Diversified National Platform Positioned for Continued Profitable Growth. January

Transcription

1 Diversified National Platform Positioned for Continued Profitable Growth January

2 Disclaimer 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 Third Quarter 2015 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. 2

3 Investment Highlights TSX symbol: NVU.UN For Investors Seeking Sustainable Yield and Growth One of Canada s largest multi-family RElTs Diversified national platform Identified organic growth opportunities and development program Increased distributions eight times in 13 years Conservative payout ratio Key Stats Over 24,000 multi-family suites in 60 markets across eight provinces and two territories 1.2 million square feet of commercial real estate Sustainable FFO pay out ratio of less than 70% $2.7 billion enterprise value 1 $880 million market capitalization 1 (1) As at Jan. 8,

4 2015 Northview Transaction Overview Northern Property REIT Acquired: True North units / Class B units at a fixed exchange ratio of Represents a Capitalization Rate of 5.6% An institutional portfolio of 4,650 multi-family suites for total consideration of $535 million in cash, assumption of debt and NPR units / Class B units. Represents a Capitalization Rate of 5.5% 24,323 multi-family suites in 60 markets across eight provinces and two territories Northview Apartment REIT: 3 rd largest publicly-traded multi-family REIT in Canada TSX symbol: NVU.UN $2.7 billion 1 pro forma enterprise value $0.9 billion 1 pro forma market capitalization Pro Forma Ownership % 15% 15% 10% 61% Former NPR Unitholders Former True North Unitholders (excl. Daniel Drimmer) Daniel Drimmer related entities (through units and Class B units) Canadian Institutional Investor (1) Based on an NVU.UN closing price of $16.93 on Jan. 8,

5 Northview Apartment REIT Building Greater Value Together Addressed growth challenges and managed risks related to portfolio concentration Achieved vital goals of financial strength and increased scale Creation of Northview delivered on these strategies and positions the REIT for further growth and distributions to unitholders Diversified national platform Financial strength and liquidity Identified growth opportunities Access to markets with higher projected population growth 5

6 Northview s Growth Strategy Builds Upon its Diversified, National Platform 2002 Initial NPR Western Expansion Eastern Expansion Atlantic Expansion Northern Property portfolio 2015 Transaction BC 2,975 NT 1,329 AB 3, Acquisition SK 429 NU 1,096 ON 8, Acquisition Multi-family Residential Units QC 2,285 NB 1,163 NS 1,288 NL 1,728 6

7 Toronto Montreal Kitchener Halifax London Abbotsford St. John's Moncton Grande Prairie St Cat.- Niagara Fort McMurray Nunavut NWT Profitable Growth in New Markets 2015 Acquisitions are in markets with higher projected population growth High penetration in smaller markets constrains growth Acquisitions are in markets with significantly higher expected population growth Thousands Market Penetration Percentage of Canadian Population % CAGR 472 NPR (Northern Markets (1) ) 31% 1% 300 NPR (Other Markets (1) ) Acquisition Properties (2) 8% 2% 1% 33% % % % % % % % % 8 0.2% 4 0.7% 2 1.0% 2 (0.3%) (1) Selected Population Growth Forecast: (3) (1) NPR suites owned as at June 2015; Market suites and Canada population as at April 2015; City population based on 2011 census figures. Source: CMHC Rental Market Report; CMHC Northern Housing Report; Statistics Canada (2) Sources: Statistics Canada (as at July 2015); CMHC Rental Market reports (as at October 2014); Conference Board (3) Grande Prairie and Wood Buffalo (region where Fort McMurray is situated) is based on a census division population forecast from the Alberta Treasury Board and Finance. Source: Conference Board Metropolitan Outlook; Conference Board Territorial Outlook; Alberta Treasury Board and Finance Population Projection 7

8 Acquisition Portfolio Locations and Number of Units Guelph, ON Toronto, ON New Brunswick: 1,163 NOI Breakdown by Size of City (1) Kitchener-Waterloo, ON Peterborough, ON Fredericton, NB Saint John, NB Small 9% Kingston, ON Montreal, QC Moncton, NB Large 61% Medium 30% London, ON Sarnia, ON Southwestern ON: 4,625 Eastern ON: 1,831 GTA: 1,779 Montreal: 2,124 Halifax, NS Brockville, ON Nova Scotia: 1,288 Oshawa, ON St. Catharines-Niagara, ON Brantford, ON Hamilton, ON (1) Size of city is based on population, where: small=30,000 or less, medium=31, ,000, and large=100,001 or greater Note: City population based on 2011 census figures (Source: Statistics Canada) 8

9 Stability from Diverse Geographies Multi-family Portfolio Pro Forma NOI by Region (1) NT 11% NU 18% Quality diversified portfolio across Canada provides stability, mitigating the impact of cyclical regional economic downturns. BC 9% AB 17% SK 2% QC ON 6% 25% NB 2% NS 2% NL 8% Property Composition by NOI Residential 85% Execusuites & Hotel 3% Commercial 12% Residential Units 24,323, Occupancy 93.4% (1) NOI for Q with respect to NPR and True North, and management s estimates for institutional portfolio on an annualized basis 9

