Dean Wilkinson, CFA Jake Stivaletti, CPA

EQUITY RESEARCH
December 19, 2023 Initiating Coverage

NORTHVIEW RESIDENTIAL REIT

There And Back Again, A Residential Landlord’s Tale
Our Conclusion Neutral
As of December 19, we initiate coverage of Northview Residential REIT NRR-TSX, Sector: Real Estate
(NRR) with a Neutral rating and $12.00 price target. NRR was created by Current Price (12/18/23): C$10.10
way of a recapitalization transaction from its predecessor Northview Fund. Price Target (12-18 mos.): C$12.00
While the REIT’s properties may be largely familiar to the ‘REIT regulars,’ the
vehicles in which they have been held are perhaps less so, with the assets
having found a home in traditional REIT structures and in a high-yield, CIBC Estimates and Valuation
income-oriented fund.
(Dec. 31) 2022 2023 2024 2025
Given the REIT’s passage from what was viewed as a more FFOPS 0.82E 1.87E 2.06E
AFFOPS 0.62E 1.51E 1.69E
income-oriented, high-yield vehicle to a more staid and conservative balance
sheet entity, we believe the market is perhaps viewing NRR as an FFOPS Q1 Q2 Q3 Q4
investment in transition rather than it having reached its final destination, with 2023 0.43A 0.40E
a clear delineation between its higher financial gearing and a yield 2024 0.34E 0.50E 0.57E 0.46E
commensurate with such. We believe that, in time, the normalization of the
AFFOPS Q1 Q2 Q3 Q4
REIT’s balance sheet to be more representative of its direct peers should 2023 0.31A 0.31E
serve as a catalyst for material unit price performance. However, with that 2024 0.25E 0.41E 0.48E 0.37E
said, the path towards such normalization may take some time given the
large NAV discount, and within the context of a 12-month investment Valuation 2022 2023 2024 2025
P/FFOPS 12.3x 5.4x 4.9x
horizon, the predominant high yield attribute may continue to be the REIT’s P/AFFOPS 16.4x 6.7x 6.0x
key distinguishing characteristic in the near term.
Key Points
Elevated Leverage—Near-term Headwind, Long-term Opportunity: NRR, Stock Performance and Key Indicators
as a result of its transition from a high-yield fund, employs a considerably Avg. Dly. Vol.: 5K Shares O/S: 29.5M
higher level of financial gearing than its direct peers. At a D/GBV level of Market Cap.: C$298M Float: 5.6M
~66%, it is some 50%+ higher than the domestic residential REITs (on a 52-wk Range: C$9.59 - C$22.00 Div. / Yield: C$1.09/10.88%
relative basis). While we do expect that leverage will drop over time, it’s also
not something that we anticipate in the near term. That being said, we
believe the market may be looking at NRR’s relative value through such a TSX Composite Index vs. NRR-TSX
normalized lens and any moves which would place its balance sheet on an 30 27,000
equal footing may result in a closing of the significant valuation gap.
24 24,500
Seasoned Management Team: NRR’s management team has an extensive 18 22,000
and successful history as real estate owners, operators, and investors. Key
11 19,500
personnel have been involved with many of the REIT’s assets, dating back
5 17,000
as far as the Northern Property REIT days—there is a significant degree of
Dec-20

Dec-21

Dec-22

Dec-23
Jun-21

Jun-22

Jun-23

institutional memory within both the portfolio and the REIT structure.
NRR-TSX Index
Strong Institutional Backing (Plusses And Minuses): NRR’s largest
unitholders account for ~80% of the REIT’s equity. While such alignment is (Source: FactSet)
positive for the REIT long term, it does create a natural liquidity discount that
has historically come with such centralized ownership. We expect that an
increase in the REIT’s public float, over time, would help to reduce the
current discount valuation.

All figures in Canadian dollars unless otherwise stated.

Please see "Price Target Calculation and Key Risks to Price Target" information on page 10.
For required regulatory disclosures please refer to "Important Disclosures" beginning on page 16.
 There And Back Again, A Residential Landlord’s Tale - December 19, 2023

Northview Residential REIT (NRR-TSX) — Neutral

Price (12/18/23) C$10.10 12-18 mo. Price Target C$12.00
Sector: Real Estate
Dean Wilkinson, CFA

