2015
ANNUAL REPORT
Corporate Profile
Northview Apartment Real Estate Investment Trust (“Northview”) is primarily a multi-family residential real estate investor and operator providing a
broad spectrum of rental accommodations with a portfolio of more than 24,000 quality residential suites in more than 60 markets across Canada,
which provides Northview the means to deliver stable and growing profitability and cash distributions to Unitholders. The REIT’s residential
portfolio is comprised of a multi-family segment: apartments, town homes, and single family rental units; and an execusuites and hotel segment
where the rental period ranges from a few days to several months. Northview also has a portfolio of commercial buildings focused on government
and quality corporate tenants predominantly located in the Northwest Territories, Nunavut, and Newfoundland and Labrador.
Geographically Diversified
Northview operates in eight Canadian provinces and two territories. The geographical segments include Ontario, Western Canada, Atlantic
Canada, Northern Canada, and Québec. The Ontario and Québec regions include only the operations of properties located in those respective
provinces. The Western Canada segment includes the operations of properties located in British Columbia, Alberta, and Saskatchewan. The
Northern Canada segment includes the operations of properties located in Nunavut and the Northwest Territories. The Atlantic Canada segment
includes the operations of properties located in Newfoundland and Labrador, New Brunswick, and Nova Scotia.
While our roots are in Canada's north, we are also located in some of Canada's largest urban areas and key secondary markets across the
country. In many of our regions, we are the leading residential landlord, including in key centers for commodity-based industries. Our diverse
locations enable us to deliver stable and growing profitability and cash distributions to our Unitholders over time. The map below highlights how
Northview derives net operating income (“NOI”) from across Canada.
Northview’s cities and towns are multi-faceted economically. Some have
an important natural resource component and are in communities that
have leadership positions in oil, natural gas, diamonds, forestry products
or agriculture. These communities represent Northview’s roots and
remain an important part of its strategy, which has now been expanded
to include higher growth markets.
Following the completion of a transformational transaction in 2015,
Northview’s portfolio is now diversified across more than 60 Canadian
rental markets located in eight provinces and two territories, with
reduced exposure to occasionally volatile resource prices. Northview’s
new markets in eastern and central Canada provide opportunities for
both internal and external growth from growing populations, increasing
demand for rental apartments, and lower market penetration relative to
Northern Property REIT (“NPR”) traditional markets.
Market
Penetration
Percentage
of Canadian
Population
NPR
(Northern Markets)
31%
NPR
(Other Markets)
Properties
Acquired in 2015
8%
1%
1%
2%
33%
NORTHVIEW 2015 ANNUAL REPORT│1
Residential/Government Focus
Northview’s primary business is providing residential rental property to Canadians in selected markets. Our definition of housing is broad.
Northview owns and operates rental apartments, town homes and mixed use properties. Northview is a significant provider of housing to
government and corporations in Northern Canada, which sublet our units to their staff. Northview also provides furnished executive-suite and hotel
accommodation in selected locations.
In addition, Northview has a portfolio of commercial properties primarily located in its Northern communities and Newfoundland and Labrador. Our
commercial properties most often involve government or corporate covenants and longer-term leases.
297-301 Base Line Road West, London Ontario
Qilaut Commercial Building, Iqaluit, Nunavut
Conservatively Managed
The REIT operates on a financially prudent basis. Northview’s debt to the gross book value of its assets for year ended December 31, 2015, was
59.2 percent. Our debt ratios remain strong and will further improve through our disposition program and newly restructured credit facilities to
reduce overall debt levels. Northview also has an extended track record of increasing its funds from operations (“FFO”) and distributions while
maintaining conservative payout and debt ratios to ensure distributions remain sustainable to Unitholders.
Funds from Operations per Unit ($)
FFO Payout Ratio
2.17 2.16
2.08
2.35
2.26 2.27
2.37 2.35
81.3% 79.5% 77.2%
69.8% 67.3% 70.0%
65.3% 68.1% 69.3% 67.1% 69.2%
1.82
1.64
1.52
05*
06*
07*
08*
09*
10
11
12
13**
14
15***
05
06
07
08
09
10
11
12
13
14
15
*In accordance with Previous GAAP.
**Excluding Trust Unit current income taxes.
***Funds from operations per Trust Unit – basic.
Table of Contents
Our Results 3 Letter to Trust Unitholders 4 Management’s Discussion and Analysis 6
Management’s Report 33 Independent Auditor’s Report 34
Consolidated Financial Statements 35 Notes to the Consolidated Financial Statements 39
Trustees of Northview and Officers 73 Corporate Information 73
NORTHVIEW 2015 ANNUAL REPORT│2
Our Results
Total revenue ($000s)
Net operating income ($000s)
Assets ($000s)
Funds from operations – basic ($000s)
Funds from operations – diluted ($000s)
Funds from operations per Trust Unit – basic
Funds from operations per Trust Unit – diluted
FFO payout ratio – basic
FFO payout ratio – diluted
Distributions per Trust Unit
Number of residential units at December 31
Total commercial square feet at December 31
2015
217,578
126,699
3,132,617
82,833
83,054
$2.35
$2.34
69.2%
69.0%
$1.63
24,621
1,143,000
2014
187,841
109,607
1,666,171
75,450
75,450
$2.37
$2.37
67.1%
67.1%
$1.59
10,910
1,142,000
Business Segment as a % of NOI (1)
Regions as a % of NOI (1)
Commercial
16%
Execusuites
4%
Multi-family
80%
Western
36%
Atlantic
12%
Québec
2%
Ontario
6%
Northern
44%
(1) The charts provides the breakdown of the NOI by business and geographical segments for the year ended December 31, 2015.
NORTHVIEW 2015 ANNUAL REPORT│3
Letter to Trust Unitholders
Dear Fellow Trust Unitholders:
March 24, 2016
2015 was a transformational year for the REIT. I would like to share a few thoughts on where we have been and our outlook for 2016 and beyond.
We entered 2015 with higher uncertainty in our resource based markets as sustained low commodity prices, specifically in the price of crude oil,
continued to impact our financial results and growth opportunities. While close to two thirds of NOI was generated from our real estate located in
Canada’s north and other areas of Canada that are unaffected by low commodity prices, our unit price continued to trade with a high correlation to
the price of oil. During the year it became apparent that the high correlation of our unit price to the price of oil needed to be addressed by the
Trust, as it could potentially impact our long record of providing sustained and increasing distributions to our Unitholders.
Our diversification strategy prior to 2015 had somewhat insulated our financial results from the impact of the low natural resource prices, but early
last year we found ourselves in the position of having limited growth opportunities through organic growth, acquisitions and developments. In
short, our strong position in markets that we operated in limited the potential for internal growth or growth via acquisitions and developments. The
answer to the growth challenge was the transformational transaction that we completed in October of 2015.
The transaction to acquire almost 14,000 multi-family units through the acquisition of True North Apartment REIT and a portfolio of apartments
from Starlight and PSP accelerated the growth and diversification strategy that NPR had been executing since inception, albeit on a much larger
scale. NPR has been transformed into a nationally diverse apartment REIT, reducing its exposure to volatile natural resource economies and
providing both near term and long-term growth opportunities, which were not available to the REIT and its Unitholders prior to completion of the
transaction. On October 31, 2015, we completed the transaction and rebranded ourselves as Northview Apartment REIT. In addition to enhanced
growth opportunities, NOI from resource based regions has been reduced from 30% to 22%.
NPR Regions as a % of NOI
SK
3%
QC
1%
NL
12%
BC
14%
NT
18%
NU
27%
AB
25%
Northview Regions as a % of NOI
NS
2%
SK
2%
NB
3%
QC
5%
ON
27%
NL
8%
BC
9%
NT
12%
AB
15%
NU
17%
NORTHVIEW 2015 ANNUAL REPORT│4
Sustaining and Enhancing Value Creation for Unitholders
The operating environment is challenging, as Canada’s resource sector is in a cyclical trough and the economy adjusts to weakened buying
power associated with a lower Canadian dollar, but Northview is well positioned to weather the storm and to continue delivering value to
Unitholders. In support of this focus, our strategic priorities for the next 12 to 24 months are as follows:
1. Execution of Strategic Value Creation Initiatives: Northview will continue to execute on the value creation initiatives identified in the
Transaction and continue to identify areas throughout the existing portfolio where similar benefits would be expected to materialize.
These include the execution of the high-end renovation program, increasing rents to market, completing the sub-metering program in
Ontario, and the achievement of approved above guideline rent increases in Ontario.
NPR has a long and successful history of managing its properties directly. Management plans to internalize the property management
of the properties acquired in the Transaction over the next two years, with 7,600 units in Ontario being internalized effective April 1,
2016, with expected annualized savings of $2.0 million.
2. Disposition of Non-Core Assets: Management has identified approximately $150 million of non-core properties across the portfolio
and it intends to divest these properties in 2016 and 2017. Proceeds from these dispositions will be used to reduce overall debt levels,
to fund development activities and repurchase Trust Units. Management plans to implement a Normal Course Issuer Bid program that
can be utilized if the REIT's units continue to trade at a significant discount to NAV.
3. Restructure Credit Facilities: Management expects to repay the bridge facility of $350 million obtained to purchase the Institutional
Portfolios in the Transaction by obtaining new mortgage financing on these properties. To date, 35% of the bridge facility has been
repaid, with the remainder of the facility expected to be repaid early in the second quarter of 2016. Management also intends to
restructure Northview's current operating credit facilities, including the consolidation of the facilities and the negotiation of more
favourable terms.
4. Maintain Current Conservative Distribution Levels: Through continued disciplined revenue and expense management, Northview
will maintain its current conservative distribution levels, with a low annual FFO payout ratio of approximately 70%, to ensure that
distributions remain sustainable in a challenging operating environment.
While 2015 was a transformational year for Northview, as we expanded our traditional strategy of focusing on northern and secondary markets to
include higher growth markets, we remain true to our roots and will continue to execute on aspects of our proven strategy. For example, our
successful development program will continue on a smaller scale, with our current development in Calgary well underway with expected turnover
dates to start later in the year. The REIT has accelerated its growth strategy but will execute on new opportunities with the same discipline that
Unitholders have been accustomed to.
I look forward to working with our very strong team to deliver on the commitments we have made. We remain focused on delivering continued
growth and value and thank our Unitholders for your continued support of Northview Apartment REIT.
Respectfully submitted,
Todd R. Cook, President and Chief Executive Officer
NORTHVIEW 2015 ANNUAL REPORT│5
Management’s Discussion and Analysis
ADVISORIES
The following Management’s Discussion and Analysis of Financial Results (“MD&A”), dated March 9, 2016, should be read in conjunction with the
cautionary statement regarding forward-looking information below, as well as the Northview Apartment REIT (“Northview” or the REIT”) (formerly
Northern Property Real Estate Investment Trust (“Northern Property REIT”)) audited consolidated financial statements and notes thereto for the
years ended December 31, 2015, and 2014. The consolidated financial statements have been prepared in accordance with International Financial
Reporting Standards (“IFRS”). This MD&A is intended to provide readers with management’s assessment of the performance of Northview, as
well as its financial position and future prospects. All amounts in the following MD&A are in Canadian Dollars unless otherwise stated. Additional
information relating to Northview, including periodic quarterly and annual reports and Annual Information Forms (“AIF”), filed with the Canadian
securities regulatory authorities, is available on SEDAR at www.sedar.com.
Cautionary statement regarding forward-looking information
Certain information contained in this MD&A may constitute forward-looking statements within the meaning of securities laws relating to the
business and financial outlook of Northview. Statements which reflect Northview’s current objectives, plans, goals, and strategies are subject to
risks, uncertainties, and other factors which could cause actual results to differ materially from future results expressed, projected, or implied by
such forward-looking statements. In some instances, forward-looking information can be identified by the use of terms such as “may”, “should”,
“expect”, “will”, “anticipate”, “believe”, “intend”, “estimate”, “predict”, “potentially”, “starting”, “beginning”, “begun”, “moving”, “continue”, or other
similar expressions concerning matters that are not historical facts. Forward-looking statements include, but are not limited to, statements related
to acquisitions or dispositions, development activities, future maintenance expenditures, financing and the availability of financing, tenant
incentives, and occupancy levels. Such statements involve significant risks and uncertainties and are not meant to provide guarantees of future
performance or results. All of the statements and information contained in this MD&A incorporating forward-looking information are qualified by
these cautionary statements.
Forward-looking statements are made as of March 9, 2016, and are based on information available to management as of that date. Management
believes that the expectations reflected in forward-looking statements are based upon information and reasonable assumptions available at the
time they are made; however, management can give no assurance that the actual results will be consistent with these forward-looking
statements. Factors that could cause actual results, performance, or achievements to differ materially from those expressed or implied by
forward-looking statements include, but are not limited to, general economic conditions, the availability of new competitive supply of real estate
which may become available through construction, Northview’s ability to maintain occupancy and the timely lease or re-lease of residential and
execusuite and hotel units and commercial space at current market rates, tenant defaults, changes in interest rates, changes in operating costs,
governmental regulations and taxation, fluctuations in commodity prices, and the availability of financing. Additional risks and uncertainties not
presently known to Northview, or those risks and uncertainties that Northview currently believes to be not material, may also adversely affect
Northview. Northview cautions readers that this 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 materially from those expected. This
statement also qualifies any predictions made regarding Northview’s future funds from operations, debt to gross book value, coverage ratios, and
FFO payout ratio.
Except as specifically required by applicable Canadian law, Northview assumes no obligation to update or revise publicly any forward-looking
statements to reflect new events or circumstances that may arise after March 9, 2016.
Non-GAAP and additional GAAP measures
Certain measures in this MD&A do not have any standardized meaning as prescribed by generally accepted accounting principles (“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 IFRS. In addition, the definitions of these measures are subject to interpretation by the preparers of financial statements and may not
be applied consistently between real estate entities.
Please refer to page 31 of this MD&A for definitions of non-GAAP and additional GAAP measures, including net operating income (“NOI”), funds
from operations (“FFO”), debt to gross book value, debt service coverage, and interest coverage.
NORTHVIEW 2015 ANNUAL REPORT│6
BUSINESS OVERVIEW
Northview is primarily a multi-family residential real estate investor and operator providing a broad spectrum of rental accommodations with a
portfolio of more than 24,000 quality residential suites in more than 60 markets across Canada, which provides Northview the means to deliver
stable and growing profitability and cash distributions to Unitholders. The REIT’s residential portfolio is comprised of a multi-family segment:
apartments, town homes, and single family rental units; and an execusuites and hotel segment where the rental period ranges from a few days
to several months. Northview 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. Northview currently trades on the TSX under the
ticker symbol: NVU.UN.
Completion of Transformational Transaction
Northern Property REIT (“NPR”) acquired all of the assets and properties of True North Apartment Real Estate Investment Trust (“TN”) in
exchange for NPR Trust Units and NPR Special Voting Units, through a plan of arrangement, on October 30, 2015. TN Trust Unitholders
received 0.3908 NPR Trust Unit or NPR Special Voting Unit per one TN Trust Unit. The Trust issued 7,587,375 NPR Trust Units and 5,445,820
NPR Special Voting Units as consideration for the TN units outstanding on the date of acquisition. The transactions were overwhelmingly
approved at special meetings of both NPR Unitholders and TN Unitholders held separately on October 14, 2015, with 88% and 90%,
respectively, voting in favour of the transaction. Upon completion of the transactions, NPR changed its name to Northview Apartment Real Estate
Investment Trust.
In addition, NPR acquired seven apartment properties held by Starlight Investments Ltd. (“Starlight” or “SL”) for aggregate consideration of
$105.3 million and 26 apartment properties from a joint venture between affiliates of SL and affiliates of the Public Sector Pension Investment
Board (“PSP”) for aggregate consideration of $429.8 million, collectively referred to as “the Portfolio Acquisitions”. The aggregate purchase
price of $535.1 million for the Portfolio Acquisitions was satisfied with cash, the assumption of debt, and the issuance of NPR Trust Units and
NPR Special Voting Units, which are economically equivalent to and exchangeable for Trust Units of NPR. The acquisition of the assets and
liabilities of TN and the Portfolio Acquisitions are referred to as “the Transaction”.
Upon completing the Transaction, NPR has almost doubled in size with total assets now in excess of $3.1 billion and over 24,000 residential
units. The Transaction significantly enhanced Northview’s geographic diversification and provided opportunities for near term growth in FFO
and value creation for unitholders, notwithstanding the prospect for significant headwinds in 2016 as a result of a continued tough economic
outlook for natural resource prices. Management’s focus for the near term is on the integration of the assets acquired via the Transaction and
continuing to execute on its value creation initiatives. Transaction-associated initiatives include driving synergies from the internalization of
property management, continued execution of the high-end renovation and sub-metering programs, increasing rents on tenant turnover,
implementing approved Above Guideline Increases (“AGI’s”) for rent in properties that have completed significant capital improvements in
Ontario, and occupancy improvements in certain regions where current occupancy is below market rates.
The primary benefits of the Transaction are the improved geographic diversity, reduced exposure to resource dependant markets, and increased
potential for near term profitable growth and increasing distributions for unitholders.
The key benefits and drivers of completing the Transaction included:
•
Portfolio diversification: Northview’s portfolio is now diversified across more than 60 Canadian rental markets located in eight
provinces and two territories, with reduced exposure to occasionally volatile resource prices and markets. In turn, this mitigates the
impact of fluctuations in occupancy and rental rates in resource markets and increases the stability of Northview’s overall financial
performance. The charts below show how the exposure to natural resource markets has decreased from 30% to 22% of total NOI,
following the closing of the Transaction.
NORTHVIEW 2015 ANNUAL REPORT│7
•
•
•
•
•
Expanded field of opportunity: With a significantly enhanced portfolio in established stable markets characterized by expanding
populations, growing economies, high occupancy levels and rising rents, Northview has greatly improved its ability to increase
profitability and cash distributions over time.
Financial Strength: The Transaction provides opportunities for organic FFO growth through internalization of property
management, rent increases as a result of previous capital investment, and occupancy improvements. Further, management
believes that the more diversified portfolio provides enhanced stability in future financial results.
Unique opportunity to add a high quality multi-family portfolio: The portfolios acquired in the Transaction have received
significant CAPEX investment over the last several years. Since 2012, over $120 million has been invested to improve their physical
appearance and attractiveness to tenants, and to enhance their physical and structural attributes.
Near-term prospects for growth: The Transaction provides opportunities for near-term growth through synergies obtained from
internalization of property management, continued execution of the high-end renovation and sub-metering programs, increasing
rents on tenant turnover, approved AGI’s to rents in properties that have significant capital improvements in Ontario, and
improvements in occupancy in certain regions where current levels are below market rates.
New strategic partner and potential acquisition pipeline: Through completing the Transaction, Northview formed a relationship
with Starlight, which holds interests in approximately 12,000 additional multi-family suites in Canada that may be considered for
future acquisitions.
2016 Strategic Priorities
The strategic priorities for Northview in 2016 are sustaining value creation for the REIT’s Unitholders and maintaining financial stability. This
will be achieved through carrying out the following initiatives:
1. Execution of Strategic Value Creation Initiatives
A key driver of the Transaction was Northview’s enhanced ability to drive growth in FFO organically. Management has identified several
areas that will drive FFO growth over the next three to five years:
(i) Execute high-end renovation program: Management has identified several properties acquired in the Transaction that will
undergo a significant renovation to increase rental rates. These renovations will involve extensive upgrades to many of the
properties common areas and high-end in-suite improvements, including: enhanced landscaping and complete bathroom and
kitchen renovations. The expected post renovation increase in rents is approximately $250 to $300 per month and provides a
return on equity of 15 to 20% on the additional capital invested.
(ii) Address below market rents: At the time of the Transaction, monthly rents in the portfolios acquired were on average $32
below current market rents. Management believes these rents can be moved to market levels on turnover, with the completion
of standard renovations.
(iii) Complete sub-metering program: The sub-metering program in Ontario provides individual electric meters for each suite,
which allows tenants to pay their electricity bill directly. On tenant turnover, this reduces the utility costs to the landlord, which
could result in estimated average monthly savings of $40 per suite.
(iv) Above guideline increases: The significant capital that has been invested in the assets acquired in the Transaction has
enabled management to submit applications to the Ontario Landlord and Tenant Board to increase rents by more than the
regulated annual increase. These AGI’s have resulted in rental rates increasing by approximately 4% compared to the 1.6%
permitted in Ontario in 2015.
(v) Property management internalization: NPR has a long and successful history of managing its properties directly. Management
has a plan in place to internalize the property management of the properties acquired in the Transaction over the next two years,
with 7,600 units in Ontario being internalized in 2016. Internal property management will bring added benefits of direct control over
the properties and reduced operating costs.
2. Disposition of Non-Core Assets
Management has identified approximately $150 million of non-core properties across the portfolio that will be disposed throughout 2016 and
2017. The proceeds from these dispositions will be used to reduce overall debt levels and repurchase its Trust Units though a Normal
Course Issuer Bid (“NCIB”) that is intended to be implemented in the first quarter of 2016. Management believes the repurchase of
Northview Trust Units is a prudent use of the sale proceeds as they currently trade at a significant discount to Net Asset Value and remain
highly correlated to the price of crude oil.
NORTHVIEW 2015 ANNUAL REPORT│8
3. Restructure Credit Facilities
During the first half of 2016, Northview intends to repay the Bridge Facility that was put in place to purchase the Portfolio Acquisitions in the
Transaction by obtaining new mortgage financing on these properties. To date, 35% of the Bridge Facility has been repaid, with the
remainder of the facility expected to be repaid in Q2 2016. Management also intends to restructure Northview’s current operating facilities,
including the consolidation of the facilities and the negotiation of more favourable terms.
4. Maintain Current Conservative Distribution Levels
Through continued disciplined revenue and expense management across the entire portfolio, Northview will maintain its current
conservative distribution levels, with a low annual FFO payout ratio of approximately 70%, to ensure that distributions remain sustainable
in a challenging operating environment.
2015 OVERVIEW
The following MD&A is for the financial results of Northview for the years ended December 31, 2015, and 2014, and includes November and
December 2015 operating results of the portfolios acquired in the Transaction.
Northview Apartment REIT Unit Price Performance
The trading price of Northview’s Trust Units remains closely correlated to the price of crude oil. Management believes that the enhanced
geographic diversification following completion of the Transaction further reduces Northview’s exposure to the natural resource sector and that
the trading price will, over time, become less correlated to oil. The chart below highlights the correlation between the NVU.UN unit trading price
and the price of West Texas Intermediate Crude Oil (“WTI”) since the beginning of 2015.
$25.00
$23.00
$21.00
$19.00
$17.00
$15.00
2015 Results
$65.00
$60.00
$55.00
$50.00
$45.00
$40.00
$35.00
$30.00
$25.00
NVU.UN $
WTI $
FFO for the year ended December 31, 2015, was $82.8 million compared to $75.5 million for 2014. The increase from the prior year is due to the
completion of the Transaction on October 30, 2015. On a per unit basis, basic FFO for the year ended December 31, 2015, decreased by 0.8% to
$2.35, compared to $2.37 per unit for the year ended December 31, 2014. The decrease on a per unit basis was attributable to the following:
•
•
•
Continued same door NOI decline of approximately 4% in the second half of 2015. The same door NOI decline was driven by the
resource based regions in Alberta, Northeastern British Columbia, and Labrador, offset in part by positive growth in Northern Canada.
Higher administration costs compared to the prior year as a result of higher professional fees, bank charges and lower than normal
incentive compensation in 2014.
Lower than planned occupancy in certain properties acquired in the Transaction, specifically Montreal.
NORTHVIEW 2015 ANNUAL REPORT│9
•
•
•
Additional interest expense from the floating rate Bridge Facility used in completing the Portfolio Acquisitions.
Additional Trust and Class B LP Units issued in the Transaction.
Positive contributions from NPR acquisitions and developments completed in 2014 and 2015 partially offset the items detailed above.
Outside of natural resource based markets, the remainder of Northview’s portfolio continues to perform as expected. Southern British Columbia
continues to operate with high occupancy and Northern Canada remains one of the best real estate markets in Canada. The portfolios in Ontario
and Atlantic Canada have added stability to the portfolio with high occupancy and rising rental rates.
Select financial information
(thousands of dollars, except per unit amounts)
Total revenue
NOI
NOI margin
Net and comprehensive income
FFO – basic
FFO – diluted
FFO per Trust Unit, basic
FFO per Trust Unit, diluted
FFO payout ratio – basic
FFO payout ratio – diluted
Weighted average number of units outstanding – Basic
(000’s)
Weighted average number of units outstanding – Diluted
(000’s)
Distributions declared to Trust Unitholders
Distributions declared per Trust Unit
2015
217,578
126,699
58.2%
31,852
82,833
83,054
$2.35
$2.34
69.2%
69.0%
35,234
35,458
57,312
$1.63
2014
187,841
109,607
58.4%
74,264
75,450
75,450
$2.37
$2.37
67.1%
67.1%
31,871
31,900
50,615
$1.59
2013
175,325
104,759
59.8%
87,070
71,499
71,499
$2.23
$2.23
69.3%
69.3%
32,029
32,048
49,536
$1.55
2012
166,653
103,769
62.3%
82,486
70,851
70,851
$2.26
$2.26
68.1%
68.1%
31,374
31,397
48,224
$1.53
(thousands of dollars, except per unit amounts)
Total assets
Total liabilities
Mortgages payable
Debt to gross book value (excluding convertible debentures)
Interest coverage ratio (times)
Debt service coverage ratio (times)
Weighted average mortgage interest rate
Weighted average term to maturity (years)
Weighted average capitalization rate
Occupancy
2015
3,132,617
2,083,511
1,359,889
2014
1,666,171
829,190
734,553
2013
1,516,822
697,862
633,809
2012
1,350,072
564,110
518,123
59.2%
3.31
1.86
3.33%
5.0
6.83%
90.3%
48.6%
3.70
2.10
3.67%
5.0
7.97%
91.6%
45.0%
3.87
2.20
3.84%
4.8
8.01%
93.5%
41.0%
3.65
2.17
4.37%
4.1
8.04%
95.7%
Number of residential units
Commercial square feet
Please refer to page 31 of this MD&A for the definitions of non-GAAP measures.
24,621
1,143,000
10,910
1,142,000
10,310
1,067,000
9,597
1,073,000
NORTHVIEW 2015 ANNUAL REPORT│10
Portfolio Summary (including joint ventures at 100%) – December 31, 2015
Regions
Ontario
Western Canada
Atlantic Canada
Northern Canada
Québec
Total
Multi-family
Execusuites &
Hotel
% Portfolio
8,235
7,101
4,179
2,402
2,285
24,202
-
-
142
277
-
419
-
-
33.9%
66.1%
-
Total
Residential
(units)
8,235
7,101
4,321
2,679
2,285
Commercial
(sq. ft.)
-
136,000
225,000
779,000
3,000
100.0%
24,621
1,143,000
Portfolio reconciliation (including joint ventures at 100%) – December 31, 2015
(Commercial square footage rounded to the nearest thousand)
Multi-family
Execusuites & Hotel
Total Residential
(units)
Commercial
(sq. ft.)
Balance, December 31, 2014
Acquisitions
Developments completed
Dispositions
Adjustments(1)
Total net change for the period
Balance, December 31, 2015
(1) Includes 17 units lost due to a building fire in Yellowknife, NT, during the year.
10,491
13,698
299
(245)
(41)
13,711
24,202
419
-
-
-
-
-
419
10,910
13,698
299
(245)
(41)
13,711
24,621
1,142,000
39,000
-
(38,000)
-
1,000
1,143,000
Acquisition activity
The key transaction of 2015 for Northview was the acquisition of TN and the Portfolio Acquisitions of multi-family suites from SL and PSP, which
is discussed on page 7 of this MD&A.
Acquisitions for the year ended December 31, 2015
(thousands of dollars)
Property Type
Multi-family/Commercial(1)
Location
Various
Acquisition Date
Units/
Commercial sq. ft.
October 30, 2015
13,558 / 7,000
Multi-family
Commercial
Multi-family
Commercial
(1) The Transaction
Pangnirtung, NU
October 08, 2015
Yellowknife, NT
May 13, 2015
St. John’s, NL
St. John’s, NL
March 20, 2015
January 14, 2015
1
2,800
139
29,400
13,698 / 39,200
Total Costs
1,385,087
82
684
11,732
6,801
1,404,386
Development activity
Northview’s growth strategy includes both the development of new properties and the acquisition of existing properties. Development activity is
focused in areas with high asking prices for existing apartments, and long term potential for high occupancy and increasing rents. New
developments tend to be in existing markets where Northview leverages its local presence and internal knowledge of the region. New properties
have a modern design, obtain higher rental rates, and have lower initial ongoing capital maintenance requirements, all of which allow Northview to
generate returns 100 to 200 basis points higher than those associated with acquiring existing apartments. Northview’s extensive in-house
development expertise provides the flexibility to adjust development activities as market conditions change. Units constructed are typically four
storey wood frame buildings with large balconies, elevators, and six appliances, including in-suite laundry.
