Northern Property REIT reports fourth quarter and fiscal year 2014 financial results 2014 FFO per unit increases 5.3% from 2013

CALGARY, March 11, 2015 /CNW/ - Northern Property Real Estate Investment Trust (the "REIT" or "NPR") (NPR.UN – TSX) today announced financial results for the three months and year ended December 31, 2014. NPR reported fourth quarter funds from operations ("FFO") per Trust Unit of $0.60, an increase of 7.1% from $0.56 in the fourth quarter of 2013, excluding the stapled unit income tax. On a per unit basis, FFO for the year ended December 31, 2014, increased by 5.3% to $2.37 per unit compared to $2.25 per unit for 2013, excluding stapled unit income tax and the one-time lease termination fee in 2013.

Todd Cook, President and CEO, commented, "We are pleased with the 2014 financial results with growth in NOI and FFO while maintaining a strong financial position. As we move into 2015, NPR is well positioned against lower natural resource prices with a diversified portfolio, low payout ratio and conservative debt metrics and balance sheet. Our growth opportunities will continue to be through developments with the expectation of starting 300 – 400 multi-family units in Calgary and the surrounding area. 2015 will also involve a higher capex program to improve the competitiveness of the portfolio as well as the continued focus on customer service, retention, and leasing to ensure NPR is the first choice in its markets."

Mr. Cook continued, "The weakened economy, including a rapid decrease in crude oil prices in late 2014, will continue to put pressure on vacancy and operating results in two of our key regions in Alberta: Fort McMurray and Lloydminster. NPR's conservative management practices continue to provide stability for our Trust Unit holders and are our best defense against the weakened economy. The strong balance sheet and low payout ratios allow management to continue to fund internal capex requirements, growth initiatives and sustain distributions in the long term."

Financial Performance Highlights

(thousands of dollars, except per Trust Unit and percentage amounts)	Three months ended December 31			For years ended December 31
	2014	2013	Change	2014	2013	Change
Total revenue	48,091	45,082	6.7%	187,841	175,325	7.1%
Net operating income	27,473	25,971	5.8%	109,607	104,759	4.6%
Net and comprehensive income	23,078	35,829	(35.6%)	74,264	87,070	(14.7%)
FFO	19,043	16,512	15.3%	75,450	71,499	5.5%
FFO per Trust Unit, basic and diluted	$0.60	$0.52	15.4%	$2.37	$2.23	6.3%
FFO payout ratio	67.3%	76.5%	(9.2%)	67.1%	69.3%	(2.2%)
Excluding 2013 one-time items ^i
FFO	19,043	17,845	6.7%	75,450	72,072	4.7%
FFO per Trust Unit	$0.60	$0.56	7.1%	$2.37	$2.25	5.3%
Distributions declared to Trust Unit holders	12,820	12,628	1.5%	50,615	49,536	2.2%
Distributions per Trust Unit^ii	$0.40	$0.40	0.0%	$1.59	$1.55	2.6%

ⁱ 2013 FFO excludes the one-time net lease termination fee of $760,000 or $0.02 per unit relating to the sale of a non-core warehouse in British Columbia and stapled unit income tax expense of $1.3 million or $0.04 per unit
ⁱⁱ On November 5, 2014, the Board of Trustees approved an increase to the annual distribution by 3.2% from $1.58 per year to $1.63 per year per Trust Unit. 

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 December 31, 2014, was $19.0 million compared to $17.8 million for the same period of 2013, excluding stapled unit income tax. On a per unit basis, FFO was $0.60 and $0.56 for 2014 and 2013, respectively, an increase of 7.1%. FFO for the year ended December 31, 2014, was $75.5 million, an increase of 4.7% compared to $72.0 million for the same period of 2013, excluding stapled unit income tax of $1.3 million and the one-time lease termination fee of $0.8 million in 2013. On a per unit basis, FFO was $2.37 and $2.25 for 2014 and 2013, respectively, an increase of 5.3%. FFO increased from 2013 as a result of higher NOI driven by the contribution from newly acquired and developed properties and lower administration costs. This was partially offset by higher vacancy, mainly in Fort McMurray, AB, and Yellowknife, NT, weaker performance in the execusuites and hotel segment, and the increase in financing costs due to the higher mortgage balance and credit facilities when compared to 2013.

