December 5, 2024

Inews Fit

Innovation that Serves, Quality that is Trusted

Northwest Healthcare Properties Real Estate Investment Trust Reports Third Quarter 2024 Results

Northwest Healthcare Properties Real Estate Investment Trust Reports Third Quarter 2024 Results

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.”

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:

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:

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.

Contacts

Craig Mitchell, CEO, [email protected].

Stephanie Karamarkovic, CFO, [email protected].

Alyssa Barry, Investor Relations, [email protected], [email protected], (416) 366-2000 Ext. 2202

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).

To view the source version of this press release, please visit

link

Leave a Reply

Your email address will not be published. Required fields are marked *

Copyright © All rights reserved. | Newsphere by AF themes.