Toronto, Ontario–(Newsfile Corp. – November 14, 2024) – Northwest Healthcare Properties Real Estate Investment Trust (TSX: NWH.UN) (the ‘REIT’ or ‘Northwest’), a leading owner and operator of healthcare real estate infrastructure in North America, Brazil, Europe and Australasia, announces results for the three and nine months ended September 30, 2024.

 

‘As we continue to streamline our portfolio through our asset disposition strategy and simplify operations, we are laying a solid foundation for stability, sustainable growth, and long-term value creation for our unitholders,’ said Craig Mitchell, CEO of Northwest. ‘Our progress to-date—monetizing assets, significantly reducing debt, addressing debt maturities, and improving operating performance—demonstrates our commitment to creating a more resilient, focused, and institutional-quality healthcare REIT. With steady growth in Same Property NOI metrics and disciplined expense management, we are well-positioned to complete our strategic initiatives during 2025, turning around the business and allowing for a seamless transition to new leadership.’

 

Q3 2024 Highlights

 

Highlights for Q3 2024 and events subsequent to the quarter are set out below:

 

• Revenue from investment properties was $107.0 million for Q3 2024, a decrease of 12% from Q3 2023 due to the disposition of non-core assets during 2023 and 2024, partially offset by rent indexation and development rentalization;
• Same Property Net Operating Income (‘SPNOI’) was $70.7 million for Q3 2024, an increase of 5.0% from Q3 2023, reflecting a steady growth across all regions (see Exhibit 1);
• Net loss for Q3 2024 was $157.3 million, an increase of $62.0 million compared to Q3 2023, primarily due to lower net operating income due to disposition activities previously mentioned, the fair value loss on disposal of investment properties associated with the disposition of the UK Portfolio, and fair value losses on revaluation of the REIT’s convertible debentures;
• General and administrative expenses, excluding the impact of employee termination benefits and unit-based compensation in Q3 2024 was $12.7 million, a decrease of 14% compared to Q3 2023. In a strategic effort to enhance operational efficiency, the REIT made the decision to reduce its workforce by approximately 16% resulting in a stabilized headcount of 260. The REIT recognized termination benefits costs totaling $3.8 million for the three and nine months ended September 30, 2024, which have been included in general and administrative expenses. This workforce reduction measure is expected to result in annualized savings of approximately $3.7 million in general and administrative expenses and property operating costs, net of capitalization;
• Adjusted funds from operations (‘AFFO’) was $0.09 per unit in Q3 2024 as compared to $0.13 per unit in Q3 2023 ($0.06 per unit excluding impact of interest rate caps, which expired in the first quarter of 2024), resulting in an AFFO payout ratio in Q3 2024 of 99% compared to 122% in Q3 2023 (183% in Q3 2023 excluding impact of interest rate caps) (see Exhibit 2);
• The REIT’s leverage at the end of Q3 2024 was 43.6% (49.2% including convertible debentures) as compared to 47.7% (51.9% including convertible debentures) at December 31, 2023; and
• Continued strong operating performance in Q3 2024 was underpinned by a long-term lease maturity profile with a weighted-average lease expiry (‘WALE’) of 13.4 years, a global portfolio occupancy rate of 96.1%, and a global rent collection rate of 99%.

 

Selected Financial Information:

 

(unaudited) ($000’s, except unit and per unit amounts)		Three months ended September 30, 2024			Three months ended September 30, 2023
Number of properties		186			231
Gross leasable area (sf)		16,064,306			18,530,160
Occupancy		96 %			96 %
Weighted Average Lease Expiry (Years)		13.4			13.5
Rent collection rate		99 %			99 %
Net Operating Income	$	82,216		$	95,097
Net Income (Loss) attributable to unitholders	$	(157,266	)	$	(95,270	)
Funds from Operations (‘FFO’), excluding accelerated amortization of deferred financing charges 1	$	26,093		$	33,559
Adjusted Funds from Operations (‘AFFO’)	$	22,352		$	32,879
Debt to Gross Book Value – Declaration of Trust		44 %			47 %
Debt to Gross Book Value – Including Convertible Debentures		49 %			51 %

 

 

(1) For the three months ended September 30, 2024, FFO and FFO per unit excludes $10.3 million of amortization of transactional deferred financing charges which includes accelerated amortization of deferred financing costs due to early repayment of debt upon sale of the UK portfolio in August 2024. FFO and FFO per unit including amortization of transactional deferred financing charges is $15.8 million or $0.06 per unit, respectively for the three months ended September 30, 2024.

