Mr. Todd Cook reports

NORTHVIEW FUND ANNOUNCES Q2 2023 FINANCIAL RESULTS, INCLUDING STRONG OCCUPANCY GAINS AND NOI GROWTH OF 7.1 PERCENT

Northview Fund today released its financial results for the three and six months ended June 30, 2023.

All amounts in this news release are in thousands of Canadian dollars unless otherwise indicated (as is always the case on Stockwatch).

"We are pleased to announce NOI growth of 7.1 per cent in the second quarter results, which was driven by the multiresidential segment as well as the commercial and execusuite segment," noted Mr. Todd Cook, chief executive officer of Northview. "We also look forward to the expected completion of the fund's recapitalization event, which will lead our transformation into Northview Residential REIT. The acquisitions of the three high-quality property portfolios, strengthening Northview's balance sheet, will provide the REIT additional financial flexibility and help to drive unitholder value in the years to come."

Q2 2023 highlights

• On June 12, 2023, Northview announced a recapitalization transaction of three portfolios and its intention to transform into Northview Residential REIT (the recapitalization event). On Aug. 4, 2023, unitholders approved the recapitalization event, the closing of which remains subject to customary closing conditions, including the receipt of certain third party consents.
• Net operating income (NOI) and NOI margin increased by 7.1 per cent and 0.9 per cent, respectively, from the second quarter of 2022 as increased revenues, driven by higher occupancy and average monthly rent (AMR), exceeded higher operating expenses in both the multiresidential and the commercial and execusuite segments.
• In the multiresidential segment, NOI growth of 7.4 per cent from the second quarter of 2022 was driven by increases in occupancy and AMR in Western Canada and Atlantic Canada resulting in NOI growth of 20.7 per cent and 13.5 per cent, respectively, for these regions. This NOI growth was partially offset by lower NOI in Northern Canada due to higher maintenance expenses.
• Occupancy for the multiresidential segment increased for the fifth consecutive quarter. Multiresidential segment occupancy of 94.1 per cent represented an increase of 320 basis points (bps) from the second quarter of 2022 and an increase of 40 bps from the previous quarter. Compared with the second quarter of 2022, the increase in occupancy was due to a 780 bps increase in Western Canada and a 130 bps increase in Atlantic Canada.
• Funds from operations (FFO) was $11.4-million compared with $14.6-million for the three months ended June 30, 2022, resulting in an FFO per unit of 32 cents compared with 41 cents for the comparative period. The decreases in FFO and FFO per unit were attributable to higher financing costs, which more than offset growth in NOI.
• Net and comprehensive loss of $3.1-million was lower than $3.8-million for the three months ended June 30, 2022, as strong NOI results and lower distributions to unitholders outpaced higher financing costs compared with the second quarter of 2022.
• In June, 2023, Northview adjusted its distribution to 62.5 cents from $1.26 per Class A unit per annum (with proportionately equivalent changes to the distributions per Class C unit and Class F unit). The current level of distributions is expected to allow for stable monthly cash distributions to unitholders.
• In Q2 2023, $72.1-million of mortgage financing, excluding short-term financing, for multiresidential properties was completed at a weighted average interest rate of 4.13 per cent and average term to maturity of 9.28 years.

2023 year-to-date highlights

• NOI of $57.5-million in 2023 was higher than $53.3-million for 2022 as higher revenue more than offset higher operating expenses. The 8.0-per-cent increase was driven by the multiresidential segment due to a 320 bps increase in occupancy compared with the six months ended June 30, 2022, and higher AMR across all regions.
• 2023 FFO of $18.5-million (52 cents per unit) was lower than $27.1-million (75 cents per unit) for the six months ended June 30, 2022, as higher financing costs due to higher interest rates on the credit facility were partially offset by higher NOI resulting in an FFO payout ratio of 101.6 per cent compared with 73.2 per cent in 2022.
• Net and comprehensive loss for the six months ended June 30, 2023, of $12.5-million was higher than $7.0-million for 2022. The increase in net and comprehensive loss was driven by increased financing costs, partially offset by NOI growth.
• Debt to gross book value was 67.8 per cent as at June 30, 2023, an increase of 140 bps from 66.4 per cent as at Dec. 31, 2022, as a result of higher debt.
• During the six months ended June 30, 2023, Northview completed $215.2-million of mortgage financing with a weighted average interest rate of 4.16 per cent and an average term to maturity of 6.60 years.
• Credit facility repayments of $98.1-million and borrowings of $23.9-million were completed for the six months ended June 30, 2023. As market conditions permit, Northview intends to continue to utilize availability of financing on its properties to reduce interest rate exposure, as mortgage financing is expected to be used to repay borrowings on the credit facility.

Recapitalization event

• On June 12, 2023, Northview announced its recapitalization event, including the acquisitions of three portfolios for $742-million and its intention to transform into Northview Residential REIT. The purchase price is expected to be satisfied through a combination of the issuance of units at an issue price of $15.06 per unit, exchangeable or redeemable units of certain subsidiariesof Northview at a value of $15.06 per unit, the assumption of in-place mortgage debt, and credit facility borrowings.
• In connection with the recapitalization event, Northview intends to amend its declaration of trust to align Northview with typical open-ended real estate investment trusts and to facilitate the aforementioned acquisitions.
• Upon close of the recapitalization event, Northview expects to execute amendments to the existing credit facility which include, among other matters, an extension of the maturity date of Oct. 30, 2023, to Dec. 31, 2024, and a revised threshold for the debt service coverage ratio of 1.20 from 1.40. In addition to the amendments to its existing credit facility, Northview expects an additional $60.0-million credit facility.
• In accordance with its terms, the management agreement dated Nov. 2, 2020, by and among Starlight Investments CDN AM Group LP and Northview, will terminate upon completion of the recapitalization event.
• Northview received a no-action letter from the Competition Bureau and on Aug. 4, 2023, unitholders approved the recapitalization event. The closing of the recapitalization event remains subject to customary closing conditions, including the receipt of certain third party consents.

For additional information, see also the notice of annual and special meeting of unitholders and management information circular dated June 30, 2023, at the Northview website and on SEDAR+.

Financial information

Northview's unaudited condensed consolidated interim financial statements, the notes thereto, and management's discussion and analysis for the three and six months ended June 30, 2023, and 2022, can be found on Northview's website and on SEDAR+.

About Northview Fund

Northview is a closed-end fund, as no further units will be issued in its current structure, 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.

We seek Safe Harbor.