Development is currently focused on larger centres and the surrounding areas, with 401 multi-family units started in 2015.
As of December 31, 2015, Northview has 48.0 acres of land held for future development which allows for the construction of approximately 1,700
units. In addition, there are a number of development opportunities that will be evaluated within the portfolios acquired in the Transaction.
NORTHVIEW 2015 ANNUAL REPORT│11
Projects under development – December 31, 2015
(thousands of dollars)
Property Type
Location
Units
Start Date
Expected
Completion Date
%
Complete
Expected
Total Costs
Expected Cap
Rate
Multi-family
Multi-family
Airdrie, AB
Calgary, AB
140
261
401
Q1 2015
Q3 2015
Q1 2016
Q4 2016 – Q2 2017
90%
20%
25,000
45,000
70,000
7.0% to 7.5%
7.0% to 7.5%
The first building of the project in Airdrie, AB, opened on February 1, 2016, and the second building on March 1, 2016. The project is
approximately 50% leased and committed at March 1, 2016. The project is being well received and currently achieving pro-forma rents. The
Airdrie project was developed with additional amenities to give a competitive edge in the larger rental market.
While economic conditions in Calgary, AB, have weakened over the past year, management continues to believe there is an opportunity to
successfully develop suburban purpose built rental properties in this market. Northview’s first Calgary, AB, development commenced late in the
third quarter of 2015, with the total project expected to have 419 units. The first phase of development, consisting of 261 units, is anticipated to be
completed between Q4 2016 and Q2 2017. Similar to the project in Airdrie, the Calgary project will include additional amenities to give a
competitive edge in the larger urban market.
Developments completed during the year ended December 31, 2015
(thousands of dollars)
Property Type
Location
Multi-family
Multi-family
Bonnyville, AB
Fort St. John, BC
Multi-family(1)
Grande Prairie, AB
Total
Approved
Units
Units
Completed
181
189
213
583
110
118
142
370
Completion Date
Total Costs
Q3 2015
Q2 2015
Q1 2015
18,100
21,800
22,800
62,700
Expected Cap
Rate
8.0% to 8.5%
7.0% to 7.5%
7.0% to 7.5%
(1) 71 of the 142 units reported were completed in December 2014, making up $11.5 million of the $22.8 million in costs.
Dispositions
Investment property dispositions for the year ended December 31, 2015
(thousands of dollars)
Property Type
Location
Period Disposed
Units/
Commercial sq. ft.
Gross Proceeds
Multi-family
Commercial
Multi-family
Multi-family
Multi-family
Courtenay, BC
Redcliff, AB
Sachs Harbour, NT
Quesnel, BC
Bonavista, NL
Q4 2015
Q4 2015
Q3 2015
Q3 2015
Q1 2015
33
37,540
2
156
54
245 / 37,540
2,700
3,800
110
3,400
2,300
12,310
During the second quarter of 2015, Northview disposed of a parcel of land held for development in St. John's, NL, for $3.7 million, after an
application to have the land rezoned for residential development was denied.
Management has identified approximately $150 million of properties that it considered to be non-core for the REIT, and it intends to divest these
properties throughout 2016 and 2017. The proceeds from these dispositions will be used to reduce overall debt levels and to repurchase its Trust
Units through an NCIB that is expected to be implemented in the first quarter of 2016.
FFO
Northview measures its performance by using industry accepted non-GAAP performance metrics such as FFO, which has been calculated in
accordance with the Real Property Association of Canada’s (“RealPAC”) White Paper. The IFRS measurement most comparable to FFO is net
income (for which reconciliation is provided below). See page 31 for additional information on non-GAAP measures.
NORTHVIEW 2015 ANNUAL REPORT│12
FFO for the three months ended December 31, 2015, was $24.4 million for FFO basic and $24.6 million for FFO diluted, an increase of 28.0%
and 29.1%, respectively, compared to $19.0 million, basic and diluted, for the same period of 2014. On a per unit basis, FFO basic for Q4 2015
was $0.54 and FFO diluted was $0.53 compared to $0.60 for FFO basic and diluted for the fourth quarter of 2014, a decrease of 10.0% for FFO
basic and 11.7% for FFO diluted. For the year ended December 31, 2015, FFO basic was $82.8 million or $2.35 per unit, while FFO diluted was
$83.1 million or $2.34 per unit, compared to $75.5 million or $2.37 per unit for both basic and diluted for the same period of 2014.
The decrease in FFO on a per unit basis in the quarter and the year was driven by the same door NOI decline in the resource based regions in
Alberta, Northeastern British Columbia, and Labrador, higher administration costs, lower than planned occupancy in certain properties acquired in
the Transaction, additional interest expense from the floating rate Bridge Facility, and the additional units issued in the Transaction. Partially
offsetting the decline was positive same door NOI growth from Northern Canada, and positive contributions from NPR acquisitions and
developments completed in 2014 and 2015.
Northview’s FFO payout ratio basic was 75.9% and FFO payout ratio diluted was 75.2% for the three months ended December 31, 2015,
compared to 67.3%, basic and diluted, for the same period of 2014.
FFO calculation
(thousands of dollars, except per unit amounts)
2015
2014
Change
2015
2014
Change
Three months ended
December 31
Year ended
December 31
Net and comprehensive income from operations
Adjustments
Non-controlling interests
Depreciation of property, plant and equipment
Amortization of intangible assets
Deferred income tax expense
Amortization of tenant inducements
Loss (gain) on sale of property, plant and equipment
Unrealized fair value changes
Bargain purchase gain
Business combination transaction costs
Class B LP Unit distributions recorded as interest
Fair value adjustments for non-controlling interest and
equity investments
FFO basic
Add: Interest on 2019 Debentures
FFO diluted
FFO per Trust Unit – basic
FFO payout ratio – basic
FFO per Trust Unit – diluted
FFO payout ratio – diluted
Weighted average number of units outstanding:
Basic (000’s)
Effect of dilution:
LTIP units issued
Deferred Units issued
2019 Debentures
Diluted (000’s)
21,153
23,078
(8.3%)
31,852
74,264
(57.1%)
(160)
1,242
148
-
118
307
14,907
(50,893)
35,277
2,130
(70)
875
153
-
117
-
(4,845)
-
-
28
128.6%
41.9%
(3.3%)
n/m
0.9%
n/m
n/m
n/m
n/m
n/m
(154)
3,951
594
-
476
762
55,103
(50,893)
38,959
2,213
(292)
3,468
615
393
456
(341)
(2,813)
-
-
108
(47.3%)
13.9%
(3.4%)
(100.0%)
4.4%
n/m
n/m
n/m
n/m
n/m
142
(293)
(148.5%)
(30)
(408)
(92.6%)
24,371
221
24,592
$0.54
75.9%
$0.53
75.2%
19,043
-
19,043
$0.60
67.3%
$0.60
67.3%
28.0%
n/m
29.1%
(10.0%)
8.6%
(11.7%)
7.9%
82,833
221
83,054
$2.35
69.2%
$2.34
69.0%
75,450
-
75,450
$2.37
67.1%
$2.37
67.1%
9.8%
n/m
10.1%
(0.8%)
2.1%
(1.3%)
1.9%
45,540
31,800
43.2%
35,234
31,871
10.6%
83
6
651
28
-
-
46,280
31,828
196.4%
n/m
n/m
45.4%
59
1
164
29
-
-
35,458
31,900
100.9%
n/m
n/m
11.1%
Distributions declared to Trust Unitholders
Distributions declared to Trust Unitholders per unit
18,493
$0.41
12,820
$0.40
44.3%
2.5%
57,312
$1.63
50,615
$1.59
13.2%
2.5%
NORTHVIEW 2015 ANNUAL REPORT│13
2015 RESULTS OF OPERATIONS
The following section provides a comparison of the financial results for the three months and year ended December 31, 2015, with the same
period of 2014. Operations include residential, commercial, and execusuites and hotel business segments. The financial results discussed below
are those of Northview for the year ended December 31, 2015, and 2014, and includes November and December 2015 operating results of the
portfolios acquired in the Transaction.
Rental revenue
(thousands of dollars)
Residential
Multi-family
Execusuites and hotel
Commercial
Total
Three months ended December 31
Year ended December 31
2015
2014
Change
2015
2014
Change
59,389
2,837
62,226
8,509
70,735
37,329
2,879
40,208
7,883
48,091
59.1%
(1.5%)
54.8%
7.9%
47.1%
172,361
11,932
184,293
33,285
217,578
144,403
12,383
156,786
31,055
187,841
19.4%
(3.6%)
17.5%
7.2%
15.8%
Total rental revenue for the year ended December 31, 2015, increased 15.8% from the same period of 2014, largely as a result of an increase in
the multi-family business segment, which increased by 19.4% from the same period of 2014. The increase was related to the completion of the
Transaction on October 30, 2015, and revenue contribution from NPR developments and acquisitions completed during the year.
Execusuites and hotel revenue decreased 3.6% for the year ended December 31, 2015, compared to the same period of 2014. The decrease
was a result of suites taken out of inventory for the extensive capital improvement projects underway during the period. In addition, reduced
government and industry travel to Northern Canada impacted revenue during 2015. The increase in commercial revenue is mainly due to the
addition of the final phase of the Bristol Court Office Park project in St. John’s, NL, partially offset by the sale of a warehouse property in Redcliff,
AB.
The charts below show the percentage of overall revenue contributed by business segment and geographic region for the year ended December
31, 2015. The portfolios acquired in the Transaction have two months of operating results in the twelve months presented in these charts.
Business Segments as a % of Revenue
Regions as a % of Revenue
Commercial
15%
Execusuites
5%
Atlantic
14%
Quebec
2%
Ontario
7%
Western
36%
Multi-family
80%
Northern
41%
NORTHVIEW 2015 ANNUAL REPORT│14
Operating expenses
(thousands of dollars)
Operating expenses
Utilities
Property taxes
Salaries and benefits
Maintenance
Cleaning
Other expenses
% of Total
Operating
Expense
27.0%
20.3%
13.0%
15.2%
5.1%
19.4%
2015
8,466
6,356
4,067
4,769
1,626
6,098
2014
5,495
2,820
3,161
2,864
1,478
4,800
Three months ended December 31
Year ended December 31
% of Total
Operating
Expense
% of Total
Operating
Expense
2015
% of Total
Operating
Expense
2014
26.7%
13.7%
15.3%
13.9%
7.1%
23.3%
23,312
15,976
13,085
11,806
6,232
20,468
90,879
25.6%
17.6%
14.4%
13.0%
6.9%
22.5%
100.0%
21,339
11,205
11,613
10,734
5,801
17,542
78,234
27.3%
14.3%
14.8%
13.7%
7.4%
22.5%
100.0%
Total
31,382
100.0%
20,618
100.0%
Operating expenses as a percentage of revenues were 44.4% for the three months ended December 31, 2015, compared to 42.9% in the fourth
quarter of 2014. For the year ended December 31, 2015, operating expenses were 41.8% of revenues compared to 41.7% for the same period of
2014.
Utilities increased to 27.0% of total operating costs in the fourth quarter of 2015, from 26.7% in the fourth quarter of 2014. For the year ended
December 31, 2015, utility costs decreased to 25.6% from 27.3% for the same period of 2014. The more moderate weather experienced in 2015
compared to 2014 is the main reason for the decrease for year ended December 31. Additionally, lower utility rates have also contributed to the
decreased utility costs.
Property taxes as a percentage of total operating costs for the three months and year ended December 31, 2015, increased to 20.3% and 17.6%,
respectively, from 13.7% and 14.3% for the comparable periods of 2014. The increase is mainly due to property tax rates being significantly
higher as a percentage of overall operating costs in the Ontario portfolio acquired in the Transaction. Additionally, 2015 was a reassessment year
in a number of key markets, resulting in higher property taxes in those regions.
Net operating income
Northview uses NOI as a key indicator to measure the financial performance of a region or business segment. NOI is an additional GAAP
measure. Refer to the audited consolidated statements of net and comprehensive income for NOI calculation. See page 31 for details about non-
GAAP and additional GAAP measures.
(thousands of dollars)
Residential
Multi-family
Execusuites and hotel
Commercial
Total
Three months ended December 31
Year ended December 31
2015
2014
Change
2015
2014
Change
33,263
1,236
34,499
4,854
39,353
21,655
1,042
22,697
4,776
27,473
53.6%
18.6%
52.0%
1.6%
43.2%
100,884
5,300
106,184
20,515
126,699
86,368
4,756
91,124
18,483
109,607
16.8%
11.4%
16.5%
11.0%
15.6%
Multi-family NOI increased 53.6% for the three months ended December 31, 2015, largely driven by the Transaction.
Commercial NOI increased by 1.6% for the fourth quarter compared to 2014, primarily due to the final phase of the Bristol Court Office Park
project in St. John’s, NL, being fully leased. As the lease up of most new developments and the lease renewals from 2014 have been in place for
more than a year, the year over year growth trend for the commercial business segment will be lower than experienced in recent years.
Execusuites and hotel NOI increased by 18.6% compared to 2014, as the operating expenses for most of the business segment were
considerably lower due to a reduction in controllable expenses, partially offset by lower revenues. The extensive ongoing CAPEX and rebranding
program in the execusuite properties in Yellowknife, NT, and St. John’s, NL, has negatively impacted revenues in the current year due to the
suites that were taken out of inventory for the extensive capital improvements underway during the period.
NORTHVIEW 2015 ANNUAL REPORT│15
The charts below provide the breakdown of the NOI by business and geographical segments for the year ended December 31, 2015. The 2015
contribution from the business segments was consistent with 2014, as the multi-family properties acquired in the Transaction had only two
months of operating results. Multi-family continued to contribute the majority of NOI at 80%, the commercial segment accounted for 16%, and the
execusuites and hotel segment remained at 4%.
Business Segment as a % of NOI
Regions as a % of NOI
Commercial
16%
Execusuites
4%
Multi-family
80%
Western
36%
Atlantic
12%
Quebec
2%
Ontario
6%
Northern
44%
Same door performance
Same door performance is calculated on properties owned by Northview for both the current and previous reporting periods. For the purpose of
this discussion, properties that were owned by Northview on or before January 1, 2014, are included in the calculation. This calculation excludes
all properties acquired, developed, or divested during the 2014 and 2015 fiscal years, including the portfolios acquired in the Transaction. Same
door revenue for the three months ended December 31, 2015, decreased $2.6 million or 5.7%, led by a 22.4% decrease in Alberta due to lower
occupancy resulting from current economic conditions.
Same door NOI quarterly change is represented in the chart below:
2.0%
1.0%
0.0%
-1.0%
-2.0%
-3.0%
-4.0%
-5.0%
-6.0%
-7.0%
-8.0%
-6.9%
0.9%
1.2%
-0.2%
-2.0%
-1.7%
-2.6%
-1.6%
-3.1%
-5.3%
Q1 2014
Q2 2014
Q3 2014
Q4 2014
2014
Q1 2015
Q2 2015
Q3 2015
Q4 2015
2015
For the three months and year ended December 31, 2015, same door NOI decreased 3.1% and 1.6% compared to the same period of 2014,
respectively. The decrease in same door results in 2015 was attributable to lower revenue from lower occupancy in Alberta and Northeastern
British Columbia; coupled with decreased rental rates. This was partially offset by lower utility costs from lower utility rates and more moderate
weather.
NORTHVIEW 2015 ANNUAL REPORT│16
Same door NOI quarterly change by business segment
Business Segment
Q1
2014
Q2
2014
Q3
2014
Q4
2014
2014
Q1
2015
Q2
2015
Q3
2015
Q4
2015
2015
Multi-family
(7.1%)
(0.9%)
(2.0%)
(3.2%)
(3.4%)
(1.1%)
(2.6%)
(5.0%)
(4.4%)
(3.3%)
Execusuites and Hotel
(29.4%)
(37.2%)
(19.1%)
(10.2%)
(24.5%)
(6.8%)
30.1%
1.5%
Commercial
Total
7.5%
8.0%
21.5%
8.0%
11.2%
12.1%
14.1%
(8.9%)
(6.9%)
(2.0%)
(0.2%)
(1.7%)
(2.6%)
0.9%
1.2%
(5.3%)
(3.1%)
(1.6%)
4.1%
0.8%
6.5%
4.6%
From a business segment perspective, multi-family same door NOI decreased 4.4%, commercial increased 0.8%, and the execusuites and hotel
increased 4.1% for the three months ended December 31, 2015. For the year ended December 31, 2015, multi-family same door NOI decreased
3.3%, commercial increased 4.6%, and the execusuites and hotel increased 6.5%.
Throughout 2015 there has been a decline in same door NOI in the multi-family business segment due to economic conditions and resulting
vacancy in resource based markets. The effects are most notable in the second half of the year when adjustments to markets rents and
aggressive lease incentives were utilized to combat the declines in occupancy in these markets. The diversity in the portfolios acquired in the
Transaction are expected to reduce the overall impact of the volatility in the resource dependant markets.
Multi-family operations
On completion of the Transaction, Northview now operates in eight Canadian provinces and two territories. As such, Management has changed
the geographical segment reporting to Ontario, Western Canada, Atlantic Canada, Northern Canada, and Québec, from the previous provincial
and territorial reporting. The Ontario and Québec regions include only the operations of properties located in those respective provinces. The
Western Canada segment includes the operations of properties located in British Columbia, Alberta, and Saskatchewan. The Northern Canada
segment includes the operations of properties located in Nunavut and the Northwest Territories. The Atlantic Canada segment includes the
operations of properties located in Newfoundland and Labrador, New Brunswick, and Nova Scotia.
Properties located in Ontario, Québec, Nova Scotia, and New Brunswick acquired as part of the Transaction are currently managed by third-party
property managers for a fee. The contracts are cancellable with 30 to 60 days’ notice. During Q2 2016, approximately 7,600 residential units in
Ontario will be internalized and managed by Northview. The internalization of the remainder of the 5,150 units in Nova Scotia, New Brunswick,
Québec and Ontario is to be completed in 2017.
Occupancy
Occupancy is a measure used by management to evaluate the performance of its properties on a comparable basis.
Occupancy for the three months ended December 31, 2015, was 91.5%, consistent with 91.3% for the same period of 2014. Due to the weak
economic conditions in a number of resource based regions, Northview continued to experience a higher than normal amount of tenant move
outs in certain regions in 2015. The addition of the Atlantic Canada and Ontario portfolios acquired in the Transaction has added stability to the
overall results and decreased Northview’s dependence on high natural resource prices. Through dedicated leasing teams, select rental
incentives, and the organization-wide focus on customer service, occupancy has remained stable throughout 2015. The efforts of the “Street to
Suite” capital program have had a direct impact in increasing occupancy in Yellowknife, NT, and stabilizing occupancy in Fort McMurray, AB.
Occupancy by region
Ontario
Western Canada
Atlantic Canada
Northern Canada
Québec
Overall
Q4 2014
n/a
88.5%
96.2%
93.7%
99.8%
91.3%
2014
n/a
89.5%
95.6%
93.0%
99.6%
91.6%
Q1 2015
Q2 2015
Q3 2015
Q4 2015
n/a
85.8%
94.4%
93.1%
99.6%
89.4%
n/a
84.7%
93.7%
96.1%
99.0%
89.9%
n/a
84.5%
91.3%
97.4%
99.3%
90.0%
96.2%
84.3%
93.1%
96.5%
90.6%
91.5%
2015
96.2%
84.8%
93.1%
95.8%
92.5%
90.3%
NORTHVIEW 2015 ANNUAL REPORT│17
Ontario operations
Occupancy for the Ontario operations was 96.2% for the fourth quarter of 2015. Large scale infrastructure projects currently under construction
such as the LRT expansions in Hamilton and Kitchener/Waterloo and the extension of Highway 407 to Oshawa are expected to have a positive
impact given Northview’s strong presence in these regions.
Residential Occupancy
Eastern
Toronto and Area
Southwestern
Ontario
Total number of units
Q1 2014
n/a
Q2 2014
n/a
Q3 2014
n/a
Q4 2014
n/a
Q1 2015
n/a
Q2 2015
n/a
Q3 2015
n/a
Q4 2015
97.6%
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
97.3%
95.1%
96.2%
8,235
Number of
Units
1,831
1,779
4,625
8,235
Revenues for the two months of operations for the Ontario segment for the fourth quarter of 2015 were $16.1 million, while operating expenses for
the same period were $8.2 million. As Northview intends to internalize the management of approximately 7,600 residential units in Ontario April 1,
2016, it is expected that there will be a reduction in certain controllable expenses, and NOI margins will improve over time.
Residential Operating Results
Three months ended December 31
Year ended December 31
(thousands of dollars)
Revenue
Operating expenses
Net operating income
Western Canada operations
2015
16,089
(8,245)
7,844
2014
Change
n/a
n/a
n/a
n/m
n/m
n/m
2015
16,089
(8,245)
7,844
2014
Change
n/a
n/a
n/a
n/m
n/m
n/m
Occupancy for the Western Canada operations was 84.3% for the three months ended December 31, 2015, compared to 88.5% in the same
period of 2014. The decrease in occupancy is attributable to the resource dependant markets in Alberta, mainly Fort McMurray, Lloydminster, and
Grande Prairie. In this current period of lower than normal occupancy, Northview is continuing to invest in its buildings through the “Street to Suite”
program. The program, which is substantially completed, focused on ensuring properties are well maintained, secure, and renovated. Northview
increased its regular annual CAPEX spending in Fort McMurray in 2015 to ensure that when the market recovers, Northview will be well
positioned to be the first choice for new residents. Almost all Northview regions in British Columbia experienced improvements in occupancy from
the third quarter of 2015, especially Abbotsford and Nanaimo.
Residential Occupancy
Q1 2014
Q2 2014
Q3 2014
Q4 2014
Q1 2015
Q2 2015
Q3 2015
Q4 2015
British Columbia
Alberta
Saskatchewan
Western Canada
85.2%
93.4%
78.3%
89.2%
88.0%
92.9%
81.0%
90.3%
87.3%
92.4%
89.0%
90.3%
87.8%
88.3%
93.1%
88.5%
86.6%
84.5%
92.2%
85.8%
82.3%
85.2%
92.4%
84.7%
84.4%
83.3%
94.2%
84.5%
Total number of units
5,510
5,789
5,789
6,018
6,089
6,207
6,317
87.0%
81.8%
94.5%
84.3%
7,101
Number of
Units
2,767
3,905
429
7,101
Revenues in the Western Canada operations for the fourth quarter of 2015 were down 2.1% compared to the same period of 2014, and increased
by 3.9% for the full year comparison. Operating expenses decreased by 4.5% in the fourth quarter of 2015 compared to the same period of 2014,
with expenses for the full year increasing by 9.0%. The increase in revenue was due to the southern Alberta portfolio that was acquired as part of
the Transaction, along with the newly developed Alberta properties in Lloydminster, Grande Prairie and Bonnyville, and was partially offset by
lower occupancy levels throughout Alberta. These newly acquired and developed properties also accounted for most of the increase in operating
expenses, while the remainder of the increase resulted from higher property taxes and leasing incentives throughout the rest of the Alberta
portfolio. In addition, there was an increase in bad debts experienced during 2015 as a result of higher turnover and vacancy. Performance of the
British Columbia and Saskatchewan portfolios remained strong, with results consistent with the prior year.
NORTHVIEW 2015 ANNUAL REPORT│18
Western Canada operations (continued)
Residential Operating Results
Three months ended December 31
Year ended December 31
(thousands of dollars)
Revenue
Operating expenses
Net operating income
Atlantic Canada operations
2015
18,674
(7,207)
11,467
2014
19,083
(7,550)
11,533
Change
(2.1%)
(4.5%)
(0.6%)
2015
75,683
(30,916)
44,767
2014
Change
72,857
(28,376)
44,481
3.9%
9.0%
0.6%
Occupancy for the Atlantic Canada operations was 93.1% for the three months ended December 31, 2015, compared to 96.2% for the same
period of 2014, as a result of lower occupancy in Labrador City. In Labrador City, occupancy has remained at approximately 60% for the second
half of the year, compared to approximately 90% in 2014. The Labrador City economy is linked to the iron ore industry, which has seen lower
prices over the last year, resulting in mine closures and layoffs. The rental market in St. John’s continues to perform well, with occupancy of
95.2% for the fourth quarter of 2015.
Residential Occupancy
Newfoundland and Labrador
Nova Scotia
New Brunswick
Atlantic Canada
Total number of units
Q1 2014
Q2 2014
Q3 2014
Q4 2014
Q1 2015
Q2 2015
Q3 2015
Q4 2015
94.7%
95.3%
96.2%
96.2%
94.4%
93.7%
91.3%
n/a
n/a
94.7%
1,589
n/a
n/a
95.3%
1,589
n/a
n/a
96.2%
1,589
n/a
n/a
96.2%
1,589
n/a
n/a
94.4%
1,728
n/a
n/a
93.7%
1,728
n/a
n/a
91.3%
1,728
90.7%
97.1%
95.0%
93.1%
4,179
Number of
Units
1,728
1,288
1,163
4,179
Revenues in the Atlantic Canada operations for the fourth quarter of 2015 were up 78.2% compared to the same period of 2014, and increased
by 20.4% for the full year comparison. Operating expenses increased by 89.5% in the fourth quarter of 2015 compared to the same period of
2014, with expenses for the full year increasing by 24.3%. The New Brunswick and Nova Scotia portfolios acquired in the Transaction contributed
$3.4 million of revenues and $2.0 million of additional operating expenses in the two months of operations. The Newfoundland and Labrador
portfolio had an NOI increase of 15.7% for the fourth quarter of 2015 compared to the same period of 2014, and an increase of 4.5% for the full
year due to the 139 multi-family units acquired during the first quarter of 2015.
Residential Operating Results
Three months ended December 31
Year ended December 31
(thousands of dollars)
Revenue
Operating expenses
Net operating income
Northern Canada operations
2015
7,512
(3,684)
3,828
2014
4,216
(1,944)
2,272
Change
78.2%
89.5%
68.5%
2015
20,095
(9,093)
11,002
2014
16,693
(7,314)
9,379
Change
20.4%
24.3%
17.3%
Occupancy for the Northern Canada operations was 96.5% for the three months ended December 31, 2015, compared to 93.7% for the same
period of 2014. Yellowknife occupancy had significant improvement from the fourth quarter of 2014, increasing to 94.2% from 86.5%. Yellowknife
has undergone a significant CAPEX program in 2015, whereby the focus was to improve the overall condition of the buildings, specifically the
exteriors, landscaping, and common areas, which has had a positive impact on occupancy in the region. Iqaluit continues to be one of the
strongest performing regions with high market rents and occupancy above 97%.
Residential Occupancy
Northwest Territories
Nunavut
Northern Canada
Total number of units
Q1 2014
88.1%
96.6%
92.7%
2,401
Q2 2014
87.9%
96.5%
92.6%
2,425
Q3 2014
87.1%
97.6%
92.8%
2,425
Q4 2014
88.6%
97.9%
93.7%
2,425
Q1 2015
88.8%
96.4%
93.1%
2,425
Q2 2015
93.8%
97.9%
96.1%
2,425
Q3 2015
96.2%
98.3%
97.4%
2,423
Q4 2015
94.9%
97.7%
96.5%
2,402
Number of
Units
1,309
1,093
2,402
NORTHVIEW 2015 ANNUAL REPORT│19
Revenues in the Northern Canada operations for the fourth quarter of 2015 increased by 1.7% from the same period of 2014 and increased by
5.4% for the full year. The increases are mainly due to lease renewals in Iqaluit and higher occupancy in Yellowknife. Operating expenses
decreased mainly due to lower utility costs from both rate decreases and lower consumption, as the 2015 weather was not as severe as in 2014.