Leadership Team
Todd Cook - CEO
Company Profile
Sarah Walker - CFO Northview is a REIT that owns and operates a portfolio of
Per Share Data 2022 2023E 2024E 2025E income-producing multi-residential rental properties located
Dividends per Share 1.12 1.09 1.09 across Canada.
AFFOPS 0.62 1.51 1.69
Investment Thesis
FFOPS 0.82 1.87 2.06
Northview’s diversified portfolio, by geography and tenant mix,
Source: FactSet, Company Reports, and CIBC World Markets Inc.
mitigates the concentration-related risks generally associated
with commercial property investments. Post-recapitalization,
Price Target Calculation & NAV Northview’s diverse portfolio spreads across Canada and is
CIBC 2024E FFO: $1.87 located predominantly in rental markets with favorable
Target Multiple (2024E FFO): 6.4x demand/supply characteristics. We believe management’s ability
CIBC Price Target: $12.00 to extract incremental value from its portfolio will be derived
Implied 12 — 18 Month Total Return: 30% through occupancy increases and rental lifts. Elevated leverage
CIBC NAV(E): $20.00
will remain a concern and we believe that a normalization of
Premium / (Discount) to NAV: (50%)
NRR’s balance sheet to more peer-like metrics could close the
Cap Rate: 6.50%
large relative valuation gap, but at current levels would be
Total Return 2021 2022 2023
materially dilutive to the REIT on a per unit basis. While the
Price Return n/a n/a (22.4%) continued (and post-recapitalization increasing) institutional
Yield n/a n/a 2.8% ownership serves to substantiate the REIT’s growth prospects, it
Total n/a n/a (19.6%) would be remiss to ignore the implications such ownership has
on current unit liquidity, resulting in a float of ~19%.
Debt Maturity Schedule ($MM) 2023 2024 2025
Price Target (Base Case): C$12.00
Mortgage Maturities $233.3 $144.6 $114.4
Our 12- to 18-month price target is $12.00/unit, which is based
W. Avg. Mortgage Interest Rate 3.8%
on a ~40% discount to our $20.00/unit NAV estimate. Our cap
Liquidity ($MM) rate of 6.5% represents a ~300 bps spread over current 10-year
Cash & Equivalents $18.9 government bonds and is, we believe, fairly representative of
Undrawn Credit Facilities $53.5 recent market transactions (or is theoretically so). For every
Total Liquidity $72.4 25 bps change in cap rates, the estimated NAV would change by
~13%.
SPNOI Growth % Q1 Q2 Q3 Q4
Upside Scenario: C$20.00
2023 n/a n/a 0.3%
We assume that NOI is above our base case expectations, cap
2022 n/a n/a n/a n/a
2021 n/a n/a n/a n/a rates are lower, and units trade at a ~10% discount to NAV.
Downside Scenario: C$5.00
Portfolio Breakdown (Q3/23) % Suites We assume a reduction in NOI, driven by a reduction in
Atlantic Canada 28% occupancy, coupled with a reduction in rental growth and NOI
Central Canada 6%
margins.
Western Canada 49%
Northern Canada 17% Scenario Analysis:
Total 100% $25 Upside Scenario
2024E 2025E $20.00 (+97%)
Comparables Table $20
FFO Multiples
Northview 5.4x 4.9x $15 Price Target
$12.00 (+18%)
Peer Group1 17.7x 16.6x
AFFO Multiples $10
Northview 6.7x 6.0x
Downside Scenario
Peer Group1 20.5x 19.1x $5 $5.00 (-51%)
Note1: KMP.UN, IIP.UN, CAR.UN and MI.UN. $0
Source: Company reports, FactSet, CIBC World Markets Inc.
Nov-21

May-22

Nov-22

May-23

Nov-23

May-24

Nov-24

Leverage Summary Q3/23 Q3/22 Limit

Debt Service Coverage
1.4x n/a 1.20x
Ratio:
IFRS D / GBV (Net of
65.8% n/a 70.0%
Cash):

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There And Back Again, A Residential Landlord’s Tale - December 19, 2023

Executive Summary
As of December 19, we initiate coverage of Northview Residential REIT with a Neutral rating
and a 12- to 18-month price target of $12.00. Our price target is based on a ~40% discount to
our $20.00 net asset value (NAV) estimate (or an equivalent ~5% discount to our peer group
normalized balance sheet NAV of $13.80/unit) and implies an ~8x 2024E AFFO multiple (or
16.3x on a ‘normalized’ basis, a modest discount to its closest Canadian apartment REIT
peers on a ‘like-for-like’ comparison). To be clear, our price target is relative to the current
unit value of the REIT, and, as such, is ostensibly independent of the value of the underlying
real estate, which more precisely reflects current public market participants’ desire to invest in
lower-leverage balance sheets given the ensuing rate environment.

Key Investment Highlights

Focus On Defensive Asset Class: Residential real estate tends to have relatively lower risk
due to its necessity-based tenancies and is, historically speaking, less affected during times
of economic stress (people have to live somewhere and Canada has a chronic housing
shortage). Additionally, Northview’s diversified portfolio, by geography and tenant mix,
mitigates the concentration-related risks generally associated with commercial property
investments. These characteristics have resulted in relatively high and stable occupancy
levels across the apartment industry, with observed vacancies on an aggregate basis
generally not exceeding 5% historically (see Appendix 2 for an industry summary).

Diversified Portfolio With Significant Scale: Post-recapitalization, Northview’s diverse

portfolio spreads across Canada and is located predominantly in rental markets with
favorable demand/supply characteristics. On the demand side, we expect the portfolio to
continue to benefit from sustained economic growth in its key market of Alberta, where there
is a notable absence of rent controls, strong immigration tailwinds and an increase in the
propensity to rent (driven by the ongoing deterioration of home ownership affordability). On
the supply side, we expect Northview to benefit from constrained rental supply in its key
markets primarily due to rapidly increasing development, financing, and land costs.

Embedded Internal Growth: We believe management’s ability to extract incremental value

from its portfolio will be derived through occupancy increases and rental lifts. In Q3/23,
same-door net operating income (NOI) increased by 0.3%, as NOI gains from Western
Canada, Atlantic Canada and Central Canada were offset by a decrease in Northern Canada,
the largest regional contributor of NOI. Much of the offset was due to lower revenues
resulting from rental abatements, which we expect to moderate going forward, provided to
tenants due to the wild fires in Yellowknife.

Strong Institutional Alignment—A Near-term Drag On Trading Liquidity? Starlight

Investments, through its affiliates, is the REIT’s largest unitholder with a ~28% effective
interest, while KingSett Capital (through certain of its affiliated funds) is the second-largest
unit holder, owning ~22% of the REIT. In addition to the above, one of the two institutional
investors who vended in the Winnipeg portfolio owns ~16%, while an existing institutional
investor owns ~14% of the REIT. Given the high institutional ownership serves to
substantiate the REIT’s growth prospects, it would be remiss to ignore the implications such
ownership has on current unit liquidity, resulting in a float of ~19%. We view the additional
liquidity risk as a potential valuation mitigant, further supported by the 30-day average volume
at approximately 4,800 units/day. While the theoretical and obvious catalyst would be an
increase in liquidity, we view this as unlikely during our initial forecast period given the units
held institutionally have lock-up periods ranging from 18 to 21 months.