NOI
For the fourth quarter of 2014, NPR reported an NOI increase of $1.5 million or 5.8% from the same period of 2013. For 2014, NPR reported an NOI increase of $4.8 million or 4.6% over 2013, due to increases in the multi-family and commercial business segments from additional properties, partially offset by a decline in the execusuites and hotel segment.

Same door NOI decreased 1.7% for the three months ended December 31, 2014, when compared to the same period in 2013. Same door NOI decreased 2.6% for the year ended December 31, 2014, when compared to 2013. The decline in same door results in 2014 was attributable to higher vacancy in Fort McMurray, AB, and Yellowknife, NT, and weaker performance in the execusuite property in St. John's, NL, and the hotel in Iqaluit, NU. This was partially offset by the vacancy improvements in British Columbia and Newfoundland and Labrador and growth in the commercial segment. Commercial same door NOI increased as a result of two Bristol Court buildings in St. John's, NL, being fully leased and lease renewals for the warehouses in St. John's, NL.

From a business segment perspective, multi-family same door NOI decreased 3.4%, commercial increased 11.2%, and the execusuites and hotel declined 25.3% for the year ended December 31, 2014. The execusuites and hotel segment accounted for over half of the same door NOI decline on a dollar basis, while it only accounted for 4% of overall NOI. Excluding execusuites and hotel, same door NOI decreased 1.2% for the three months ended December 31, 2014, and decreased 1.1% for the year ended December 31, 2014, when compared to 2013.

Vacancy
Stabilized vacancy for the three months ended December 31, 2014, was 7.6% and 7.5% for the year ended December 31, 2014. While vacancy remains high in the key markets of Yellowknife, NT, and Fort McMurray, AB, there are decreases in vacancy noted in Newfoundland and Labrador, and Saskatchewan. 

Residential Stabilized Vacancy Loss

Region	Q1 2014	Q2 2014	Q3 2014	Q4 2014	2014
Alberta	6.5%	6.8%	7.7%	9.2%	7.6%
British Columbia	14.0%	11.2%	11.7%	11.1%	12.0%
Newfoundland and Labrador and Quebec	5.0%	4.1%	3.7%	3.9%	4.2%
Northwest Territories	11.9%	12.2%	12.7%	11.4%	12.1%
Nunavut	1.8%	1.7%	2.4%	2.1%	2.0%
Saskatchewan	6.5%	5.6%	5.1%	3.9%	6.2%
Overall	7.8%	7.1%	7.6%	7.6%	7.5%

Total vacancy loss for the fourth quarter was 8.7%, an increase from 6.7% for the same period of 2013. Total residential vacancy loss for the year was 8.5%, an increase from 6.5% in 2013.

Portfolio Summary (including joint ventures at 100%) – December 31, 2014

Province	Multi-family	Execusuites & Hotel	Total Residential (units)	Commercial (sq. ft.)
Alberta	2,976	-	2,976	83,243
British Columbia	2,857	-	2,857	86,238
Newfoundland and Labrador	1,643	142	1,785	196,049
Northwest Territories	1,329	160	1,489	533,563
Nunavut	1,096	117	1,213	242,946
Saskatchewan	429	-	429	-
Quebec	161	-	161	-
Total	10,491	419	10,910	1,142,039

Developments
During 2014, NPR completed 363 multi-family units in five regions for total costs of $61.4 million.

The 2013 Regina, SK, project was completed in the first quarter of 2014 with the last 71 units being delivered.  The total Regina project has 189 units, cost $26.7 million, has vacancy of approximately 5%, and is delivering a Cap Rate of 8.8%.

In the first quarter of 2014, NPR commenced its second multi-family project in Lloydminster, AB. Total approved development is for 371 multi-family units, with the first phase of the project consisting of two buildings with 150 units which were completed in the fourth quarter of 2014. The first building was fully leased upon opening and the second building is leasing up within expectations despite declining activity near the end of 2014 due to layoffs and reduced capital spending by energy producers. Total cost of the project was $21.1 million and is delivering a Cap Rate in excess of 8.0%.