10 Reduced Exposure to Resource Oriented Markets NPR NOI Northview NOI NE BC 7% Alberta 23% NE BC 5% Alberta 17% Other regions 70% Other regions 78% Resource based region NOI of 30% (1) Resource based region NOI of 22% (1) (1) NOI for Q with respect to NPR and True North, and management s estimates for institutional portfolio on an annualized basis 10

11 Value Creation Opportunities Organic Opportunities

12 Executing on Value Creation Opportunities Translates into distribution increases Value Creation Opportunities # of eligible suites in acquired portfolios Estimated monthly improvement in NOI per suite Total Estimated Annual NOI Increase (in thousands) High-end renovation program 1, ,800 Below market rent 13, ,200 Sub-metering program 5, ,500 Above Guideline Increases 3, Total 14,300 Assumed Capitilization rate 5.5% Estimated value creation (in thousands) 260,000 Estimated increase in fully diluted FFO/unit

13 High-End Renovation Program Value creation through investment Before After Average cost: $15,000-20,000/suite Avg. rent increase: $250-$300/month ROI: 15-20% Target: 300 suites annually Identified Suites 2, Properties Completed % (1) As of November Additional 9 high end units expected in December

14 Value Creation through Market Pricing Realizing full value across through recent acquisition portfolios Below Market Rents Opportunity to increase rents to market level on tenant turnover, with minimal capex Average $32/suite (3.8%) below market across 14,000 suite acquisition portfolio Annual tenant turnover 30-35% Sub-metering Program (in Ontario) Opportunity for expense reduction on tenant turnover Average monthly savings: $40/suite Potential annual savings: $2.5 million Identified Suites Completed (1) Remaining 6,226 1,230 4, Properties 20% (1) As of November Addition 30 sub-metering enrollments expected in December

15 Above Guideline Increases (AGI) Value creation through investment Opportunity for return on significant capital investment in Ontario portfolio through rental rate growth above provincial guideline AGI Applications Approved Pending Approval 2016 Suites Average rent increase (1) 2017 Suites Average rent increase (1) % % 2, % 1, % (1) As of November Includes a 2.0% guideline increase (the Ontario provincial guideline increase for 2016) 15

16 Value Creation From NVU s Proven Internal Management Model Future growth from structure Cost savings through internalization of property management Continuity of experienced management team Property management internalization expected to be completed by 2017 Region Suites 2015 Alberta Ontario 7, New Brunswick, Nova Scotia, Quebec, Ontario 5,150 16

17 Value Creation Opportunities Development and Starlight Relationship

18 Development A highly accretive opportunity Shortage of supply Development yields bps higher than acquisition cap rates Current rents support new construction Strong in-house expertise (since 1980s) Ability to ramp up or down based on economic conditions without financial penalty Lower CAPEX requirement for first 10+ years Historical units completed Projected 2017 Projected 18

19 Development Plan Current: Focus on stable, non-resource based markets 2016: Calgary: 261 units Review non-resource based markets and new opportunities in Central and Eastern Canada 42 acres owned for 1,500 units in Western and Northern Canada 6 intensification opportunities identified in Ontario market Long Term: Develop 600 to 800 units per year Identifying new opportunities in the acquired portfolio 19

20 Completed Development 189 Units McCarthy Ridge Regina, SK Rents and NOI are exceeding pro-forma expectations Completed cost of $142,000 per unit in 2014 Cap Rate on completion ~ 8.0% Fair value increase of $30,000 per unit recognized upon completion Stabilized at 95% occupancy 20

21 Suites Potential Starlight Pipeline Starlight Investments is one of Canada s leading private real estate investors and asset managers Starlight is owned by Daniel Drimmer, who acts as President and CEO, 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 Track Record of Growing Public Vehicles Summary of Assets Sold by Privately Held Drimmer Entities to Drimmer Sponsored REITs 12,000 10,000 8,000 8,200 10,626 Suites 6,000 4,000 2,000 2,076 1,570 2, (IPO) Institutional Portfolio Demonstrates Potential of Starlight Relationship 21

22 Financial Metrics Among the strongest in the Canadian REIT sector

23 Increased Scale: New Opportunities & Reduced Risk Enhanced access to capital, increased market liquidity $7.0 $6.5 $6.0 $5.0 $4.4 $4.0 $3.0 $2.0 $2.7 $2.3 $1.7 $1.6 $1.0 $1.0 $1.0 $0.8 $0.0 29FEB Enterprise Value 1 $ billions (1) Closing prices on Jan. 8,