 

Included in FFO and AFFO for the three months ended September 30, 2023, is $11.0 million related to interest rate caps which matured during the three months ended March 31, 2024, the impact of which is $0.05 per unit.

 

Operations and Leasing

 

The REIT’s consolidated SPNOI for Q3 2024 increased by 5.0% over the comparable prior year period mainly due to inflationary adjustments on rents, rentalised capital spend and improved recoveries reflecting a steady growth in our underlying lease rentals and additionally supported by a long-term weighted-average lease expiry (‘WALE’) of 13.4 years.

 

SPNOI within the REIT’s geographic regions increased 7.1% in North America, 4.9% in Brazil, 4.0% in Europe and 4.0% in Australasia.

 

In Brazil, the Sabara hospital lease for approximately 157,000 square feet which was expiring on September 30, 2024, was renewed for a 10-year term, with a 10-year renewal option, at expiring rental rates, and is subject to future inflationary increases.

 

Valuations

 

During Q3 2024, the REIT recorded a fair value loss on investment properties of $94.7 million, compared to $122.2 million in Q3 2023. The fair value loss was mainly attributable to changes in valuation parameters, incorporating market evidence when available and rent reviews.

 

As of September 30, 2024, the weighted average capitalization rate was 6.2% for the consolidated portfolio, compared to 5.9% as at December 31, 2023.

 

Disposition Activity and Assets Held for Sale

 

To date in 2024, the REIT has disposed of investment properties for total proceeds of $1.3 billion. The property dispositions represented 16 properties in North America, 5 properties in Australasia, and 15 properties in Europe, 14 of which were related to the UK sale, with the proceeds used to pay directly attributable debt as well as balances outstanding on credit facilities.

 

As previously announced on August 8, 2024, the REIT’s UK portfolio was sold to Assura PLC (‘Assura’), a publicly-listed REIT on the London Stock Exchange (LSE: AGR) for total consideration of $885 million, consisting of $708 million of cash and the remaining $177 million in shares of Assura, calculated on a 30-day VWAP basis. The REIT’s stake in Assura equates to approximately 8% of Assura’s public float and is subject to certain disposal restrictions for a period of six months following August 8, 2024. The net cash proceeds from the sale of the UK portfolio were used to repay debts with a weighted average interest rate of 7.9%.

 

During the three and nine months ended September 30, 2024, the REIT sold or redeemed units of its investment in unlisted securities totaling $19.2 million and $50.0 million, respectively. Subsequent to September 30, 2024, the REIT completed approximately $12.6 million of incremental sales of its investment in the unlisted securities. The proceeds were used towards repaying balances outstanding on credit facilities. As of today, the balance of the REIT’s investment in unlisted securities is approximately $9.5 million.

 

As at September 30, 2024, the REIT has 19 income producing properties and one development property totaling $122.8 million classified as assets held for sale. The REIT expects to complete the dispositions within the next 12 months and will use the proceeds to repay debt and reduce leverage.

 

Capital Management Update

 

The net cash proceeds from the sale of the UK portfolio were used to repay debt secured by Brazilian properties of $140.0 million, and total credit facilities of $143.5 million. The $470.7 million term debt secured by the underlying UK properties were settled by the purchaser and the underlying European (GBP) interest derivative swaps were settled in full.

 

During Q3 2024, the REIT’s credit facility, with an outstanding balance of $65.0 million, previously maturing in March 2025, was amended to extend maturity to March 2026.

 

Further, during the quarter, the REIT’s North American term debt with a balance outstanding of $185.7 million was amended to extend the maturity date by 2 years to January 2027. Subsequent to September 30, 2024, the interest rate derivative swaps relating to the North American term debt were also extended by 2 years.

 

Mortgages in North America totaling $14.1 million were amended, bearing a weighted average interest rate of 3.13% with new mortgages of $15.0 million bearing a weighted average interest rate of 5.07%. The weighted average term to maturity was extended by approximately 5 years. Subsequent to quarter end, the REIT received lender commitments or executed refinancing of all remaining 2024 debt maturities totaling $48.8 million increasing the weighted average interest rates from 3.30% to 4.80% and extended the weighted average term on these debts by 4 years.