Residential Operating Results
Three months ended December 31
Year ended December 31
(thousands of dollars)
Revenue
Operating expenses
Net operating income
Québec operations
2015
13,961
(4,656)
9,305
2014
13,722
(5,896)
7,826
Change
1.7%
(21.0%)
18.9%
2015
56,401
(21,071)
35,330
2014
Change
53,517
(22,692)
30,825
5.4%
(7.1%)
14.6%
Occupancy for the Québec operations was 90.6% for the fourth quarter of 2015. Sept-Iles continues to be a consistent and strong performing
market for Northview with occupancy at 99.4%. The Montreal portfolio acquired as part of the Transaction had occupancy of 89.7% in the fourth
quarter of 2015. While a number of properties in Montreal are performing at or near market occupancy, the Norgate and Renaissance properties
had occupancy of 86.6% during the fourth quarter due to renovation downtime. As renovation downtime decreases, the focus for 2016 will be to
bring occupancy levels closer in line with current market levels in Montreal.
Residential Occupancy
Montreal
Sept-Iles
Quebéc
Total number of units
Q1 2014
n/a
99.8%
99.8%
161
Q2 2014
n/a
99.4%
99.4%
161
Q3 2014
n/a
99.5%
99.5%
161
Q4 2014
n/a
99.8%
99.8%
161
Q1 2015
n/a
99.6%
99.6%
161
Q2 2015
n/a
99.0%
99.0%
161
Q3 2015
n/a
99.3%
99.3%
161
Q4 2015
89.7%
99.4%
90.6%
2,285
Number of
Units
2,124
161
2,285
Revenues for the two months of operations for the Montreal portfolio for the fourth quarter of 2015 were $2.8 million, while operating expenses for
the same period were $1.6 million. For the fourth quarter and year ended December 31, 2015, NOI in the Sept-Iles portfolio increased by 27.1%
and 6.7%, respectively, compared to the same period of 2014.
Residential Operating Results
Three months ended December 31
Year ended December 31
(thousands of dollars)
Revenue
Operating expenses
Net operating income
2015
3,176
(1,727)
1,449
2014
329
(163)
166
Change
865.3%
959.5%
772.9%
2015
4,173
(2,151)
2,022
2014
1,312
(577)
735
Change
218.1%
272.8%
175.1%
Commercial operations
Northview’s commercial properties are located primarily in regions where it has existing multi-family operations. Commercial properties consist of
office, warehouse, retail, and mixed-use buildings, which are largely leased to federal or territorial governments and other quality commercial
tenants under long term leases. Commercial rental revenue for the three months ended December 31, 2015, was $8.5 million, 7.9% higher than
the $7.9 million for the corresponding period of 2014. The increase in revenue was primarily due to the lease up of the final phase of the Bristol
Court Office Park project in St. John’s, NL.
Commercial vacancy was 38,100 square feet or 3.3% at December 31, 2015, compared to 34,100 square feet or 3.0% vacancy at December 31,
2014. The 37,540 square foot warehouse property in southern Alberta that became vacant in the third quarter of 2015 due to a tenant bankruptcy
was sold in the fourth quarter. There was approximately 169,000 square feet of commercial space up for lease renewal in 2016, of which
approximately 79,000 has been renewed as of March 1, 2016.
NORTHVIEW 2015 ANNUAL REPORT│20
Commercial portfolio summary (including joint ventures at 100%) – December 31
Region
Commercial sq. ft.
$ Average Rent/sq. ft. (i)
Atlantic Canada
Northern Canada
Québec
Western Canada
Total / Average
(i) Average rent per square foot is for the three months ended December 31.
2015
225,000
779,000
3,000
136,000
1,143,000
2014
196,000
777,000
-
169,000
1,142,000
2015
17.86
24.56
21.89
14.88
21.94
2014
15.96
23.98
-
14.96
21.26
The increase in the average rent per square foot in the Atlantic segment was due to the completion of the final phase of the Bristol Court Office
Park project being leased and the increases obtained on lease renewals of the warehouse leases.
Execusuites and hotel operations
Northview operates five execusuite and hotel properties: one in Yellowknife, NT; two in Iqaluit, NU; one in St. John’s, NL; and a 50% joint
venture in Inuvik, NT. The execusuite properties consist of four execusuite apartment style properties which are rented for both short and long
term stays. The hotel property, located in Iqaluit, NU, is a full service hotel with food and beverage operations that are leased to an independent
operator.
For the year ended December 31, 2015, the execusuites and hotel operated at an average occupancy of 52.2%, compared to 53.7% for the
same period of 2014. The execusuite properties in Yellowknife, NT, and St. John’s, NL, had suites taken out of inventory during the year due to
the extensive capital improvements that are currently underway, which contributed to the lower occupancy. The ongoing CAPEX and
rebranding program in the execusuite properties in Yellowknife, NT, and St. John’s, NL, is expected to yield improvements in operating results
in 2016. Execusuites and hotel rental revenue for the year ended December 31, 2015, was $12.0 million, a decrease from $12.4 million in 2014.
There were revenue decreases in the execusuite properties in Yellowknife, NT, and St. John’s, NL, which were partially offset by revenue
increases in both the hotel and execusuite properties in Iqaluit, NU. During the year, the execusuites and hotel incurred lower controllable
costs, contributing to the higher NOI in the period.
Other expenses (income)
(thousands of dollars)
Financing costs
Administration
Depreciation and amortization
Loss (gain) on sale of property, plant and equipment
Equity income from joint ventures
Bargain purchase gain
Business combination transaction costs
Unrealized fair value changes
Total
Three months ended
December 31
Year ended December 31
2015
14,501
2,899
1,408
307
(206)
(50,893)
35,277
14,907
18,200
2014
6,805
1,802
1,149
-
(516)
-
-
(4,845)
4,395
2015
37,957
8,999
5,030
762
(1,070)
(50,893)
38,959
55,103
94,847
2014
27,887
6,617
4,600
(341)
(1,212)
-
-
(2,813)
34,738
Financing costs
Financing costs consist of mortgage interest, deferred financing costs, interest expense on operating facilities, interest expense on Limited
Partnership Class B Units (“Class B LP Units”), and other interest expense. Financing costs were $14.5 million and $38.0 million for the three
months and year ended December 31, 2015, respectively. The increase was a result of the $350 million bridge operating facility used to fund part
of the Transaction and additional mortgages assumed. Additionally, higher operating facility balances and increased mortgage leverage
contributed to the increased expense in 2015, and was partially offset by the decrease in the weighted average interest rate to 3.33% at
December 31, 2015, from 3.67% at December 31, 2014. Included in the year ended December 31, 2015, amount were costs of $0.8 million
incurred on the early renewal of a number of mortgages to access up-financing capacity at historically low rates for 10 year terms.
NORTHVIEW 2015 ANNUAL REPORT│21
Administration
Administration expense for the three months and year ended December 31, 2015, increased by 60.9% and 36.0%, respectively, when compared
to the same period of 2014. The increase for the year ended December 31, 2015, was due mainly to 2014 having lower than normal salary and
benefit expenses, and variable incentive costs, along with additional staff retained as part of the Transaction. There were also increases in
professional fees incurred and bank charges. There was a new variable incentive compensation plan approved by unitholders in May 2015. Under
the new plan, performance units granted to individuals now have up to a three year vesting period, with the expense being recognized
proportionately each year.
Business combination transaction costs
The costs recorded for business combinations for the three months and year ended December 31, 2015, relate to the completion of the
Transaction on October 30, 2015. They consist mainly of advisory services and other fees related to the Transaction.
Bargain purchase gain
The bargain purchase income recorded on the Transaction relates to the difference between the fair market value of the assets acquired and the
fair market value of the consideration paid. At the time that the agreements were signed for the Transaction, the NPR units that were being given
as consideration in the deal were valued at $23.03 per unit and the unit price on the date the deal closed was $18.49, resulting in a bargain
purchase gain as the proceeds given theoretically had a lower value than the value of the assets purchased.
Unrealized fair value changes
Three months ended
December 31
Twelve months ended
December 31
(thousands of dollars)
2015
2014
Change
2015
2014
Change
Expense (income)
Unrealized fair value change to investment properties
Sustaining CAPEX
Interest rate swap
2019 Debentures
Unit based payments
Class B LP Units
Net unrealized fair value decrease (increase)
1,183
21,462
234
(460)
(166)
(7,346)
14,907
(9,412)
4,939
-
-
(77)
(295)
(4,845)
112.6%
334.5%
n/m
n/m
115.6%
n/m
407.7%
8,391
54,910
234
(460)
(351)
(7,621)
55,103
(19,836)
17,343
-
-
(71)
(249)
(2,813)
142.3%
216.6%
n/m
n/m
394.4%
n/m
n/m
Management monitors certain trigger events that could substantiate a change in an investment property’s fair market value, such as a change in
market conditions, added competition through new supply, an other than temporary increase or decrease in market occupancy or rental rates,
recent transactions at Cap Rates different than ones previously experienced, independent appraisals, or an other than temporary change in a
property’s NOI.
The change in fair value of investment properties for the three months ended December 31, 2015, related mainly to multi-family properties held in
Fort McMurray, AB. Due to the decline in natural resource prices and demand, the economies in Western Canada are struggling, which has led to
sustained decreases in rental rates and changes to assumptions regarding long term occupancy levels. There was also a write down of specific
assets in Québec, which was mostly offset by increases in fair value of specific properties in Ontario.
Sustaining CAPEX represents ongoing expenditures required to maintain or improve the productive capacity of Northview’s portfolio. Northview’s
focus on improving and maintaining the quality of its multi-family buildings is the reason for the increase in sustaining CAPEX for the three months
ended December 31, 2015, when compared to the same period of 2014.
As part of the Transaction, Northview acquired $23.0 million of convertible unsecured subordinated debentures, which bear interest at 5.75% per
annum. These debentures are marked to market each reporting period, with the change in value being recorded to unrealized fair value gain or
loss.
As partial consideration paid for the assets acquired in the Transaction, Northview issued 7,741,743 Special Voting Units to holders of Class B LP
Units, which are exchangeable for regular REIT units. Class B LP Units are marked to market each reporting period, with the change in value
being recorded to unrealized fair value gain or loss. The increase in the number of Class B LP Units outstanding will make the fair value changes
between reporting periods more pronounced.
Working capital requirements
Northview requires working capital resources to fund day to day operating expenditures, sustaining CAPEX, distributions to REIT Unitholders, and
mortgage interest costs. Northview expects that funds generated from operations will be sufficient to cover these expenditures. Principal
repayments on existing mortgages are funded in part through the funds generated from operations.
NORTHVIEW 2015 ANNUAL REPORT│22
Capital improvements and sustaining CAPEX
(thousands of dollars, except per unit amounts)
Three months ended December 31
Year ended December 31
Capital improvements
Sustaining CAPEX
Number of multi-family units
2015
330
21,462
21,792
24,202
2014
1,423
4,939
6,362
10,491
2015
3,783
54,910
58,693
24,202
2014
14,083
17,343
31,426
10,491
Capital improvements are capital repairs or additions, improvements to the properties to meet investment requirements, and expenditures
generally made in the 18 months following the acquisition of a property to complete any deferred maintenance or to reposition the property
following the acquisition. Capital improvements are generally funded from borrowings associated with the improvement projects.
Sustaining CAPEX represents ongoing expenditures required to maintain or improve the productive capacity of Northview’s portfolio. These
include expenditures to maintain and renew common areas, HVAC systems, building envelopes, investments in wood pellet boilers, expenditures
to reduce energy consumption, and to refurbish units on resident turnover. Sustaining CAPEX is generally funded through cash flow from
operations. Northview’s focus on improving and maintaining the quality of its multi-family buildings is the reason for the increase in sustaining
CAPEX for 2015, when compared to the same period of 2014. The largest increases in the current year were noted in Fort McMurray, AB, and
Yellowknife, NT, where the majority of the “Street to Suite” CAPEX program spending was utilized. During the fourth quarter of 2015, there was
also a significant amount of sustaining CAPEX work performed on specific properties acquired in Ontario and Québec in the Transaction. In
addition, in Iqaluit, NU, timing and availability of shipments of materials play a large factor on when costs are incurred, along with the overall
higher costs of both materials and labour. Sustaining CAPEX incurred in the more remote Nunavut communities tends to be more expensive on a
per door basis due to the higher cost of materials, freight, and labour.
Tax status
Northview is a mutual fund trust for Canadian income tax purposes. In accordance with the Declaration of Trust (“DOT”), distributions to Trust
Unitholders are declared at the discretion of the Board of Trustees (“Trustees”). Pursuant to the DOT, the Trustees may, at their sole discretion,
determine distributions or designate that all taxable income earned, including the taxable part of net realized capital gains, be distributed to Trust
Unitholders and will deduct such distributions and designations for income tax purposes.
The Tax Act contains rules (the “SIFT Rules”) that impose tax on certain mutual fund trusts and their Trust Unitholders at rates that approximate
corporate and dividend income tax rates. The SIFT Rules do not apply to any mutual fund trust that qualifies as a “real estate investment trust” (a
“Tax REIT”) as defined in the Tax Act (the “Tax REIT Exemption”). A REIT must hold less than 10% of non-qualifying assets and earn less than
10% of non-qualifying revenue to keep its status as a Tax REIT. As of December 31, 2015, the REIT met all the requirements related to the
qualification of the REIT as a real estate investment trust for tax purposes.
The Tax REIT Exemption does not apply to corporate subsidiaries of Northview, which are therefore subject to Canadian income taxes. Northview
does not currently hold any income producing property or operations in taxable corporate subsidiaries. As such, there is currently no provision for
current or deferred income tax expense required in the current reporting period.
Income tax expense incurred in 2014 related to the stapled security structure still in place for part of the year. The securities were unstapled and
NorSerCo was dissolved during the first quarter of 2014.
The Transaction completed on October 30, 2015, will not affect the REIT’s status as a Tax REIT.
On February 18, 2016, the Ontario Ministry of Finance published amendments to the Land Transfer Act (Ontario) that may impact the transfers of
partnership interests in prior fiscal periods. The impact of the amendments is currently being evaluated by the REIT.
NORTHVIEW 2015 ANNUAL REPORT│23
SUMMARY OF QUARTERLY RESULTS
The table below summarizes Northview’s financial results for the last eight fiscal quarters:
(thousands of dollars, except per unit
amounts)
Total revenue
NOI
Distributions to Trust Unitholders
Distributions per Trust Unit
FFO – basic
FFO per Trust Unit – basic
FFO payout ratio – basic
FFO – diluted
FFO per Trust Unit – diluted
FFO payout ratio – diluted
Q4
70,735
39,353
18,493
$0.41
24,371
$0.54
75.9%
24,592
$0.53
75.2%
Q3
48,621
30,965
12,940
$0.41
21,561
$0.68
60.0%
21,561
$0.68
60.0%
2015
Q2
49,401
30,041
12,940
$0.41
20,327
$0.64
63.7%
20,327
$0.64
63.7%
Q1
48,821
26,340
12,940
$0.41
16,574
$0.52
78.1%
16,574
$0.52
78.1%
Q4
48,091
27,473
12,820
$0.40
19,043
$0.60
67.3%
19,043
$0.60
67.3%
2014
Q3
48,240
30,649
12,584
$0.40
21,482
$0.67
58.6%
21,482
$0.67
58.6%
Q2
46,102
27,613
12,591
$0.40
19,432
$0.61
64.8%
19,432
$0.61
64.8%
Q1
45,408
23,872
12,620
$0.40
15,493
$0.49
81.5%
15,493
$0.49
81.5%
Northview’s quarterly financial results have a seasonal component resulting from higher utility costs in the first and fourth quarters of each year.
LIQUIDITY AND CAPITAL RESOURCES
In recent years, Northview has grown through successful acquisition and development activities that have been funded internally, resulting in
increased debt to gross book value. The Transaction completed in 2015 has also temporarily increased debt to gross book value from 52.2% at
September 30, 2015, to 59.2% at December 31, 2015. Northview’s coverage ratios remain strong and among the best in the Canadian Multi-
family sector. For the year ended December 31, 2015, interest coverage ratio was 3.31x and the debt service coverage ratio was 1.86x.
Management has a clear debt strategy plan to reduce leverage over the next several years. The organic growth initiatives discussed earlier are
expected to provide significant investment property value increases. This coupled with the non-core asset disposition plan should reduce debt to
gross book value below 55% in the next three to five years with the long-term goal of maintaining debt to gross book value in the 50% to 55%
range.
Credit facilities and mortgages
Management’s responsibility is to ensure that Northview has sufficient liquidity to fund sustaining CAPEX, investment property capital
improvements, Trust Unit distributions, and to provide for future developments and acquisitions by maintaining a reasonable amount of credit
facilities. Northview is able to finance its commitments with cash flow from operations, revolving operating facilities, construction financing,
mortgage debt secured by investment properties, and equity issuances.
Borrowings under credit facilities
Operating facilities (i)
Operating facility – single advance (ii)
Bridge facility(iii)
Land financing(iv)
Construction financing(v)
Total
December 31, 2015
88,450
-
350,000
6,004
39,289
483,743
December 31, 2014
20,500
10,000
-
6,004
15,548
52,052
(i) At December 31, 2015, Northview had three revolving operating facilities with borrowing capacity of $135.0 million (December 31, 2014 –
$90.0 million) for acquisition, development, and operating purposes.
The $75.0 million facility bears interest at prime plus 0.75% or Bankers’ Acceptance plus 2.00% with a maturity date of May 12, 2016. As of
December 31, 2015, the maximum borrowing capacity was $56.0 million (December 31, 2014 – $58.8 million) based on the investment
properties pledged. At December 31, 2015, $42.2 million had been drawn (December 31, 2014 – $20.5 million). Specific investment
properties with a fair value of $160.5 million (December 31, 2014 – $161.7 million) have been pledged as collateral security for the
operating facility. Northview also has $5.5 million (December 31, 2014 – $7.1 million) in Letters of Credit (“LOC”) outstanding as security for
construction projects and mortgage holdbacks. The LOC reduces the amount available under the $75.0 million operating facility.
The $15.0 million facility bears interest at prime plus 0.75% or Bankers’ Acceptance plus 2.00% with a maturity date of July 23, 2016. As of
December 31, 2015, the maximum borrowing capacity was $15.0 million (December 31, 2014 – $7.5 million) based on the investment
NORTHVIEW 2015 ANNUAL REPORT│24
properties pledged. At December 31, 2015, $7.0 million had been drawn (December 31, 2014 – $nil). Specific investment properties with a
fair value of $34.5 million (December 31, 2014 – $11.1 million) have been pledged as collateral security for the operating facility. During the
first quarter of 2016, the maximum borrowing capacity has been increased to $20.0 million.
As part of the Transaction, Northview acquired a $45.0 million credit facility. The $45.0 million facility bears interest at prime plus 0.75% or
Bankers’ Acceptance plus 2.00% with a maturity date of May 31, 2016. As of December 31, 2015, the maximum borrowing capacity was
$40.6 million based on the investment properties pledged. At December 31, 2015, $39.3 million had been drawn. Specific investment
properties with a fair value of $123.5 million have been pledged as collateral security for the operating facility. This facility is subject to
certain covenants, including occupancy achievement and debt service coverage. As of December 31, 2015, Northview was in compliance
with all covenants.
(ii)
In June 2014, Northview received $10.0 million under a single advance non-revolving demand operating facility bearing interest at prime
plus 0.75% with a maturity date of December 31, 2014. The investment properties held as collateral security for the $75.0 million operating
facility are also held for the single advance operating facility. On January 8, 2015, this single advance non-revolving demand operating
facility was repaid.
(iii) Northview entered into two Bridge Facilities for a total of $350.0 million to fund the Transaction, completed on October 30, 2015. The first
Bridge Facility is a two-year senior secured non-revolving term loan facility bearing interest at prime plus 0.7% or Bankers’ Acceptance plus
1.95% for the amount of $325.0 million with a maturity date of October 30, 2017. The second Bridge Facility is a six month term, with a six
month extension subject to lender approval, senior secured non-revolving equity bridge facility bearing interest at prime plus 1.25% or
Bankers’ Acceptance plus 2.5% for the amount of $25.0 million with a maturity date of April 30, 2016. Specific investment properties with a
fair value of $550.4 million have been pledged as collateral security for the Bridge Facilities.
Repayment of the Bridge Facility is well underway with all financing committed. Repayment to date is $122 million, with an average term of
7.9 years and an average interest rate of 2.77%. The remainder of the repayment is expected to be completed in Q2 2016.
(iv) The land financing relates to land held for development, is due on demand, has a maturity date of December 31, 2016, and bears interest at
prime plus 0.50% or Bankers’ Acceptance plus 2.00%. Financing is secured by two parcels of land held for development.
(v) At December 31, 2015, Northview had three construction financing loans outstanding relating to the developments in Airdrie, AB; Fort St.
John, BC; and Bonnyville, AB. Interest rates range from prime plus 0.50% to 0.75% or Banker’s Acceptance plus 2.00% to 2.20%. Maturity
dates range from April 16, 2016, to December 31, 2016. A mortgage was obtained in 2015 on the new development in Grande Prairie, AB,
and the funds were used to repay the 2014 construction financing related to the project.
During the year ended December 31, 2015, Northview completed $214.2 million in mortgage financings and renewals with a weighted average
interest rate of 3.10% and a term to maturity of 8.5 years compared to $207.8 million, 3.03%, and 7.2 years, respectively, in the same period of
2014. The majority of the funding in 2015 was on multi-family residential properties, which qualify for Canada Mortgage and Housing Corporation
(“CMHC”) rates. The net proceeds were used to repay existing mortgages and operating facilities, and fund developments and acquisitions.
Northview continues to extend the term on new and renewed mortgages, utilizing 10 year terms where possible.
Northview continuously monitors interest rates to identify opportunities for the reduction of its weighted average interest rate. Northview’s
weighted average interest rate on mortgage debt at December 31, 2015, decreased to 3.33%, compared to 3.67% at December 31, 2014. At
December 31, 2015, the weighted average term to maturity was 5.0 years, compared to 5.0 years at December 31, 2014.
Northview utilizes CMHC insured mortgage lender financing when possible to obtain loans of up to 75% of CMHC’s assessed value of a multi-
family property. Northview can obtain a lower borrowing cost on properties financed using insured mortgage lender financing after including the
cost of the insurance when compared to conventional financing.
NORTHVIEW 2015 ANNUAL REPORT│25
The following table outlines Northview’s mortgages payable maturity schedule as at December 31, 2015, for the next ten years and thereafter:
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025 and thereafter
Principal Repayments
During the Year
37,194
35,457
33,542
28,666
23,300
17,261
14,669
13,222
9,580
4,089
216,980
Principal on
Maturity
122,040
67,178
169,342
182,520
169,756
110,220
42,290
81,118
67,242
128,529
1,140,235
Total
159,234
102,635
202,884
211,186
193,056
127,481
56,959
94,340
76,822
132,618
1,357,215
% of Total
11.7%
7.6%
14.9%
15.6%
14.2%
9.4%
4.2%
7.0%
5.8%
9.8%
100.0%
Weighted Average
Interest Rate
3.59%
3.31%
3.94%
3.29%
2.74%
3.87%
3.25%
3.24%
3.13%
3.19%
3.33%
Covenants
Northview is subject to financial covenants on its mortgages payable and credit facilities. The principal financial covenants are debt to gross book
value, debt service coverage, and interest coverage. Debt to gross book value has increased from December 31, 2014, as a result of completion
of the Transaction. As part of Northview’s debt management strategy, Management has identified approximately $150 million of assets
considered to be non-core that will be divested in 2016 and 2017, with the net proceeds of disposition being used to reduce overall debt levels.
The following debt to gross book value, interest coverage, and debt service coverage excludes the 2019 Debentures and interest expenses on
the 2019 Debentures.
(thousands of dollars)
Cash
Credit facilities
Mortgages payable
Debt
Investment properties
Property, plant and equipment
Accumulated depreciation and amortization
Gross book value
Debt to gross book value
December 31, 2015
(4,487)
483,743
1,357,215
1,836,471
3,025,468
55,510
22,156
3,103,134
59.2%
December 31, 2014
-
52,052
750,805
802,857
1,582,011
51,775
18,285
1,652,071
48.6%
NORTHVIEW 2015 ANNUAL REPORT│26
Interest and debt service coverage
(thousands of dollars)
Income before income taxes
Depreciation and amortization
Mortgage interest and deferred financing costs
Interest expense on credit facilities
Interest expense to Class B LP Unitholders
Bargain purchase gain
Business combination transaction costs
Unrealized fair value changes
Earnings before interest, taxes and depreciation (“EBITDA”), bargain
purchase gain, and business combination transaction costs
Mortgage interest and deferred financing costs
Interest expense on credit facilities
Total interest expense
Principal repayments
Debt service payments
Interest coverage
Debt service coverage
Year ended
December 31, 2015
31,852
5,030
32,250
3,315
2,213
(50,893)
38,959
55,103
Year ended
December 31, 2014
74,869
4,600
28,044
338
108
-
-
(2,813)
117,829
32,250
3,315
35,565
27,757
63,322
3.31
1.86
105,146
28,044
338
28,382
21,593
49,975
3.70
2.10
Interest coverage and debt service coverage are calculated based on the previous twelve months. Interest coverage for December 31, 2015, was
3.31 compared to 3.70 for the year ended December 31, 2014. Debt service coverage for December 31, 2015, was 1.86 compared to 2.10 for the
year ended December 31, 2014. Both ratios declined as a result of leveraging the recent acquisitions and new developments, however, they are
still within management’s expectation. Northview’s operating facilities interest coverage ratio covenant is 1.90 and debt service coverage ratio
covenant is 1.50.
Debt to gross book value, interest coverage, and debt service coverage including the 2019 Debentures and interest expenses on the 2019
Debentures is 59.9%, 3.30, and 1.86, respectively.
EQUITY
Northview’s issued and outstanding Trust Units, along with Trust Units potentially issuable, are as follows:
(number of units)
Issued and outstanding
Trust Units
Class B LP Units
Units potentially issuable
Units from long-term incentive plans
Units from unit award plan
Units from Deferred Units
Units from 2019 Debenture
Total Trust Units potentially issuable
Total outstanding and potentially issuable Trust Units
December 31, 2015
December 31, 2014
44,410,640
7,809,539
52,220,179
2,980
72,910
10,026
966,386
1,052,302
53,272,481
31,674,160
67,796
31,741,956
36,895
-
-
-
36,895
31,778,851
Normal Course Issuer Bid
On July 31, 2014, the TSX approved Northview’s notice of intention to renew the NCIB for its Trust Units. Northview's NCIB was made in
accordance with the policies of the TSX. Northview was allowed to purchase Trust Units during the period from August 6, 2014, to August 5,
2015, or an earlier date had Northview completed its maximum purchases. As of December 31, 2015, the NCIB has expired and was not
renewed.
NORTHVIEW 2015 ANNUAL REPORT│27
Northview would have paid 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 would have been funded out of Northview's working capital.
Northview was authorized to purchase, in a 12 month period, up to 3,095,587 Trust Units, representing 10% of its public float, through the facilities
of the TSX and other Canadian trading platforms. On any trading day, Northview would not have purchased more than 12,474 Trust Units, which
is equal to 25% of Northview's average daily trading volume over the previous six months, except where such purchases were made in
accordance with the block purchase exemptions under the TSX rules.
During the year ended December 31, 2015, Northview did not purchase and subsequently cancel any Trust Units under its NCIB (December 31,
2014 – Northview purchased and subsequently cancelled 137,600 Trust Units under its NCIB for total consideration of $3.8 million).
Management intends to initiate an NCIB program during the first quarter of 2016.
Distributions to Trust Unitholders
Pursuant to the DOT, holders of Trust Units and Class B LP Units are entitled to receive distributions made on each distribution date as approved
by the Trustees. During the three months ended December 31, 2015, Northview declared monthly cash distributions of $0.1358 per Trust Unit.
For the year ended December 31, 2015, Northview declared distributions totaling $57.3 million (December 31, 2014 – $50.6 million). The 2015
increase in distributions relates to the additional units issued in the Transaction.
For the year ended December 31, 2015, total distributions of $53.4 million were paid to Trust Unitholders from $51.6 million of cash flow from
operations in the same period. Management expects cash flow from operations to exceed distributions paid in future years due to the additional
stability added to the portfolio through the Transaction and through the execution of strategic growth initiatives.
RELATED PARTY TRANSACTIONS
Related party transactions are conducted in the normal course of operations and are made on terms equivalent to those used in arm’s length
transactions.
During the period, revenue from associates related to management fees and maintenance service fees received from Inuvik Commercial
Properties Zheh Gwizu’ Limited Partnership (“ICP”) and Inuvik Capital Suites Zheh Gwizuh Limited Partnership (“ICS”), and receipt of services
from associates related to rent paid by Northview to ICP, was as follows:
Revenue from associates
Receipt of services from associates
Transactions for the three
months ended December 31
2014
58
13
2015
141
13
Transactions for the years
ended December 31
2015
379
53
2014
402
53
Balance Outstanding as at
December 31
2015
118
1
2014
53
2
Northview has engaged Starlight to perform certain services, as outlined below. Starlight is a related party as it is controlled by a significant
Unitholder of Northview.