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There And Back Again, A Residential Landlord’s Tale - December 19, 2023

Elevated Leverage Is A Concern: Post-recapitalization, the REIT’s D/GBV sits at ~66%,

previously at ~71%, with the percentage of variable rate debt falling from ~44% at year-end
2022 to ~25%. The REIT’s total debt amounts to ~$1.47B. While we view this step as one in
the right direction, relative leverage will remain a concern given the REIT’s domestic
residential peer group has an average D/GBV of ~42% and an average variable debt as a
percentage of total debt of less than 10%. We believe that a normalization of NRR’s balance
sheet to more peer-like metrics could close the large relative valuation gap, but at current
levels would be materially dilutive to the REIT on a per unit basis.

Potential For Dividend Growth: Our 12-month forward forecast AFFO payout is projected to
be ~72%, leaving management with sufficient room to increase distributions in the future and
potentially drive yields higher. However, at this time we would suggest that, at a yield
currently in excess of 10%, the best use of any excess capital would be squarely focused on
debt reduction.

Company Overview
North By Any Other Name
Northview Residential REIT is a TSX-listed REIT under the ticker NRR that focuses on
investing and operating in multi-residential apartment properties across Canada. While newly
listed, the REIT has a lengthy track record, dating back to Northern Property REIT’s
acquisition of True North REIT to form Northview Apartment REIT (2015-2019). In 2020,
Starlight Investments and KingSett Capital completed the acquisition of Northview Apartment
REIT, resulting in the subsequent name change to Northview Canadian High Yield
Residential Fund (2020-2023), a public, closed-end fund, and the adoption of a higher
leverage, higher payout strategy—the initial targeted yield on the fund was 10.5% with a limit
on indebtedness of up to 70% D/GBV in the aggregate. Upon the recent closing of the
recapitalization event, in August 2023, Northview Residential REIT was created.

As part of the aforementioned recapitalization, the REIT increased its support from its existing
institutional investors, including affiliates of Starlight Investments and KingSett Capital, and
garnered a new, significant investment from a global institutional investor. Although providing
strong alignment, the undesired effect of strong institutional ownership is a drag on liquidity
and, in turn, the unit price, as built-in unit lock-ups serve to increase liquidity risk through our
forecast period. Upon the restructuring of Northview Fund into Northview Residential REIT,
NRR moved from external to internalized management and reduced leverage by ~500 bps.
Concurrent with the recapitalization event, the REIT consolidated its units on a 1.75:1 basis
and reduced the distribution by ~50% from a level of $1.26 per annum per Class A unit to
$0.625 per Class A unit (pre-consolidation), bringing the payout ratio to a much more
sustainable level than the previous six months ended June 2023 of 140%. The table in
Exhibit 1 details the vend-in portfolio completed as part of the recapitalization event.

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There And Back Again, A Residential Landlord’s Tale - December 19, 2023

Exhibit 1: NRR – Vend-in Portfolio, 2023

AB/ON/NS/QB Portfolio
Number Of Suites /
Address Location Commercial Square Feet
6 Kingsview Road SE Airdrie, Alberta 140
20, 40, 60, 80 & 100 Skyview Ranch Landing NE Calgary, Alberta 419
915 44 Street SE Calgary, Alberta 35
78, 80, 90 & 92 Geikie Street Jasper, Alberta 230/370 sq. ft.
1415-1800 rue Crevier, 1655-1675 rue Tasse, 1650-1670 rue Deguire & 1660-1684
rue Poirier Montreal, Quebec 420/4,490 sq. ft.
1, 6, 7 & 10 Crystal Drive Dartmouth, Nova Scotia 114
1 & 3 Farthington Place Dartmouth, Nova Scotia 94
31 & 35 Highfield Park Drive & 11 Joseph Young Drive Dartmouth, Nova Scotia 111
15, 25 & 35 Leaman Drive & 81 Jackson Road Dartmouth, Nova Scotia 161
36, 60, 65 & 81 Primrose Street Dartmouth, Nova Scotia 242
211-221 Glenforest Drive, 185-199 Willet Street and 13, 17- 43 & 57 Willowbend Court Halifax, Nova Scotia 50
9-54 Paige Plaza & 11-15 Downsview Drive Lower Sackville, Nova Scotia 72/2,288 sq. ft.
Total 2,088/7,148 sq. ft.

Starlight Portfolio
Number Of Suites /
Address Location Commercial Square Feet
129 Wellington Street Brantford, Ontario 129/470 sq. ft.
150 Darling Street Brantford, Ontario 121/828 sq. ft.
253 & 263 Exhibition Street Guelph, Ontario 22
10049 103 Street NW Edmonton, Alberta 96/10,234 sq. ft.
Total 368/11,532 sq. ft.

Winnipeg Portfolio
Number Of Suites /
Address Location Commercial Square Feet
160 Smith Street Winnipeg, Manitoba 34
26 & 45 Hargrave Street Winnipeg, Manitoba 428
525 & 555 St. Mary Avenue (Colony Square) Winnipeg, Manitoba 84,212 sq. ft.
70 Garry Street Winnipeg, Manitoba 198
Total 845/100,963 Square Feet
Source: Company reports and CIBC World Markets Inc.

Pre-recapitalization Portfolio Performance

The pre-recapitalization portfolio had a weighted-average monthly in-place rent of
~$1,299/suite as of Q2/23 ($1,301 for the total portfolio as of Q3/23), at the lower end of all
the Canadian-focused, public, multi-residential REITs. In addition, the pre-recapitalization
portfolio had a weighted-average occupancy of 94.1%, a 320 bps increase Y/Y. We do note
that while the REIT’s geographic footprint is diverse on a suite basis the higher rents in the
Northern portfolio do result in a much higher economic exposure there.

Exhibit 2: NRR – Weighted-average Portfolio Occupancy, Q2/22 And Q2/23 (left), Weighted-average Portfolio Average
Monthly Rent, Q2/22 And Q2/23 (middle), And NOI Contribution By Region, Q3/23 (right)
100% $2,500 Central
Canada
95% $2,000 3%
Western
90% 36%
$1,500 Northern
85% 39%
$1,000
80%

75% $500

70% $-
Western Atlantic Northern Consolidated Western Atlantic Northern Consolidated
Atlantic
Q2/2022 Q2/2023 Q2/2022 Q2/2023 22%

Source: Company reports and CIBC World Markets Inc.

