Northern Property REIT reports first quarter 2015 financial results

FFO per unit increases 6.1% from 2014

CALGARY, May 6, 2015 /CNW/ - Northern Property Real Estate Investment Trust (the "REIT" or "NPR") (NPR.UN – TSX) today announced financial results for the three months ended March 31, 2015. NPR reported first quarter funds from operations ("FFO") per Trust Unit of $0.52, an increase of 6.1% from $0.49 in the first quarter of 2014.

Todd Cook, President and CEO, commented, "In light of the difficult economic environment for regions with natural resource based economies, we are satisfied with the increase in NOI and FFO. Our low payout ratios, strong debt metrics and diversified portfolio provide NPR with the stability to continue our strong financial performance, maintain our sustainable distribution levels and continue our growth initiatives through 2015."

Mr. Cook continued, "The low price of crude oil continues to drive vacancy issues in Fort McMurray, AB, and Lloydminster, AB. We are taking advantage of this period of higher vacancies in our natural resource based markets to increase reinvestment in our properties to improve the competiveness of our portfolio. This reinvestment and our focus on improving levels of customer service, leasing and resident retention will help ensure NPR is the first choice in our markets."

Financial Performance Highlights
(thousands of dollars, except per Trust Unit and percentage amounts)	Three months ended March 31
	2015	2014	Change
Total revenue	48,821	45,408	7.5%
Net operating income	26,340	23,872	10.3%
Net and comprehensive income	14,618	18,113	(19.3%)
FFO	16,574	15,493	7.0%
FFO per Trust Unit, basic and diluted	$0.52	$0.49	6.1%
FFO payout ratio	78.1%	81.5%	(3.4%)
Distributions declared to Trust Unit holders	12,940	12,620	2.5%
Distributions per Trust Unit	$0.41	$0.40	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.

FFO
FFO for the three months ended March 31, 2015, was $16.6 million, an increase of 7.0% compared to $15.5 million for the same period of 2014. On a per unit basis, FFO was $0.52 and $0.49 for the first quarters of 2015 and 2014, respectively, an increase of 6.1%. FFO increased from 2014 as a result of higher NOI driven by the contribution from newly acquired and developed properties. This was partially offset by higher than normal vacancy, mainly in Fort McMurray, AB, and Lloydminster, AB, lower NOI in the execusuites and hotel segment, an increase in financing costs due to the higher mortgage balance and operating facilities, and higher administration costs.

NOI
For the three months ended March 31, 2015, NPR reported an NOI increase of 10.3% from the same period of 2014 due to increases in the multi-family and commercial business segments from additional properties and lower utility costs, partially offset by a decline in the execusuites and hotel segment.

Same door NOI increased 0.9% for the three months ended March 31, 2015, when compared to the same period in 2014. The improvement in same door results in 2015 was attributable to the growth in the commercial segment in St. John's, NL, and Iqaluit, NU; and lower utility costs from less severe winter weather. This was partially offset by higher vacancy in Fort McMurray, AB, Lloydminster, AB, and northeastern British Columbia, along with weaker performance in the execusuite property in St. John's, NL, and the hotel in Iqaluit, NU. Commercial same door NOI increased as a result of two Bristol Court buildings in St. John's, NL, being fully leased in mid-2014 and lease renewals completed in 2014 for the warehouses in St. John's, NL.

From a business segment perspective, multi-family same door NOI decreased 1.1%, commercial increased 12.1%, and the execusuites and hotel decreased 6.8% for the three months ended March 31, 2015.

Stabilized Vacancy Loss
Stabilized vacancy for the three months ended March 31, 2015, was 9.5%, up from 7.8% for the same period of 2014. While vacancy remains high in the key markets of Yellowknife, NT; Fort McMurray, AB; and Lloydminster, AB; most regions experienced only a slight vacancy increase in the first quarter of 2015. Vacancy in the natural resource based markets is not expected to improve significantly until there is a material and sustainable recovery in the price of crude oil resulting in increased economic activity. Capital programs, lease incentives and select rental rate reductions are being used to attract and retain residents to decrease vacancy.