Pursuant to the Transitional Services Agreement dated October 30, 2015, Starlight is to provide transitional services of an asset management
nature for a monthly fee equal to 0.125% of the sum of: (i) the agreed upon allocated values of the properties acquired from True North and its
affiliates in connection with the Transaction; (ii) the third party appraised values of the private portfolio acquired by Northview in connection with
the Transaction; (iii) the purchase price of new sourced properties; (iv) the third party appraised values of added properties; and (v) the cost of
any capital expenditures incurred by Northview or any of its affiliates in respect of the properties since the closing date of the Transaction. This
agreement is for a term of three years ending October 30, 2018, with Northview having the option to exclude the New Brunswick and Nova Scotia
properties from the agreement after the second year. At Northview’s option, the term may be renewed for two additional one year terms.
For the year ended December 31, 2015, the costs of these services aggregated to $0.4 million. Of this amount, $0.1 million has been capitalized,
while the remaining $0.3 million has been recognized as administration expenses in the consolidated statements of net and comprehensive
income.
NORTHVIEW 2015 ANNUAL REPORT│28
ACCOUNTING
Critical accounting estimates and judgments
The preparation of financial statements requires management to make estimates and judgments about the future. Estimates and judgments are
continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be
reasonable under the circumstances. Accounting estimates will, by definition, seldom equal the actual results. The following discussion sets forth
management’s most critical estimates and assumptions in determining the value of assets and liabilities and management’s most critical
judgments in applying accounting policies. Actual results may differ from these estimates.
Estimates
(i) Fair value of investment properties
Northview carries its investment properties at fair value. Significant estimates used in determining the fair value of Northview’s investment
properties include Cap Rates and NOI. A change to either of these inputs could significantly alter the fair value of an investment property.
(ii) Depreciation and amortization
Depreciation and amortization are calculated to write off the cost, less estimated residual value, of assets on a systematic and rational basis
over their expected useful lives. Estimates of useful lives are based on data and information from various sources including industry practice
and company-specific history. Expected useful lives and residual values are reviewed annually for any change to estimates and
assumptions.
(iii) Allowance for doubtful accounts
Northview must make an assessment of whether accounts receivable are collectible from tenants. Accordingly, management establishes an
allowance for estimated losses arising from non-payment, taking into consideration tenant creditworthiness, current economic trends, and
past experience. If future collections differ from estimates, future income would be affected.
(iv) Accrued liabilities
Northview must estimate accrued liabilities when invoices have not been received in order to ensure all expenditures have been recognized.
If future expenditures differ from estimates, future income would be affected. Accrued liabilities are included in Trade and other payables.
(v) Capital adequacy
Northview prepares estimated cash flow projections on a regular basis to ensure there will be adequate liquidity to maintain operating,
capital, and investment activities and uses these estimates to assess capital adequacy. Management reviews the current financial results
and the annual business plan in determining appropriate capital adequacy and uses this to determine distribution levels. Changes in these
estimates affect distributions to the Trust Unitholders and Northview’s cost of capital, which in turn affects income.
Income taxes
(vi)
Under current tax legislation, a real estate investment trust is not liable to pay Canadian income taxes provided that its taxable income is
fully distributed to Unitholders during the year. Northview is a real estate investment trust if it meets prescribed conditions under the Income
Tax Act (Canada) relating to the nature of its assets and revenue (the "REIT Conditions"). Northview has reviewed the REIT Conditions and
has assessed their interpretation and application to Northview's assets and revenue, and it has determined that it qualifies as a real estate
investment trust.
Northview expects to qualify as a real estate investment trust under the Income Tax Act (Canada); however, should it no longer qualify, it
would not be able to flow-through its taxable income to Unitholders and Northview would, therefore, be subject to tax.
Judgments
(i) Purchase of investment properties
Northview reviews its purchases of investment property to determine whether or not the purchase is part of a business combination, as IFRS
requires differing treatment of property acquisitions depending on whether or not the purchase is part of a business combination. Judgment
is involved in determining whether or not a purchase forms part of a business combination or an asset acquisition. Should the purchase form
part of a business combination, closing costs, such as appraisal and legal fees, are expensed immediately and earnings are affected. If the
purchase is an asset acquisition, these costs form part of the purchase price and earnings are not immediately affected.
(ii) Fair value of investment properties
While investment properties are recorded at fair value on a quarterly basis, not every property is independently appraised every year.
Significant judgment is applied in arriving at these fair values, particularly as the properties are in smaller communities with limited trading
activity. Changes in the value of the investment properties affect income.
NORTHVIEW 2015 ANNUAL REPORT│29
(iii) Componentization
The componentization of Northview’s property, plant and equipment, namely buildings, are based on management’s judgment of what
components constitute a significant cost in relation to the total cost of an asset and whether these components have similar or dissimilar
patterns of consumption and useful lives for purposes of calculating depreciation and amortization.
Impairment
(iv)
Assessment of impairment is based on management’s judgment of whether there are sufficient internal and external factors that would
indicate that an asset or Cash Generating Unit (“CGU”) is impaired. The determination of CGUs is also based on management’s judgment
and is an assessment of the smallest group of assets that generate cash inflows independently of other assets. Factors considered include
whether an active market exists for the output produced by the asset or group of assets, as well as how management monitors and makes
decisions about Northview’s operations.
(v) Control over Icicle Joint Venture (“Icicle”)
Northview controlled 49% of Icicle joint operations until the joint venture was dissolved on August 31, 2015. Northview controlled less than a
majority interest in Icicle, therefore, judgment is involved in determining whether there was control over the entity. Northview had the
practical ability to direct the relevant activities of the joint venture since Northview managed all aspects of the joint venture’s operations and
hence Northview had control over Icicle.
(vi) Classification of ICP and ICS as joint ventures
The ownership of ICS is for the purpose of investing in an income producing execusuite property in Inuvik, NT, and the ownership of ICP is
for the purpose of investing in a portfolio of commercial and mixed-use income producing properties in Inuvik, NT. Furthermore, there is no
contractual arrangement or any other facts and circumstances that indicate that the parties to the joint arrangement have rights to the assets
and obligations for the liabilities of the joint arrangement. Accordingly, ICP and ICS are classified as joint ventures for Northview.
Recent accounting pronouncements
The International Accounting Standards Board (“IASB”) has issued the following standards that have not been applied in preparing the audited
consolidated financial statements as their effective dates fall within annual periods subsequent to the current reporting period.
Proposed Standard
Description
Previous Standard
Effective Date
Amendments to IFRS 11 –
Joint
Arrangement:
Accounting for Acquisitions
of Interests
The amendments to IFRS 11 require an acquirer
of an interest in a joint operation in which the
activity constitutes a business combination as
defined in IFRS 3 – Business Combinations to
apply the relevant principles on accounting for
business combinations in IFRS 3 and other
standards.
No direct replacement.
Effective date for annual
periods beginning on or
after January 1, 2016.
IFRS 15 – Revenue from
Contracts with Customers
IFRS
Instruments
9
–
Financial
IFRS 16 – Leases
Introduces a principle to report information about
nature, timing, and uncertainty of revenue from
single,
contracts with
customers
comprehensive revenue recognition model.
in
a
IAS 18 – Revenue, IAS 11 –
Construction Contracts, and
related interpretations.
Effective date for annual
periods beginning on or
after January 1, 2018.
replaces
The IASB has undertaken a three-phase project
to replace IAS 39 with IFRS 9. The new
current multiple
standard
the
classification and measurement models
for
financial assets and liabilities with a single model
that has only
two classification categories:
amortized cost and fair value; and introduces a
new hedge accounting model. The standard was
finalized in July 2014.
The IASB issued IFRS 16 – Leases, which
provides a single lessee accounting model,
requiring
to recognize assets and
liabilities for all leases unless the lease term is
12 months or less or the underlying asset has a
low value.
lessees
–
39
IAS
Instruments:
and Measurement.
Financial
Recognition
Effective date for annual
periods beginning on or
after January 1, 2018.
IAS 17 – Leases
Effective date for annual
periods beginning on or
after January 1, 2019.
Management continues to evaluate the potential qualitative and quantitative impact of these new standards on Northview’s financial statement
measurements and disclosures. Northview is not early adopting these standards.
NORTHVIEW 2015 ANNUAL REPORT│30
CONTROLS AND PROCEDURES
Disclosure controls and procedures (“DC&P”) and internal controls over financial reporting (“ICFR”) have been designed and implemented by or
under the supervision of the REIT’s Chief Executive Officer (“CEO”), Chief Financial Officer (“CFO”), and Senior Management.
Disclosure controls and procedures
DC&P are designed to provide reasonable assurance that all relevant information is gathered and reported to management, including the CEO
and the CFO, on a timely basis so that appropriate decisions can be made regarding public disclosures. The presented information has been
reviewed by the Disclosure Committee, the Audit Committee, and the Board of Trustees of the REIT, which approved it prior to its publication.
An evaluation was conducted by management under the supervision of the CEO and CFO. Based on this evaluation, the CEO and CFO
concluded that as at December 31, 2015, Northview’s DC&P, as defined in National Instrument 52-109 (“NI 52-109”), Certification of Disclosure in
Issuer’s Annual and Interim Filings, was effective and provided reasonable assurance that information required to be disclosed in reports that
were filed or submitted under Canadian securities legislation related to Northview.
Changes in controls over financial reporting
During 2015, there have been no changes to the REIT's internal control over financial reporting that have materially affected, or are reasonably
likely to materially affect, the REIT's internal control over financial reporting, except as noted below.
On October 30, 2015, NPR and TN announced the completion of the Transaction. Management has not fully completed its review of internal
controls over financial reporting for portfolios acquired in the Transaction. Since the acquisition occurred within the 365 days of the reporting
period, management has limited the scope of design and subsequent evaluation of disclosure controls and procedures and internal controls over
financial reporting, as permitted under Section 3.3 of NI 52-109.
The contribution to Northview’s audited consolidated financial statements of portfolios acquired in the Transaction for the year ended
December 31, 2015, was approximately 10.3% of consolidated revenues and 35.9% of consolidated net and comprehensive income. Additionally,
at December 31, 2015, the values of current assets and current liabilities of portfolios acquired in the Transaction were approximately 31.3% and
15.4% of consolidated current assets and current liabilities, respectively, and its non-current assets and non-current liabilities were approximately
42.1% and 45.2% of consolidated non-current assets and non-current liabilities, respectively.
In accordance with the provisions of NI 52-109, Management has limited the scope of their design of the REIT's DC&P and ICFR for the period
ending December 31, 2015, to exclude controls, policies and procedures of TN, SL, and PSP. The scope limitation is primarily based on the time
required to assess the DC&P and ICFR of the portfolios acquired in the Transaction in a manner consistent with the REIT’s other operations.
NON-GAAP AND ADDITIONAL GAAP MEASURES
The following non-GAAP and additional GAAP measures are used to monitor Northview’s financial performance. All non-GAAP measures do not
have any standardized meaning prescribed by GAAP and are therefore unlikely to be comparable to similar measures presented by other issuers.
Net operating income: NOI is calculated by deducting the direct operating costs of maintaining and operating investment properties from the
revenue which they generate. The most significant direct operating costs affecting NOI are: utilities, property taxes, insurance, cleaning, and
repairs and maintenance. Refer to the audited consolidated statements of net and comprehensive income for NOI calculation.
Same door NOI: Measured as the annual change in NOI from properties that have been owned by Northview for both the current and prior year
reporting periods. See page 16 for discussion of same door NOI.
Funds from operations: FFO is calculated as prescribed by RealPAC’s White Paper. FFO measures operating performance by adjusting net
and comprehensive income for: unrealized fair value changes; depreciation of income producing property, plant and equipment; gains or losses
on disposal of investment property and property, plant and equipment; amortization of tenant cash incentives; amortization of business
combination transaction costs; deferred income taxes; distributions to Trust Unitholders reported in net income as interest; and other non-cash
item adjustments that do not provide an accurate portrait of Northview’s past or recurring performance. See page 12 for FFO calculation.
FFO payout ratio: calculated as distributions declared during the period divided by FFO for the same period.
Debt: the sum of credit facilities and mortgages payable less cash (bank indebtedness). See page 26 for debt calculation.
Gross book value: the book value of the assets of Northview and its consolidated subsidiaries, as shown on its then most recent audited
consolidated statements of financial position, plus the amount of accumulated depreciation and amortization included therein or in the notes
thereto, plus the amount of deferred income tax liability arising out of indirect acquisitions or, if approved by a majority of the Trustees, the
appraised value of the real property held directly or indirectly by Northview, calculated in accordance with GAAP. See page 26 for gross book
value calculation.
NORTHVIEW 2015 ANNUAL REPORT│31
Debt to gross book value: calculated as debt over gross book value and is a measure of leverage. See page 26 for debt to gross book value
calculation.
Interest coverage: calculated as net income before interest (excluding distributions classified as interest paid on Trust Units or Class B LP
Units), unrealized fair value adjustments, taxes, and depreciation, divided by total interest expense (excluding distributions classified as interest
paid on Trust Units or Class B LP Units). See page 27 for interest coverage calculation.
Debt service coverage: calculated as net income before interest (excluding distributions classified as interest paid on Trust Units or Class B LP
Units), unrealized fair value adjustments, taxes, and depreciation divided by the debt service payments: total interest expense (excluding
distributions classified as interest paid on Trust Units or Class B LP Units) and principal repayments. See page 27 for debt service coverage
calculation.
NORTHVIEW 2015 ANNUAL REPORT│32
MANAGEMENT’S REPORT
To the Unitholders of Northview Apartment Real Estate Investment Trust:
The accompanying consolidated financial statements of Northview Apartment Real Estate Investment Trust (“Northview”) (formerly Northern
Property Real Estate Investment Trust) were prepared by management in accordance with the accounting policies in the notes to the
consolidated financial statements. The management of Northview is responsible for the integrity and objectivity of the information presented in the
consolidated financial statements including the amounts based on estimates and judgments. The consolidated financial statements have been
prepared by management in accordance with International Financial Reporting Standards (“IFRS”) appropriate in the circumstances. Financial
information contained in Management’s Discussion and Analysis is consistent with these consolidated financial statements.
To fulfill its responsibility, Northview maintains appropriate systems of internal control, policies, and procedures to ensure that its’ reporting
practices and accounting and administrative procedures are of high quality. Northview’s internal controls are designed to provide reasonable
assurance that transactions are authorized, assets are safeguarded, and proper records are maintained.
The Board of Trustees oversees management’s responsibility for financial reporting through an Audit and Risk Management Committee which is
comprised of four independent trustees. The Audit and Risk Management Committee reviews the consolidated financial statements and
recommends them for approval to the Board of Trustees. The consolidated financial statements have been further reviewed by the Board of
Trustees of Northview prior to their approval.
Deloitte LLP, the auditors appointed by the Unitholders, has examined the consolidated financial statements in accordance with Canadian
generally accepted auditing standards to enable them to express to the Unitholders their opinion on the consolidated financial statements. Their
report as auditors is set forth herein. The auditors have direct and full access to the Audit and Risk Management Committee to discuss their audit
and related findings.
“Signed”
“Signed”
Todd R. Cook
Chief Executive Officer
Robert J. Palmer
Chief Financial Officer
NORTHVIEW 2015 ANNUAL REPORT│33
Deloitte LLP
700, 850 - 2nd Street S.W.
Calgary AB T2P 0R8
Canada
Tel: (403) 267-1700
Fax: (587) 774-5379
www.deloitte.ca
INDEPENDENT AUDITOR’S REPORT
To the Unitholders of Northview Apartment Real Estate Investment Trust:
We have audited the accompanying consolidated financial statements of Northview Apartment Real Estate Investment Trust (formerly Northern
Property Real Estate Investment Trust), which comprise the consolidated statements of financial position as at December 31, 2015, and
December 31, 2014, and the consolidated statements of net and comprehensive income, consolidated statements of changes in Unitholders’
equity and consolidated statements of cash flows for the years then ended, and a summary of significant accounting policies and other
explanatory information.
Management’s Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International
Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of consolidated
financial statements that are free from material misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in
accordance with Canadian generally accepted auditing standards. Those standards require that we comply with ethical requirements and plan
and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The
procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated
financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s
preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes
evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as
evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of Northview Apartment Real
Estate Investment Trust as at December 31, 2015, and December 31, 2014, and its financial performance and its cash flows for the years then
ended in accordance with International Financial Reporting Standards.
Chartered Professional Accountants, Chartered Accountants
March 9, 2016
Calgary, Alberta
NORTHVIEW 2015 ANNUAL REPORT│34
Northview Apartment Real Estate Investment Trust
Consolidated Statements of Financial Position
(thousands of Canadian dollars)
Note
December 31, 2015
December 31, 2014
5
6
7
8
9
10
10
20(b)(ii)
2(j)
17(b)
12
13
12
12
14
15
Assets
Non-current assets
Investment properties
Property, plant and equipment
Other long-term assets
Investment in joint ventures
Intangible assets
Loans receivable
Instalment notes receivable
Current assets
Instalment notes receivable
Prepaid expenses and other assets
Accounts receivable
Restricted cash
Cash
Liabilities
Non-current liabilities
Class B LP Units
Mortgages payable
Convertible debentures
Derivative instruments
Current liabilities
Mortgages payable
Credit facilities
Trade and other payables
Distributions payable
Unit based payments
Unitholders’ equity
Equity attributable to Unitholders
Non-controlling interests
Total equity
See accompanying notes to the consolidated financial statements.
Guarantees, commitments and contingencies (Note 19).
3,025,468
55,510
5,593
6,210
520
6,112
1,136
3,100,549
666
4,760
12,417
9,738
4,487
32,068
3,132,617
137,135
1,228,857
22,885
1,515
1,390,392
131,032
483,743
70,467
7,089
788
693,119
2,083,511
1,047,296
1,810
1,049,106
3,132,617
1,582,011
51,775
5,187
5,310
1,093
4,796
-
1,650,172
-
2,667
6,244
7,088
-
15,999
1,666,171
1,612
604,931
-
-
606,543
129,622
52,052
36,186
4,311
476
222,647
829,190
835,113
1,868
836,981
1,666,171
NORTHVIEW 2015 ANNUAL REPORT│35
Northview Apartment Real Estate Investment Trust
Consolidated Statements of Net and Comprehensive Income
Years ended December 31
(thousands of Canadian dollars)
Note
23
4
4
24
11
11
Revenue
Rental revenue
Other revenue
Operating expenses
Net operating income
Other expense (income)
Financing costs
Administration
Depreciation and amortization
Loss (gain) on sale of property, plant and equipment
Equity income from joint ventures
Bargain purchase gain
Business combination transaction costs
Unrealized fair value changes
Income before income taxes
Income tax expense
Current
Deferred
Net and comprehensive income
Net and comprehensive income attributable to:
Unitholders
Non-controlling interests
Net and comprehensive income
See accompanying notes to the consolidated financial statements.
2015
211,182
6,396
217,578
90,879
126,699
37,957
8,999
5,030
762
(1,070)
(50,893)
38,959
55,103
94,847
31,852
-
-
-
31,852
31,698
154
31,852
2014
182,612
5,229
187,841
78,234
109,607
27,887
6,617
4,600
(341)
(1,212)
-
-
(2,813)
34,738
74,869
213
392
605
74,264
73,972
292
74,264
NORTHVIEW 2015 ANNUAL REPORT│36
Northview Apartment Real Estate Investment Trust
Consolidated Statements of Changes in Unitholders’ Equity
Years ended December 31
(thousands of Canadian dollars)
Units
Balance, January 1
Long-term incentive plan units issued
Units issued, net of issue costs
NorSerCo unstapling
Units repurchased and cancelled
Balance, December 31
Retained earnings
Cumulative net income
Balance, January 1
Units cancelled
NorSerCo unstapling
Net and comprehensive income attributable to Unitholders
Balance, December 31
Cumulative distributions to Unitholders
Balance, January 1
Distributions declared to Unitholders
NorSerCo unstapling
Balance, December 31
Cumulative (deficit) retained earnings, December 31
Equity attributable to Unitholders
Non-controlling interests
Balance, January 1
Net and comprehensive income
Distributions to non-controlling interests
Acquisition of interest held by non-controlling interest
Balance, December 31
Total Unitholders’ equity
See accompanying notes to the consolidated financial statements.
Note
17
17
1
17(d)
17(d)
1
1
2015
818,041
715
234,870
-
-
1,053,626
251,106
-
-
31,698
282,804
(234,034)
(55,100)
-
(289,134)
(6,330)
1,047,296
1,868
154
(212)
-
1,810
1,049,106
2014
830,646
858
-
(7,613)
(5,850)
818,041
177,109
(260)
285
73,972
251,106
(190,882)
(50,509)
7,357
(234,034)
17,072
835,113
2,087
292
(181)
(330)
1,868
836,981
NORTHVIEW 2015 ANNUAL REPORT│37
Northview Apartment Real Estate Investment Trust
Consolidated Statements of Cash Flows
Years ended December 31
(thousands of Canadian dollars)
Operating activities:
Net and comprehensive income
Adjustments:
Deferred rental revenue
Tenant inducements amortization
Depreciation and amortization
Mortgage and credit facilities interest expense
Mortgage and credit facilities interest paid
Interest expense to Class B LP Unitholders
Distribution interest paid to Class B LP Unitholders
Interest expense on convertible debentures
Interest on convertible debentures paid
Unrealized fair value changes
Loss (gain) on sale of property, plant and equipment
Equity income from joint ventures
Long-term incentive plan compensation
Bargain purchase gain
Income tax expense
Income tax paid
Changes in non-cash working capital
Financing activities:
Proceeds from mortgages
Repayment of mortgages
Draw of credit facilities, net
Payments to non-controlling interests
Acquisition of interest held by non-controlling interest
Units repurchased in normal course issuer bid
Distributions paid to Unitholders
Investing activities:
Acquisition of investment properties and land for future development
Acquisition of Starlight and IMH portfolios
Cash acquired in True North acquisition
Investment properties under development
Investment property improvements
Proceeds from sale of investment properties
Acquisition of property, plant and equipment
Distributions received from equity investees
Acquisition of intangible assets
Changes in non-cash working capital
Net increase (decrease) in cash
Cash, beginning of year
Cash, end of year
See accompanying notes to the consolidated financial statements.
Note
24
25
17(d)
17(c)
5
4
4
5
5
6
8
25
2015
31,852
83
476
5,030
35,570
(33,752)
2,213
(1,162)
221
(667)
55,103
762
(1,070)
1,255
(50,893)
-
-
6,877
51,898
162,549
(103,986)
394,690
(212)
-
-
(53,371)
399,670
(34,322)
(317,136)
1,582
(45,424)
(58,694)
15,745
(6,401)
170
(21)
(2,580)
(447,081)
4,487
-
4,487
2014
74,264
(389)
456
4,600
28,382
(26,129)
108
(107)
-
-
(2,813)
(341)
(1,212)
704
-
605
(213)
2,786
80,701
125,722
(42,296)
26,557
(181)
(325)
(6,110)
(50,403)
52,964
(39,819)
-
-
(63,808)
(28,632)
662
(1,952)
1,210
(278)
(1,092)
(133,709)
(44)
44
-
NORTHVIEW 2015 ANNUAL REPORT│38
Northview Apartment Real Estate Investment Trust
Notes to the Consolidated Financial Statements
Years ended December 31, 2015 and 2014
(Tabular amounts expressed in thousands of Canadian dollars except where indicated)
1. Description of the consolidated entities
Northview Apartment Real Estate Investment Trust (“Northview” or the “REIT” or the “Trust”) (formerly Northern Property Real Estate Investment
Trust (“NPR”)) is an unincorporated, open-ended real estate investment trust created pursuant to a declaration of trust (“DOT”) dated January 2,
2002, and last amended October 30, 2015, under the laws of the Province of Alberta (and the federal laws of Canada applicable therein).
Northview is primarily a multi-family residential real estate investor and operator providing a broad spectrum of rental accommodations with a
portfolio of more than 24,000 quality residential suites in more than 60 markets across Canada, which provides Northview the means to deliver
stable and growing profitability and cash distributions to Unitholders. Northview’s registered office is located at 110, 6131 6th Street SE, Calgary,
Alberta.
On October 30, 2015, through a plan of arrangement, NPR acquired all of the assets and properties of True North Apartment Real Estate
Investment Trust ("TN" or “True North”) in exchange for NPR Trust Units and NPR Special Voting Units. In addition, NPR acquired seven
apartment properties held by Starlight Investment Ltd. (“SL” or “Starlight”) and 26 apartment properties from a joint venture between affiliates of SL
and affiliates of the Public Sector Pension Investment Board (“PSP”), collectively the “Transaction”, see Note 4(a)(b) for more details.
Upon completion of the Transaction, NPR changed its name to “Northview Apartment Real Estate Investment Trust”. NPR units were delisted
from the Toronto Stock Exchange (“TSX”) under the trading symbol NPR.UN. On November 5, 2015, Northview was listed and began trading on
the TSX under the symbol “NVU.UN”. Northview continues to qualify as a real estate investment trust for tax purposes.
On August 31, 2015, Northview sold the last duplex property in Sachs Harbour, NT for $110,000 which was jointly operated with Icicle Joint
Venture (“Icicle”). Subsequent to the sale, Northview has no further investments in Icicle and the joint venture has been dissolved. Northview no
longer consolidates its 49% ownership of Icicle and no longer records a 51% non-controlling interest.
On March 20, 2014, Northview purchased the remaining 51% ownership of Aqsaqniq Ninety North Limited (“Aqsaqniq”) from its partner for
$120,000 in cash and a duplex property in Taloyoak, NU, with a fair value of $45,000. Northview has 100% ownership of Aqsaqniq.
Northview unstapled its stapled unit structure, NorSerCo Inc. (“NorSerCo”), effective February 3, 2014, and transferred all of its active business to
Northview and filed articles of dissolution with the Registrar of Corporations (Alberta), pursuant to the resolutions that were approved by
NorSerCo shareholders at a special meeting held on July 13, 2012. As a result, the NorSerCo common shares were de-listed (the NorSerCo
common shares had previously traded as part of a stapled security) from the Toronto Stock Exchange (“TSX”).
Immediately prior to the unstapling and dissolution of the NorSerCo shares, Northview purchased all operating assets of NorSerCo and assumed
all remaining liabilities through a subsidiary entity. As a result of the unstapling, the NorSerCo share capital and distributions paid by NorSerCo
have been removed from Unitholders’ equity.
2. Significant accounting policies
a) Basis of preparation and statement of compliance
The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by
the International Accounting Standards Board (“IASB”) and approved by the Canadian Accounting Standards Board (“AcSB”).
These consolidated financial statements have been prepared on a going concern basis and are presented in Canadian dollars rounded to the
nearest thousand except where indicated. The accounting policies set out below have been applied consistently to all periods presented in these
consolidated financial statements. These consolidated financial statements reflect all normal and recurring adjustments which are, in the opinion
of management, necessary for a fair presentation of the respective years presented.
Within the consolidated statements of cash flows, a reclassification was made between cash flows from investment properties under development
and investment property improvements for the year ended December 31, 2015.
The consolidated financial statements were authorized for release by the trustees of Northview (the “Trustees”) on March 9, 2016.
NORTHVIEW 2015 ANNUAL REPORT│39
Northview Apartment Real Estate Investment Trust
Notes to the Consolidated Financial Statements
Years ended December 31, 2015 and 2014
(Tabular amounts expressed in thousands of Canadian dollars except where indicated)
b) Principles of consolidation
These consolidated financial statements include the accounts of Northview, wholly-owned subsidiaries, partially owned partnerships, and joint
arrangements, collectively Northview. Subsidiaries are entities controlled by Northview. The financial transactions of subsidiaries are included in
the consolidated financial statements to the date that control ceases. The accounting policies of subsidiaries, partially owned partnerships, and
joint arrangements are the same as those of the Trust. Northview has no controlling entity.
Investment properties
c)
Northview’s investment properties include residential and commercial properties held to earn rental income, held for capital appreciation, or
properties that are being constructed, developed, or redeveloped for future use as investment properties.
Investment properties are measured initially at cost, including transaction costs, unless the acquisition is part of a business combination.