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There And Back Again, A Residential Landlord’s Tale - December 19, 2023

Corporate Objectives
Northview Residential REIT’s objectives are to:

1. Own and operate a high-quality, geographically diversified real estate portfolio,

comprising income-producing multi-residential suites, commercial real estate, and
execusuites; and,
2. Generate stable income to support monthly cash distributions.

Bringing Management In House

The internalization of management activities, which is our generally preferred structure,
should serve to produce significant cost savings. Upon completion of the recapitalization
transaction, the management agreement dated November 2, 2020, for Starlight Investments
CDN AM Group LP, the Fund and Northview Canadian HY Properties LP was terminated.
There was no payment or termination fee in connection with the internalization. Upon
completion of the transaction, the carried interest represented by the Class B LP Units of
Northview Canadian HY Holdings LP held by Starlight became exchangeable into ~2.8MM
Class C Units of the Fund.

Northview’s management team will maintain portfolio continuity, and will be employed directly
by the REIT. Please refer to Appendix 1 for further details.

Northview’s Growth Strategies

Northview plans to pursue a growth strategy primarily through organic growth initiatives in the
near term. Beyond the generally favorable economic and demographic fundamentals within
its primary markets, we expect the REIT’s near-term growth profile to benefit from
below-market in-place rents and continued occupancy level increases, while in the long term,
intensification and repositioning initiatives and future acquisitions could result in incremental
external growth.

Internal Growth: The two main organic growth levers the REIT has at its disposal are
occupancy improvements and rental rate growth. Management has made substantial strides
in regards to occupancy improvements within the pre-recapitalization portfolio, posting a
250 bps increase Y/Y in the same-door rental portfolio in Q3/23 (from 92.1% to 94.6%). While
the increase in occupancy levels is encouraging, the REIT still remains below its domestic
multi-residential peers with an average of ~97.5%. As of Q3/23, Northview has seen
same-door AMR grow from $1,276 to $1,316, representing an increase of ~3%. This
compares to its domestic peers posting an average same-property AMR increase of ~6% in
the comparable period.

Upon achieving effectively full occupancy levels (95%+), we believe that the REIT will be able
to drive its organic growth by incrementally bringing its in-place rents to market over the next
few years, moving further in line with the growth seen by its peers. We do note, however, that
the process of marking rents to market can and does take time, and with increasing demand
driving rental rates to record highs, we anticipate that a renter’s propensity to maintain their
current address will increase, leading to longer tenancies and lower portfolio turnover.
Indeed, this is a scenario we have seen play out over the past year as many of the domestic
peers’ portfolio turnover has dropped substantially.

While not expected in the near term, management has indicated that there is future
optionality regarding development and intensification of additional multi-residential rental
units on certain properties in the Northern portfolio. These properties tend to have excess
land and are lower density sites.

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There And Back Again, A Residential Landlord’s Tale - December 19, 2023

External Growth: The Northview management team has a proven and tried history of
acquisition execution, successfully completing ~$672MM of growth acquisitions from
2017-2019 (apart from the integration with True North Apartment REIT). This was further
bolstered by the ~$742MM acquisition of Northview Residential REIT as part of the
recapitalization transaction. The management team will continue to take advantage of
attractive acquisition opportunities for both NOI and NAV growth using disciplined leverage,
although this is not our base case as we view a reduction in leverage to be more in line with
peers as a more effective allocation of any retained cash flow.

Commitment To ESG
Northview is committed to enhancing its long-term ESG strategy as it continues to assess
sustainability-related opportunities, support diversity and inclusion efforts, provide a safe and
healthy environment for all employees, and comply with all applicable environmental laws
and regulations.

Environmental: Northview is committed to an annual investment of $1MM towards

energy-efficient retrofits across the portfolio, piloting solar projects and waste management
through technology and the replacement of heating oil boilers with natural gas boilers.

Social: The REIT partners with social housing programs across the country and has
implemented health and safety programs designed to enhance the safety of staff, residents
and tenants. Inclusive policies and practises are also designed to prevent discrimination and
harassment.

Governance: The Board of Trustees adopted a strong governance framework in 2020 which
has subsequently been carried across into the formation of the REIT, as well as a Code of
Conduct and a Whistleblower and Disclosure policy.

Financial Forecasts
We outline our key assumptions for our forecasts in the following section. Please refer to
Appendix 3 for our Northview financial forecasts.

Same-property Revenue Growth: We believe that Northview will be able to achieve

sustainable long-term SP-NOI growth in the 3%-4% range, reflecting below-market in-place
rents, increasing occupancy levels, and strong economic and demographic fundamentals in
Northview’s core markets, somewhat offset by existing rent control legislation.

Margins: Our forecast implies an annualized NOI margin assumption of ~57%.

Occupancy: We assume that Northview will achieve occupancy levels of ~96% through
2024E and ~87% in the commercial portfolio.

Rental Rates: We have assumed an average in-place monthly rental rate of ~$1,300/suite
beginning in Q4/23E, increasing to ~$1,400/suite by the end of the forecast period.

Interest Expense: Mortgage rates remain below current market rates on the REIT’s fixed
rate debt, while sensitivity does remain given the REIT has ~19% of total mortgage debt
maturing in 2024 at a weighted-average interest rate of ~5%. Of the REIT’s total debt, ~25%
remains at floating rates.

G&A/Trust Expenses: We assume that corporate expenses equal 3.0%-4.0% of revenue

over the forecast period, which equates to approximately 33 bps of the value of the Income
Producing Properties.

FFO And AFFO

Our FFO and AFFO estimates are detailed in Appendix 3. We project that Northview will
generate Y/Y FFO and AFFO growth of ~10% and ~12%, respectively, for 2025. Our AFFO
forecast assumes $1,000/suite in normal annual maintenance capex.

