NexLiving Communities' (NXLV-X) financial results are beginning to show the impacts of last year’s transformational Devcore deal, by which the firm essentially doubled its apartment portfolio, with its Q1 2025 filings this week reporting record revenues.

"In Q1, we delivered 110 per cent year-over-year growth in FFO and 70 per cent growth in NOI, driven by both acquisitions and stronger performance across our existing portfolio,” president and chief executive officer Stavro Stathonikos noted in the results. “Occupancy improved to 97.4 per cent at quarter-end and has continued to strengthen post-quarter as we continue to reduce churn at one of our Saint John properties. 

“I'm especially proud of our team for driving these strong results while also advancing the integration of more than 1,000 units acquired in the past six months."

The publicly traded, Halifax-based company acquired a $224-million portfolio of 16 multifamily properties, comprising 991 housing units, from Devcore in a transaction financed by a share issuance and the transfer and assumption of mortgage debt. The deal increased NexLiving's portfolio from 1,166 to 2,157 units before some divestments that left it with 1,998 units in New Brunswick, Ontario and Quebec.

“Combined, it's a much more resilient portfolio and will have better economic returns for people,” Stathonikos told RENX in an interview, while acknowledging the integration of new systems, cultures, employees and board members was more challenging than expected.

“The Devcore principals are now very large shareholders in Nex and we're all aligned,” Stathonikos continued. “We’ve spent a lot of time discussing the strategies and understanding the opportunities going forward, and we’re very excited about it.”

NexLiving's Q4 and 2024 results

Q4 2024 was the first full quarter under the new circumstances and there were several one-time costs and elements involved with the transition. Most of the full impact of the growth was evident in its Q1 2025 report.

During Q1, NexLiving’s net operating income (NOI) increased by more than 70 per cent to $4.9 million on a year-over-year basis. Same property NOI increased 2.1 per cent, driven by a 3.1 per cent rise in revenues while expenses rose 4.5 per cent.

NexLiving’s funds from operations were up 110 per cent to $1.7 million and diluted FFO per share increased six per cent to $0.05 for the period.

Its debt-to-gross-book-value ratio declined 10 basis points to 67.6 per cent.

In NexLiving’s 2024 year-end reporting, released just a few weeks earlier, NOI was up 29 per cent to $14.3 million. The Devcore portfolio delivered NOI of $2.3 million and incurred interest expense of $1.1 million in the final quarter.

“Going forward through 2025 we’ll see the true impact from the acquisitions and hopefully harvest good returns from all the work we did in 2024 putting it together,” Stathonikos told RENX. “The combined company will have higher margins, two to three times more free cash flow and, on a cash-flow-per-share basis, we expect to be 30 per cent higher for each individual shareholder.”

Portfolio occupancy improved by 100 basis points to 97.4 per cent as of March 31 as a result of NexLiving's active leasing program.

New acquisition in Winnipeg

NexLiving continues to execute on its plan to acquire recently built or refurbished, highly leased multiresidential properties in secondary markets.

“The growth we're seeing in secondary markets at least matches the larger cities, but we're able to enter into properties at a third of the cost of what you see in larger cities,” Stathonikos observed. “The value proposition is very strong.”

The company just acquired a 50 per cent interest in eight multiresidential properties comprising 169 units in Winnipeg. The remaining 50 per cent stake will continue to be owned by Halifax-based VIDA, which will also continue to act as property manager.

NexLiving's equity investment of $1.8 million was funded from cash on hand. The portfolio is financed with Canada Mortgage and Housing Corporation-insured mortgages totalling approximately $14.4 million and bearing a weighted-average interest rate of 2.72 per cent and a remaining average term of approximately three years.

VIDA has a portfolio of more than 3,200 units across 240 buildings in Nova Scotia, New Brunswick, Prince Edward Island and Manitoba.

“Their strategy is similar in some ways but very different in other ways,” Stathonikos said of VIDA. “It's similar in the way that they operate in secondary markets and in mid-cap-sized buildings.”

But where NexLiving’s primary focus is on newer buildings with amenities, services, higher-end finishes and higher rents, VIDA’s properties are typically older and have lower rents.

Since the acquisition is NexLiving’s first move into Manitoba, Stathonikos said it made sense to just take a 50 per cent stake and for VIDA to continue managing the properties. NexLiving fully owns the rest of the properties in its portfolio.

NexLiving completed a series of transactions in December, including the $5.8-million sale of a 35-unit Moncton, N.B. property and multiple mortgage repayments and refinancings, which combined will result in annual interest savings of approximately $400,000 (which subsequently has risen to about $600,000, according to Stathonikos) and a reduction in net debt of $2.4 million.

While NexLiving is aggressively paying down debt and buying back shares, it also anticipates acquiring more properties.

Development and dispositions

NexLiving isn’t considering developing new apartment buildings at this time even though some of its properties have land that could be intensified.

“Development has the potential to earn high returns, but along with it comes a lot of risk and a lot of work,” Stathonikos explained. “Today, I don't think the economics are attractive for the risk taken.”

If NexLiving starts developing, it would likely leverage third-party groups and Stathonikos said development exposure would only comprise five to 10 per cent of the total portfolio.

With NexLiving’s growth, it’s possible some smaller properties could be considered non-core assets. If the company is going out of its way to manage them, it would consider selling if the offer is attractive. But the Halifax-based company isn’t actively seeking to dispose of any properties. 

“We generally are long-term owners,” Stathonikos said. “But occasionally there are some capital recycling opportunities whereby it's maybe worth more in someone else's hands or somebody approaches us with some very aggressive pricing.”

- With files from Don Wilcox