Subsequent to initial recognition, investment properties are measured at fair value, in accordance with International Accounting Standard 40 –
Investment Property (“IAS 40”).
The fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants
at the measurement date. In estimating the fair value of the investment properties, the highest and best use of the investment properties is their
current use. Northview reviews the fair value of its investment property each reporting period and revises the carrying value when market
circumstances change the underlying variables used to fair value investment properties. The fair value of investment property is based on
valuations by a combination of independent appraisers and management estimates including any capital additions since the date of the most
recent appraisal. External appraisals of investment property are performed throughout each year and continue to be used to verify certain
variables used in the internal calculation of investment property values. Management relies on the external investment property appraisals to
verify its assessment of regional vacancy, management overhead and Capitalization Rate (“Cap Rate”) information which is then applied to the
stabilized net operating income, which is projected annual net operating income that an investment property is likely to experience over the
holding period, to calculate the fair value of the remainder of Northview’s investment properties within the region. Where increases or decreases
are warranted, Northview adjusts the fair value of its investment properties. Unrealized gains and losses arising from changes in the fair value of
investment properties are included in the consolidated statements of net and comprehensive income in the period in which they arise. There has
been no change to the valuation technique during the year.
In accordance with IFRS 5 – Non-current Assets Held for Sale and Discontinued Operations (“IFRS 5”), investment properties are reclassified to
“Assets held for sale” when certain criteria are met. An investment property is derecognized upon disposal or when the investment property is
permanently withdrawn from use and no future economic benefits are expected from the disposal. Any gain or loss arising on derecognition of the
property (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the consolidated
statements of net and comprehensive income in the period in which the property is derecognized.
Investment properties are segregated into the following categories: (i) residential (apartments, townhouses, duplexes, single family, and mixed
use) and (ii) commercial (office, industrial, and retail).
Investment property consists of several separate components which are included in the estimation of fair value for each property. Residential
investment property includes prepaid land equity leases ranging in terms from 15 to 30 years, asset acquisition costs, furniture and fixtures, and
sustaining CAPEX. In addition, commercial investment property includes above and below market leases, in-place leases, prepaid tenant
improvements, and direct leasing costs.
Land held for development is measured initially at cost, and subsequently measured at fair value. Initial costs that are capitalized include any
costs associated with the purchase of the land. Unrealized gains and losses arising from changes in the fair value of land held for development
are included in the consolidated statements of net and comprehensive income in the period in which they arise.
Sustaining CAPEX represents ongoing expenditures required to maintain the productive capacity of Northview’s portfolio. These include capital
expenditures to maintain and renew common areas, heating ventilating and air conditioning (“HVAC”) systems, building envelopes, investment in
wood pellet boilers, expenditures to reduce energy consumption, and to refurbish interior finishes in units on tenant turnover.
Capital improvements are capital repairs or additions, improvements to the properties to meet investment requirements, and expenditures made
in the 18 months following the acquisition of a property to complete any deferred maintenance.
Tenant inducements include cash payments made to tenants where no specific obligation exists on how the payment is utilized by the tenant.
Tenant inducements are considered in the cash inflows modeled to measure the fair value of a commercial investment property. The lease
incentive asset is separated on the statement of financial position by deducting this amount from the fair value of the property to avoid double
counting of assets.
d) Asset acquisition / Business combination
In accordance with IFRS 3 – Business Combination (“IFRS 3”), a transaction is recorded as a business combination if the significant assets,
liabilities, or activities in addition to property and related mortgage debt assumed constitute a business. A business is defined as an integrated set
NORTHVIEW 2015 ANNUAL REPORT│40
Northview Apartment Real Estate Investment Trust
Notes to the Consolidated Financial Statements
Years ended December 31, 2015 and 2014
(Tabular amounts expressed in thousands of Canadian dollars except where indicated)
of activities and assets, capable of being conducted and managed for the purpose of providing a return, lower costs, or other economic benefits.
Where there are no such integrated activities, the transaction is treated as an asset acquisition.
Residential and commercial properties, developments and redevelopments are measured initially at cost. Cost includes all amounts relating to the
acquisition, including transaction costs (except transaction costs related to a business combination) and improvement of the properties.
Costs that are directly attributable to investment properties under development or redevelopment are capitalized. These costs include direct
development costs, realty taxes, borrowing costs directly attributable to the development, and upgrading and extending the economic life of the
existing facilities, other than ordinary repairs and maintenance.
e) Borrowing costs
Borrowing costs associated with direct expenditures on investment properties under development or redevelopment are capitalized. Borrowing
costs are also capitalized on the purchase cost of a site or property acquired specifically for redevelopment in the short-term but only where
activities necessary to prepare the asset for development or redevelopment are in progress. The amount of borrowing costs capitalized is
determined first by reference to borrowings specific to the project, where relevant, and otherwise by applying a weighted average cost of
borrowings to eligible expenditures after adjusting for borrowings associated with other specific developments. Where borrowings are associated
with specific developments, the amount capitalized is the gross cost incurred on those borrowings less any investment income arising on their
temporary investment. Borrowing costs are capitalized from the commencement of the development until the date of practical completion,
normally the receipt of an occupancy permit. The capitalization of borrowing costs is suspended if there are prolonged periods when development
activity is interrupted. Northview considers practical completion to have occurred when the property is capable of operating in the manner
intended by management. Generally this occurs upon completion of construction and receipt of all necessary occupancy and other material
permits. Where Northview has pre-leased space as of or prior to the start of the development and the lease requires Northview to construct tenant
improvements which enhance the value of the property, practical completion is considered to occur on completion of such improvements.
Property, plant and equipment
f)
Land and buildings used by Northview as administrative offices and warehouse properties, as well as the execusuites and hotels, are classified as
property, plant and equipment (“PP&E”) in accordance with IAS 16 – Property, Plant and Equipment (“IAS 16”). PP&E is initially measured using
the cost model. PP&E is measured and carried at cost less accumulated depreciation and any accumulated impairment losses.
PP&E is recorded at cost and depreciated using the following annual rates and methods:
Buildings
Parking lot
Roof
HVAC
CAPEX
Furniture, fixtures and equipment
Automotive
Computer
maximum 50 years
20 years
15 years
15 years
5 years
5 years
5 years
4 years
straight-line basis
straight-line basis
straight-line basis
straight-line basis
straight-line basis
straight-line basis
straight-line basis
straight-line basis
Cost includes expenditures that are directly attributable to the acquisition of the asset. The cost initially recognized with respect to a building is
further allocated amongst its significant component parts with each part being depreciated separately. Northview has identified the significant
components of a building to be the parking lot, roof, HVAC, and CAPEX which is defined as interior finishing including wallpaper, paint, flooring or
carpeting, cabinets, and bathroom fixtures. The method of depreciation, estimated economic lives of tangible assets, and PP&E are evaluated
annually by management and any changes in these estimates are accounted for on a prospective basis in accordance with IAS 8 – Accounting
Policies, Changes in Accounting Estimates and Errors (“IAS 8”).
Gains and losses on disposal of an item of PP&E are determined by comparing the proceeds from disposal with the carrying amount of PP&E,
and are recognized net within expenses and other income.
g) Transfers between investment property and PP&E
Transfers between investment property and PP&E are based on change in use from earning passive income to serving an administrative purpose
and vice versa. The change in use is tracked only for units which actively serve an administrative purpose. Northview reviews this allocation on an
annual basis. Northview does not revise these allocations unless a significant change in the number of units or square footage occupied occurs.
Property transfers from investment property to PP&E are transferred at the fair value of the asset at the time of transfer. Differences in the fair
value are recorded in net income.
Property transfers from PP&E to investment property are transferred at the fair value of the asset at the time of transfer. Differences in the fair
value are recorded in other comprehensive income for fair value increases. Differences in the fair value are recorded in net income for fair value
decreases.
NORTHVIEW 2015 ANNUAL REPORT│41
Northview Apartment Real Estate Investment Trust
Notes to the Consolidated Financial Statements
Years ended December 31, 2015 and 2014
(Tabular amounts expressed in thousands of Canadian dollars except where indicated)
Impairment
h)
Significant assumptions are used in assessing PP&E for impairment including estimates of future operating cash flows, the time period over which
they will occur, a discount rate and growth rates.
The carrying amounts of Northview’s assets, other than investment property, are reviewed at each reporting date to determine whether there is
any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. The recoverable amount is the
higher of an asset’s fair value less cost to sell or its value in use. Northview estimates fair value based upon current prices for similar assets. In
assessing value-in-use, the estimated future cash flows are discounted to their present value using the asset’s original effective interest rate.
An impairment loss is recognized in the consolidated statement of net and comprehensive income in the amount by which the carrying amount of
the asset exceeds the recoverable amount determined. When a subsequent event causes the amount of impairment loss to decrease, the
decrease in impairment loss is reversed through income.
Impairment losses are evaluated for potential reversals when events or changes in circumstances warrant such consideration.
Assets held for sale and discontinued operations
i)
Non-current assets (or disposal groups) are classified as held for sale if their carrying amount will be recovered principally through a sale
transaction rather than through continuing use. Amounts related to the disposal of non-current assets are classified as “Assets held for sale”, and
the results of operations and cash flows associated with the assets held for sale are reported separately as being related to assets held for sale or
discontinued operations, less applicable income taxes. A non-current asset is classified as an “Asset held for sale” at the point in time when it is
available for immediate sale, management has committed to a plan to sell the asset and is actively seeking a buyer for the asset at a sales price
that is reasonable in relation to the current fair value of the asset, and the sale is probable and is expected to be completed within a one-year
period. For unsolicited interest in a non-current asset, the asset is classified as held for sale only if all the conditions of the purchase and sale
agreement have been met, a sufficient purchaser deposit has been received and the sale is probable and expected to be completed shortly after
the end of the current period.
A discontinued operation is a component of an entity that either has been disposed of, or is classified as held for sale, and
(a)
(b)
(c)
represents a separate major line of business or geographical area of operations;
is part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations; or
is a subsidiary acquired exclusively with a view to resale.
The component will have been a cash-generating unit (“CGU”) or group of CGUs while being held for use. Profits and gains or losses related to
the disposal of discontinued operations are measured based on fair value less cost to sell, except for investment property which is valued at fair
value, or on the disposal of assets and are presented in the consolidated financial statements on an after tax basis in accordance with IFRS 5.
Comparative figures are restated to reflect retrospective application of discontinued operations.
Financial instruments
j)
Financial assets and financial liabilities are recognized when Northview becomes a party to the contractual provisions of the instrument. Financial
assets and financial liabilities are initially recognized at fair value and are subsequently accounted for based on their classification as described
below:
Financial assets at fair value through profit or loss (“FVTPL”)
i)
Financial assets are classified as FVTPL when acquired principally for the purpose of trading, if so designated by management (fair
value option), or if they are derivative assets. Financial assets classified as FVTPL are measured at fair value, with changes
recognized in the consolidated statement of net and comprehensive income.
Loans and receivables
ii)
Loans and receivables are non-derivative financial assets that have fixed or determinable payments and are not quoted in an active
market. Subsequent to initial recognition, loans and receivables are carried at amortized cost, using the effective interest method, less
a provision for impairment. A provision for impairment is established when there is objective evidence that collection will not be
possible under the original terms of the contract. Indicators of impairment include delinquency of payment and significant financial
difficulty of the holder. The carrying amount of the financial asset is reduced through an allowance account and the amount of loss is
recognized in the consolidated statement of net and comprehensive income. Financial instruments that are subsequently measured at
amortized cost are subject to testing for impairment each reporting period. Any subsequent reversal of an impairment loss is
recognized in profit or loss.
iii) Financial liabilities at FVTPL
Financial liabilities are classified as FVTPL if they are designated as such by management, or they are derivative liabilities. Financial
liabilities classified as FVTPL are measured at fair value, with changes recognized in the consolidated statement of net and
comprehensive income.
NORTHVIEW 2015 ANNUAL REPORT│42
Northview Apartment Real Estate Investment Trust
Notes to the Consolidated Financial Statements
Years ended December 31, 2015 and 2014
(Tabular amounts expressed in thousands of Canadian dollars except where indicated)
iv) Other financial liabilities
Other financial liabilities are financial liabilities that are not classified as FVTPL. Subsequent to initial recognition, other financial
liabilities are measured at amortized cost using the effective interest method. The effective interest method is a method of calculating
the amortized cost of an instrument and of allocating interest income over the relevant period. The effective interest rate is the rate that
exactly discounts estimated future cash receipts (including all transaction costs and other premiums or discounts) through the expected
life of the debt instrument to the net carrying amount on initial recognition.
Fair value measurements recognized in the consolidated statement of financial position are categorized using a fair value hierarchy that reflects
the significance of inputs used in determining the fair value:
i)
ii)
Level 1: Quoted prices in active markets for identical assets or liabilities.
Level 2: Quoted prices in active markets for similar assets or liabilities or valuation techniques where significant inputs are based
on observable market data.
iii) Level 3: Valuation techniques for which any significant input is not based on observable market data.
Each type of fair value is categorized based on the lowest level input that is significant to the fair value measurement in its entirety.
Classification and measurement of financial assets and liabilities:
Financial asset or financial liability
Financial assets
Non-current financial assets
Other long-term assets
Loans receivable
Instalment notes receivable
Current financial assets
Accounts receivable
Restricted cash
Cash
Financial liabilities
Non-current financial liabilities
Mortgages payable
Convertible debentures
Derivative instruments
Class B LP Units
Current financial liabilities
Distributions payable
Trade and other payables
Unit based payments
Bank indebtedness
Credit facilities
Classification
Measurement
Loans and receivables
Loans and receivables
Loans and receivables
Loans and receivables
FVTPL
FVTPL
Other financial liabilities
FVTPL
FVTPL
FVTPL
Other financial liabilities
Other financial liabilities
FVTPL
FVTPL
Other financial liabilities
Amortized cost
Amortized cost
Amortized cost
Amortized cost
Fair value
Fair value
Amortized cost
Fair value
Fair value
Fair value
Amortized cost
Amortized cost
Fair value
Fair value
Amortized cost
Cash is comprised of cash balances and all deposits used in operations. Restricted cash is comprised of cash balances not available for
immediate and general use by Northview related to security deposits paid by residential tenants. Security deposits are returned to the tenant upon
move out net of any additional charges. Bank indebtedness, repayable on demand and forming an integral part of Northview’s cash management,
is included as a component of cash for the purpose of the statement of cash flows. Distributions or dividends payable declared on units with a
record date of or prior to Northview’s reporting date are recorded as a financial liability.
Transaction costs that are directly attributable to the acquisition or issuance of financial assets or liabilities, other than financial assets and
liabilities measured at FVTPL, are accounted for as part of the carrying amount of the respective asset or liability at inception. Transaction costs
on financial assets and liabilities measured at FVTPL are expensed in the period incurred. Transaction costs related to financial instruments
measured at amortized cost are amortized using the effective interest rate over the anticipated life of the related instrument.
Derivative instruments are recorded in the consolidated statement of financial position at fair value, including those derivatives that are embedded
in financial or non
financial contracts and which are not closely related to the host contract.
‐
Income taxes
k)
Northview is taxed as a “mutual fund trust” for income tax purposes. Pursuant to the DOT, the Trustees may, at their sole discretion, determine
distributions or designate all taxable income earned, including the taxable part of net realized capital gains, to Unitholders and will deduct such
distributions and designations for income tax purposes. Northview meets the definition of a Real Estate Investment Trust under the Tax Act and is
not subject to entity level income taxation provided that all of its taxable income is distributed to its Unitholders.
Northview follows the liability method for determining deferred income taxes. Under this method, deferred taxes are recognized on temporary
differences between the carrying values of assets and liabilities in the consolidated financial statements and the corresponding tax carrying
NORTHVIEW 2015 ANNUAL REPORT│43
Northview Apartment Real Estate Investment Trust
Notes to the Consolidated Financial Statements
Years ended December 31, 2015 and 2014
(Tabular amounts expressed in thousands of Canadian dollars except where indicated)
values for the same assets and liabilities. Deferred tax assets are recognized for all deductible temporary differences to the extent it is probable
that taxable income will be available against which the deductible temporary differences can be utilized. Deferred tax liabilities are recognized for
all taxable temporary differences. Deferred tax liabilities are not recognized for the temporary differences from investments in all subsidiaries and
joint arrangements to the extent that:
i)
ii)
Northview is able to control the timing of the reversal of the temporary differences; and
the temporary difference will not reverse in the foreseeable future.
Deferred tax assets and liabilities are measured based on enacted or substantively enacted tax rates and laws at the date of the financial
statements for the years in which these temporary differences are expected to reverse, and adjustments are recognized in earnings as they
occur.
l)
Unit based payments
(i) Unit award plan
Northview issues units to executives and key personnel under a unit award plan and a Long-Term Incentive Plan (“LTIP”).
The unit
award plan comprised of a Long-term Incentive (“LTI”) plan, whereby performance units (“Performance Units”) are issued to
executives and key personnel of Northview. The unit award plan will be used in place of the former LTIP. Under these plans, the fair
value of the units granted to executives and key personnel is recognized as compensation expense with an offsetting amount to unit
based payments based on the market price at the time of vesting. Northview records compensation expense and unit based
payments based on the fair values of the units over the vesting period, less an estimated forfeiture rate. The estimated forfeiture rate
is based on the historical forfeiture rate. As units are forfeited or issued, this estimate is adjusted to actual over the vesting period.
The impact of the revision of the original estimates, if any, is recognized in the consolidated statements of net and comprehensive
income prospectively such that the cumulative expense reflects the revised estimate. Upon issue, the market value of the units is
credited to capital with a corresponding reduction to unit based payments. In accordance with IAS 32 – Financial Instruments:
Presentation (“IAS 32”), the units are presented as a liability on the consolidated statement of financial position as the Trust is obliged
to provide the holder with Trust Units once the units vest. Under IAS 39 – Financial Instruments: Recognition and Measurement (“IAS
39”), the units are classified as ‘fair value through profit or loss’ and are measured at each reporting period at fair value with changes
in fair value recognized in the consolidated statements of net and comprehensive income. Fair value of the units is calculated based
on the observable market price of Northview’s units.
(ii) Deferred unit plan ("DUP")
Northview has a DUP whereby the Trustees receive a portion of their annual retainer in the form of deferred units ("Deferred Units")
that vest immediately when granted. Deferred Units are redeemable upon the Trustee’s retirement from Northview. The Deferred Units
are equivalent in value to units and accumulate additional Deferred Units at the same rate that distributions are paid on units.
Northview measures Deferred Units as a liability at their fair value which is equivalent to the fair value of units with changes in fair
value being recognized in the consolidated statements of net and comprehensive income.
Investment in joint ventures
m)
Under IFRS 11 – Joint Arrangements (“IFRS 11”), there are two types of joint arrangements – joint operations and joint ventures. Joint
arrangements are determined based on the rights and obligations of parties to the joint arrangements by considering the structure, the legal form
of the arrangements, the contractual terms agreed by the parties to the arrangement, and, when relevant, other facts and circumstances. A joint
operation is a joint arrangement whereby the parties that have joint control of the arrangement (i.e. joint operators) have rights to the assets, and
obligations for the liabilities, relating to the arrangement. A joint venture is a joint arrangement whereby the parties that have joint control of the
arrangement (i.e. joint venturers) have rights to the net assets of the arrangement.
Northview classifies its joint arrangements as joint ventures and accounts for them using the equity method. Under the equity method,
investments in joint ventures are carried in the consolidated statement of financial position at cost as adjusted for Northview’s proportionate share
of post-acquisition changes in the net assets of the joint ventures, or for post-acquisition changes in any excess of Northview’s carrying amount
over the net assets of the joint ventures, less any identified impairment loss. When Northview’s share of losses of a joint venture equals or
exceeds its interest in that joint venture, Northview discontinues recognizing its share of further losses. An additional share of losses is provided
for and a liability is recognized only to the extent that Northview has incurred legal or constructive obligations to fund the entity or made payments
on behalf of that entity.
Where a group entity transacts with a joint venture of Northview, profits and losses are eliminated to the extent of the Trust’s interest in the
relevant joint venture. Balances outstanding between Northview and jointly controlled entities are not eliminated in the consolidated statement of
financial position.
n) Subsidiaries and associates
Subsidiaries and associates are consolidated when Northview has the power to govern the financial and operating policies of the entity so as to
obtain benefits from its activities. Subsidiary accounting policies are consistent with those of Northview and reporting dates are the same as
Northview. The subsidiary financial statements are consolidated line by line, adding assets, liabilities, equity, revenue and expenses of similar
NORTHVIEW 2015 ANNUAL REPORT│44
Northview Apartment Real Estate Investment Trust
Notes to the Consolidated Financial Statements
Years ended December 31, 2015 and 2014
(Tabular amounts expressed in thousands of Canadian dollars except where indicated)
types. Intercompany balances, transactions, income, and expense are eliminated and gains or losses on intercompany transactions are
eliminated. Where Northview does not own 100% of the subsidiary or associate, non-controlling interest is classified as a component of equity.
Intangible assets
o)
Intangible assets with finite useful lives that are acquired separately are carried at cost less accumulated amortization and accumulated
impairment losses. Amortization is recognized on a straight-line basis over the intangible assets’ estimated useful lives. The estimated useful life
and amortization method are reviewed at the end of each reporting period, with the effect of any changes in estimate being accounted for on a
prospective basis.
p) Revenue recognition
Revenue from an income producing property is recognized when a tenant commences occupancy of a property and rent is due. Northview
retains all benefits and risks of ownership of its investment properties and, therefore, accounts for leases with its tenants as operating leases.
Rental revenue includes rent and other sundry revenue recoveries. Rental revenue to be received from leases with rental rates varying over the
term of the lease is recorded on a straight-line basis over the term of the associated lease. Accordingly, the difference between the rental revenue
recorded on a straight line basis and the rent that is contractually due from the tenant has been recorded as deferred rent receivable for
accounting purposes.
Operational cost recoveries (“OCR”) for commercial tenants and on selected residential leases are accrued monthly on a leased square footage
based on budgeted operating costs. Operating costs are verified annually, usually within 90 days after year end, tenant accounts are reconciled
and additional amounts are either invoiced or rebated. Deferred recoverable costs are recorded as other long-term assets and charged against
expenses.
Tenant inducements for commercial tenants are recorded as other long-term assets and charged against revenue on a straight-line basis over the
lease term.
q) Class B LP Units
The Class B LP Units are exchangeable into Trust Units at the option of the holder. The Trust Units are puttable and, therefore, the Class B LP
Units meet the definition of a financial liability under IAS 32. Further, the Class B LP Units are designated as FVTPL financial liabilities and are
measured at fair value at each reporting period with any changes in fair value recorded in the consolidated statements of net and comprehensive
income. The distributions paid on the Class B LP Units are accounted for as financing costs.
r) Unit capital
The Trust Units are redeemable at the option of the holder and, therefore, are considered puttable instruments in accordance with IAS 32.
Puttable instruments are required to be accounted for as financial liabilities, except where certain conditions are met in accordance with IAS 32, in
which case, the puttable instruments may be presented as Unitholders' equity. The Trust Units meet the conditions of IAS 32 and are, therefore,
presented as Unitholders' equity.
As a result of the redemption feature of Trust Units, these units are considered financial liabilities under IAS 33 – Earnings Per Share, and they
may not be considered as equity for the purposes of calculating net and comprehensive income on a per unit basis. Consequently, Northview has
elected not to report an Earnings Per Unit calculation, as permitted under IFRS.
s) Unit repurchases
If Northview repurchases its own Trust Units, those Trust Units are deducted from Unitholders' equity and the associated Trust Units are
cancelled. No gain or loss is recognized and the consideration paid, including any directly attributable incremental costs, is recognized in
Unitholders' equity.
t) Distributions to Unitholders and Class B LP Unitholders
Unitholders at the close of business on each Distribution Record Date (the last day of the month) are entitled to receive distributions from
Northview as declared by the Trustees for such month. The distributions are accrued and will be paid on the Distribution Date (usually the 15th of
the following month). Where the Trustees determine that Northview does not have sufficient cash to pay distributions, the payment may, at the
Trustees’ discretion, include the issuance of additional units.
Distributions declared to Class B LP Unitholders are classified as financing costs for reporting purposes because the units are treated as financial
liabilities.
u) Convertible debentures
The convertible debentures are convertible into Trust Units. As the Trust Units are redeemable at the option of the holder and are considered
puttable instruments in accordance with IAS 32, the convertible debentures are considered a financial liability containing liability-classified
embedded derivatives. Northview has elected to reflect the full outstanding amount of each convertible debenture at its fair value and are
designated as FVTPL with the changes in fair value being recognized in the consolidated statements of net and comprehensive income. The
interests paid on the convertible debentures are accounted for as financing costs.
NORTHVIEW 2015 ANNUAL REPORT│45
Northview Apartment Real Estate Investment Trust
Notes to the Consolidated Financial Statements
Years ended December 31, 2015 and 2014
(Tabular amounts expressed in thousands of Canadian dollars except where indicated)
v) Finance cost and finance income
Interest earned from financial assets is recognized by applying the effective interest rate to the principal outstanding when it is probable that
economic benefits will flow to Northview.
Mortgage interest and interest on credit facilities is recognized by applying the effective interest rate to the principal outstanding.
w) Critical accounting estimates and judgments
The preparation of financial statements requires management to make estimates and judgments about the future. Estimates and judgments are
continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be
reasonable under the circumstances. Accounting estimates will, by definition, differ from the actual results. The following discussion sets forth
management’s most critical estimates and assumptions in determining the value of assets and liabilities and management’s most critical
judgments in applying accounting policies. Actual results may differ from these estimates.
Estimates
(i) Fair value of investment properties
Northview carries its investment properties at fair value. Significant estimates used in determining the fair value of Northview’s investment
properties include capitalization rates and net operating income (which is influenced by inflation rates and vacancy rates). A change to any
one of these inputs could significantly alter the fair value of an investment property.
(ii) Depreciation and amortization
Depreciation and amortization are calculated to write off the cost, less estimated residual value, of assets on a systematic and rational basis
over their expected useful lives. Estimates of useful lives are based on data and information from various sources including industry practice
and company-specific history. Expected useful lives and residual values are reviewed annually for any change to estimates and
assumptions.
(iii) Allowance for doubtful accounts
Northview must make an assessment of whether accounts receivable are collectible from tenants. Accordingly, management establishes an
allowance for estimated losses arising from non-payment, taking into consideration customer creditworthiness, current economic trends, and
past experience. If future collections differ from estimates, future income would be affected.
(iv) Accrued liabilities
Northview must estimate accrued liabilities when invoices have not been received in order to ensure all expenditures have been recognized.
If future expenditures differ from estimates, future income would be affected. Accrued liabilities are included in trade and other payables.
(v) Capital adequacy
Northview prepares estimated cash flow projections on a regular basis to ensure there will be adequate liquidity to maintain operating,
capital and investment activities and uses these estimates to assess capital adequacy. Management reviews the current financial results
and the annual business plan in determining appropriate capital adequacy and uses this to determine distribution levels. Changes in these
estimates affect distributions to the Unitholders and Northview’s cost of capital, which in turn affects income.
Income taxes
(vi)
Under current tax legislation, a real estate investment trust is not liable to pay Canadian income taxes provided that its taxable income is
fully distributed to Unitholders during the year. Northview is a real estate investment trust if it meets prescribed conditions under the Income
Tax Act (Canada) relating to the nature of its assets and revenue (the "REIT Conditions"). Northview has reviewed the REIT Conditions and
has assessed their interpretation and application to Northview's assets and revenue, and it has determined that it qualifies as a real estate
investment trust.
Northview expects to qualify as a real estate investment trust under the Income Tax Act (Canada); however, should it no longer qualify, it
would not be able to flow-through its taxable income to Unitholders and Northview would, therefore, be subject to tax.
Judgments
(i) Purchase of investment properties
Northview reviews its purchases of investment property to determine whether or not the purchase is part of a business combination as IFRS
requires differing treatment of property acquisitions depending on whether or not the purchase is part of a business combination. Judgment
is involved in determining whether or not a purchase forms part of a business combination or an asset acquisition. Should the purchase
form part of a business combination, closing costs, such as appraisal and legal fees, are expensed immediately and earnings are affected. If
the purchase is an asset acquisition, these costs form part of the purchase price and earnings are not immediately affected.
(ii) Fair value of investment properties
While investment properties are recorded at fair value on a quarterly basis, not every property is independently appraised every year.
Significant judgment is applied in arriving at these fair values, particularly as the properties are in smaller communities with limited trading
activity. Changes in the value of the investment properties affect income.