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There And Back Again, A Residential Landlord’s Tale - December 19, 2023

Dividend Policy
Northview currently pays an annual dividend of $1.09/unit, a ~50% reduction from the
previous $2.20/unit (after taking into consideration the unit consolidation). Within the realm of
the listed Canadian apartment REITs, NRR is currently the only REIT that has chosen to
reduce its distribution (a decision which we believe was necessary given the nature of the
high-yield predecessor). We’ve observed in other asset classes that the post-distribution cut
yield often tends to revert to that of the pre-distribution cut (likely a function of the
yield-oriented investor base), which we would note holds true with NRR as well. The current
annual distribution equates to ~72% of 2024E AFFO. We believe, therefore, that the dividend
is well covered in the immediate term. While there appears to be the potential for the
distribution to grow over the next few years, this is not our base case as we believe any
retained cash flow will be used to reduce leverage, primarily floating rate debt exposure.

Balance Sheet/Liquidity
Northview has above-average financial leverage, however adequate liquidity, as of Q3/23. Its
reported D/GBV of 65.8% is substantially higher than the Canadian residential REIT peer
group average (~42% as of Q3/23). Further, management has indicated that the REIT had
~$53MM of undrawn capacity on its credit facilities as of Q3/23. As previously noted, NRR
was created by way of a recapitalization transaction from its predecessor Northview Fund
(formerly the Northview Canadian High Yield Residential Fund). As such, the REIT has
inherited a rather unique capital structure. While the properties of the REIT may fit the
traditional mould, the vehicles in which they have been held perhaps do not, with the assets
having found a home in both traditional REIT structures and in a high-yield, income-oriented
fund. Accordingly, we view a reduction in leverage as the best use of capital and likely the
largest catalyst in unlocking unit value over time.

Debt Maturities
NRR has ~$233MM of mortgages maturing through 2024 at a weighted-average interest rate
of ~5%. Given the higher rate of its near-term debt maturities we believe the refinancing risk
is limited (~19% of mortgages due to mature through 2024); however, we note that the REIT
has a larger proportion of maturing debt from 2025 onwards (~12%, ~10% and ~14% of total
mortgages in each of 2025, 2026 and 2027, respectively) at expiring rates ranging from
2.40%-3.80%. That being said, the laddering of the REIT’s debt obligations is, in general, a
common practice, and we believe the majority of investors are more than familiar with the
current interest rate environment (and the implications thereto). If the market does play out as
most economists expect, then NRR stands to benefit from a decrease in rates by 2025,
minimizing any material refinancing risks.

Valuation
In deriving our $20.00/unit NAV estimate for Northview, we use a 6.50% cap rate applied to
our forward NOI forecast—this equates to an implied 5.65% cap rate on the Q3/23 run-rate
NOI. This cap rate represents a ~300 bps spread over current 10-year government bonds
and is, we believe, fairly representative of recent market transactions (or is theoretically so).
For every 25 bps change in cap rates, the estimated NAV would change by ~13%.

Exhibit 3: NRR – Current NAV Estimate

Cap Rate
5.75% 6.00% 6.25% 6.50% 6.75% 7.00% 7.25%
Implied Value Of IPP 2,791,617 2,675,299 2,568,287 2,469,507 2,378,044 2,293,114 2,214,041
Total Debt 1,467,659 1,467,659 1,467,659 1,467,659 1,467,659 1,467,659 1,467,659
NAV/Unit ($) 28.93 25.71 22.74 20.00 17.46 15.11 12.91
Source: Company reports, FactSet and CIBC World Markets Inc.

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There And Back Again, A Residential Landlord’s Tale - December 19, 2023

Comparable Valuation
Given the unique structure of NRR’s balance sheet relative to its direct peers, we believe that
the market may be taking a more ‘normalized’ view of its relative valuation metrics and, thus,
resulting in a wider discount on face value. If one were to normalize the relative leverage by
assuming an equity injection such that NRR’s overall leverage declined from the current
~65% to a more peer average mid-40% range (something we do believe is a longer-term
target for the REIT), then the potentially dilutive impact can be viewed perhaps on a more
apples-to-apples basis (as opposed to assigning a de facto leverage discount on an
unaffected basis). The theoretical equity injection used in our model would amount to an
issuance of ~47MM units. While such an exercise is, we acknowledge, by its very nature
theoretical, at best it does serve to illustrate the implied valuation disconnect the market may
indeed be inferring.

In the table in Exhibit 4 we compare the relevant metrics on our current forecast vs. the
theoretical normalized balance sheet that would have NRR more closely resemble its direct
peer group. While we acknowledge such an approach may seem arguably unorthodox, we
believe that it may explain the wide valuation differential that the market has applied to NRR’s
units in the face of investor aversion to more highly leveraged balance sheets amid a
higher-for-longer rate environment. Put another way, it is possible that as a private entity the
REIT could garner a potentially higher valuation as a private investor may not be as sensitive
to current leverage levels in the context of a longer-term investment.

Similarly, we note that the secondary market nature of many of the REIT’s locations do
garner higher cap rates than those of many of the more urban-focused peers. If we accept
the premise that a cap rate is essentially the inverse of an unleveraged earnings multiple, all
else equal, an average ~170 bps higher cap rate ought equate to an unleveraged multiple
differential of approximately 5.4x. If an assumed multiple discount of 2x were applied to
account for significantly higher leverage and an additional 2x multiple discount were applied
to account for liquidity, it would imply a multiple discount in line with our $12.00 price target.

We also make the observation that the dilutive impact of normalizing the balance sheet
would, out of necessity, in all likelihood require a reset of the current distribution, decreasing
to ~$0.50/unit, to a payout level also in keeping with the broader peer set assuming the
objective were to appeal to the broader multi-family investor rather than a more yield-oriented
investor set.

