation do not have any standardized meaning as prescribed by International Financial Reporting
Standards (“IFRS”) and, therefore, are considered non-GAAP measures. These measures are provided to enhance the reader's overall
understanding of financial conditions. They are included to provide investors and management with an alternative method for assessing
operating results in a manner that is focused on the performance of 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 IFRS. 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 Second Quarter 2016 Management's Discussion &
Analysis for definitions of non-GAAP measures and additional GAAP measures, including NOI, FFO, debt to gross book value, and interest
coverage.
Content Overview
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Page
Investment Highlights 4
2015 Transaction Overview 9
2016 Strategic Objectives 11
Execution of Strategic Value Creation Initiatives 12
Growth Opportunities 16
Financial Metrics 20
Portfolio Overview 24
For Investors Seeking Sustainable Yield and Growth
• One of Canada’s largest multi-family RElTs
• Diversified national platform
• Identified organic growth opportunities, development program,
and acquisition pipeline
• Sustainable payout ratio
• History of FFO and distribution growth
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Investment Highlights TSX Symbol: NVU.UN
Summary TSX Symbol: NVU.UN
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Key Statistics
Unit Price (1) $20.25
Trust Units Outstanding (Basic) (2) 52.2 million
Market Capitalization $1.1 billion
Enterprise Value $3.0 billion
Annual Distributions Per Trust Unit $1.63
Distribution Yield 8%
FFO Payout Ratio (2)(3) 77%
Estimated AFFO Multiple 2016 (4) 12.0x
Multi-Family Units (2) 24,314
Commercial Square Footage (2) 1,135,000
Execusuites and Hotel Units (2) 419
(1) Closing price as at August 31, 2016.
(2) Source: Q2 2016 MD&A.
(3) Diluted FFO payout ratio excluding Non-recurring Items for the six months ended June 30, 2016.
(4) Source: BMO REIT Beat (dated August 26, 2016).
Diversified National Platform Geographically diverse portfolio operating in eight provinces and two territories
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Northview property portfolio
Multi-family
Residential Units
$3.0 billion
24,314
Western
Canada Ontario
Atlantic
Canada
Northern
Canada Québec
8,235 2,285 7,241 4,151 2,402
Enterprise Value
$7.5
$4.9
$3.2 $3.0
$1.9 $1.8
$1.3 $1.0 $1.0
CAP Boardwalk MilestoneApartments
Northview Killam MorguardResidential
InterRent MainstreetEquity
Pure Multi-Family
Enterprise Value(1)
$ billions
Increased Scale: New Opportunities Enhanced access to capital, increased market liquidity
29FEB201210222095
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(1) Source: Closing prices as at August 31, 2016. Data provided by Scotiabank.
TM
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Other
Regions
78%
Resource
Based
Regions
22%
Source: Q2 2016 Financial Statements. NOI for resource based markets excludes Non-recurring Items.
Northern Canada, $31.7
(34%)
Western Canada, $19.5
(Resource Based Markets $12.3)
(22%)
Ontario, $24.3 (27%)
Atlantic Canada, $11.2
(12%)
Québec, $4.6 (5%)
Q2 2016 YTD NOI ($ MILLIONS)
Resourced
Based Markets
Resource
Based Markets
National Portfolio Insulated from regional market risk
Northern Canada, $26.2
(46%)
Western Canada, $22.9
(Resource Based Markets $16.0)
(41%)
Atlantic Canada, $6.9
(12%)
Québec, $0.4 (1%)
Q2 2015 YTD NOI ($ MILLIONS)
Resource
Based Markets
Diversified portfolio across Canada provides
stability, mitigating the impact of cyclical regional
economic downturns.