NORTHVIEW 2015 ANNUAL REPORT│46
Northview Apartment Real Estate Investment Trust
Notes to the Consolidated Financial Statements
Years ended December 31, 2015 and 2014
(Tabular amounts expressed in thousands of Canadian dollars except where indicated)
(iii) Componentization
The componentization of Northview’s PP&E, namely buildings, is based on management’s judgment of what components constitute a
significant cost in relation to the total cost of an asset and whether these components have similar or dissimilar patterns of consumption and
useful lives for purposes of calculating depreciation and amortization.
Impairment
(iv)
Assessment of impairment is based on management’s judgment of whether there are sufficient internal and external factors that would
indicate that an asset or cash generating unit (“CGU”) is impaired. The determination of CGUs is also based on management’s judgment
and is an assessment of the smallest group of assets that generate cash inflows independently of other assets. Factors considered include
whether an active market exists for the output produced by the asset or group of assets as well as how management monitors and makes
decisions about Northview’s operations.
(v) Classification of Inuvik Commercial Properties Zheh Gwizu’ Limited Partnership (“ICP”) and Inuvik Capital Suites Zheh Gwizuh Limited
Partnership (“ICS”) as joint ventures
Note 7 describes that the ownership of ICS is for the purpose of investing in an income producing execusuite property in the Northwest
Territories and the ownership of ICP is for the purpose of investing in a portfolio of commercial and mixed-use income producing properties
in the Northwest Territories. Furthermore, there is no contractual arrangement or any other facts and circumstances that indicate that the
parties to the joint arrangement have rights to the assets and obligations for the liabilities of the joint arrangement. Accordingly, ICP and ICS
are classified as joint ventures for Northview.
3. Application of new and revised IFRSs
a) Recent accounting pronouncements
The IASB has issued the following standards that have not been applied in preparing these consolidated financial statements as their effective
dates fall within annual periods subsequent to the current reporting period.
Proposed Standard
Description
Previous Standard
Effective Date
Amendments to IFRS 11 –
Joint
Arrangement:
Accounting for Acquisitions
of Interests
The amendments to IFRS 11 require an acquirer
of an interest in a joint operation in which the
activity constitutes a business combination as
defined in IFRS 3 – Business Combinations to
apply the relevant principles on accounting for
business combinations in IFRS 3 and other
standards.
No direct replacement.
Effective date for annual
periods beginning on or
after January 1, 2016.
IFRS 15 – Revenue from
Contracts with Customers
Introduces a principle to report information about
the nature, timing, and uncertainty of revenue
from contracts with customers in a single,
comprehensive revenue recognition model.
IAS 18 – Revenue, IAS 11 –
Construction Contracts, and
related interpretations.
Effective date for annual
periods beginning on or
after January 1, 2018.
IFRS 9
Instruments
– Financial
IFRS 16 – Leases
replaces
The IASB has undertaken a three-phase project
to replace IAS 39 with IFRS 9. The new
current multiple
standard
the
classification and measurement models
for
financial assets and liabilities with a single model
two classification categories:
that has only
amortized cost and fair value; and introduces a
new hedge accounting model. The standard was
finalized in July 2014.
The IASB issued IFRS 16 – Leases, which
provides a single lessee accounting model,
to recognize assets and
requiring
liabilities for all leases unless the lease term is
12 months or less or the underlying asset has a
low value.
lessees
–
39
IAS
Instruments:
and Measurement.
Financial
Recognition
Effective date for annual
periods beginning on or
after January 1, 2018.
IAS 17 – Leases
Effective date for annual
periods beginning on or
after January 1, 2019.
Management continues to evaluate the potential qualitative and quantitative impact of these new standards on Northview’s financial statement
measurements and disclosures. Northview is not early adopting these standards.
NORTHVIEW 2015 ANNUAL REPORT│47
Northview Apartment Real Estate Investment Trust
Notes to the Consolidated Financial Statements
Years ended December 31, 2015 and 2014
(Tabular amounts expressed in thousands of Canadian dollars except where indicated)
4. Business combinations
a) True North acquisition
On October 30, 2015, NPR acquired 100% of the outstanding Trust Units and Class B LP Units of TN, a real estate investment trust listed on the
TSX. TN held a portfolio of residential rental apartments in Alberta, Ontario, Québec, Nova Scotia, and New Brunswick, and the acquisition
provided NPR a unique opportunity to achieve scale and diversification in central and eastern Canada and access to those rental markets. The
existing strategic management functions and associated processes were acquired with the properties and, as such, this transaction constitutes
the acquisition of a business rather than an asset acquisition.
The fair value of the identifiable assets and liabilities of TN as at the date of acquisition:
Fair value recognized on TN acquisition
Assets acquired:
Cash
Restricted cash
Accounts receivable
Prepaid expenses and other assets
Instalment notes receivable
Other long-term assets
Property, plant, and equipment
Investment property
Fair value of assets obtained
Liabilities assumed:
Trade and other payables
Derivative instruments
Credit facilities
Convertible debentures
Mortgages and loans payable
Fair value of liabilities assumed
Fair value of net assets
Fair value of purchase consideration transferred
Bargain purchase gain
1,582
3,681
686
2,568
1,917
919
886
846,959
859,198
22,202
1,280
37,000
23,345
513,658
597,485
261,713
240,984
(20,729)
The TN acquisition was funded through a unit exchange, where each of the outstanding TN Trust Units and Class B LP Units were exchanged for
0.3908 NPR Trust Units and NPR Special Voting Units (“NPR Units”), respectively. NPR issued to each holder of TN Class B LP Units, for each
TN Special Voting Unit held by such holder, such number of NPR Special Voting Units that is equal to the product obtained by multiplying the
number of TN Class B LP Units held by such holder by the exchange ratio of 0.3908. The 7,587,375 NPR Trust Units and 5,445,820 NPR Special
Voting Units issued as consideration are measured at fair value using the closing market price on the date of acquisition.
The net asset value after fair value adjustments exceeded the purchase consideration transferred, and the resulting bargain purchase gain of
$20,729 is recognized as bargain purchase gain in the REIT’s consolidated statements of net and comprehensive income on the acquisition date.
The transaction resulted in a gain primarily due to the decrease in market price of the equity considerations issued, observed between the
agreement date and acquisition date. The decrease in NPR Units’ market price is primarily attributable to the economic downturn of the energy
market and the market responding to the acquisitions. The investment properties acquired were not impaired as favourable Canadian real estate
market conditions continue to support their fair valuation.
The transaction costs of $28,507 incurred in connection with the TN acquisition have been expensed in the consolidated statements of net and
comprehensive income.
The fair value at the date of acquisition of the accounts receivable amounted to $686, of which $442 was tenant rent receivable net of allowance
for doubtful accounts, and $244 was other receivables. The gross amounts of the tenant rent receivable and other receivables are $4,086 and
$244, respectively. None of the accounts receivables have been impaired and it is expected that the full contractual amounts can be collected.
NORTHVIEW 2015 ANNUAL REPORT│48
Northview Apartment Real Estate Investment Trust
Notes to the Consolidated Financial Statements
Years ended December 31, 2015 and 2014
(Tabular amounts expressed in thousands of Canadian dollars except where indicated)
From the date of acquisition, TN has contributed $12.1 million to the net and comprehensive loss and $13.4 million to revenues. If the business
combination had taken place at the beginning of the year, the estimated net and comprehensive loss for the REIT would have been $7.5 million
and revenue would have been $281.1 million.
b) Starlight and IMH acquisitions
On October 30, 2015, NPR acquired the undivided interest of seven investment properties from Starlight (the “SL Portfolio”) and 26 investment
properties from a joint venture between Public Sector Pension Investment Board and Starlight Investments Ltd., together with its affiliates (the
“IMH Portfolio”), collectively the “Portfolio Acquisitions”. The portfolios consist of residential rental apartments in Ontario, Nova Scotia, and New
Brunswick, and the acquisition provided NPR a unique opportunity to achieve scale and diversification in central and eastern Canada and access
to those rental markets. The existing strategic management functions and associated processes were acquired with the properties and, as such,
this transaction constitutes the acquisition of a business rather than an asset acquisition.
The fair value of the identifiable assets and liabilities of the SL Portfolio as at the date of acquisition:
Fair value recognized on SL acquisition
Assets acquired:
Investment property
Property, plant, and equipment
Prepaid expenses and other assets
Fair value of assets obtained
Liabilities assumed:
Mortgages and loans payable
Trade and other payables
Fair value of liabilities assumed
Fair value of net assets
Fair value of purchase consideration transferred
Bargain purchase gain
108,318
238
843
109,399
16,927
790
17,717
91,682
88,350
(3,332)
The fair value of the identifiable assets and liabilities of the IMH Portfolio as at the date of acquisition:
Fair value recognized on IMH acquisition
Assets acquired:
Investment property
Prepaid expenses and other assets
Fair value of assets obtained
Liabilities assumed:
Mortgages and loans payable
Trade and other payables
Fair value of liabilities assumed
Fair value of net assets
Fair value of purchase consideration transferred
Bargain purchase gain
429,810
1,948
431,758
35,002
4,107
39,109
392,649
365,817
(26,832)
The acquisition of the SL Portfolio was funded through a combination of (i) issuance of 879,053 of NPR Special Voting Units with an agreed upon
value of $23.03 per unit to satisfy $20,245 of the purchase price, and (ii) cash consideration of $72,097 funded by a new credit facility. The fair
value adjustment premiums on mortgages payable is $660. The NPR Special Voting Units issued as consideration are measured at fair value
using the closing market price on the date of acquisition. The net asset value after fair value adjustments exceeded the purchase consideration
transferred, and the resulting bargain purchase gain of $3,332 is recognized as bargain purchase gain in the REIT’s consolidated statements of
net and comprehensive income on the acquisition date.
NORTHVIEW 2015 ANNUAL REPORT│49
Northview Apartment Real Estate Investment Trust
Notes to the Consolidated Financial Statements
Years ended December 31, 2015 and 2014
(Tabular amounts expressed in thousands of Canadian dollars except where indicated)
The acquisition of the IMH Portfolio was funded through a combination of (i) issuance of 5,115,190 of NPR Trust Units with an agreed upon value
of $23.03 per unit to satisfy $117,803 of purchase price, (ii) issuance of 1,416,870 of NPR Special Voting Units with an agreed upon value of
$23.03 per unit to satisfy $32,631 of purchase price, and (iii) cash consideration of $245,039 funded by a new credit facility. The fair value
adjustment premiums on mortgages payable is $2,824. The NPR Units and NPR Special Voting Units issued as consideration are measured at
fair value using the closing market price on the date of acquisition. The net asset value after fair value adjustments exceeded the purchase
consideration transferred, and the resulting bargain purchase gain of $26,832 is recognized as bargain purchase gain in the REIT’s consolidated
statements of net and comprehensive income on the acquisition date.
The transaction costs of $2,057 and $8,395 incurred in connection with the respective SL and IMH acquisitions have been expensed in the
consolidated statements of net and comprehensive income.
From the date of acquisition, the SL portfolio has contributed $1.1 million to the net and comprehensive loss and $1.7 million to revenues. If the
business combination had taken place at the beginning of the year, the net and comprehensive income for the REIT would have been $29.4
million and revenue would have been $206.8 million.
From the date of acquisition, the IMH portfolio contributed $24.6 million to the net and comprehensive income and $7.2 million to revenues. If the
business combination had taken place at the beginning of the year, the net and comprehensive income for the REIT would have been $70.5
million and revenue would have been $239.8 million.
5.
Investment properties
Investment properties
Investment properties under development
Land held for development
Changes to investment properties for the years:
Balance, January 1
Acquisitions of investment properties
Acquisitions of land for future development
Business combinations (Note 4)
Disposals
Transfers (to) from property, plant and equipment
Transfers from assets held for sale
Investment properties under development
Investment property improvements
Unrealized fair value changes
Balance, end of year
2015
2,956,571
38,490
30,407
3,025,468
2015
1,582,011
19,299
15,023
1,385,087
(16,010)
(759)
-
45,424
58,694
(63,301)
3,025,468
2014
1,522,052
31,871
28,088
1,582,011
2014
1,412,051
43,165
11,913
-
(45)
9,469
7,731
63,808
31,426
2,493
1,582,011
As at December 31, 2015, Northview capitalized borrowing costs of $0.9 million (as at December 31, 2014 – $1.2 million) to investment properties
under development.
During the year ended December 31, 2015, 18.4 acres of land (December 31, 2014 – 22.6 acres) were purchased for a total of $15.0 million (year
ended December 31, 2014 – $11.9 million). During 2015, Northview disposed of a parcel of land in St. John’s, NL, for $3.7 million as disclosed in
Note 19.
NORTHVIEW 2015 ANNUAL REPORT│50
Northview Apartment Real Estate Investment Trust
Notes to the Consolidated Financial Statements
Years ended December 31, 2015 and 2014
(Tabular amounts expressed in thousands of Canadian dollars except where indicated)
Dispositions for the year ended December 31, 2015, were as follows:
Disposition Date
December 10, 2015
November 20, 2015
August 31, 2015
July 8, 2015
February 27, 2015
Property
Type
Commercial
Multi-family
Multi-family
Multi-family
Multi-family
Units
/ sq ft
37,540
33
2
156
54
245 / 37,540
Region
Redcliff, AB
Courtenay, BC
Sachs Harbour, NT
Quesnel, BC
Bonavista, NL
Gross Proceeds
3,800
2,700
110
3,400
2,300
12,310
During 2014, as part of the purchase of Aqsaqniq disclosed in Note 1, an investment property with a fair value of $45,000 was transferred to the
partner as part of the purchase price.
Acquisitions for the year ended December 31, 2015, were as follows:
Acquisition Date
October 8, 2015
May 13, 2015
March 20, 2015
January 14, 2015
Property
Type
Multi-family
Commercial(i)
Multi-family
Commercial
Units
/ sq ft
1
2,800
139
29,400
140 / 32,200
Region
Pangnirtung, NU
Yellowknife, NT
St. John’s, NL
St. John’s, NL
Total Acquisition
Costs
82
684
11,732
6,801
19,299
Mortgage
Funding
-
-
-
-
-
Cash Paid
82
684
11,732
6,801
19,299
(i) Northview acquired the commercial building for its own use as administrative space
On October 30, 2015, Northview acquired 13,558 multi-family units and 7,095 commercial square footage in various regions as part of the
Transaction, as discussed in Note 4.
Acquisitions for the year ended December 31, 2014, were as follows:
Acquisition Date
June 25, 2014
June 25, 2014
January 31, 2014
January 15, 2014
Property
Type
Multi-family
Multi-family
Commercial
Multi-family
Units
/ sq ft
247
32
30,000
5
284 / 30,000
Region
Slave Lake, AB
Lloydminster, SK
St. John’s, NL
Iqaluit, NU
Total Acquisition
Costs
30,294
4,424
6,655
1,792
43,165
Mortgage
Funding
15,241
-
-
-
15,241
Cash Paid
15,053
4,424
6,655
1,792
27,924
Northview uses the capitalization rate (“Cap Rate”) method to value investment properties. As at December 31, 2015, Cap Rates ranging from
4.35% to 13.00% (December 31, 2014 – 4.75% to 13.00%) were applied to a projected stabilized net operating income (“NOI”). The weighted
average Cap Rate applied to fair value Northview’s investment properties as at December 31, 2015, is 6.83% (December 31, 2014 – 7.97%).
A summary of the Cap Rates used for the December 31, 2015, and December 31, 2014, valuations is as follows:
Regions
Atlantic Canada
Northern Canada
Ontario
Québec
Western Canada
Overall
2015
Maximum
9.50%
13.00%
6.00%
7.55%
11.00%
13.00%
Minimum
5.50%
6.86%
4.35%
5.85%
4.75%
4.35%
Effective
Weighted
Average
6.85%
9.20%
5.30%
6.07%
7.19%
6.83%
Minimum
6.73%
6.86%
n/a
7.55%
4.75%
4.75%
2014
Maximum
9.50%
13.00%
n/a
7.55%
11.00%
13.00%
Effective
Weighted
Average
7.56%
8.92%
n/a
7.55%
7.41%
7.97%
NORTHVIEW 2015 ANNUAL REPORT│51
Northview Apartment Real Estate Investment Trust
Notes to the Consolidated Financial Statements
Years ended December 31, 2015 and 2014
(Tabular amounts expressed in thousands of Canadian dollars except where indicated)
The impact of a 10 basis point change in Cap Rates used to value the investment properties would affect the fair value as follows:
Regions
Atlantic Canada
Northern Canada
Ontario
Québec
Western Canada
Overall
Effective
Weighted
Average
6.85%
9.20%
5.30%
6.07%
7.19%
6.83%
2015
Increase
(5,460)
(6,206)
(18,072)
(2,771)
(12,695)
(45,204)
Effective
Weighted
Average
7.56%
8.92%
n/a
7.55%
7.41%
7.97%
Decrease
5,622
6,343
18,767
2,864
13,050
46,646
2014
Increase
(2,562)
(6,414)
n/a
(115)
(10,860)
(19,951)
Decrease
2,630
6,561
n/a
120
11,159
20,470
The impact of a 1% change in stabilized NOI used to value the investment properties would increase or decrease the fair value as follows:
Regions
Atlantic Canada
Northern Canada
Ontario
Québec
Western Canada
Overall
6. Property, plant and equipment
Cost or deemed cost
Balance at January 1, 2014
Additions for the year
Transfers to investment property
Transfers from assets held for sale
Disposals for the year
Balance at December 31, 2014
Additions for the year
Business combinations (Note 4)
Transfers from investment property
Disposals for the year
Balance at December 31, 2015
Accumulated depreciation
Balance at January 1, 2014
Depreciation for the year
Disposals for the year
Balance at December 31, 2014
Depreciation for the year
Disposals for the year
Balance at December 31, 2015
Carrying amounts
December 31, 2014
December 31, 2015
2015
3,797
5,771
9,764
1,710
9,258
30,300
Land
Buildings
Fixtures Automotive
Furniture &
Other
Assets
2,026
-
(157)
1
-
1,870
-
22
294
(1)
2,185
-
-
-
-
-
-
-
1,870
2,185
68,132
940
(9,173)
25
-
59,924
5,322
697
465
(25)
66,383
9,894
2,800
-
12,694
3,202
-
15,896
47,230
50,487
2,198
509
(139)
-
-
2,568
82
11
-
-
2,661
1,138
458
-
1,596
519
-
2,115
972
546
2,795
257
-
-
(61)
2,991
381
-
-
(185)
3,187
1,652
423
(59)
2,016
400
(148)
2,268
975
919
2,461
246
-
-
-
2,707
616
394
-
(467)
3,250
1,675
304
-
1,979
315
(417)
1,877
728
1,373
2014
1,962
5,721
n/a
550
7,658
15,891
Total
77,612
1,952
(9,469)
26
(61)
70,060
6,401
1,124
759
(678)
77,666
14,359
3,985
(59)
18,285
4,436
(565)
22,156
51,775
55,510
NORTHVIEW 2015 ANNUAL REPORT│52
Northview Apartment Real Estate Investment Trust
Notes to the Consolidated Financial Statements
Years ended December 31, 2015 and 2014
(Tabular amounts expressed in thousands of Canadian dollars except where indicated)
7.
Investment in joint ventures
Northview has a 50% interest in ICS and a 50% interest in ICP. The ownership of ICS is between the Zheh Gwizu’ Limited Partnership and
NPRLP for the purpose of investing in an income producing execusuite property in the Northwest Territories. The ownership of ICP is between
the Zheh Gwizu’ Limited Partnership and NPRLP for the purpose of investing in a portfolio of commercial and mixed use income producing
properties in the Northwest Territories.
The table below summarizes key financial position balances, revenue and expenses as well as Northview’s share for the periods noted.
Current
assets
Non-current
assets Total assets
Current
liabilities
Non-current
liabilities
Total
liabilities
Net assets
Northview
share of net
assets
December 31, 2015
ICP
ICS
Total
December 31, 2014
ICP
ICS
Total
2,539
582
3,121
1,587
306
1,893
Years ended December 31
2015
ICP
ICS
Total
2014
ICP
ICS
Total
16,604
5,556
22,160
16,625
5,698
22,323
19,143
6,138
25,281
18,212
6,004
24,216
6,551
397
6,948
6,397
378
6,775
2,742
3,171
5,913
3,428
3,393
6,821
9,293
3,568
12,861
9,825
3,771
13,596
9,850
2,570
12,420
8,387
2,233
10,620
4,925
1,285
6,210
4,193
1,117
5,310
Revenue
Expenses
Income
3,929
2,207
6,136
4,237
2,243
6,480
2,465
1,531
3,996
2,319
1,737
4,056
1,464
676
2,140
1,918
506
2,424
Northview
share of
income
732
338
1,070
959
253
1,212
There has been no change in Northview’s 50% ownership and voting interests in these joint ventures for the reported periods.
NORTHVIEW 2015 ANNUAL REPORT│53
Northview Apartment Real Estate Investment Trust
Notes to the Consolidated Financial Statements
Years ended December 31, 2015 and 2014
(Tabular amounts expressed in thousands of Canadian dollars except where indicated)
8.
Intangible assets
Intangible assets consist of a non-compete clause acquired in a business combination on April 15, 2011, a non-compete clause acquired with a
real estate portfolio on June 25, 2014, and computer software.
Non-compete agreements
Computer Software
Total
Cost or deemed cost
Balance at January 1, 2014
Additions for the year
Disposals for the year
Balance at December 31, 2014
Additions for the year
Balance at December 31, 2015
Accumulated amortization
Balance at January 1, 2014
Amortization for the year
Disposals for the year
Balance at December 31, 2014
Amortization for the year
Balance at December 31, 2015
Carrying amounts
December 31, 2014
December 31, 2015
9. Loans receivable
2,521
250
-
2,771
-
2,771
1,260
517
-
1,777
529
2,306
994
465
332
28
(30)
330
21
351
163
98
(30)
231
65
296
99
55
2,853
278
(30)
3,101
21
3,122
1,423
615
(30)
2,008
594
2,602
1,093
520
Loans receivable consists of tenant inducement loans and vendor take back loans (“VTB”) on disposals of investment properties as follows:
Balance, January 1
Tenant inducement loans additions
VTB loans additions
Repayments received
Balance, December 31
Current
Non-current
Balance, end of year
2015
4,796
1,150
1,720
(1,554)
6,112
2015
326
5,786
6,112
2014
3,314
2,305
-
(823)
4,796
2014
288
4,508
4,796
VTB receivable on asset disposals are a receivable over terms of 3 to 10 years at interest rates of between 6.0% and 10.0%, maturing between
March 1, 2017, and January 31, 2022. Loans are secured by investment properties which had a fair value of $26.0 million at the time of sale.
Should the purchasers default on the loans, Northview has the option to reacquire the properties as settlement of the outstanding loan balances.
At December 31, 2015, there are $4.1 million in VTB receivable outstanding (December 31, 2014 – $2.6 million).
Tenant inducement loans are repayable over terms of 5 to 10 years, matching the lease terms, at interest rates of between 0.0% to 10.0%,
maturing between September 1, 2017, and March 1, 2024. At December 31, 2015, there are $2.0 million in tenant inducement loans outstanding
(December 31, 2014 – $2.2 million).
NORTHVIEW 2015 ANNUAL REPORT│54
Northview Apartment Real Estate Investment Trust
Notes to the Consolidated Financial Statements
Years ended December 31, 2015 and 2014
(Tabular amounts expressed in thousands of Canadian dollars except where indicated)
10. Instalment notes receivable
Pursuant to the acquisition of TN, as discussed in Note 4, Northview acquired certain non-interest bearing instalment notes, with a present value
of $1,794. As at December 31, 2015, instalment notes receivable include $1,000 from an entity under the same common ownership as Starlight, a
related party. For the year ended December 31, 2015, Northview received principal instalment note receipts of $110 (December 31, 2014 - nil), of
which $83 (December 31, 2014 - nil) represents instalment note receipts from an entity under the same common ownership as Starlight, a related
party. These instalment notes extend over the maturity dates of the assumed mortgages, expiring on various dates between June 1, 2017 and
December 1, 2022.
The following table summarizes the instalment notes receivable and principal receipts on instalment notes receivable:
2015
-
1,794
123
(110)
(5)
1,802
Balance, January 1
Present value of instalment notes receivable – October 2015
Fair value adjustment on instalment notes receivable
Principal receipts on instalment notes receivable
Amortization of instalment note premium
Balance, December 31, 2015
2014
-
-
-
-
-
-
11. Income taxes
Northview is a mutual fund trust for Canadian income tax purposes. In accordance with the DOT, distributions to Unitholders are declared at the
discretion of the Board of Trustees (“Trustees”). Pursuant to the DOT, the Trustees may, at their sole discretion, determine distributions or
designate that all taxable income earned, including the taxable part of net realized capital gains, be distributed to Unitholders and will deduct such
distributions and designations for income tax purposes.
The Tax Act contains rules (the “SIFT Rules”) that impose tax on certain mutual fund trusts and their Unitholders at rates that approximate
corporate and dividend income tax rates. A REIT must hold less than 10% of non-qualifying assets and earn less than 10% of non-qualifying
revenue to keep its status as a Tax REIT. The SIFT Rules do not apply to any mutual fund trust that qualifies as a “real estate investment trust” (a
“Tax REIT”) as defined in the Tax Act (the “Tax REIT Exemption”). As of December 31, 2015, Northview met all the requirements related to the
qualification of Northview as a real estate investment trust for tax purposes.
The Tax REIT Exemption does not apply to corporate subsidiaries of Northview, which are therefore subject to Canadian income taxes.
The continuity schedule for the deferred income tax asset is as follows:
NorSerCo
Balance, January 1
Deferred income tax expense – NorSerCo unstapling
Balance, December 31
Income tax expense:
NorSerCo
Current income tax
2015
-
-
-
2015
-
-
2014
392
(392)
-
2014
213
213
NORTHVIEW 2015 ANNUAL REPORT│55
Northview Apartment Real Estate Investment Trust
Notes to the Consolidated Financial Statements
Years ended December 31, 2015 and 2014
(Tabular amounts expressed in thousands of Canadian dollars except where indicated)
12. Mortgages payable
Mortgages payable
Fair value adjustment
Deferred financing costs
Total
Current
Non-current
Total
2015
1,357,215
20,838
(18,164)
1,359,889
131,032
1,228,857
1,359,889
2014
750,805
904
(17,156)
734,553
129,622
604,931
734,553
Mortgages payable bear interest at rates ranging from 1.41% to 6.48% (December 31, 2014 – 1.81% to 6.48%) and have a weighted average
rate of 3.33% as at December 31, 2015 (December 31, 2014 – 3.67%). Mortgages are payable in monthly installments of blended principal and
interest of approximately $6.7 million (December 31, 2014 – $4.2 million). The mortgages mature between 2016 and 2025 (December 31, 2014 –
2015 and 2025) and are secured by charges against specific properties. Land and buildings with a carrying value of $2.3 billion (December 31,
2014 – $1.4 billion) have been pledged to secure the mortgages payable of Northview.
The fair value of mortgages payable at December 31, 2015, is approximately $1.4 billion (December 31, 2014 – $742.6 million). The fair value is
determined by discounting the future cash payments by the current market borrowing rate. Most of the mortgages on Northview’s investment
properties are insured by Canada Mortgage and Housing Corporation (“CMHC”). Pursuant to standard mortgage terms, each mortgagee has a
first position security interest in the specified property funded with mortgage proceeds. As well, there are some mortgagees with a second
position security interest. In addition, certain investment properties are cross-securitized providing the lender with preferential security rights to
those properties.
The following table summarizes certain aspects of Northview’s mortgage maturities as at December 31, 2015:
2016
2017
2018
2019
2020
2021
2022
2023
2024
Thereafter
Principal
Repayments
During the Year
37,194
35,457
33,542
28,666
23,300
17,261
14,669
13,222
9,580
4,089
216,980
Principal on Maturity
122,040
67,178
169,342
182,520
169,756
110,220
42,290
81,118
67,242
128,529
1,140,235
Total
159,234
102,635
202,884
211,186
193,056
127,481
56,959
94,340
76,822
132,618
1,357,215
% of Total
11.7%
7.6%
14.9%
15.6%
14.2%
9.4%
4.2%
7.0%
5.8%
9.6%
100.0%
Weighted
Average
Interest Rate
3.59%
3.31%
3.94%
3.29%
2.74%
3.87%
3.25%
3.24%
3.13%
3.19%
3.33%
Northview may, from time to time, enter into derivative financial instruments to mitigate interest rate risk.