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There And Back Again, A Residential Landlord’s Tale - December 19, 2023

Exhibit 4: NRR – Peer Comparison Using Both Our Current Forecast And Normalized Balance Sheet Forecast
NRR-U
BEI-U CAR-U IIP-U KMP-U MI-U NRR-U Average Normalized
Assets
Apartment Units 33,846 64,461 12,728 25,108 6,712 14,422 26,213 14,422
BV Of IPP $7,502,442 $16,482,890 $4,315,966 $4,982,691 $2,572,645 $2,637,124 $6,415,626 $2,637,124
Implied BV Per Suite (000) $221.66 $255.70 $339.09 $198.45 $383.29 $182.85 $263.51 $182.85
IFRS NAV $82.07 $54.36 $17.62 $23.34 $23.01 $26.36 $16.41
Consensus NAV R[1] $52.89 $14.15 $20.91 $20.37 $20.00 $13.80
IFRS CAP Rate 5.05% 4.25% 4.22% 4.53% 4.06% 6.47% 4.76% 6.47%

Liabilities
D/GBV 43.10% 41.40% 38.60% 42.80% 42.80% 65.80% 45.75% 46.00%
Avg Rate 2.90% 2.73% 3.48% 3.00% 3.23% 3.77% 3.19% 3.77%
DSCR 2.9x 1.8x 1.5x 1.5x 1.5x 1.4x 1.8x 1.4x
% Fixed Rate Debt 100% 99% 95% 95% 90% 75% 92% 75%
2024 Maturities
% Of Debt 12.4% 10.1% 12.8% 14.4% 8.1% 18.7% 12.75% 18.7%
Expiring Rate 2.93% 2.91% 5.33% 2.66% 3.24% 4.95% 3.67% 4.95%
2025 Maturities
% Of Debt 17.3% 10.7% 13.3% 16.7% 20.2% 12.1% 15.06% 12.1%
Expiring Rate 2.44% 2.56% 3.24% 2.10% 5.16% 2.99% 3.08% 2.99%

Operations
Occupancy 98.50% 98.90% 95.20% 97.10% 97.80% 94.70% 97.03% 94.70%
AMR $1,357 $1,490 $1,576 $1,355 $1,837 $1,301 $1,486 $1,301
SP-NOI (Last Quarter) 12.10% 7.80% 10.50% 8.10% 6.90% 0.30% 7.62% 0.30%
SP-NOI YTD 12.70% 7.10% 12.00% 7.50% 10.50% 5.20% 9.17% 5.20%
NOI Margin (Last Quarter) 62.90% 66.50% 67.60% 67.60% 64.80% 61.00% 65.07% 61.00%

Distributions
Distribution (Annual) $1.17 $1.45 $0.38 $0.70 $0.51 $1.09 $0.50
Distribution Yield 1.8% 3.2% 3.2% 4.1% 3.6% 10.8% 4.44% 4.9%
Payout (2024E FFO) R[1] 57% 62% 59% 59% 58% 54% 57%
Payout (2024E AFFO) R[1] 67% 69% 69% 67% 72% 64% 68%

Valuation
Unit Price (11/27/2023) $64.99 $45.08 $11.98 $16.95 $14.25 $10.11 $10.11
Discount To NAV R[1] -15% -15% -19% -30% -49% -23% -27%
P/FFO (2024E) R[1] 17.7x 19.6x 14.2x 16.6x 5.4x 15.1x 11.6x
P/AFFO (2024E) R[1] 20.7x 21.8x 16.6x 18.8x 6.7x 17.8x 13.7x

Price Target R[1] $50.00 $13.50 $20.00 $19.00 $12.00 $12.00

Implied Multiple R[1] 22.9x 24.5x 19.6x 25.0x 8.00x 23.5x 16.25x
[1] BEI.UN is under Equity Research Publication Restriction.
Source: Company reports, FactSet and CIBC World Markets Inc.

Price Target Calculation

Our 12- to 18-month price target is $12.00/unit, which is based on a ~40% discount to our
$20.00/unit NAV estimate. Our cap rate of 6.5% represents a ~300 bps spread over current
10-year government bonds and is, we believe, fairly representative of recent market
transactions (or is theoretically so). For every 25 bps change in cap rates, the estimated NAV
would change by ~13%.

Key Risks To Price Target

Risks include the potential for an unanticipated increase in interest rates, an unexpected
deterioration in residential leasing conditions, and a diversion of investors’ capital flows away
from high-yielding real estate equities toward other asset classes. We note that the multiple
classes of units retain equal voting rights, thus limiting the governance issues that typically
arise from dual-class ownership.

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There And Back Again, A Residential Landlord’s Tale - December 19, 2023

Appendix 1: Management Team

Northview benefits not only from a highly experienced internal management team, but one
that has been able to maintain portfolio continuity and provide an in-depth and intimate
knowledge of the underlying assets.

Todd Cook – Chief Executive Officer

Chief Executive Officer Todd Cook has over 20 years of experience in the real estate sector,
formerly serving as the Chief Financial Officer of TGS North American REIT (acquired by a
subsidiary of The Great West Life Assurance Company in June 2006). Mr. Cook joined
Northern Property REIT in 2006 as the CFO, holding various senior executive positions
before being appointed President and Chief Executive Officer in 2014. In 2015 Mr. Cook led
the acquisition of True North Apartment REIT, resulting in the creation of Northview
Apartment REIT, for which he served as the President and CEO of the newly created entity.
Given the aforementioned timeline, Mr. Cook has over 17 years of experience investing and
operating many of the assets within the Northview Residential REIT portfolio.

Sarah Walker – Chief Financial Officer

Sarah Walker is the REIT’s Chief Financial Officer and was appointed Chief Financial Officer
of Northview Fund in April 2021. Previously Ms. Walker was the Vice President Controller
from 2015-2021 and Director Accounting from 2010-2015 of WestJet Airlines Ltd. in Calgary.

Linay Freda – Vice President, Operations

Ms. Freda joined Northview Apartment REIT in 2009, and was appointed Regional VP of
Northern Canada in 2015 and VP, Operations, Northern Operation on the formation of the
fund in 2020.

Karl Bomhof – Vice President, General Counsel and Human Resources

Mr. Bomhof joined Northview Apartment REIT in 2019 as the VP, Legal and Corporate
Secretary. Prior to his time at the REIT Mr. Bomhof was President and CEO of FortisAlberta
Inc. and held several senior executive roles since 2010.