 

Post completion of the Q3 2024 asset sales and refinancing activities completed during the quarter (including subsequent events), consolidated leverage has decreased to 43.6% and the REIT has reduced 2024 and 2025 debt maturities by approximately $1.1 billion to approximately $281 million as at the date of this press release. The remaining 2025 maturities are represented by $156 million of mortgages and property level borrowings across multiple facilities in the REIT’s portfolio which the REIT expects to be refinanced in the normal course, and $125 million Series G Convertible Debentures maturing on March 31, 2025, not available for prepayment, which are a continued focus for the REIT. The REIT’s objective is to repay the Series G Convertible Debentures on maturity through existing credit facility capacity and proceeds from further asset sales.

 

As at the date of this press release, the REIT has approximately $104 million of available liquidity between cash and unused portion of its credit facilities.

 

The weighted average interest rate on debt as of September 30, 2024, was 5.60%, as compared to 6.27% at December 31, 2023.

 

Corporate Presentation

 

Download the Company’s Updated Corporate Presentation:

 

https://www.nwhreit.com/investors/unitholders/presentations

 

Upcoming Q3 2024 Results Conference Call

 

The REIT will be hosting its Q3 2024 conference call on Friday, November 15, 2024, at 10:00 a.m. ET. The dial-in numbers for the conference call are as follows:

 

North America (toll free): 1-844-763-8274

 

Overseas or local (Toronto): 1-647-484-8814

 

Link to audio webcast: https://www.gowebcasting.com/13691

 

A replay will be available until November 22, 2024, by accessing:

 

US Toll Free: 1-877-344-7529

 

International Toll Free: 1-412-317-0088

 

Canada Toll Free: 1-855-669-9658

 

Replay Access Code: 9659034

 

About Northwest

 

Northwest provides investors with access to a portfolio of high-quality international healthcare real estate infrastructure comprised as at November 14, 2024, of interests in a diversified portfolio of 185 income-producing properties and 16.1 million square feet of gross leasable area located throughout major markets in North America, Brazil, Europe and Australasia. The REIT’s portfolio of medical office buildings, clinics, and hospitals is characterized by long-term indexed leases and stable occupancies. Northwest leverages its global workforce 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, FFO, FFO per Unit, AFFO, AFFO per Unit, AFFO Payout Ratio, and Proportionate Investment Properties 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 three and nine months ended September 30, 2024, 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 words such as ‘may’, ‘will’, ‘expect’, ‘estimate’, ‘anticipate’, ‘intends’, ‘believe’, ‘normalized’, ‘contracted’, or ‘continue’ or the negative thereof or similar variations. Forward looking statements in this press release may include statements concerning the REIT’s position as a leading healthcare real estate asset manager globally, the impact of its sustainability efforts, impact of asset sales, including but not limited to, the disposition of the UK portfolio and associated debt repayments made with sale proceeds, balance sheet optimization arrangements, the REIT’s commitment to simplifying its business, reducing costs, and further reducing its debt and the related anticipated impact on unitholder value, and the REIT’s expected progress on the refinancing or extension of its remaining 2025 debt maturities. 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 dispositions and deleveraging transactions; (ii) the REIT’s properties continuing to perform as they have recently, (iii) various general economic and market factors, including exchange rates remaining constant, local real estate conditions remaining strong, and interest rates remaining at current levels or decreasing; and (iv) the availability of equity and debt financing to the REIT and the REIT’s ability to refinance, or extend the maturity of, its existing debt. Such forward-looking statements are qualified in their entirety by the inherent risks and uncertainties surrounding future expectations, including that the transactions contemplated herein are completed. 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.

 

