NWH.DB.G Northwest Healthcare Properties Real Estate Investment Trust

TORONTO, March 14, 2024 /CNW/ - Northwest Healthcare Properties Real Estate Investment Trust (the "REIT" or "Northwest") (TSX: NWH.UN), a leading global owner and manager of healthcare real estate infrastructure in the Americas, Australasia, and Europe, announces results for the three months and year ended December 31, 2023.

2023 Fourth Quarter Financial and Operational Highlights:

For the three months ("Q4 2023") and year ended December 31, 2023, the REIT delivered strong operating results with key highlights as follows:

• Revenue from investment properties for Q4 2023 and year ended December 31 of $124.0 million and $508.0 million, respectively, was 4.1% and 12.3% higher in Q4 2023 compared to Q4 2022, respectively, primarily from rental lease indexation and full year of US portfolio acquisition.  
• Same property net operating income ("SPNOI") of $90.9 million was 4.0% higher in Q4 2023 compared to Q4 2022, and annual SPNOI of $293.4 million increased 3.7% from $283.1 million in 2022 (see Exhibit 1).
• Strong operating performance is underpinned by a long-term lease maturity profile with a weighted-average lease expiry ("WALE") of 13.3 years, a global portfolio occupancy rate of 97%, and a global rent collection rate of 99%.
• Adjustments to investment property fair values, and higher interest expense for variable rate debts resulted in net income (loss) for the Q4 2023 and year ended December 31, 2023, of $(188.9) million and $(480.7) million in 2023, respectively, compared to $(135.5) million and $125.6 million in 2022, respectively. 
• Higher interest expense represents an effective weighted-average interest rate ("WAIR") of 6.27% as at December 31, 2023, compared to 5.35% as at December 31, 2022.
• Adjusted funds from operations ("AFFO") for Q4 2023 was $0.13⁽¹⁾ per unit (Q4 2022 - $0.17 per unit), resulting in an AFFO payout ratio for Q4 2023 of 67% (Q4 2022 - 117%) (see Exhibit 3).

Selected Financial Information:

"2023 was about strengthening our business and balance sheet," said Craig Mitchell, Northwest's Chief Executive Officer. "As demonstrated in our financial results, we have an exceptional healthcare real estate portfolio that is performing well in a sector that is resilient and positioned for growth. It is important to highlight that the constraints we have faced as a company over the past year stemmed from balance sheet leverage and the resulting interest expense. However, our underlying real estate and business fundamentals remain strong.

"Throughout 2023, to strengthen our financial position, the REIT divested of assets valued at over $450.0 million, including non-core investment properties and unlisted securities, with the proceeds used to pay down debt. We also amended, extended, repaid and refinanced total debt facilities valued at over $1.4 billion with 2023 and 2024 maturities.

"These efforts not only immediately positively impact earnings through reducing interest expense, but also enhance the balance sheet. While there is still work ahead of us, we are confident in our ability to continue to unlock value within our portfolio.

"The REIT's high-quality real estate portfolio with long-term leases, is well-positioned to capitalize on the heightened demand for healthcare real estate. As we look ahead, we are optimistic about the future of the real estate healthcare sector and our position within it."

Same Property NOI

The REIT's strong operating performance can be seen in the SPNOI for Q4 2023, which increased by 4.0% over the comparable prior year period. The property portfolio performed well with 83.1% of the property portfolio rents indexed to inflation and an 87% lease renewal rate supported by a long-term WALE of 13.3 years. These strong operating results came from all regions in the quarter with SPNOI growth coming from the Americas at 2.5%, Europe at 3.2% and Australasia at 6.5%.

Valuations

During Q4 2023 and year ended December 31, 2023, the REIT recorded a fair value loss on income producing properties of $157.6 million and $571.8 million, respectively. The fair value losses were attributable mainly to cap rate expansions in consideration of the interest rate environments in which the REIT operates. The weighted average capitalization rate increased to 5.9% for the consolidated portfolio, as compared to 5.4% December 31, 2022.

For the year ended December 31, 2023, 82% of the REIT's investment property fair values were determined by independent third-party appraisers. 

Balance Sheet Strengthening

During the second half of 2023, the REIT announced a number of initiatives to manage 2023 and 2024 debt maturities and to strengthen the balance sheet, including asset sales and the refinancing, and extension of its debt. As at December 31, 2023, the REIT had mortgages and loans payable of $3.6 billion (December 31, 2022 - $3.8 billion).

Dispositions

During 2023, the REIT divested properties with a fair value of $360.7 million with $162.8 million occurring in Q4. The proceeds were used to repay property level debt, corporate credit facilities and Australasian term debt. 

In 2023, the REIT sold or redeemed approximately 63% of its investment in unlisted securities for proceeds of $134.5 million. The proceeds were used towards the full repayment of the Australasian term debt, secured by the underlying unlisted securities. In 2024 to-date, the REIT has redeemed additional unlisted securities of $15.5 million. 