During the year ended December 31, 2014, 22.6 acres of land was purchased for $11.9 million for development purposes. As of December 31, 2014, NPR has 44.9 acres of land held for future development which allows for approximately 1,600 units.

The following projects are under development as at December 31, 2014:

(thousands of dollars, except per unit amounts)	Location	Units	Expected Completion Date		Expected Total Costs	Expected Cap Rate
Property Type				% Complete
Multi-family	Grande Prairie, AB	71	Q1 2015	85%	21,000	7.0% to 7.5%
Multi-family	Fort St. John, BC	118	Q2 2015	50%	20,000	7.0% to 7.5%
Multi-family	Bonnyville, AB	110	Q3 2015	35%	17,000	8.0% to 8.5%
		299			58,000

In late 2013, NPR acquired 10 acres of land in Calgary, AB, which allows for the development of approximately 400 multi-family units. During 2014, NPR also acquired 4.5 acres of land in Airdrie, AB, a bedroom community of Calgary, AB, which allows for the development of 142 multi-family units. These projects are in the final planning stages and are expected to commence in mid-2015.

Financial Strength

(thousands of dollars, except per Trust Unit and percentage amounts)	December 31, 2014	December 31, 2013	Change
Total assets	1,666,171	1,516,822	9.8%
Debt to gross book value	48.6%	45.0%	3.6%
Interest coverage ratio (times)	3.70	3.87	(4.4%)
Debt service coverage ratio (times)	2.10	2.20	(4.5%)
Weighted average mortgage interest rate	3.67%	3.84%	(0.17%)
Weighted average term to maturity (years)	5.00	4.76	5.0%
Weighted average capitalization rate	7.97%	8.01%	(0.04%)

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 both the targeted ranges set out in the REIT's declaration of trust and required under the REIT's operating facilities. During the three months ended December 31, 2014, NPR completed $33.9 million in mortgage financings and renewals with a weighted average interest rate of 2.91% and an average term to maturity of 9.74 years. During the year ended December 31, 2014, NPR completed $207.8 million in mortgage financings and renewals with a weighted average interest rate of 3.03% and a weighted average term to maturity of 7.17 years. The net proceeds were used to repay existing loans and fund acquisitions and developments.  During the quarter ended December 31, 2014, the syndicated operating facility limit was increased from $50.0 million to $75.0 million. As at December 31, 2014, NPR has two revolving operating facilities with available credit of $90.0 million and the maximum borrowing capacity was $66.3 million.

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 December 31, 2014, NPR repurchased 88,900 Trust Units for total consideration of $2.3 million at an average price of $25.77 per Trust Unit. For the year ended December 31, 2014, NPR repurchased 226,500 Trust Units for total consideration of $6.1 million at an average price of $26.97 per Trust Unit.

Distributions to Trust Unit holders
On November 5, 2014, the Board of Trustees approved an increase to the annual distribution by 3.2% from $1.58 per year to $1.63 per year per Trust Unit.  The monthly distribution increased to $0.1358 from $0.1317 effective for Trust Unit holders of record on November 28, 2014, payable December 15, 2014. For the year ended December 31, 2014, NPR declared distributions totaling $50.6 million (December 31, 2013 – $49.5 million).

Financial Statements
NPR's audited consolidated financial statements and the notes thereto and Management's Discussion and Analysis for year ended December 31, 2014, can be found on NPR's website at www.npreit.com or on www.sedar.com.

Cautionary/forward looking statements
This news release contains forwardlooking 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 35 of our 2014 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, March 12, 2015, at 9:00 a.m. Mountain Time, 11:00 a.m. Eastern Time. Participating on the call will be Mr. Todd Cook (Chair), President & 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 #73136835 prior to being admitted to the call. A recorded playback of the call will be available from March 12, 2015 to March 19, 2015 by calling 416-849-0833 or 1-855-859-2056, passcode #73136835. The recording will also be available on our website on March 13, 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 tenancies and quality corporate tenants 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, Quebec, and Saskatchewan. The value of NPR's real estate at December 31, 2014, was $1.6 billion with 10,910 residential units and 1,142,039 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.

Related Links

http://www.npreit.com