2015 Transaction Overview Reduced risk and created new opportunities for profitable growth
Reduced inherent risk associated with NPR’s portfolio
• Portfolio concentration in Northern and Western Canada
• Impact of resource based markets on occupancy and rental rates
On strategy
• Continues geographic expansion since NPR IPO in 2002
• Consistent with core skillset of owning and
managing multi-family properties across Canada
Delivers continued profitable growth
• NPR’s high market penetration limited opportunities
• Diversification through acquiring and developing
properties in markets with expanding populations
and growing economies in Central and Atlantic
Canada
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Unit Price Performance Delink from Oil Correlation to oil has decreased since the 2015 Transaction
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65
75
85
95
105
115
125
135
Oct-15 Dec-15 Feb-16 Apr-16 Jun-16 Aug-16
Northview WTI Crude Oil (C$)
(12.8%)
9.5%
Correlation: 47.1%
Correl.:
(32.3%)
60
65
70
75
80
85
90
95
100
105
110
Oct-14 Jan-15 Apr-15 Jul-15 Oct-15
Northern Property WTI Crude Oil (C$)
(25.9%)
(33.9%)
Correlation: 90.9%
Pre Deal Close (12 Months)
Price Return (Base = 100)
Since Deal Close (October 30, 2015)
Price Return (Base = 100)
Source: Bloomberg.
2016 Strategic Objectives Sustaining and enhancing value creation for Unitholders
• Execution of Strategic Value Creation Initiatives 1
• Disposition of Non-Core Assets 2
• Restructure Credit Facilities 3
Maintain Current Conservative Distribution Levels 4
Cre
atin
g V
alue
for
Uni
thol
ders
11
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Execution of Strategic Value Creation Initiatives Realizing full value across through recent acquisition portfolios
Value Creation Initiative Progress
High-End Renovation Program
Completed 116 units in Q2 2016 YTD, 72 units expected in Q3 2016.
Average rental rate increase on 98 renovated units that have been
leased is $203 per unit with average return on investment of 15%.
Below Market Rents Achieved $9 per unit increase in monthly rent on the acquired portfolio
since January 1, 2016.
Sub-Metering Program Identified 7,354 units, 3,727 units have been sub-metered of which
40% are enrolled.
Above Guideline Increases
Received approval on 2,850 units of which 1,250 units have been
approved in 2016 at an increase of 4%, including the 2016 guideline of
2%.
Property Management
Internalization
Internalized 7,600 units in Ontario on April 1, 2016, with plans to
internalize remaining 5,150 units in 2017 (NS, NB, QC, ON).
558 Durham Crescent, Woodstock, ON
• $150 million of non-core properties expected
to be sold in 2016 and 2017
• $79 million including sales under contract are
expected to close by Q3 2016
Disposition of Non-Core Assets Sales under contract in 2016 to reduce debt to gross book value by 0.9%
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50 Tripp Boulevard, Trenton, ON
Debt to Gross Book Value
• 60.2% (excluding convertible debentures) at Q2 2016
• Target of 50% to 55% range
Clear Path to Leverage Reduction
• Execution of strategic value creation initiatives
• Disposition of non-core assets
Restructure Credit Facilities
• Utilize CMHC financing extend term and lower interest rate
• Bridge loan refinanced during Q1 2016 and established a new $30.0 million credit facility in Q2
• Consolidation of the $75 million and $45 million operating facilities into one operating facility to be
completed in Q3
Restructure Credit Facilities Systematic plan to reduce leverage
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$1.15 $1.18
$1.25
$1.31
$1.38
$1.48 $1.48 $1.48
$1.53 $1.53 $1.53(1) $1.55
$1.59
$1.63
90.9% 80.3% 77.7% 81.3% 79.5% 77.2%
69.8% 67.3% 70.0% 65.3% 68.1% 69.3% 67.1% 69.2%
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Annual Distributions FFO Payout Ratio - Basic
Maintain Conservative Distribution Levels Sustainable FFO payout ratio
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(1) Excludes special distribution of $0.56 per unit.