In 2024 to-date, the REIT divested five non-core properties at fair value of $41.8 million, with proceeds used to repay asset specific and corporate variable rate debt, and for general corporate purposes.

Capital Management

During 2023, the REIT refinanced, amended and extended $1.0 billion of term debt and credit facilities. The REIT further executed a new term loan for total proceeds of $140.0 million maturing in 2025 and completed a public offering of $86.3 million aggregate principal amount of Series I convertible debentures, which included the exercise in full of the over allotment of $11.3 million. The weighted average interest rate on debt as of December 31, 2023, is 6.27% as compared to 5.35% at December 31, 2022, including convertible debentures which had a weighted average interest rate of 7.88% in 2023 and 5.92% in 2022. 

On November 27, 2023, holders of Northwest's $125.0 million 'Series G' Convertible Unsecured Subordinated Debentures (TSX: NWH.DB.G) (the "Debentures") passed an extraordinary resolution approving certain amendments to the Debentures, including an extension of the maturity of the Debentures from December 2023 to March 2025.

In the first three months of 2024, the REIT extended approximately 28% of its non-mortgage debt maturing in 2024 and 2025. This includes the extension of $125.0 million of its revolving corporate debt from 2024 to 2025, and $172.0 million of debt from 2025 to 2027. 

On March 13, 2024, Vital Healthcare Property Trust ("Vital") extended the weighted average term to maturity to approximately 4 years for $430.0 million of term debts, of which $177.0 million were maturing in 2025. The extensions are at approximately the same weighted average interest margins as current financing. 

Governance Milestones

Corporate Governance

On August 8, 2023, Northwest appointed Mr. Dale Klein (formerly Lead Independent Trustee) as the REIT's Non-Executive Chair. Ms. Laura King, Trustee, was appointed Chair of the REIT's Compensation, Governance and Nominating Committee. Ms. Maureen O'Connell, Trustee, was appointed Chair of the Audit Committee.

On January 30, 2024, Northwest announced the retirement of Mr. Robert Baron from the Board of Trustees, effective January 29, 2024. Also on January 30, 2024, the Board appointed Mr. Robert 'Bobby' Julien and Mr. Graham Garner to the Board.

Management Team

On August 8, 2023, Craig Mitchell was appointed Interim CEO and Mike Brady was appointed President.  On October 23, 2023, Craig Mitchell was announced as the REIT's permanent CEO.  

In February 2024, Tracey Whittall joined as the REIT's new Chief Operating Officer ("COO"). She will be based in the Toronto corporate office and has more than 20 years of leadership experience in the financial industry. Previously, Tracey was Chief Operating Officer at Flexiti, a leading financial services company. Before joining Flexiti, Tracey had a 22-year career with CIBC, one of Canada's largest banks.

Craig Mitchell, Northwest's CEO states: "Northwest is very pleased to have Tracey join the Northwest team and we would also like to extend our gratitude to Peter Riggin, our outgoing COO, for his valuable contributions to the REIT during his tenure. Peter originally joined the Northwest family in 2004 as Senior Vice President, Acquisitions with the REIT's predecessor company, where he was later appointed CEO in 2010. At Northwest, Peter held a number of important, strategic executive roles, including the REIT's Managing Director - Canada, and Chief Administrative Officer, among other roles. We would like to thank Peter for his many years of great leadership, and we wish Peter all the best in his retirement after twenty years of service for Northwest."

2023 ESG Global Ranking

In 2023, the REIT and Vital (which is managed by Northwest) participated in the GRESB Real Estate Assessment for the third year running. 

Northwest and Vital were GRESB Sector Leaders in the Global Listed Sector's Healthcare Standing Investments and Healthcare Development categories (Vital and Northwest came in 1st and 2nd place respectively). In the Global Sector, Healthcare Development, Vital and Northwest came in 1st and 3rd place, respectively. These results for the REIT and Vital demonstrate Northwest's commitment to ESG best practices. 

Q4 2023 Conference Call

The REIT invites you to participate in its conference call with senior management to discuss our fourth quarter 2023 results on March 15, 2024 at 10:00 AM ET.

Investors are invited to access the call by dialing 416-764-8609 or 1-888-390-0605. The conference ID is 42243950#.

Audio replay will be available from March 15, 2024 through March 22, 2024 by dialing 416-764-8677 or 1-888-390-0541. The conference replay ID is 243950#.

Vital Healthcare Property Trust

On February 15, 2024, Vital also announced its financial results for the half year ended December 31, 2023. Details on Vital's financial results are available on Vital's website at www.vitalhealthcareproperty.co.nz.  