NORTHWEST HEALTHCARE PROPERTIES REAL ESTATE INVESTMENT TRUST
Condensed Consolidated Interim Statements of Income (Loss)
(in thousands of Canadian dollars)
Unaudited		For the three months ended June 30,						For the six months ended June 30,
		2024			2023			2024			2023
Net Property Operating Income
Revenue from investment properties	$	107,015		$	122,182		$	359,701		$	384,010
Property operating costs		24,799			27,085			88,057			95,471
		82,216			95,097		$	271,644		$	288,539
Other Income (loss)
Interest and other		6,151			7,882			12,910			15,963
Management fees		4,117			3,660			11,333			11,139
Share of profit (loss) of equity accounted investments		(22,100	)		1,966			(32,084	)		(19,917	)
		(11,832	)		13,508		$	(7,841	)	$	7,185
Expenses and other
Mortgage and loan interest expense		44,332			58,715			153,521			167,550
General and administrative expenses		16,003			16,664			45,019			45,235
Transaction costs		5,366			6,209			12,300			13,905
Foreign exchange (gain) loss		500			2,521			(12,369	)		(7,487	)
		66,201			84,109		$	198,471		$	219,203
Income before finance income (expense), net gain (loss) on financial instruments, net gain (loss) on dispositions, and fair value adjustments		4,183			24,496		$	65,332		$	76,521
Finance income (expense)
Amortization of financing costs		(11,366	)		(2,686	)		(20,817	)		(8,649	)
Class B exchangeable unit distributions		–			(342	)		63			(1,026	)
Fair value adjustment of Class B exchangeable units		–			2,052			(205	)		7,558
Accretion of financial liabilities		(937	)		(814	)		(5,369	)		(6,602	)
Fair value adjustment of convertible debentures		(34,179	)		12,613			(35,871	)		26,792
Convertible debenture issuance costs		–			(91	)		(27	)		(4,601	)
Gain (loss) on financial instruments		(21,490	)		(6,585	)		(10,141	)		14,204
Fair value adjustment of investment properties		(94,747	)		(122,204	)		(338,867	)		(414,189	)
Net loss on disposals of investment properties		(21,299	)		(5,046	)		(31,396	)		(20,783	)
Fair value adjustment of Unit-Based Compensation Liability		(1,641	)		2,692			(480	)		12,275
Income (loss) before taxes		(181,476	)		(95,915	)	$	(377,778	)	$	(318,500	)
Current tax expense		6,641			11,049			13,035			22,515
Deferred tax expense (recovery)		(30,851	)		(11,694	)		(67,681	)		(49,179	)
Income tax expense (recovery)		(24,210	)		(645	)	$	(54,646	)	$	(26,664	)
Net income (loss)	$	(157,266	)	$	(95,270	)	$	(323,132	)	$	(291,836	)
Net income (loss) attributable to:
Unitholders	$	(138,252	)	$	(81,276	)	$	(308,222	)	$	(210,855	)
Non-controlling interests		(19,014	)		(13,994	)		(14,910	)		(80,981	)
	$	(157,266	)	$	(95,270	)	$	(323,132	)	$	(291,836	)

 

 

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. SPNOI is more fully defined and discussed in the REIT’s MD&A (see ‘Performance Measurement’).

 

SAME PROPERTY NOI
		Three months ended September 30,										Nine months ended September 30,
		2024			2023			Var %				2024			2023			Var %
Same property NOI (1)
North America	$	18,920		$	17,663			7.1%			$	54,828		$	51,804			5.8%
Brazil		13,388			12,765			4.9%				42,423			40,499			4.8%
Europe		7,665			7,368			4.0%				23,103			22,256			3.8%
Australasia		30,739			29,555			4.0%				89,812			86,385			4.0%
Same property NOI (1)	$	70,712		$	67,351			5.0%			$	210,166		$	200,944			4.6%
Impact of foreign currency translation		–			1,242							–			797
Straight-line rental revenue recognition		214			893							2,291			3,596
Amortization of operating leases		35			39							111			124
Lease termination fees		2			188							104			227
Other transactions		833			(60	)						1,149			3,000
Developments		4,664			1,171							12,951			4,403
Dispositions		5,756			24,270							44,872			75,446
NOI	$	82,216		$	95,094			(13.5)%			$	271,644		$	288,537			(5.9)%

 

 

(1) Same property NOI is a non-IFRS measure, defined and discussed in the REIT’s MD&A.

 

Exhibit 2– Funds From Operations and Adjusted Funds from Operations Reconciliation

 

FFO is a supplemental non-IFRS industry wide financial measure of a REIT’s operating performance. The REIT calculates FFO based on certain adjustments to net income (computed in accordance with IFRS) as detailed below. FFO is more fully defined and discussed in the MD&A (see ‘Performance Measurement‘ and ‘Funds From Operations‘).

 

For the three and nine months ended September 30, 2024, FFO per unit was $0.06 and $0.26 per unit, respectively, including accelerated amortization of deferred financing costs as a result of early repayment of the underlying debt, using proceeds from asset sales. Excluding the impact of $10.3 million of accelerated amortization of deferred financing costs, FFO for the three and nine months ended September 30, 2024 is $0.11 and $0.31 per unit, respectively.