Growth Opportunities Development and Starlight Relationship
331
363
299
401
2013 2014 2015 2016Projected
Development Highly accretive opportunities
• Development yields 100 to 200 bps higher than acquisition Cap Rates
• Existing land holdings creates substantial development pipeline
• 48 acres owned for 1,700 units in Western and Northern Canada
• Approximately 500 new units can be developed on existing properties in
Ontario
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Historical units completed
Cobble Hill, Airdrie, AB
Vista – Calgary, AB
Cambridge Bay, NU
36 $290 10.5%
Units Per Unit Stabilized Cap
Rate
thousand
Development Activity Quality multi-family rental properties
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Q2
Completion
Date
2017
Calgary, AB
261 $170 7.5%
Units Per Unit Stabilized Cap
Rate
thousand
Q4
Completion
Date
2016
Airdrie, AB
140 $186 7.0%
Units Per Unit Stabilized Cap
Rate
thousand
Q1
Completion
Date
2016
Potential Starlight Pipeline Institutional portfolio demonstrates potential of Starlight relationship
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Track Record of
Growing Public
Vehicles
• Starlight Investments is one of Canada’s leading private real estate
investors and asset managers
• Starlight is owned by Daniel Drimmer, a Trustee of Northview, and has
completed over $9.0 billion worth of acquisition and financing
transactions over the past 20 years
• Starlight maintains a portfolio of over 12,000 multi-family suites in
Canada
Summary of Assets Sold by Privately Held Drimmer
Entities to REITs
8,200
10,626
2,076 1,570
2,824
4,650
0
2,000
4,000
6,000
8,000
10,000
12,000
2010 (IPO) 2011 2012 2013 2014 2015
Su
ites
Financial Metrics Strong Financial Base for Sustainable Distributions
3.5x
3.1x 3.0x
2.6x 2.5x
2.0x
1.7x 1.6x
1.5x 1.4x
Boardwalk Northview Cap Interrent Killam
Interest Coverage Ratio Debt Service Coverage Ratio
Strong Coverage Ratios Among the best in the Canadian multi-family REIT sector
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(1) BEI.UN, NVU.UN, CAR.UN, IIP.UN, and KMP based on trailing twelve months as of June 30, 2016.
(1) (1) (1) (1) (1) TM
21.7%
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21.9%
25.4%
9.3%
14.4%
TM
Source: Total unit return performance is from January 1, 2016 to August 31, 2016. Data provided by Scotiabank.
NVU.UN Total Unit Return Performance Strong performance in 2016
23.8x
19.9x
17.6x 16.8x
12.0x
IIP CAP BEI KMP NVU
Source: BMO REIT Beat (dated August 26, 2016). NVU.UN distribution yield as at August 31, 2016.
Lowest AFFO Multiple in the REIT Sector Opportunity for improvement
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Distribution
Yield 3% 4% 5% 5% 8%
TM
Portfolio Overview Geographical diversification
Portfolio Summary NOI diversified across country
Northern
Canada
34%
Atlantic
Canada
12%
NOI BY PORTFOLIO
25
Commercial,
10%
Execusuites
& Hotel, 4%
Residential,
86%
Source: Q2 2016 MD&A and Financial Statements. NOI percentage based on six months ended June 30, 2016.
Western
Canada
22%
Ontario
27%
Québec
5%
Multi-family
Residential Units
24,314 Occupancy
91%
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Regional Overview – Ontario Opportunities for internal and external growth from growing populations
Six months ended Q2 2016
NOI ($millions) $24.3
Total NOI % 27%
Occupancy (%) 96%
Multi-Family Units 8,235 Oshawa, ON
Hamilton, ON
Toronto, ON
Sarnia, ON
Guelph, ON
Kitchener-Waterloo, ON
London, ON
St. Catharines-Niagara, ON
Peterborough, ON
Brockville, ON
Southwestern ON: 4,625
Eastern ON: 1,831
GTA: 1,779
Note: Regions with a portfolio of greater than 200 units are listed.
Lindsay, ON
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Regional Overview – Western Canada Well positioned to be the first choice for new residents when the market recovers
Fort Nelson, BC Dawson Creek, BC
Fort St. John, BC
Chetwynd, BC
Abbotsford, BC
Nanaimo, BC
Grande Prairie, AB
Fort McMurray, AB
Bonnyville, AB
Lloydminster, AB Regina, SK
Airdrie, AB
Calgary, AB
Lethbridge, AB
BC: 2,767
AB: 4,045
SK: 429
Six months ended Q2 2016
NOI ($millions) $19.5
Total NOI % 22%
Occupancy (%) 81%
Multi-Family Units 7,241
Commercial Square Feet 136,000
Note: Regions with a portfolio of greater than 200 units in BC or 500 units in AB and SK or recent developments are listed.
