Northview Apartment REIT Has An 8.7% Yield With A 30% Margin Of Safety

Northview Apartment REIT is the third-largest multi-family REIT in Canada with a diversified portfolio across Canada. It has an 8.7% yield, a 30% margin of safety, and a potential upside of 44%. There are multiple value-creation opportunities under execution that could offer even higher returns.

Northview Apartment REIT (TSX:NVU.UN) has a P/FFO of 7.7 while its normal multiple of 11.3 implies there’s a 30% margin of safety with a potential upside of 44% from under C$19 level to the C$27 level, which would be its normal multiple of 11.3.

You might know Northview under its previous name and ticker of Northern Property REIT (TSX:NPR.UN).

Northview is negatively affected by its resource region exposure. By acquiring the True North portfolio last year, Northview has reduced its net operating income exposure from resource regions from 30% to 22%. The True North portfolio allowed Northview to expand into Ontario, Quebec, New Brunswick, and Nova Scotia.

Now, Northview has more than 24,000 suites in 60 markets across 8 provinces and 2 territories. On top of that, it also has 1.2M square feet of commercial real estate. The REIT is being proactive by identifying value creation opportunities, such as identifying REITs for high-end renovation and from its acquisition portfolio–raising rents that are below market as tenant turnover occurs.

Northview believes these value creation opportunities can increase its FFO/unit by C$0.29, equating to an about 12% growth from the 2015’s estimated FFO/unit of C$2.43. Northview is scheduled to release its Q4 earnings on March 9.

Northview has increased its distribution 8 times in 13 years without ever cutting it. Simultaneously, it decreased its payout ratio from over 90% to below 70%.

If commodity prices recover, Northview Apartment REIT will revert to its true value. While waiting, investors can get a decent yield of 8.7%.

This is primarily an excerpt from this Seeking Alpha article: Northview Apartment REIT Has An 8.7% Yield With A 30% Margin Of Safety

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Disclosure: At the time of writing, I’m long TSX:NVU.UN

Disclaimer: I am not a certified financial advisor. This article is for educational purposes, so consult a financial advisor and or tax professional if necessary before making any investment decisions.

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