Residential Stabilized Vacancy Loss
Province and Territory	Q1 2014	Q2 2014	Q3 2014	Q4 2014	2014	Q1 2015
Alberta	6.5%	6.8%	7.7%	9.2%	7.6%	13.0%
British Columbia	14.0%	11.2%	11.7%	11.1%	12.0%	12.3%
Newfoundland and Labrador and Québec	5.0%	4.1%	3.7%	3.9%	4.2%	5.3%
Northwest Territories	11.9%	12.2%	12.7%	11.4%	12.1%	11.2%
Nunavut	1.8%	1.7%	2.4%	2.1%	2.0%	3.6%
Saskatchewan	6.5%	5.6%	5.1%	6.9%	6.2%	7.8%
Overall	7.8%	7.1%	7.6%	7.6%	7.5%	9.5%

Total vacancy loss for the first quarter of 2015 was 10.6%, an increase from 8.8% for the same period of 2014.

Portfolio Summary (including joint ventures at 100%) – March 31, 2015
(Commercial square footage rounded to the nearest thousand)		Execusuites & Hotel	Total Residential (units)	Commercial (sq. ft.)
Province and Territory	Multi-family
Alberta	3,047	-	3,047	83,000
British Columbia	2,857	-	2,857	86,000
Newfoundland and Labrador	1,728	142	1,870	225,000
Northwest Territories	1,329	160	1,489	534,000
Nunavut	1,096	117	1,213	243,000
Saskatchewan	429	-	429	-
Québec	161	-	161	-
Total	10,647	419	11,066	1,171,000

Developments
In light of the current economic conditions, development activities have been reduced in 2015. Development will be focused on larger centres, mostly in Calgary, AB, and the surrounding areas with an expectation to start 300 to 400 multi-family units in 2015.

During the quarter ended March 31, 2015, NPR purchased 6.9 acres of land for $4.8 million for development purposes. As of March 31, 2015, NPR has 47.3 acres of land held for future development which allows for approximately 1,700 units.

During the second quarter of 2014, a development was started in Grande Prairie, AB, which has approval for 213 multi-family units. The first phase of the development consisted of two buildings totalling 142 units. The first 71 unit building was completed in December 2014, and was 100% leased on opening day. The second building was completed in February 2015 and is leasing up within expectation with occupancy currently at 70%.

The recently completed 150 unit development in Lloydminster, AB, is currently 93% leased.

Projects under development – March 31, 2015
(thousands of dollars, except per unit amounts)		Units		Expected Completion Date		Expected Total Costs	Expected Cap Rate
Property Type	Location		Start Date		% Complete
Multi-family	Fort St. John, BC	118	Q2 2014	Q2 2015	80%	20,000	7.0% to 7.5%
Multi-family	Bonnyville, AB	110	Q3 2014	Q3 2015	60%	17,000	8.0% to 8.5%
Multi-family	Airdrie, AB	140	Q1 2015	Q4 2015	5%	24,000	7.0% to 7.5%
		368				61,000

During the first quarter of 2015, NPR started a development in Airdrie, AB, a bedroom community of Calgary, AB. The project consists of 140 units and is expected to be completed in the fourth quarter of 2015 and cost approximately $170,000 per unit. The Airdrie project is the first large urban centre development for NPR. As a result, it will be built with additional amenities which are required to be competitive in larger markets.

Development in Fort St. John, BC, is well underway. The project has approval for 189 multi-family units and will be constructed in two phases, with the first phase comprised of two buildings totalling 118 units and expected completion in Q2 2015.

The development project in Bonnyville, AB, has approval for 181 multi-family units and will be constructed in two phases, with the first phase comprised of two buildings totalling 110 units and expected completion in Q3 2015.

Financial Strength
(thousands of dollars, except per unit amounts)	March 31, 2015	December 31, 2014	Change
Total assets	1,704,808	1,666,171	2.3%
Debt to gross book value	49.9%	48.6%	1.3%
Interest coverage ratio (times)	3.65	3.70	(1.4%)
Debt service coverage ratio (times)	2.07	2.10	(1.4%)
Weighted average mortgage interest rate	3.57%	3.67%	(0.10%)
Weighted average term to maturity (years)	5.3	5.0	6.0%
Weighted average capitalization rate	7.95%	7.97%	(0.02%)
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.