Appendix 2: Industry Snapshot

Our assessment of Northview’s ability to drive sustained growth is rooted in an analysis of the
multi-family asset class and the market fundamentals within its focus geographic markets
(which we believe ultimately determine the sustainability of rental growth and occupancy
maximization).

Stable Asset Class: Investors, lenders and rating agencies have historically viewed the
multi-residential rental sector as one of the most stable real estate asset classes in Canada:

1. According to data from NCREIF, the multi-residential real estate sector has been the
best-performing risk-adjusted real estate asset class (as measured by annualized total
return divided by the standard deviation of annualized return), generating higher returns
through various cycles, and outperforming other major real estate asset classes in
Canada from 1981-2021 (see the bar chart in Exhibit 5);

2. A diversified portfolio, with little reliance on large tenants, has resulted in relatively high
and stable occupancy levels, with an average national vacancy rate for purpose-built
rentals of 3.2% from 1990-2021 per CMHC data (in 2022 Canada’s 1.9% vacancy rate
was at its lowest level since 2001); and,

3. Improvement costs on turnover are generally low and predictable, resulting in a more
stable and predictable cash flow profile compared to other real estate asset classes.

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There And Back Again, A Residential Landlord’s Tale - December 19, 2023

Exhibit 5: Canadian Real Estate – Risk-adjusted Returns, 1981 - 2021

1.4x

1.2x

1.0x

0.8x

0.6x

0.4x

0.2x

0.0x
Multi-Residential Industrial Retail Office

Source: Company reports, NCREIF and CIBC World Markets Inc.

Compelling Demand Fundamentals: We expect rental housing demand in Northview’s core

markets to continue to benefit from a general increase in the propensity to rent (driven by a
general deterioration of home ownership affordability), sustained economic growth and strong
population growth stemming from immigration. Indeed, even with a sizeable expansion in
Canada’s purpose-built rental stock in 2022, the vacancy rate plunged to its lowest point in
over two decades to 1.9%. Accordingly, fierce competition for units resulted in the highest
annual increase in rent growth on record.

Increase In Propensity To Rent: The continued and seemingly unchecked growth in

Canadian housing prices continues to widen the affordability gap between renting and home
ownership. It is further exacerbated by skyrocketing borrowing costs, with interest rates
having risen to the highest level in over 20 years (in addition to the lack of clarity regarding
the magnitude and directionality of near- to medium-term adjustments). As such, we believe
an increasing proportion of households are now forced into the rental market with the dream
of obtaining home ownership likely being pushed out of reach.

Sustained Economic And Population Growth: Despite a significant slowdown in the

economy since the downturn in the oil and gas industry, 2022 marked a significant milestone
for NRR’s key market of Alberta as real GDP fully recovered from 2014 levels. In addition,
Alberta’s unemployment rate has fallen to 5.8%, its lowest level since 2014 (4.7%), and we
expect it to remain relatively flat through to the end of 2024. This compares to the national
average of 5.3%.

In terms of population growth, Alberta continues to outpace the national average. According
to Statistics Canada, in 2022 Alberta captured ~11% of new immigrants to Canada, while
British Columbia captured ~14%. Statistics Canada estimates that in terms of population
growth, Alberta and BC are poised to outpace all provinces, excluding Ontario, through to
2043, with Alberta and BC estimated to grow ~54% and ~36%, respectively (based on
Statistics Canada’s high-growth scenario projections).

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There And Back Again, A Residential Landlord’s Tale - December 19, 2023

Exhibit 6: NRR’s Core Markets – Economic Data And Trends, 2019 - 2024E

Alberta - Economic Data And Trends Newfoundland - Economic Data And Trends
15% 20%

15%
10%
10%
5%
5%
0%
0%

-5% -5%

-10% -10%
2019 2020 2021 2022 2023E 2024E 2019 2020 2021 2022 2023E 2024E

Population Growth Real GDP Growth Unemployment Rate Population Growth Real GDP Growth Unemployment Rate

British Columbia - Economic Data And Trends

10%
8%
6%
4%
2%
0%
-2%
-4%
-6%
2019 2020 2021 2022 2023E 2024E

Population Growth Real GDP Growth Unemployment Rate

Source: Company reports, FactSet, Statistics Canada and CIBC World Markets Inc.

Compelling Supply Fundamentals: With home ownership rates at 30-year lows, the topic of
Canada’s housing supply has been prevalent in headlines over the past several years. While
supply increased a strong ~3% in 2022 (the largest increase since 2013), it was more than
outpaced by the rapid increase in demand for rental units (a trend we anticipate will remain in
place well into the foreseeable future). In recent years, continued low vacancy rates have
been witnessed in NRR’s core markets, another trend that we believe will persist for the near
future.

Furthermore, rent control legislation and elevated interest rates, combined with high land
values and construction costs (including rapidly increasing development charges), have
made it increasingly difficult for developers to justify new construction of purpose-built rental
apartment buildings, as the returns on these investments are, more often that not, lower than
acquiring existing assets in the market (to put it simply, the math just doesn’t work). As such,
we believe the pick-up in planned and ongoing purpose-built rental activity over the last few
years could moderate in the near to medium term, resulting in an even more constrained
rental supply in the REIT’s core markets.