Pursuant to the acquisition of TN, as discussed in Note 4, Northview acquired an interest rate swap. At December 31, 2015, Northview held the
following interest rate swap, for which hedge accounting is not being applied:
(i) A cash-settled interest rate swap contract for $35.0 million of mortgages payable maturing in July 2017. The contract carries a swap rate of
2.44% with an effective term of five years.
During the year ended December 31, 2015, the fair value adjustment of the interest rate swap was $234 and has been recognized as unrealized
fair value (Note 24) in the consolidated statements of net and comprehensive income.
NORTHVIEW 2015 ANNUAL REPORT│56
Northview Apartment Real Estate Investment Trust
Notes to the Consolidated Financial Statements
Years ended December 31, 2015 and 2014
(Tabular amounts expressed in thousands of Canadian dollars except where indicated)
13. Convertible debentures
Pursuant to the acquisition of TN, as discussed in Note 4, Northview acquired a $23,000 principal amount of convertible unsecured subordinated
debentures at par (the “2019 Debentures”). The 2019 Debentures bear interest at 5.75% per annum, are payable semi-annually in arrears and
mature on June 30, 2019 (the "Maturity Date"). The 2019 Debentures are convertible with each $1,000 (actual dollars) of face value being
convertible into 42.0 Trust Units, being 107.5 TN Trust Units multiplied by an exchange ratio of 0.3908 of a Trust Unit for each TN Trust Unit,
representing a conversion price of $23.80 per Trust Unit, for a total of 966,386 Trust Units.
On and after June 30, 2017, but prior to June 30, 2018, the 2019 Debentures will be redeemable, in whole or in part, at par plus accrued and
unpaid interest, at the sole option of Northview, on not more than 60-day and not less than 30-day prior notice, provided that the market price of a
Unit, calculated with reference to the date on which notice of redemption is given, is not less than 125% of the conversion price.
On and after June 30, 2018, but prior to the Maturity Date, the 2019 Debentures are redeemable, in whole or in part, at par plus accrued and
unpaid interest, at the sole option of Northview, on not more than 60-day and not less than 30-day prior notice.
Northview may, at its sole option, subject to certain restrictions, elect to satisfy its obligation to pay all or any portion of the principal amount on
the 2019 Debentures by delivering to debenture holders on the redemption date that number of Trust Units obtained by dividing the principal
amount redeemed by 95% of the current market price of the Trust Units on the redemption date.
The following table summarizes the changes in the 2019 Debentures during the year ended December 31, 2015:
Convertible Debentures
Principal
Outstanding, December 31, 2014
Outstanding, October 30, 2015
Fair value adjustment
Outstanding, December 31, 2015
The following table reconciles the face value of the 2019 Debentures to their fair value:
Face value
Cumulative fair value adjustment
Fair value
-
23,000
-
23,000
2015
23,000
(115)
22,885
Amount
-
23,345
(460)
22,885
2014
-
-
-
During the year ended December 31, 2015, interest on the 2019 Debentures was $221, and has been recognized as finance costs (Note 23) in
the consolidated statements of net and comprehensive income.
14. Credit facilities
Operating facilities(i)
Operating facility – single advance(ii)
Bridge facility(iii)
Land financing(iv)
Construction financing(v)
2015
88,450
-
350,000
6,004
39,289
483,743
2014
20,500
10,000
-
6,004
15,548
52,052
(i) At December 31, 2015, Northview had three revolving operating facilities with borrowing capacity of $135.0 million (December 31, 2014 – $90.0
million) for acquisition, development, and operating purposes.
The $75.0 million facility bears interest at prime plus 0.75% or Bankers’ Acceptance plus 2.00% with a maturity date of May 12, 2016. As of
December 31, 2015, the maximum borrowing capacity was $56.0 million (December 31, 2014 – $58.8 million) based on the investment
properties pledged. At December 31, 2015, $42.2 million had been drawn (December 31, 2014 – $20.5 million). Specific investment properties
with a fair value of $160.5 million (December 31, 2014 – $161.7 million) have been pledged as collateral security for the operating facility. This
facility is subject to certain covenants, including vacancy achievement and debt service coverage. As of December 31, 2015, Northview was in
compliance with all covenants. Northview also has $5.5 million (December 31, 2014 – $7.1 million) in Letters of Credit (“LOC”) outstanding as
security for construction projects and mortgage holdbacks. The LOC reduces the amount available under the $75.0 million operating facility.
NORTHVIEW 2015 ANNUAL REPORT│57
Northview Apartment Real Estate Investment Trust
Notes to the Consolidated Financial Statements
Years ended December 31, 2015 and 2014
(Tabular amounts expressed in thousands of Canadian dollars except where indicated)
The $15.0 million facility bears interest at prime plus 0.75% or Bankers’ Acceptance plus 2.00% with a maturity date of July 23, 2016. As of
December 31, 2015, the maximum borrowing capacity was $15.0 million (December 31, 2014 – $7.5 million) based on the investment
properties pledged. At December 31, 2015, $7.0 million had been drawn (December 31, 2014 – $nil). Specific investment properties with a fair
value of $34.5 million (December 31, 2014 – $11.1 million) have been pledged as collateral security for the operating facility. This facility is
subject to certain covenants, including lease term minimums and debt service coverage. As of December 31, 2015, Northview was in
compliance with all covenants.
Pursuant to the acquisition of TN, as discussed in Note 4, Northview acquired a $45.0 million credit facility. The $45.0 million facility bears
interest at prime plus 0.75% or Bankers’ Acceptance plus 2.00% with a maturity date of May 31, 2016. As of December 31, 2015, the maximum
borrowing capacity was $40.6 million based on the investment properties pledged. At December 31, 2015, $39.3 million had been drawn.
Specific investment properties with a fair value of $123.5 million have been pledged as collateral security for the operating facility. This facility
is subject to certain covenants, including vacancy achievement and debt service coverage. As of December 31, 2015, Northview was in
compliance with all covenants.
(ii) In June 2014, Northview received $10.0 million under a single advance non-revolving demand operating facility bearing interest at prime plus
0.75% with a maturity date of December 31, 2014. The investment properties held as collateral security for the $75.0 million operating facility
were also held for the single advance operating facility. On January 8, 2015, this single advance non-revolving demand operating facility was
repaid.
(iii) Northview entered into two bridge facilities for a total of $350.0 million to fund the Transaction, as discussed in Note 4, on October 30, 2015.
The first bridge facility is a two-year senior secured non-revolving term loan facility bearing interest at prime plus 0.7% or Bankers’ Acceptance
plus 1.95% for the amount of $325.0 million with a maturity date of October 30, 2017. The second bridge facility is a six month term, with a six
month extension subject to lender approval, senior secured non-revolving equity bridge facility bearing interest at prime plus 1.25% or Bankers’
Acceptance plus 2.5% for the amount of $25.0 million with a maturity date of April 30, 2016. Specific investment properties with a fair value of
$550.4 million have been pledged as collateral security for the bridge facility.
(iv) The land financing relates to land held for development, is due on demand, has a maturity date of December 31, 2016, and bears interest at
prime plus 0.50% or Bankers’ Acceptance plus 2.00%. Financing is secured by two parcels of land held for development.
(v) At December 31, 2015, Northview had three construction financing loans outstanding relating to the developments in Airdrie, AB; Fort St. John,
BC; and Bonnyville, AB. Interest rates range from prime plus 0.50% to 0.75% or Banker’s Acceptance plus 2.00% to 2.20%. Maturity dates
range from April 16, 2016, to December 31, 2016. The 2014 construction financing related to the new development in Grande Prairie, AB, was
repaid using the funds received from the mortgage obtained in 2015.
15. Unit based payments
a) Performance Units
On May 6, 2015, the Trustees approved a new unit award plan comprised of an LTI plan, whereby Performance Units are issued to executives
and key personnel of Northview. The unit award plan will be used in place of the former LTIP. Each Performance Unit entitles the employees to
receive payment upon vesting in the form of voting units of Northview. Performance Units vest over a period of up to three years and incorporate
performance criteria established at the time of grant. Northview intends to settle all Performance Units with units either through the purchase of
voting units on the open market or the issuance of new units from treasury; however, wholly at its own discretion, Northview may settle the units
in cash. Compensation expense is recognized in net and comprehensive income over the service period.
Total Performance Units granted under the LTI plan are as follows:
Balance, January 1
Units granted
Changes in plan participants
Balance, end of year
2015
Number of Units
-
74,535
(1,625)
72,910
Issue Price
-
-
-
-
2014
Number of Units
-
-
-
-
Issue Price
-
-
-
-
NORTHVIEW 2015 ANNUAL REPORT│58
Northview Apartment Real Estate Investment Trust
Notes to the Consolidated Financial Statements
Years ended December 31, 2015 and 2014
(Tabular amounts expressed in thousands of Canadian dollars except where indicated)
Performance Units granted under the LTI plan to key management personnel (also included in the above table) are as follows:
2014
2015
Balance, January 1
Units granted
Balance, end of year
Number of Units
-
33,266
33,266
Issue Price
-
-
-
Number of Units
Issue Price
-
-
-
-
-
-
b) Long-term incentive plan
Northview has an LTIP for the executives and key personnel, based on the results of each fiscal year. This plan was replaced with the LTI plan
described in Note 15(a). As such, Northview does not intend to grant any additional securities under the LTIP. The total amount of LTIP awards
are determined at the end of each fiscal year by the Trustees based on an assessment of the performance of Northview and the individual
performance of the executives and key personnel. The number of units granted is based on the weighted average trading price on December 31
of each year. Pursuant to the policy, rights to units generally vest in 1/3 tranches: immediately upon award, then 12 and 24 months following.
Total Units granted and issued under the LTIP are as follows:
Balance, January 1
Units issued, January
Units issued, December
Units granted
Changes in plan participants
Balance, end of year
2015
Number of Units
36,895
(20,030)
(13,885)
-
-
2,980
Issue Price
-
$23.50
$17.55
-
-
-
2014
Number of Units
58,342
(30,131)
-
8,964
(280)
36,895
Units granted and issued under the LTIP to key management personnel (also included in the above table) are as follows:
Balance, January 1
Units issued, January
Units issued, December
Units granted
Balance, end of year
2015
Number of Units
16,052
(8,355)
(6,404)
-
1,293
Issue Price
-
$23.50
$17.55
-
-
2014
Number of Units
28,204
(16,031)
-
3,879
16,052
Issue Price
-
$28.21
-
-
$29.11
-
Issue Price
-
$28.31
-
-
-
c) Deferred Units
On May 6, 2015, the Unitholders approved a new unit award plan, whereby Deferred Units are issued to Trustees of Northview. The DUP is an
alternative form of compensation for non-executive Trustees of Northview. Total compensation expense is recognized at the time of grant.
Fluctuations in the market value are recognized in fair value in the consolidated statements of net and comprehensive income in the period in
which the fluctuations occur. For the year ended December 31, 2015, 10,026 Deferred Units were granted. During the year ended December 31,
2015, Northview did not settle any Deferred Units. The carrying amount of the liability, included in unit based payments, relating to the cash-
settled Deferred Units at December 31, 2015 is $179. At December 31, 2015, 10,026 Deferred Units are vested and outstanding. Deferred Units
are redeemable upon the Trustee’s retirement from Northview.
Total Deferred Units granted under the DUP are as follows:
Balance, January 1
Units granted
Balance, end of year
2015
Number of Units
-
10,026
10,026
Issue Price
-
-
-
2014
Number of Units
-
-
-
Issue Price
-
-
-
NORTHVIEW 2015 ANNUAL REPORT│59
Northview Apartment Real Estate Investment Trust
Notes to the Consolidated Financial Statements
Years ended December 31, 2015 and 2014
(Tabular amounts expressed in thousands of Canadian dollars except where indicated)
16. Employee unit purchase plan
Changes to the Employee Unit Purchase Plan (the “EUPP”) were approved by the Board and made effective May 11, 2012. Under the terms of
the revised EUPP, employees may invest a maximum of 5% of their salary in Northview units and Northview contributes one unit for every four
units acquired by an employee. The units are purchased on the TSX at market prices. During the year ended December 31, 2015, employees
invested a total of $284 (December 31, 2014 – $210) and Northview contributed $71 (December 31, 2014 – $53). During the year ended
December 31, 2015, 18,076 units (December 31, 2014 – 9,995 units) were purchased at an average cost of $21.56 per unit (December 31, 2014
– $28.00).
17. Unitholders’ equity
a) Trust Units
The aggregate number of Trust Units and Special Voting Units which is authorized and may be issued is unlimited.
Each Trust Unit represents an equal undivided beneficial interest in any distributions from Northview, and in any of the net assets of Northview in
the event of termination or winding up of Northview. All Trust Units are of the same class with equal rights and privileges and are not subject to
future calls or assessments. Each Trust Unit entitles the holder of record thereof to one vote for each whole Trust Unit held at all meetings of
Trust Unitholders. Except as set out under “Redemption Rights” below, the Trust Units have no conversion, retraction, redemption or pre-emptive
rights.
The Trust Units should not be viewed by potential investors as shares in Northview. A Trust Unitholder has substantially all of the same
protections, rights and remedies as a shareholder would have under the Canada Business Corporations Act (“CBCA”), except that Trust
Unitholders will not have the statutory rights normally associated with ownership of shares of a CBCA corporation including, for example, “dissent
rights” in respect of certain corporate transactions and fundamental changes, rights to submit shareholder proposals at shareholder meetings, or
the right to bring “derivative” or “oppression” actions. The Trustees of Northview have powers, responsibilities and duties analogous to those of a
board of directors of a corporation governed by the CBCA. The protections, rights and remedies available to a Trust Unitholder are contained in
the DOT.
Transfer of Trust Units
Pursuant to the DOT, the Trust Units are freely transferable.
Repurchase of Trust Units
Northview shall be entitled to purchase for cancellation at any time the whole or from time to time any part of the outstanding Trust Units, at a
price per Trust Unit and on a basis to be determined by the Trustees in compliance with all applicable securities regulatory laws, regulations or
policies or the policies of any applicable stock exchange.
Redemption Rights
Trust Units are redeemable at any time on demand by the holders. A Trust Unitholder not otherwise holding a fully registered Trust Unit
certificate who wishes to exercise the redemption right is required to obtain a written redemption notice (the “Redemption Notice”) from his or her
investment dealer who is then required to deliver the completed Redemption Notice to Northview. Upon receipt by Northview of the Redemption
Notice, the Trust Unitholder shall thereafter cease to have any rights with respect to the Trust Units tendered for redemption (other than to receive
the redemption payment thereof) including the right to receive any distributions thereon which are declared payable to the Trust Unitholders of
record on a date which is subsequent to the day of receipt by Northview of such notice. Trust Units shall be considered to be tendered for
redemption on the date that Northview has, to the satisfaction of the Trustees, received the Redemption Notice and all other required documents
or evidence.
Upon receipt of the Redemption Notice by Northview, the holder of the Trust Units tendered for redemption shall be entitled to receive a price per
Trust Unit (the “Redemption Price”) equal to the lesser of:
a)
b)
90% of the “market price” of the Trust Units on the principal market on which the units are quoted for trading during the 20 trading day
period commencing immediately subsequent to the day on which the units were surrendered to Northview for redemption (the
“Redemption Date”); and
100% of the “closing market price” on the principal market on which the Trust Units are quoted for trading on the Redemption Date.
For the purposes of calculating the Redemption Price, “market price” shall be an amount equal to the weighted average of the closing price of the
Trust Units for each of the trading days on which there was a closing price; provided that if the applicable exchange or market does not provide a
closing price, but only provides the highest and lowest prices of the Trust Units traded on a particular day, the “market price” shall be an amount
equal to the average of the highest and lowest prices for each of the trading days on which there was a trade; and provided further that if there
was trading on the applicable exchange or market for fewer than five of the 20 trading days, the “market price” shall be the weighted average of
the following prices established for each of the 20 trading days:
(i)
(ii)
the weighted average of the last bid and last asking prices for the Trust Units for each day on which there was no trading;
the closing price of the Trust Units for each day that there was trading if the exchange or market provides a closing price; and
NORTHVIEW 2015 ANNUAL REPORT│60
Northview Apartment Real Estate Investment Trust
Notes to the Consolidated Financial Statements
Years ended December 31, 2015 and 2014
(Tabular amounts expressed in thousands of Canadian dollars except where indicated)
(iii)
the weighted average of the highest and lowest prices of the Trust Units for each day that there was trading if the market provides
only the highest and lowest prices of Trust Units traded on a particular day.
Where the holder of Trust Units tendered for redemption is entitled to receive a price per unit equal to 100% of the “closing market price” on the
principal market on which the units are quoted for trading on the Redemption Date, the “closing market price” shall be:
(i)
(ii)
(iii)
an amount equal to the closing price of the Trust Units if there was a trade on the date and the exchange or market provides a
closing price;
an amount equal to the weighted average of the highest and lowest prices of Trust Units if there was trading on the date and the
exchange or other market provides only the highest and lowest trading prices of Trust Units traded on a particular day; and
the weighted average of the last bid and last asking prices of the Trust Units if there was no trading on the date.
The aggregate Redemption Price payable by Northview in respect of any Trust Units surrendered for redemption during any calendar month shall
be satisfied by way of a cash payment no later than the last day of the calendar month following the month in which the 20 trading day period
referred to above ended, provided that there is no entitlement for Trust Unitholders to receive cash upon the redemption of their Trust Units if:
(i)
(ii)
(iii)
the total amount payable by Northview in respect of such Trust Units and all other Trust Units tendered for redemption in the
same calendar month exceeds $50,000; provided that the Trustees may, in their sole discretion, waive such limitation in respect
of all Trust Units tendered for redemption in any particular calendar month. Trust Units tendered for redemption in any calendar
month in which the total amount payable by Northview exceeds the Monthly Limit will be redeemed for cash and, subject to any
applicable regulatory approvals, by a distribution in specie of securities on a pro rata basis;
at the time the Trust Units are tendered for redemption, the outstanding Trust Units (or, as applicable, instalment receipts) are not
listed on a stock exchange or traded or quoted on another market which the Trustees consider, in their sole discretion, provides
representative fair market value prices for the Trust Units (or, as applicable, instalment receipts); or
the normal trading of the outstanding Trust Units (or, as applicable, instalment receipts) is suspended or halted on any stock
exchange on which the Trust Units (or, as applicable, instalment receipts) are listed for trading or, if not so listed, on any market
on which the Trust Units (or, as applicable, instalment receipts) are quoted for trading, on the Redemption Date or for more than
five trading days during the 20 trading day period commencing immediately after the Redemption Date.
If a Trust Unitholder is not entitled to receive cash upon the redemption of Trust Units as a result of any one of the foregoing limitations, then the
Redemption Price per Trust Unit to which the Unitholder is entitled shall be the fair market value thereof as determined by the Trustees and,
subject to any applicable regulatory approvals, shall be paid out and satisfied by way of a distribution in specie consisting of such assets of
Northview as the Trustees determine.
Based on historic information over the past year, redemption levels are expected to be nil. However, the actual level of redemptions may differ
significantly from historic experience.
Special Voting Units
The DOT provide for the issuance of the Special Voting Units which have no economic entitlement in Northview or in the distribution or assets of
Northview, but are used to provide voting rights proportionate to the votes of the Trust Units to holders of securities exchangeable into Trust
Units, including the Class B LP Units. Each Special Voting Unit is not transferable separately from the Class B LP Unit to which it is attached and
will be automatically redeemed and cancelled upon exchange of the attached Class B LP Unit into a Unit. Each Special Voting Unit will entitle the
holder to one vote, either in person or by proxy, at the meeting of Unitholders of the Trust as if he or she was a Unitholder of the Trust.
The number of Trust Units issued and outstanding at December 31, 2015, and December 31, 2014, is as follows:
Balance, January 1
LTIP units issued
Units issued (Note 4)
Units repurchased and cancelled in NCIB
NorSerCo unstapling
Balance, end of year
2015
2014
Number of Units
31,674,160
33,915
12,702,565
-
-
44,410,640
Amount
818,041
715
234,870
-
-
1,053,626
Number of Units
31,870,249
30,411
-
(226,500)
-
31,674,160
Amount
830,646
858
-
(5,850)
(7,613)
818,041
b) Class B LP Units and Special Voting Units
The Class B LP Units are units issued by subsidiaries of Northview and can be issued in conjunction with property acquisitions. The Class B LP
Units can be exchanged for Trust Units at any time at the option of the holder. Each Class B LP Unit will have a “Special Voting Unit” attached to
it, which will entitle the holder to one vote, either in person or by proxy, at the meeting of Unitholders of the Trust as if he or she was a Unitholder
of the Trust.
NORTHVIEW 2015 ANNUAL REPORT│61
Northview Apartment Real Estate Investment Trust
Notes to the Consolidated Financial Statements
Years ended December 31, 2015 and 2014
(Tabular amounts expressed in thousands of Canadian dollars except where indicated)
Subsidiaries of Northview are authorized to issue Class B LP Units and Special Voting Units. The ability to exchange Class B LP Units for Trust
Units implies a liability element exists because it imposes an unavoidable obligation to deliver units of the Trust (i.e., a financial instrument of
another entity). Therefore, Class B LP Units are classified as financial liabilities on the consolidated statements of financial position.
The total number of Class B LP Units and Special Voting Units outstanding as at December 31, 2015 is 7,809,539 (December 31, 2014 – 67,796)
with a corresponding liability of $137.1 million (December 31, 2014 - $1.6 million). During 2014, 67,796 of NorSerCo Special Shares were
dissolved due to the unstapling of NorSerCo. During 2015, 7,741,743 (December 31, 2014 – nil) Class B LP Units were issued.
On October 30, 2015, pursuant to the Transaction, as discussed in Note 4, Northview issued 5,445,820 NPR Special Voting Units, 879,053 NPR
Special Voting Units, and 1,416,870 NPR Special Voting Units as part of the consideration for the TN acquisition, acquisition of the SL portfolio,
and IMH portfolio, respectively.
The continuity schedule for the Class B LP and Special Voting Units classified as liabilities is as follows:
Date
Description
Issue Price/
Call Price
Number of Units
Amount
January 1, 2014
Q1, 2014
Q2, 2014
Q3, 2014
Q4, 2014
December 31, 2014
Q1, 2015
Q2, 2015
Q3, 2015
Fair value adjustment
Fair value adjustment
Fair value adjustment
Fair value adjustment
Fair value adjustment
Fair value adjustment
Fair value adjustment
October 30, 2015
Issuance of Special Voting Units
Q4, 2015
Fair value adjustment
December 31, 2015
$27.75
$27.72
$28.69
$28.12
$23.77
$23.77
$23.58
$22.38
$19.73
$18.49
$17.56
$17.56
67,796
-
-
-
-
67,796
-
-
-
7,741,743
-
7,809,539
1,881
(2)
66
(39)
(294)
1,612
(13)
(81)
(180)
143,144
(7,347)
137,135
c) Distributions to Unitholders
Pursuant to the DOT, holders of Trust Units and Class B LP Units are entitled to receive distributions made on each distribution date as approved
by the Trustees. During the year ended December 31, 2015, Northview declared monthly cash distributions of $0.1358 per Unit. For the year
ended December 31, 2015, Northview declared distributions totaling $57.3 million (December 31, 2014 – $50.6 million).
d) Normal course issuer bid (“NCIB”)
On July 31, 2014, the TSX approved Northview’s notice of intention to renew the NCIB for its Trust Units. Northview's NCIB was made in
accordance with the policies of the TSX. Northview was allowed to purchase Trust Units during the period from August 6, 2014, to August 5,
2015, or an earlier date had Northview completed its maximum purchases. As of December 31, 2015, the NCIB has expired and has not been
renewed.
Northview would have paid 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 would have been funded out of Northview's working capital.
Northview was authorized to purchase, in a 12 month period, up to 3,095,587 Trust Units, representing 10% of its public float, through the facilities
of the TSX and other Canadian trading platforms. On any trading day, Northview would not have purchased more than 12,474 Trust Units, which
is equal to 25% of Northview's average daily trading volume over the previous six months, except where such purchases were made in
accordance with the block purchase exemptions under the TSX rules.
During the year ended December 31, 2015, Northview did not purchase and subsequently cancel any Trust Units under its NCIB (December 31,
2014 – Northview purchased and subsequently cancelled 226,500 Trust Units under its NCIB for total consideration of $6.1 million).
NORTHVIEW 2015 ANNUAL REPORT│62
Northview Apartment Real Estate Investment Trust
Notes to the Consolidated Financial Statements
Years ended December 31, 2015 and 2014
(Tabular amounts expressed in thousands of Canadian dollars except where indicated)
18. Non-controlling interests
Northview holds investments in a joint operation. Northview owns 55% of GoGa Cho Building Limited Partnership (“GoGa Cho”) and, accordingly,
consolidates the operations and records a 45% non-controlling interest. Northview manages all aspects of the joint operation, prepares budgets
which follow Northview operating policies and determines whether distributions should be paid to the joint venture partners. Due to the inherent
control over the joint operation, Northview consolidates their operations and records non-controlling interests.
19. Guarantees, commitments and contingencies
In the ordinary course of business, Northview may provide indemnification commitments to counterparties in transactions such as credit facilities,
leasing transactions, service arrangements, director and officer indemnification agreements, and sales of assets. These indemnification
agreements may require Northview to compensate the counterparties for costs incurred as a result of changes in laws and regulations (including
tax legislation) or as a result of litigation claims or statutory sanctions that may be suffered by counterparties as a consequence of the transaction.
The terms of these indemnification agreements vary based on the contract and do not provide any limit on the maximum potential liability. To
date, Northview has not made any payments under such indemnifications and no amount has been accrued in the consolidated financial
statements with respect to these indemnification commitments.
In the normal course of operations, from time to time, Northview becomes subject to various legal and other claims. Management and its legal
counsel evaluate these claims and, where required, accrue the best estimate of costs relating to these claims. Management believes the outcome
of claims of this nature at December 31, 2015, will not have a material impact on Northview.
During the normal course of operations, Northview provided guarantees for mortgages payable relating to investments in corporations and joint
ventures where Northview owns less than 100%. The mortgages payable are secured by specific charges against the properties owned by the
corporations and joint ventures. In the event of a default of the corporation or joint venture, Northview may be liable for up to 100% of the
outstanding balances of these mortgages payable.
At December 31, 2015, Northview has provided guarantees on mortgages secured by investment properties totaling $12.0 million (December 31,
2014 – $10.2 million) of its equity accounted joint ventures, ICP and ICS. These mortgages bear interest at rates ranging from 2.43% to 5.50%
and mature between January 2016 and March 2020 (December 31, 2014 – 2.79% to 5.50% and mature between January 2015 and July 2017).
As at December 31, 2015, land and buildings with a carrying value of $16.2 million have been pledged to secure these mortgages payable
(December 31, 2014 – $24.7 million). Due to the equity accounting of ICP and ICS, the mortgage balances have not been recorded in Northview’s
consolidated financial statements. Management believes no default will occur and, accordingly, no amount has been recorded by Northview in
these consolidated financial statements.
On May 9, 2014, Northview purchased 4.9 acres of land for development in St. John’s, NL, for a total cost of $3.7 million, of which $2.0 million
was paid in cash and the remaining $1.7 million was to be paid upon Northview receiving formal approval from the municipality of an application
to rezone the land for multi-family development. During the first quarter of 2015, the municipality declined the rezoning. As a result, in the second
quarter of 2015, the vendor repurchased the land for $3.7 million, of which $2.0 million was paid in cash and $1.7 million in the settlement of the
liability.
20. Financial instruments and risk management
a) Fair value of financial assets and financial liabilities
Northview’s financial assets and financial liabilities are carried at amortized cost, which approximates fair value, or at fair value through profit or
loss (“FVTPL”) as applicable. Such fair value estimates are not necessarily indicative of the amounts Northview might pay or receive in actual
market transactions.
Fair value measurements recognized in the consolidated statements of financial position are categorized using a fair value hierarchy that reflects
the significance of inputs used in determining the fair value:
i)
ii)
Level 1: Quoted prices in active markets for identical assets or liabilities.
Level 2: Quoted prices in active markets for similar assets or liabilities or valuation techniques where significant inputs are based
on observable market data.
iii) Level 3: Valuation techniques for which any significant input is not based on observable market data.