About Northwest Healthcare Properties Real Estate Investment Trust

Northwest Healthcare Properties Real Estate Investment Trust (TSX: NWH.UN) (Northwest) is an unincorporated, open-ended real estate investment trust established under the laws of the Province of Ontario. The REIT provides investors with access to a portfolio of high-quality international healthcare real estate infrastructure comprised as at December 31, 2023, of interests in a diversified portfolio of 219 income-producing properties and 17.7 million square feet of gross leasable area located throughout major markets in Canada, the United States, Brazil, Europe, Australia, and New Zealand. The REIT's portfolio of medical office buildings, clinics, and hospitals is characterized by long-term indexed leases and stable occupancies. With a fully integrated and aligned senior management team, the REIT leverages approximately 300 employees in ten offices in eight countries to serve as a long-term real estate partner to leading healthcare operators.

For additional information please visit: www.nwhreit.com.

Non-IFRS Measures

Some financial measures used in this press release, such as SPNOI, Constant Currency SPNOI, FFO, FFO per Unit, AFFO, AFFO per Unit, AFFO Payout Ratio, NAV, NAV per Unit, portfolio occupancy and weighted average lease expiry, are used by the real estate industry to measure and compare the operating performance of real estate companies, but they do not have any standardized meaning prescribed by IFRS.

These non-IFRS financial measures and non–IFRS ratios should not be construed as alternatives to financial measures calculated in accordance with IFRS. The REIT's method of calculating these measures and ratios may differ from the methods of other real estate investment trusts or other issuers, and accordingly may not be comparable. Further, the REIT's definitions of FFO and AFFO differ from the definitions recommended by REALpac. These non- IFRS measures are more fully defined and discussed in the exhibits to this news release and in the REIT's Management's Discussion and Analysis ("MD&A") for the year ended December 31, 2023, in the "Performance Measurement" and "Results from Operations" sections. The MD&A is available on SEDAR+ at www.sedarplus.ca.

Forward-Looking Statements

This press release may contain forward-looking statements with respect to the REIT, its operations, strategy, financial performance and condition. These statements generally can be identified by use of forward-looking words such as "may", "will", "expect", "estimate", "anticipate", "intends", "believe", "normalized", "contracted", or "continue" or the negative thereof or similar variations. Examples of such statements in this press release may include statements concerning the REIT's position as a leading healthcare real estate asset manager globally, planned asset sales, the REIT's strategic review process, ESG initiatives, balance sheet optimization arrangements, and potential acquisitions, dispositions and other transactions The REIT's actual results and performance discussed herein could differ materially from those expressed or implied by such statements. The forward-looking statements contained in this press release are based on numerous assumptions which may prove incorrect and which could cause actual results or events to differ materially from the forward-looking statements. Such assumptions include, but are not limited to (i) assumptions relating to completion of anticipated transactions  on terms disclosed; (ii) the REIT's properties continuing to perform as they have recently, (iii) the REIT successfully integrating past and future acquisitions, including the realization of synergies in connection therewith; (iv) various general economic and market factors, including exchange rates remaining constant, local real estate conditions remaining strong, interest rates remaining at current levels,; and (vii) the availability of equity and debt financing to the REIT. Such forward-looking statements are qualified in their entirety by the inherent risks and uncertainties surrounding future expectations, including that the proposed asset sales are not completed and that no transactions or other initiatives result from the REIT's strategic review process. Important factors that could cause actual results to differ materially from expectations include, among other things, general economic and market factors, competition, changes in government regulations and the factors described under "Risks and Uncertainties" in the REIT's Annual Information Form and the risks and uncertainties set out in the MD&A which are available on SEDAR+ at www.sedarplus.ca.

These cautionary statements qualify all forward-looking statements attributable to the REIT and persons acting on its behalf. Unless otherwise stated, all forward-looking statements speak only as of the date of this press release and, except as expressly required by applicable law, the REIT assumes no obligation to update such statements.

Financial Exhibits

Exhibit 1 – Constant Currency Same Property NOI

Constant Currency Same Property NOI, sometimes also presented as "Same Property NOI" or "SPNOI", is a non-IFRS financial measure, defined as NOI for investment properties that were owned for a full reporting period in both the current and comparative year, subject to certain adjustments including: (i) straight-line rental revenue recognition; (ii) amortization of operating leases; (iii) lease termination fees; and (iv) non-recurring transactions that are not expected to recur (v) excluding properties held for redevelopment and (vi) excluding impact of foreign currency translation by converting the foreign currency denominated SPNOI from comparative period at current period average exchange rates. Management considers. SPNOI is more fully defined and discussed in the REIT's MD&A (see "Performance Measurement").

Exhibit 2 – Funds From Operations Reconciliation

FFO is a supplemental non-IFRS industry wide financial measure of a REIT's operating performance. FFO is more fully defined and discussed in the REIT's MD&A (see "Performance Measurement" and "Funds From Operations").

Exhibit 3 – Adjusted Funds From Operations Reconciliation 

AFFO is a supplemental non-IFRS financial measure of a REIT's operating performance and is intended to reflect a stabilized business environment. The REIT calculates AFFO as FFO, plus/minus certain adjustments as detailed below. AFFO is more fully defined and discussed in the REIT's MD&A (see "Performance Measurement" and "Adjusted Funds From Operations").

SOURCE NorthWest Healthcare Properties Real Estate Investment Trust