REITs offer some of the best income-earning opportunities on the market, often coming with distributions that are 6% or better. Also noteworthy is the diversification appeal that comes with having hundreds of different properties scattered over a large geographic area.
Northview Apartment REIT (TSX:NVU.UN) is a unique investment that perfectly matches that description, while also offering additional key advantages that differentiate the company over its peers.
Location, location, location
Most REITs tend to focus on larger metro areas over less-urban markets. The primary reason for that comes down to the higher rental prices and demand that come from those locations.
Northview, which focuses primarily on the residential market has taken a different approach. The company has placed an emphasis on secondary markets around the country, where demand is still high and competition is low. A prime example of this is in the Northwest Territories and Nunavut, where nearly a third of NOI stems from.
That’s not to say Northview isn’t in the more populous parts of the country; Northview has invested heavily into Ontario in the past year, including a Guelph-based property announced in May and several properties in Toronto.
In total, Northview has nearly 27,000 residential units situated in 60 different markets across eight provinces and two territories. Northview also has a smaller but growing presence in the commercial space that totals 1.2 million square feet.
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Growth and expansion prospects
An impressive portfolio of properties across a large geographic area is not the only thing that Northview offers. Northview has several new developments underway across key markets with a total cost of approximately $130 million. The new developments will add over 700 new units to Northview’s portfolio.
Northview is also investing in its existing inventory of properties. The company’s high-end renovation program achieved an impressive 25.8%rate of return in the first quarter of 2019 with an average monthly rent increase hitting $329 per unit in the quarter.
In the most recent quarter, Northview completed renovations on 136 suites with a total cost of $2.6 million. For the remainder of fiscal 2019, Northview has earmarked upwards of $15 million towards additional high-end renovations.
What about results?
Turning to results, Northview really begins to shine. In the most recent quarter, the company reported revenue of $96.22 million, representing a handsome gain of 9.3% over the same period last year. NOI in the quarter realized an equally impressive gain of 7.8% over the same period last year, coming in at $51.23 million.
A handsome dividend is one of the main reasons why investors repeatedly turn towards REITs, and Northview doesn’t disappoint. Northview offers a monthly distribution that currently provides a 6.06% yield, which makes Northview one of the best-paying options on the market.
Despite that high payout, the distribution is easily covered. In the first quarter, the FFO payout ratio came in at 78.8%.
Northview represents an intriguing opportunity for investors looking for a REIT investment. Not only is the company diversified across multiple markets, but Northview is actively looking at further growth options, both from acquisitions and new development opportunities.
Throw in an impressive dividend with a monthly payout, and Northview makes compelling addition for nearly any portfolio.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.
Fool contributor Demetris Afxentiou has no position in any of the stocks mentioned.