 

FUNDS FROM OPERATIONS (‘FFO’)		Three months ended September 30,						Nine months ended September 30,
		2024			2023			2024			2023
Net income (loss) attributable to unitholders	$	(138,252	)	$	(81,276	)	$	(308,222	)	$	(210,855	)
Add / (Deduct)(1):
Fair market value losses (gains) (2)		146,541			99,081			391,899			302,038
Finance cost – Exchangeable Unit distributions		–			342			(63	)		1,026
Revaluation of financial liabilities		937			814			5,369			6,602
Unrealized foreign exchange loss (gain)		1,858			2,972			(11,433	)		(6,360	)
Deferred taxes		(26,027	)		(5,730	)		(64,539	)		(42,386	)
Transaction costs		5,011			7,925			12,041			16,758
Net loss on disposal of investment properties		20,990			4,217			30,805			18,898
Convertible Debenture issuance costs		–			91			27			4,601
Internal leasing costs		312			510			963			1,470
Property taxes accounted for under IFRIC 21		(108	)		174			(47	)		846
Net adjustment for lease amortization		(189	)		(91	)		(439	)		(257	)
Employee termination benefits and related expenses		3,807			–			3,807			–
Other FFO adjustments		895			4,530			5,026			12,236
FFO	$	15,775		$	33,559			65,194			104,617
FFO per Unit – Basic	$	0.06		$	0.14		$	0.26		$	0.43
FFO per Unit – Diluted (3)	$	0.06		$	0.14		$	0.26		$	0.43
Adjusted weighted average units outstanding (4)
Basic		246,832,144			244,782,614			246,084,555			243,903,682
Diluted (3)		247,870,148			246,594,988			247,334,010			245,770,444

 

 

(1) FFO is not a measure recognized under IFRS and do not have standardized meanings prescribed by IFRS. See Performance Measurement in the REITs MD&A. The adjustments to determine FFO have been presented on a proportionate basis.

 

(2) Included in FFO for the three and nine months ended September 30, 2024 are nil and $6.7 million related to premiums paid in connection with interest rate cap derivatives (three and nine months ended September 30, 2023 – $11.0 million and $26.2 million), the impact of which is nil and $0.03 per unit, respectively (three and nine months ended September 30, 2023 – $0.05 per unit and $0.11 per unit, respectively).

 

(3) Diluted units include the impact of vested deferred trust units and the convertible debentures, that would have a dilutive effect upon conversion.

 

(4) Under IFRS the REIT’s Class B LP Units are treated as a financial liability rather than equity. The REIT has chosen to present an adjusted basic and diluted per unit measure that includes the Class B Units in basic and diluted units outstanding/weighted average units outstanding. There were no Class B Units outstanding as at September 30, 2024 (September 30, 2023- 1,710,000 Class B Units).

 

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 MD&A (see ‘Performance Measurement’ and ‘Adjusted Funds From Operations’).

 

ADJUSTED FUNDS FROM OPERATIONS
		Three months ended September 30,						Nine months ended September 30,
		2024			2023			2024			2023
FFO (1)	$	15,775		$	33,559		$	65,194		$	104,617
Add / (Deduct):
Amortization of transactional deferred financing charges		10,318			1,465			15,134			5,220
Unit-based compensation expense		(457	)		1,883			2,362			7,380
Straight-line revenue		(417	)		(701	)		(2,116	)		(2,257	)
Leasing costs and non-recoverable maintenance capital expenditures		(2,867	)		(3,327	)		(9,209	)		(10,038	)
AFFO (1)	$	22,352		$	32,879		$	71,365		$	104,922
AFFO per Unit – Basic	$	0.09		$	0.13		$	0.29		$	0.43
AFFO per Unit – diluted (2)	$	0.09		$	0.13		$	0.29		$	0.43
Distributions per Unit – Basic	$	0.09		$	0.16		$	0.27		$	0.56
Adjusted weighted average units outstanding: (3)
Basic		246,832,144			244,782,614			246,084,555			243,903,682
Diluted (2)		247,870,148			246,594,988			247,334,010			245,770,444

 

 

(1) FFO and AFFO are not measures recognized under IFRS and does not have standardized meanings prescribed by IFRS. See Performance Measurement in the REIT’s MD&A. The adjustments to determine FFO and AFFO have been presented on a proportionate basis.

 

(2) Diluted units include the impact of vested deferred trust units and the convertible debentures, that would have a dilutive effect upon conversion.

 

(3) Under IFRS the REIT’s Class B LP Units are treated as a financial liability rather than equity. The REIT has chosen to present an adjusted basic and diluted per unit measure that includes the Class B Units in basic and diluted units outstanding/weighted average units outstanding. There were no Class B Units outstanding as at September 30, 2024 (September 30, 2023 – 1,710,000 Class B Units).