NORTHVIEW 2015 ANNUAL REPORT│63
Northview Apartment Real Estate Investment Trust
Notes to the Consolidated Financial Statements
Years ended December 31, 2015 and 2014
(Tabular amounts expressed in thousands of Canadian dollars except where indicated)
The tables below present the fair value of Northview's assets and liabilities, reflecting the significance of inputs used when determining the fair
value as at December 31, 2015 and 2014:
Assets
Investment properties
Instalment notes receivable
Cash
Restricted cash
Liabilities
Mortgages payable
Convertible debentures
Class B LP Units
Derivative instruments
Unit based payments
2015
2014
Level 1
Level 2
Level 3
Level 1
Level 2
Level 3
-
-
4,487
9,738
-
22,885
-
-
-
-
1,813
-
-
3,025,468
-
-
-
1,394,358
-
137,135
1,515
788
-
-
-
-
-
-
-
-
7,088
-
-
-
-
-
-
-
-
-
1,582,011
-
-
-
742,611
-
1,612
-
476
-
-
-
-
-
Northview had no embedded derivatives requiring separate recognition as at December 31, 2015, or December 31, 2014.
Transfers between levels in the fair value hierarchy are recognized on the date of the event or change in circumstances that caused the transfer.
During the year ended December 31, 2015, and year ended December 31, 2014, there were no transfers between Level 1, Level 2 and Level 3
classified assets and liabilities. Northview had no credit derivatives over financial assets at December 31, 2015, or December 31, 2014, and
throughout the intervening periods.
The following summarizes the significant methods and assumptions used in estimating fair values of Northview's assets and liabilities measured
at fair value and other financial instruments:
Investment properties
(i)
Northview determined the fair value of each investment property using the valuation methodology and key assumptions described in Note 5.
Instalment notes receivable
(ii)
The fair value of instalment notes receivable is estimated based on the present value of future receipts, discounted at the yield on a Government
of Canada bond with the nearest maturity date to the underlying instalment note, plus an estimated credit spread at the reporting date for a
comparable financial instrument. The credit spread used at December 31, 2015 ranged from 2.08% to 2.13%, depending on the maturity dates of
the respective instalment notes.
(iii) Mortgages payable
The fair value of mortgages payable is estimated based on the present value of future payments, discounted at the yield on a Government of
Canada bond with the nearest maturity date to the underlying mortgage, plus an estimated credit spread at the reporting date for a comparable
mortgage or the yield of a comparable mortgage. The spread rates used at December 31, 2015 ranged from 1.04% to 2.24% (December 31,
2014 - 1.03% to 2.15%), depending on the nature and terms of the respective mortgages.
Convertible debentures
(iv)
The fair value of the convertible debentures is determined based on the market trading prices of the convertible debentures as at the valuation
date. As allowed under IFRS 13, Fair Value Measurement ("IFRS 13"), if an asset or liability measured at fair value has a bid and an ask price,
the price within the bid-ask spread that is most representative of fair value in the circumstances shall be used to determine fair value. Northview
has chosen to use the closing price of the convertible debentures as the fair value for the convertible debentures.
(v) Class B LP Units
The fair value of the Class B LP Units is estimated based on the market trading prices of the Trust Units at the valuation date. As allowed under
IFRS 13, if an asset or liability measured at fair value has a bid price and an ask price, the price within the bid-ask spread that is most
representative of fair value in the circumstances shall be used to determine fair value. Northview has chosen to use the closing price of its Trust
Units for fair value measurement for its Class B LP Units.
(vi) Derivative instruments
The fair value of the interest rate swap is determined using widely accepted valuation techniques including discounted cash flow analysis on the
expected cash flows of the derivatives. The fair value is determined using the market standard methodology of netting the discounted future fixed
cash payments and the discounted expected variable cash receipts. The variable cash receipts are based on expectation of future interest rates
(forward curves) derived from observable market rate curves. The fixed cash payments are based on the rates disclosed in Note 12.
NORTHVIEW 2015 ANNUAL REPORT│64
Northview Apartment Real Estate Investment Trust
Notes to the Consolidated Financial Statements
Years ended December 31, 2015 and 2014
(Tabular amounts expressed in thousands of Canadian dollars except where indicated)
(vii) Unit based payments
Northview determines the fair value of Unit based payments and Deferred Units using the valuation methodology and key assumptions described
in Note 2(l), respectively.
(viii) Other financial assets and financial liabilities
The fair values of Northview's other financial assets, which include cash, restricted cash, accounts receivable, prepaid expenses and other
assets, as well as Northview's other financial liabilities, which include credit facilities, trade and other payables, and distributions payable,
approximate their recorded values due to their short-term nature.
b) Risk management related to financial instruments
Northview is exposed to utility, credit, interest rate, and liquidity risks associated with its financial assets and liabilities. The Trustees have
responsibility for the establishment and approval of Northview’s overall risk management policies, including those related to financial instruments.
Management performs continuous assessments so that all significant risks related to financial instruments are reviewed and addressed in light of
changes to market conditions and Northview’s operating activities.
(i) Utility cost risk
Utility cost risk is the potential financial loss Northview may experience as a result of higher resource prices or lack of supply. Northview is
exposed to utility cost risk from the fluctuation in retail prices for fuel oil, natural gas, and electricity, the primary utilities used to heat its properties.
The exposure to utility cost risk is restricted primarily to the multi-family rental and execusuites and hotel portfolios. The leases in the commercial
portfolio generally provide for recovery of operating costs from tenants, including utilities. Due to the northern locations of a significant portion of
Northview’s portfolio, the exposure to utility price fluctuations is more pronounced in the first and last fiscal quarters of the year. Northview
manages its exposure to utility risk through a number of preventative measures, including retrofitting properties with energy efficient appliances,
fixtures, and windows. Northview does not utilize hedges or forward contracts to manage exposure to utility cost risk.
Heating oil is the primary source of fuel for heating properties located in Nunavut and Yellowknife, NT.
Natural gas is the main source of fuel for heating properties located in Alberta, parts of British Columbia, New Brunswick, Nova Scotia, Ontario,
Québec, Saskatchewan, and Inuvik, NT. Natural gas prices in Alberta, British Columbia, and Ontario are not subject to regulated price control.
Northview does not use financial instruments to manage the exposure to the utility cost risk.
Management prepared a sensitivity analysis of the impact of price changes in the cost of heating oil and natural gas. A 10% change in the
combined average price of heating oil and natural gas would impact Northview’s net income by approximately $1.2 million for the year ended
December 31, 2015 (December 31, 2014 – $542).
Electricity is the primary source for heating properties located in Newfoundland and Labrador, as well as parts of British Columbia. In
Newfoundland and Labrador and British Columbia, electricity is purchased from the provincially regulated utilities and is directly paid by the
residents for a significant portion of Northview’s multi-family rental units. As a result, there is no significant risk to Northview regarding the price of
electricity in Newfoundland and Labrador and British Columbia.
(ii) Credit risk
Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation.
Northview’s credit risk primarily arises from the possibility that residents may not be able to fulfill their lease commitments. Loan receivables
consist mainly of amounts due from commercial tenants. Given Northview’s collection history and the nature of these tenants, credit risk is
assessed as low. Accounts receivable consists mainly of resident receivables. Resident receivables are comprised of a large number of residents
spread across the geographic areas in which Northview operates. There are no significant exposures to single residents with the exception of the
Governments of Canada, Nunavut and the Northwest Territories, which lease a large number of residential units and commercial space in the
Northwest Territories and Nunavut.
Northview mitigates credit risk through conducting thorough credit checks on prospective residents, requiring rental payments on the first of the
month, obtaining security deposits approximating one month’s rent from residents where legislation permits, and geographic diversification in its
portfolio. Northview records a specific bad debt provision on balances owed from past residents and provides an allowance for receivables, net of
security deposits, from current residents where the expected amount to be collected is less than the actual accounts receivable. The aging of
current residents and resident receivables are net of allowance for doubtful accounts from current and past residents.
Northview classifies residents as past residents on the date of their move out from a residential unit. Any subsequent recovery of balances owed
from past residents is recorded as a reduction in the bad debt provision for the period. The amounts disclosed on the consolidated statements of
financial position are net of allowances for uncollectible accounts from current and past residents and other receivables, estimated by
management based on prior experience and current economic conditions.
As at December 31, 2015, allowance for doubtful accounts of $5 relates to hotel and execusuites. As at December 31, 2014, allowance for
doubtful accounts of $848 mainly relates to the Bonavista, NL property sold by Northview on February 27, 2015.
NORTHVIEW 2015 ANNUAL REPORT│65
Northview Apartment Real Estate Investment Trust
Notes to the Consolidated Financial Statements
Years ended December 31, 2015 and 2014
(Tabular amounts expressed in thousands of Canadian dollars except where indicated)
The following is an aging of current residents and other receivables:
0-30 days
31-60 days
61-90 days
Over 90 days
Resident receivables
Other receivables
Allowance for doubtful accounts
2015
1,519
429
310
2,062
4,320
8,102
(5)
12,417
2014
1,382
504
42
1,830
3,758
3,334
(848)
6,244
Other receivables consist of goods and services tax rebates, mortgage holdbacks, insurance claims, and miscellaneous receivables.
As at December 31, 2015, other receivables include $453 (December 31, 2014 - nil) due from an entity under the same common ownership as
Starlight, a related party.
The reconciliation of changes in allowance for doubtful accounts is as follows:
Balance, January 1
Increase (decrease) in allowance for doubtful accounts
Balance, end of year
Age of impaired trade receivables:
Current
31-60 days
61-90 days
Over 90 days
Total
2015
848
(843)
5
2015
-
-
-
5
5
2014
700
148
848
2014
47
47
47
707
848
(iii) Interest rate risk
Interest rate risk is the risk that the value of future cash flows of a financial instrument will fluctuate as a result of changes in market interest rates.
Northview is exposed to interest rate risk on mortgages payable and its credit facilities and does not hold any financial instruments to mitigate that
risk. In the current economic environment, it is difficult to predict what future interest rates will be and, as such, Northview may not be able to
continue to renew mortgage loans with interest rates that are lower than those currently in place. Northview utilizes both fixed and floating rate
debt. Interest rate risk related to floating interest rates is limited primarily to the utilization of credit facilities. Management mitigates interest rate
risk by utilizing fixed rate mortgages, ensuring access to a number of sources of funding, and staggering mortgage maturities with the objective of
achieving relatively even annual debt maturities. To the extent possible, Northview maximizes the amount of mortgages on residential rental
properties where it is possible to lower interest rates through CMHC mortgage insurance.
A sensitivity analysis on floating rate debt has been completed based on the exposure to interest rates at the statement of financial position date.
Floating rate debt includes all mortgages payable which are not subject to fixed interest rates and the credit facilities. A 0.50% change in interest
rates, keeping all other variables constant, would change Northview’s net income for the year ended December 31, 2015, by approximately $513
(December 31, 2014 – $222). For the year ended December 31, 2015, the average floating rate debt was $4.2 million and the average credit
facilities balance was $240.0 million (December 31, 2014 – average floating rate debt was $13.2 million and the average credit facilities balance
was $44.3 million).
NORTHVIEW 2015 ANNUAL REPORT│66
Northview Apartment Real Estate Investment Trust
Notes to the Consolidated Financial Statements
Years ended December 31, 2015 and 2014
(Tabular amounts expressed in thousands of Canadian dollars except where indicated)
(iv) Liquidity risk
Liquidity risk is the risk that Northview is not able to meet its financial obligations as they fall due or can do so only at excessive cost. Northview
manages liquidity risk by managing mortgage and loan maturities to ensure a relatively even amount of mortgage maturities in each year. Cash
flow projections are completed on a regular basis to ensure there will be adequate liquidity to maintain operating, capital, and investment activities
in addition to making monthly distributions to Unitholders. The Trustees review the current financial results and the annual business plan in
determining appropriate distribution levels.
Contractual maturity for non-derivative financial liabilities at December 31, 2015:
Mortgages payable
Credit facilities
Trade and other payables (i)
Distributions payable
(i) Security deposits payable are included in trade and other payables.
Carrying
Amount
1,359,889
483,743
70,467
7,089
Contractual
Cash Flows
1,558,717
483,743
70,467
7,089
0 – 6
months
104,111
483,743
70,467
7,089
6 months
to 1 year
97,987
-
-
-
Contractual maturity for derivative financial liabilities at December 31, 2015:
Unit based payments
Carrying
Amount
788
Contractual
Cash Flows
788
0 – 6
months
788
6 months
to 1 year
-
Contractual maturity for non-derivative financial liabilities at December 31, 2014:
Mortgages payable
Credit facilities
Trade and other payables (i)
Distributions payable
(i) Security deposits payable are included in trade and other payables.
Carrying
Amount
734,553
52,052
36,186
4,311
Contractual
Cash Flows
856,687
52,052
36,186
4,311
0 – 6
months
84,810
52,052
36,186
4,311
6 months
to 1 year
68,546
-
-
-
Contractual maturity for derivative financial liabilities at December 31, 2014:
Unit based payments
Carrying
Amount
476
Contractual
Cash Flows
476
0 – 6
months
476
6 months
to 1 year
-
1 – 5
years
826,730
-
-
-
1 – 5
years
-
1 – 5
years
366,365
-
-
-
1 – 5
years
-
Over 5
years
529,889
-
-
-
Over 5
years
-
Over 5
years
336,966
-
-
-
Over 5
years
-
Management believes that future cash flows from operations, mortgage refinancing, and cash available under the current operating facilities
provide sufficient available funds through the foreseeable future to support these financial liabilities.
21. Capital management
Northview’s objectives when managing its capital are to safeguard its assets while maximizing the growth of its business, returns to Unitholders,
and maintaining the sustainability of cash distributions. Northview’s capital consists of mortgages payable, credit facilities, Trust Units, and Class
B LP Units.
Management monitors Northview’s capital structure on an ongoing basis to determine the appropriate level of mortgages payable to be placed on
specific properties at the time of acquisition or when existing debt matures. Northview follows conservative guidelines which are set out in the
DOT. In determining the most appropriate debt, consideration is given to strength of cash flow generated from the specific property, interest rate,
amortization period, maturity of the debt in relation to the existing debt of Northview, interest and debt service ratios, and limits on the amount of
floating rate debt. Northview has credit facilities which are used to fund acquisitions, development, and capital expenditures until specific
mortgage debt is placed or additional equity is raised. Consistent with others in the industry, Northview monitors capital on the basis of debt to
gross book value ratio. The DOT provides for a maximum debt to gross book value ratio of 70%. For the purposes of these consolidated financial
statements, Debt to Gross Book Value is calculated on the consolidated entities.
Northview’s calculations of its adherence to bank covenants are considered non-GAAP measures. As at December 31, 2015, Northview was in
compliance with all covenants.
The following debt to gross book value, interest coverage, and debt service coverage excludes the 2019 Debentures and interest expenses on
2019 Debentures.
NORTHVIEW 2015 ANNUAL REPORT│67
Northview Apartment Real Estate Investment Trust
Notes to the Consolidated Financial Statements
Years ended December 31, 2015 and 2014
(Tabular amounts expressed in thousands of Canadian dollars except where indicated)
Debt to gross book value
Cash
Credit facilities
Mortgages payable
Debt
Investment properties
Property, plant and equipment
Accumulated depreciation and amortization
Gross book value
Debt to gross book value
Interest coverage and debt service coverage
Income before income taxes
Depreciation and amortization
Mortgage interest and deferred financing costs
Interest expense on credit facilities
Interest expense to Class B LP Unitholders
Bargain purchase gain
Business combination transaction costs
Unrealized fair value changes
Income before interest, taxes, depreciation and amortization,
unrealized fair value changes, bargain purchase gain, and business
combination transaction costs
Mortgage interest and deferred financing costs
Interest expense on credit facilities
Total interest expense
Principal repayment
Debt service payments
Interest coverage
Debt service coverage
2015
(4,487)
483,743
1,357,215
1,836,471
3,025,468
55,510
22,156
3,103,134
59.2%
2015
31,852
5,030
32,250
3,315
2,213
(50,893)
38,959
55,103
117,829
32,250
3,315
35,565
27,757
63,322
3.31
1.86
2014
-
52,052
750,805
802,857
1,582,011
51,775
18,285
1,652,071
48.6%
2014
74,869
4,600
28,044
338
108
-
-
(2,813)
105,146
28,044
338
28,382
21,593
49,975
3.70
2.10
Interest coverage and debt service coverage are calculated based on the previous 12 months. Northview’s interest coverage ratio covenant is
1.90 and debt service coverage ratio covenant is 1.50 relating to the operating facilities.
Debt to gross book value, interest coverage, and debt service coverage including the 2019 Debentures and interest expenses on 2019
Debentures is 59.9%, 3.30, and 1.86, respectively.
22. Personnel costs
Salaries, wages and benefits
Equity settled unit based compensation
Personnel costs capitalized to investment properties
2015
37,861
715
38,576
(12,731)
25,845
2014
34,402
858
35,260
(10,114)
25,146
NORTHVIEW 2015 ANNUAL REPORT│68
Northview Apartment Real Estate Investment Trust
Notes to the Consolidated Financial Statements
Years ended December 31, 2015 and 2014
(Tabular amounts expressed in thousands of Canadian dollars except where indicated)
23. Financing costs
Mortgage interest
Deferred financing costs
Interest expense on 2019 debentures
Interest expense on credit facilities
Interest expense to Class B LP Unitholders
Interest and other income
Loss on extinguishment of debt
24. Unrealized fair value changes
Unrealized fair value change to investment properties
Sustaining CAPEX
Interest rate swap
2019 debentures
Unit based payments
Class B LP Units
Net unrealized fair value decrease (increase)
25. Changes in non-cash working capital
Restricted cash
Accounts receivable
Prepaid expenses and other assets
Loans receivable
Instalment notes receivable
Other long-term assets
Trade and other payables
Changes in non-cash working capital from operating activities
2015
29,761
2,489
221
3,315
2,213
(832)
790
37,957
2015
8,391
54,910
234
(460)
(351)
(7,621)
55,103
2015
404
(5,568)
2,068
(1,316)
110
23
11,156
6,877
2014
25,870
2,174
-
338
108
(603)
-
27,887
2014
(19,836)
17,343
-
-
(71)
(249)
(2,813)
2014
(39)
2,927
1,907
(1,482)
-
(3,069)
2,542
2,786
The changes in non-cash working capital from investing activities for the year ended December 31, 2015, of $2.6 million cash outflow (December
31, 2014 – $1.1 million cash outflow) is due to the change in trade and other payables related to work in progress with respect to investment
property improvements and land held for development.
26. Operating leases
As lessor, Northview leases commercial investment property held under operating leases. Commercial property operating leases have lease
terms of between 1 to 15 years, with an option to extend for a further period. All commercial operating lease contracts contain market review
clauses in the event that the lessee exercises its option to renew.
The future minimum lease payments receivable on commercial investment properties are as follows:
Less than 1 year
Between 1 and 5 years
More than 5 years
2015
20,370
59,758
31,341
111,469
2014
19,621
46,823
33,179
99,623
NORTHVIEW 2015 ANNUAL REPORT│69
Northview Apartment Real Estate Investment Trust
Notes to the Consolidated Financial Statements
Years ended December 31, 2015 and 2014
(Tabular amounts expressed in thousands of Canadian dollars except where indicated)
27. Related parties
a) Key management personnel
Key management personnel are comprised of Northview’s Board of Trustees and the Trust’s executive officers. The remuneration of Northview’s
key management personnel is as follows:
Salaries, wages and benefits
Equity settled unit based compensation
2015
2,327
504
2,831
2014
1,890
454
2,344
b) Related party transactions
Related party transactions are conducted in the normal course of operations and are made on terms equivalent to those used in arm’s length
transactions.
During the year, revenue from associates related to management fees and maintenance service fees received from ICP and ICS and receipt of
services from associates related to rent paid by Northview to ICP, as follows:
Revenue from associates
Receipt of services from associates
Transactions for the years ended
December 31
2015
379
53
2014
402
53
Balance Outstanding
December 31
2015
118
1
2014
53
2
Northview has engaged Starlight to perform certain services, as outlined below. Starlight is a related party as it is controlled by a significant
Unitholder of Northview.
Pursuant to the Transitional Services Agreement dated October 30, 2015, Starlight is to provide transitional services of an asset management
nature for a monthly fee equal to 0.125% annually of the sum of: (i) the agreed upon allocated values of the properties acquired from True North
and its affiliates in connection with the Transaction; (ii) the third party appraised values of the private portfolio acquired by Northview in connection
with the Transaction; (iii) the purchase price of new sourced properties; (iv) the third party appraised values of added properties; and (v) the cost
of any capital expenditures incurred by Northview or any of its affiliates in respect of the properties since the closing date of the Transaction. This
agreement is for a term of three years ending October 30, 2018. At Northview’s option, the term may be renewed for two additional one year
terms.
For the year ended December 31, 2015, the costs of these services aggregated to $356. Of this amount, $113 has been capitalized, while the
remaining $243 has been recognized as administration expenses in the consolidated statements of net and comprehensive income.
28. Segmented information
Management uses geographic segments (i.e. groups of provinces and territories) to manage the properties. The geographic segments consist of
Atlantic Canada (Newfoundland and Labrador, Nova Scotia, and New Brunswick), Northern Canada (Northwest Territories and Nunavut), Ontario,
Québec, and Western Canada (British Columbia, Alberta, and Saskatchewan). In addition, due to the differences between the commercial and
the residential markets, management also reviews operations by market segment. Within the residential property market, execusuites and hotel
are reviewed and managed as separate sub-segments.
Northview’s residential portfolio is comprised of a multi-family segment: apartments, town homes, and single family rental units; and an
execusuites and hotel segment where the rental period ranges from a few days to several months. The commercial business segment is
comprised of office, industrial, and retail properties primarily in areas where Northview has residential operations.
NORTHVIEW 2015 ANNUAL REPORT│70
Northview Apartment Real Estate Investment Trust
Notes to the Consolidated Financial Statements
Years ended December 31, 2015 and 2014
(Tabular amounts expressed in thousands of Canadian dollars except where indicated)
a) Geographic Segments
Year ended December 31, 2015
Rental revenue
Other revenue
Operating expense
Net operating income
As at December 31, 2015
Total assets
Investment properties
Total liabilities
Year ended December 31, 2014
Rental revenue
Other revenue
Operating expense
Net operating income
As at December 31, 2014
Total assets
Investment properties
Total liabilities
b) Market Segments
Year ended December 31, 2015
Rental revenue
Other revenue
Operating expense
Net operating income
As at December 31, 2015
Total assets
Investment properties
Total liabilities
Year ended December 31, 2014
Rental revenue
Other revenue
Operating expense
Net operating income
As at December 31, 2014
Total assets
Investment properties
Total liabilities
Atlantic
Canada
28,896
682
(13,508)
16,070
397,842
378,434
195,385
Atlantic
Canada
24,476
545
(11,512)
13,509
210,922
195,445
124,140
Northern
Canada
87,216
2,308
(34,920)
54,604
624,109
576,806
305,734
Northern
Canada
83,696
2,059
(36,588)
49,167
615,556
568,319
269,688
Ontario
Québec
15,561
528
(8,245)
7,844
981,084
975,821
343,364
4,141
34
(2,151)
2,024
172,993
170,562
141,541
Ontario
Québec
-
-
-
-
-
-
-
1,282
30
(577)
735
8,933
8,900
5,932
Western
Canada
75,368
2,844
(32,055)
46,157
928,606
923,845
436,343
Western
Canada
73,158
2,595
(29,557)
46,196
814,346
809,347
369,728
Total
211,182
6,396
(90,879)
126,699
3,104,634
3,025,468
1,422,367
Total
182,612
5,229
(78,234)
109,607
1,649,757
1,582,011
769,488
Multi-family
Execusuites &
Hotel
Total
Residential
Commercial
Total
167,104
5,257
(71,477)
100,884
2,809,539
2,787,123
1,267,209
11,791
141
(6,632)
5,300
46,483
-
25,941
178,895
5,398
(78,109)
106,184
2,856,022
2,787,123
1,293,150
32,287
998
(12,770)
20,515
248,612
238,345
129,217
211,182
6,396
(90,879)
126,699
3,104,634
3,025,468
1,422,367
Multi-family
Execusuites &
Hotel
Total
Residential
Commercial
Total
140,296
4,107
(58,035)
86,368
1,363,933
1,351,261
657,156
12,277
106
(7,627)
4,756
44,368
-
26,497
152,573
4,213
(65,662)
91,124
1,408,301
1,351,261
683,653
30,039
1,016
(12,572)
18,483
241,456
230,750
85,835
182,612
5,229
(78,234)
109,607
1,649,757
1,582,011
769,488
NORTHVIEW 2015 ANNUAL REPORT│71
Northview Apartment Real Estate Investment Trust
Notes to the Consolidated Financial Statements
Years ended December 31, 2015 and 2014
(Tabular amounts expressed in thousands of Canadian dollars except where indicated)
c) Reconciliation of reportable segment net income
Total net operating income for reportable segments
Financing costs
Administration
Depreciation and amortization
Gain (loss) on sale of property, plant and equipment
Equity income from joint ventures
Bargain purchase gain
Business combination transaction costs
Unrealized fair value changes
Income tax expense
Net and comprehensive income
d) Reconciliation of reportable segment assets
Total assets for reportable segments
Property, plant and equipment
Investment in joint ventures
Intangible assets
Cash
Restricted cash
Accounts receivable
Loans receivable
Instalment notes receivable
Prepaid expenses and other assets
Total assets
e) Reconciliation of reportable segment liabilities
Total liabilities for reportable segments
Credit facilities
Convertible debentures
Trade and other payables
Derivative instruments
Distributions payable
Unit based payments
Class B LP Units
Total liabilities
29. Subsequent events
2015
126,699
(37,957)
(8,999)
(5,030)
(762)
1,070
50,893
(38,959)
(55,103)
-
31,852
2015
3,104,634
329
6,210
(383)
1,805
8,743
5,682
3,941
1,802
(146)
3,132,617
2015
1,422,367
483,743
22,885
7,989
1,515
7,089
788
137,135
2,083,511
2014
109,607
(27,887)
(6,617)
(4,600)
341
1,212
-
-
2,813
(605)
74,264
2014
1,649,757
153
5,310
(340)
-
7,088
1,812
2,362
-
29
1,666,171
2014
769,488
52,052
-
1,251
-
4,311
476
1,612
829,190
Between January 1, 2016, and March 9, 2016, Northview completed new financing and renewals of $135.1 million with interest rates between
1.72% and 5.47% and terms to maturity of 5 to 10 years. Proceeds were used to pay down existing debt and pay down the credit facilities.
On February 18, 2016, the Ontario Ministry of Finance published amendments to regulation 70/91 to the Land Transfer Act (Ontario) that may
impact the transfers of partnership interests in prior fiscal years and the Transaction. Northview is currently evaluating the impact of the
amendments to its consolidated financial statements.
NORTHVIEW 2015 ANNUAL REPORT│72
Trustees of Northview
Douglas H. Mitchell, CM, AOE, QC
Trustee and Chairman of the Board
Officers
Todd R. Cook, CPA, CA
President and Chief Executive Officer
Todd R. Cook, CPA, CA
President, Chief Executive Officer, and Trustee
Leslie Veiner, CPA, CA
Chief Operating Officer
Richard Anda
Vice President, Business Development
Louise Elsey
Corporate Secretary
Kelly Hayden
Vice President, Hotel and Commercial Operations
Bo Rasmussen
Vice President, Property Development
Lizaine Wheeler
Vice President, Residential Operations
Daniel Drimmer
Trustee
Kevin E. Grayston, CPA, CA, ICD.D
Trustee
Dennis J. Hoffman, FCPA, FCA, ICD.D
Trustee
Christine McGinley, CPA, CA, ICD.D
Trustee
Terrance L. McKibbon, ICD.D
Trustee
Graham L. Rosenberg, CPA, CA
Trustee
Scott Thon, ICD.D
Trustee
Corporate Information
ANNUAL GENERAL AND SPECIAL MEETING
Thursday, May 5, 2016
2:30 p.m. MT, 4:30 p.m. ET
Harford Room,
The Ranchmen’s Club
710 – 13th Avenue SW
Calgary, AB T2R 0K9
STOCK EXCHANGE
Toronto Stock Exchange (TSX)
Trading Symbol: NVU.UN
LEGAL COUNSEL
Borden Ladner Gervais LLP
AUDITORS
Deloitte LLP
REGISTRAR AND TRANSFER AGENT
Computershare Trust Company of Canada
CORPORATE OFFICE
110, 6131 – 6th Street SE
Calgary, AB T2H 1L9
Tel: 403.531.0720
Fax: 403.531.0727
Email: info@northviewreit.com
www.northviewreit.com
NORTHVIEW 2015 ANNUAL REPORT│73