Prince George, BC
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Regional Overview – Atlantic Canada Increased presence in attractive markets
Six months ended Q2 2016
NOI ($millions) $11.2
Total NOI % 12%
Occupancy (%) 94%
Multi-Family Units 4,151
Execusuites & Hotel Units 142
Commercial Square Feet 225,000
Fredericton, NB
Saint John, NB
Moncton, NB
Dieppe, NB
Shediac, NB
Halifax, NS
Dartmouth, NS
Labrador City, NL Gander, NL
St. John’s, NL
NB: 1,135
NS: 1,288
NL: 1,728
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Regional Overview – Northern Canada Strong and stable performing region
Six months ended Q2 2016
NOI ($millions) $31.7
Total NOI % 34%
Occupancy (%) 95%
Multi-Family Units 2,402
Execusuites & Hotel Units 277
Commercial Square Feet 771,000
Yellowknife, NT
Inuvik, NT Cambridge Bay, NU
Gjoa Haven, NU
Taloyoak, NU
Arctic Bay, NU
Pond Inlet, NU
Clyde River, NU
Pangnirtung, NU
Iqaluit, NU
Kimmirut, NU
Cape Dorset, NU
NT: 1,309
NU: 1,093
Igloolik, NU
Hall Beach, NU
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Regional Overview – Québec Opportunity for growth as occupancy improves
Six months ended Q2 2016
NOI ($millions) $4.6
Total NOI % 5%
Occupancy (%) 91%
Multi-Family Units 2,285
Commercial Square Feet 3,000
Montreal, QC
Sept-Iles, QC
QC: 2,285
Experienced Management Team
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Todd Cook
President &
Chief Executive Officer
• President & CEO since 2014
• Joined Northern Property REIT in 2006, CFO from 2007 to 2011 and President and COO in 2013
• Previously CFO of TGS North American REIT from 2003 until its acquisition by The Great-West Life
Assurance Company in 2006
Leslie Veiner
Chief Operating Officer
• COO since 2015
• Previously President & CEO of the True North Apartment REIT since 2012
• Previously CFO of TransGlobe Apartment REIT from 2010 to 2012. Employed by Chartwell
Retirement Residences as SVP Real Estate from 2005 to 2008 and CFO from 2003 to 2005
Travis Beatty
Chief Financial Officer
• CFO since May 2016
• Previously CFO of West Valley Energy from 2012 to 2014 and various roles including CFO with
OPTI Canada from 2002 to 2011
Richard Anda
VP, Business Development
• VP, Business Development since 2011
• Joined Northern Property REIT in 2003. VP, Operations from 2004 to 2011
• Previously with Canada Mortgage and Housing Corporation
Lizaine Wheeler
VP, Residential Operations
• VP, Residential Operations of since 2012
• Previously SVP Operations at Mainstreet Equity Corp from 2010-2012, and prior to that, senior
operations roles with Boardwalk REIT from 1998 to 2010
Bo Rasmussen
VP, Property Development
• VP, Property Development since 2011.
Joined Northern Property REIT in 2007 as Manager of Construction and Development
• Previously VP Development for NewNorth Projects Ltd. from 2004 to 2007
Commitment to Strong Governance
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Douglas Mitchell, Chair National Co-chair, Borden Ladner Gervais LLP
Todd Cook(1) President & CEO, Northview Apartment REIT
Daniel Drimmer(1) President & CEO, Starlight Investments Ltd.
Kevin Grayston Corporate Director, former CFO, CHIP REIT
Dennis Hoffman Former Partner, City Leader (Calgary Office), PricewaterhouseCoopers LLP
Christine McGinley Corporate Director, former SVP of Operations, Canwest Global
Terrance McKibbon President & CEO, Aecon Group Inc.
Graham Rosenberg President & Co-CEO, Dental Corporation of Canada Inc.
Scott Thon President & CEO, AltaLink L.P.
Principal Occupation
(1) Non-independent.
www.NorthviewREIT.com