24 Lowest AFFO multiple in the REIT sector Opportunity for improvement 17.0x 15.9x 14.4x 14.8x 8.7x NVU KMP BEI IIP CAP Distribution 9.6% 5.9% 4.7% 3.8% 4.6% Yield (1) Source: BMO REIT Beat December 25, E (1) Closing prices on Jan. 8,

25 FFO Payout Ratio vs. Competitors 67% 69% 71% 57% 49% IIP BEI NVU CAP KMP Source: BMO REIT Beat December 25, E 25

26 NVU Historical Distribution Growth Sustainable FFO payout ratio NVU Historical Distributions $1.48 $1.48 $1.48 $1.53 $1.53 $1.53 $1.58 $1.63 $1.38 $1.25 $1.31 $1.15 $ % 80.3% 77.7% 81.3% 79.5% 77.2% 69.8% 67.3% 70.0% 65.3% 68.1% 69.3% 67.1% (1) Annual Distribution FFO Payout Ratio (1) Excludes special distribution of $0.56 per unit 26

27 Comparable Debt Metrics to Peers Coverage ratios expected to remain among the strongest in Canadian multi-family sector Interest Coverage Ratio Debt Service Coverage Ratio 4.0x 3.5x 3.6x 3.0x 2.5x 2.2x 2.9x 2.9x 2.6x 2.3x 2.0x 1.5x 1.7x 1.6x 1.5x 1.4x 1.0x 0.5x 0.0x Note: BEI.UN, CAR.UN, IIP.UN, KMP based on trailing twelve months. 27

28 ($ millions) Financing Weighted average interest rate at September 30, 2015: 3.34%, 33 bps lower than December 31, 2014 Weighted average term to maturity at September 30, 2015: 4.9 years compared to 5.0 years December 31, 2014 Potential interest savings opportunity of $1.5M in 2016 by refinancing at ~100 bps lower than the average interest rates Weighted avg. interest rate $ % 3.30% 3.87% 3.37% 2.78% 3.85% 3.25% 3.24% 3.21% $160 $120 $80 $40 $- Note: As of September 30, Thereafter 28

29 Northview Debt Management Strategy Plans to de-lever Clear path to leverage reduction Internal value creation Selective non-core asset dispositions Extend term mortgages Long-term financing at fixed rates when borrowing conditions are favourable Refinance properties on Bridge Facility with term mortgage Utilize CMHC financing to lower interest rate Majority to be completed by Q Pro Forma Debt to Gross Book Value 59.3% 57.8% Excluding pro forma mark-to-market debt adjustment & TN Convertible Debentures Competitive Debt Position to Peers 2.9x Interest Coverage Ratio 1.7x Debt Coverage Ratio 29

30 Experienced Management Team With Proven Track Record Todd Cook President & Chief Executive Officer Leslie Veiner Chief Operating Officer Robert Palmer Chief Financial Officer Richard Anda VP, Business Development Lizaine Wheeler VP, Residential Operations Bo Rasmussen VP, Property Development President & CEO of Northview Apartment REIT since 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 Previously President & CEO of the True North Apartment REIT since 2012 Previously CFO of TransGlobe Apartment REIT from 2010 to Employed by Chartwell Retirement Residences as SVP Real Estate from 2005 to 2008 and CFO from 2003 to 2005 CFO of Northview Apartment REIT since 2013 Previously VP, Controller of WestJet Airlines Ltd. from 2007 to 2012 and prior to that, senior finance roles with Molson Coors Canada from 2003 to 2007 VP, Business Development, of Northview Apartment REIT since Joined Northern Property REIT in VP, Operations from 2004 to 2011 Previously with Canada Mortgage and Housing Corporation VP, Residential Operations of Northview Apartment REIT since 2012 Previously SVP Operations at Mainstreet Equity Corp from , and prior to that, senior operations roles with Boardwalk REIT from 1998 to 2010 VP, Property Development of Northview Apartment REIT since Joined Northern Property REIT in 2007 as Manager of Construction and Development Previously VP Development for NewNorth Projects Ltd. from 2004 to

31 Commitment to Strong Governance Principal Occupation Douglas Mitchell, Chair Todd Cook 1 Daniel Drimmer 1 Kevin Grayston Dennis Hoffman Christine McGinley Terrance McKibbon Graham Rosenberg Scott Thon National Co-chair, Borden Ladner Gervais LLP President & CEO, Northview Apartment REIT President & CEO, Starlight Investments Ltd. Corporate Director, former CFO, CHIP REIT Former Partner, City Leader (Calgary Office), PricewaterhouseCoopers LLP Corporate Director, former SVP of Operations, Canwest Global President & CEO, Aecon Group Inc. President & Co-CEO, Dental Corporation of Canada Inc. President & CEO, AltaLink L.P. (1) Non-independent 31

32 Contact Information Todd Cook President & Chief Executive Officer (403) Leslie Veiner Chief Operating Officer (647) Robert Palmer Chief Financial Officer (403)