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There And Back Again, A Residential Landlord’s Tale - December 19, 2023

Appendix 3: Financial Forecasts

Exhibit 7: NRR – Consolidated Statement Of Income And FFO/AFFO, 2024E - 2025E ($000, except per unit)
Combined Statements Of Income Q1/24E Q2/24E Q3/24E Q4/24E 2024E 2025E
Revenue
Rental Revenue 65,440 66,215 67,151 67,775 266,580 276,938
65,440 66,215 67,151 67,775 266,580 276,938
Operating Expenses - 31,507 - 27,475 - 26,189 - 30,050 - 115,221 - 119,752
33,933 38,740 40,962 37,724 151,359 157,185
Other Expenses
Interest Expense - 19,912 - 19,912 - 19,912 - 19,912 - 79,648 - 79,648
Earnings Before The Undernoted 14,021 18,828 21,050 17,812 71,711 77,537
Administration - 2,127 - 2,152 - 2,182 - 2,203 - 8,664 - 8,724
Distributions Paid To Unitholders - 7,782 - 7,782 - 7,782 - 7,782 - 31,130 - 31,130
Interest And Other Income - 911 - 911 - 911 - 911 - 3,644 - 3,644
Equity In Earnings(Loss) Of Joint Ventures 300 300 300 300 1,200 1,200
Net And Comprehensive Income (Loss) 3,501 8,283 10,474 7,216 29,474 35,240
Distributions Recorded As Interest 7,782 7,782 7,782 7,782 31,130 31,130
FFO 11,283 16,065 18,257 14,999 60,603 66,370
FFO Per Unit – Basic $0.39 $0.56 $0.64 $0.52 $2.12 $2.32
FFO Per Unit – Diluted $0.34 $0.50 $0.57 $0.46 $1.87 $2.06
Less: Maintenance Capex 3,587 3,587 3,587 3,587 14,349 14,642
AFFO 7,696 12,478 14,669 11,411 46,254 51,728
AFFO Per Unit $0.25 $0.41 $0.48 $0.37 $1.51 $1.69
Source: Company reports, FactSet and CIBC World Markets Inc.

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There And Back Again, A Residential Landlord’s Tale - December 19, 2023

Exhibit 8: NRR – Combined Statement Of Financial Position, 2023E - 2025E ($000)

Q3/23 Q4/23E 2023E 2024E 2025E

Assets
Non-current Assets
Investment Properties 2,637,124 2,637,124 2,637,124 2,637,124 2,637,124
Property, Plant And Equipment 29,803 29,803 29,803 29,803 29,803
Other Long-term Assets 2,312 2,312 2,312 2,312 2,312
Investments In Joint Ventures 13,863 14,163 14,163 15,363 16,563
2,683,102 2,683,402 2,683,402 2,684,602 2,685,802
Current Assets
Cash 18,946 23,895 23,895 52,169 86,209
Restricted Cash 7,619 7,619 7,619 7,619 7,619
Accounts Receivable 7,439 7,439 7,439 7,439 7,439
Prepaid Expenses And Other Assets 5,948 5,948 5,948 5,948 5,948
Assets Held For Sale - - - - -
39,952 44,901 44,901 73,175 107,215
2,723,054 2,728,303 2,728,303 2,757,777 2,793,017
Liabilities
Non-current Liabilities
Mortgages Payable 1,103,600 1,103,600 1,103,600 1,103,600 1,103,600
Credit Facilities 364,059 364,059 364,059 364,059 364,059
Redeemable Units 71,097 71,097 71,097 71,097 71,097
1,538,756 1,538,756 1,538,756 1,538,756 1,538,756
Current Liabilities
Bank Indebtedness - - - - -
Operating Facilities - - - - -
Trade And Other Payables 39,202 39,202 39,202 39,202 39,202
Distributions Payable 3,286 3,286 3,286 3,286 3,286
Exchangeable Units 37,744 37,744 37,744 37,744 37,744
Redeemable Units 24,658 24,658 24,658 24,658 24,658
Current Portion Of Mortgages Payable 260,609 260,609 260,609 260,609 260,609
365,499 365,499 365,499 365,499 365,499
1,904,255 1,904,255 1,904,255 1,904,255 1,904,255
Equity
Equity Attributable To Stapled Unit Holders 817,640 822,889 822,889 852,363 887,603
Non-controlling Interests 1,159 1,159 1,159 1,159 1,159
Total Equity 818,799 824,048 824,048 853,522 888,762
2,723,054 2,728,303 2,728,303 2,757,777 2,793,017
Source: Company reports and CIBC World Markets Inc.

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There And Back Again, A Residential Landlord’s Tale - December 19, 2023

Important Disclosures
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CIBC World Markets Inc. Stock Rating System

Stock Ratings Abbreviation Description
Outperformer OP Stock is expected to outperform similar stocks in the coverage universe during the next 12-18 months.
Neutral NT Stock is expected to perform in line with similar stocks in the coverage universe during the next 12-18 months.
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Note: Broader market averages refer to S&P 500 in the U.S. and S&P/TSX Composite in Canada.

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There And Back Again, A Residential Landlord’s Tale - December 19, 2023

CIBC World Markets Inc. Price Chart

For price and performance charts, please visit CIBC on the web at https://researchcentral.cibccm.com/#/disclaimer-central-
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Important Disclosure Footnotes for Northview Residential REIT (NRR.UN-CA)

• 2a These companies are clients for which a CIBC World Markets company has performed investment banking services
in the past 12 months: Northview Residential REIT
• 2e CIBC World Markets Inc. has received compensation for investment banking services from these companies in the
past 12 months: Northview Residential REIT
• 2g CIBC World Markets Inc. expects to receive or intends to seek compensation for investment banking services from
these companies in the next 3 months: Northview Residential REIT
For important disclosure footnotes for companies mentioned in this report that are covered by CIBC World Markets Inc., click
here: CIBC Disclaimers & Disclosures

Ratings Distribution*: CIBC World Markets Inc. Coverage Universe

(as of 18 Dec 2023) Count Percent Inv. Banking Relationships Count Percent
Outperformer 158 52% Outperformer 157 99%
Neutral 128 42% Neutral 127 99%
Underperformer 7 2% Underperformer 7 100%
Tender 1 0% Tender 1 100%
Restricted 10 3% Restricted 10 100%
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There And Back Again, A Residential Landlord’s Tale - December 19, 2023

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There And Back Again, A Residential Landlord’s Tale - December 19, 2023

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There And Back Again, A Residential Landlord’s Tale - December 19, 2023

Legal Disclaimer (Continued)

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