NPR's balance sheet remains healthy as all of its material financial ratios continue to be strong and within the limit set out in the REIT's declaration of trust and required under the REIT's operating facilities.

During the three months ended March 31, 2015, NPR completed $58.9 million in mortgage financings and renewals with a weighted average interest rate of 2.62% and a term to maturity of 8.9 years compared to $29.6 million, 3.32%, and 5.5 years, respectively, in the same period of 2014. The net proceeds were used to repay existing loans and fund developments and acquisitions. NPR continues to extend the term on new and renewed mortgages, utilizing 10 year terms where possible. 

Normal Course Issuer Bid ("NCIB")
On July 31, 2014, the Toronto Stock Exchange ("TSX") approved NPR's notice of intention to renew the NCIB for its Trust Units. NPR's NCIB will be made in accordance with the policies of the TSX. NPR may purchase Trust Units during the period from August 6, 2014, to August 5, 2015, or an earlier date should NPR complete its maximum purchases. NPR will pay 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 will be funded out of NPR's working capital.

During the three months ended March 31, 2015, NPR did not purchase or cancel any Trust Units under its NCIB.

Distributions to Trust Unit holders
During the three months ended March 31, 2015, NPR declared monthly cash distributions of $0.1358 per Trust Unit. For the first quarter of 2015, NPR declared distributions totaling $12.9 million (March 31, 2014 – $12.6 million).

Financial Statements
NPR's unaudited condensed consolidated financial statements and the notes thereto and Management's Discussion and Analysis for three months ended March 31, 2015, can be found on NPR's website at www.npreit.com or on www.sedar.com.

Cautionary/Forward-Looking Statements
This news release contains forward-looking 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, commencement of development of new buildings, and prospects for long-term vacancy rates. 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 taxation rules, reliance on key personnel, environmental matters, tenant risks, fluctuations in commodity prices, 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 NPR or that NPR currently believes to be less significant may also adversely affect NPR.

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. There can be no assurance that the actual results, performance, events or activities anticipated by NPR will be realized or, even if substantially realized, that they will have the expected consequences to, or effect on, NPR.  Readers, therefore, should not place undue importance on forward-looking information.  Further, forward-looking statements speak only as of the date on which such statements are made.  NPR 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 23 of our first 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
NPR's conference call will take place on Thursday, May 7, 2015, at 10:00 a.m. Mountain Time, 12:00 p.m. Eastern Time. Participating on the call will be Mr. Todd Cook (Chair), President and Chief Executive 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 #14972774 prior to being admitted to the call. A recorded playback of the call will be available from May 7, 2015 to May 14, 2015 by calling 416-849-0833 or 1-855-859-2056, passcode #14972774. The recording will also be available on our website on May 11, 2015.

Corporate Profile
NPR is primarily a multi-family residential real estate investor, providing a broad spectrum of rental accommodations across Canada. NPR focuses on communities with strong economic fundamentals where capitalization rates are generally higher and competition is somewhat restrained. NPR's residential portfolio is comprised of a multi-family segment: apartments, town homes and single family rental units; and execusuites and hotel where the rental period ranges from a few days to several months. NPR also has a portfolio of commercial buildings focused on government and quality corporate tenancies predominantly located in the Northwest Territories, Nunavut, and Newfoundland and Labrador. Geographically, NPR operates in Alberta, British Columbia, Newfoundland and Labrador, the Northwest Territories, Nunavut, Québec, and Saskatchewan. The value of NPR's real estate at March 31, 2015, was $1.6 billion with 11,066 residential units and 1,171,000 square feet of commercial space. NPR is traded on the TSX under the ticker symbol: NPR.UN.

SOURCE Northern Property Real Estate Investment Trust

Robert J. Palmer, CFO, at 403-531-3545.