NorthWest Healthcare Properties REIT and NorthWest International Healthcare Properties REIT Announce Combination Transaction to Create a Leading Global Healthcare REIT

TORONTO, March 11, 2015 /CNW/ - NorthWest Healthcare Properties Real Estate Investment Trust (TSX: NWH.UN) ("NWH") and NorthWest International Healthcare Properties Real Estate Investment Trust (TSXV:MOB.UN) ("NWI") announced today that they have entered into an agreement (the "Arrangement Agreement") to combine and create a leading global diversified healthcare real estate investment trust with over $2 billion of assets. The combination will be effected by a plan of arrangement pursuant to which NWH will, among other things, acquire all of the assets of NWI and NWI unitholders will receive 0.208 of a NWH trust unit for each NWI trust unit held on a tax-deferred basis. The combined entity will operate under the NWH name and will be the only TSX-listed real estate investment trust focused on global healthcare real estate.

Transaction Benefits to NWH Unitholders

  • Enhanced Scale – Transformational transaction that increases the scale of NWH and provides exposure to high quality international medical office buildings ("MOB") and hospital assets, creating a global healthcare real estate platform.
  • Improved Portfolio Characteristics – Improves the characteristics of the combined portfolio including average age of buildings, same property growth, occupancy, average lease term and asset and geographic diversification.
  • Enhanced Growth Prospects – The combination with NWI will greatly enhance the prospects for growth of NWH by enabling the combined company to pursue value enhancing growth opportunities in international markets where NWI has operating experience and well established partnerships.
  • Exposure to International Markets – The diversification of NWH's portfolio afforded by NWI's investments in Australia, New Zealand, Brazil and Germany is expected to provide material benefit to NWH.
  • Accretive – The transaction is expected to be immediately accretive to NWH's adjusted funds from operations per unit.

Transaction Benefits to NWI Unitholders

  • Enhanced Scale – Transformational transaction that increases the scale of NWI and increases its exposure to NWH's large and stable portfolio of Canadian medical office buildings and healthcare related facilities.
  • Enhanced Flexibility and Access to Capital – The larger combined entity is expected to have enhanced flexibility and greater access to liquidity to pursue value enhancing growth opportunities.
  • Stable Canadian Portfolio – The stability of NWH's Canadian portfolio of high quality healthcare real estate when combined with NWI's portfolio in Brazil, Germany, Australia and New Zealand is expected to provide significant diversification benefits to NWI.
  • Reduces Overall Leverage – The combined entity will have lower leverage and enhanced balance sheet flexibility.

Mutual Transaction Benefits

  • Enhanced Capital Markets Presence – The combined entity is expected to have enhanced access to capital due to its larger scale, portfolio diversification and growth prospects.
  • Unified Platform – Combines the management and operating platforms of NWH and NWI as well as streamlines the costs inherent in managing two separate publicly traded REITs.
  • Larger Float and Improved Trading Liquidity – The transaction will significantly increase the public float of NWH and is expected to increase the trading liquidity of the combined entity.

Paul Dalla Lana, CEO of NWI  and Peter Riggin, CEO of NWH, commented, "We are very excited about this strategic transaction. We believe combining the stability of NWH's Canadian portfolio together with NWI's higher growth international portfolio provides a compelling opportunity for investors. With increased scale and an integrated global platform, the combined business will have a strong foundation to pursue the significant growth opportunities available in healthcare real estate. We look forward to combining the businesses and creating value for unitholders."

Combined Portfolio  



Canada


Brazil


Germany


Australasia(1)


Combined Pro
Forma
(2)












Number of Properties


73


5


19


25


122












Property Type


100%
MOB


100%
Hospital


100%
MOB


15% MOB /
85% Hospital


80% MOB /
20% Hospitals












GLA (million square feet)


4.5


1.0


0.7


1.6


6.6












Gross Assets (Proportionate
Ownership) ( C$ millions)


$1,245


$386


$138


$580


$1,908












Occupancy


91.9%


100.0%


95.2%


99.5%


93.9%












Weighted Average Lease Expiry
(Years)


4.5


22.2


4.6


15.2


7.9












Average Building Age (Years)


≈ 32


 11


 15


 15


 26












Weighted Average Cap Rate


6.8%


9.4%


6.4%


9.0%


7.5%

 

Notes



(1)

Represents information relating to properties owned by Vital Healthcare Property Trust ("Vital Trust"), in which NWI currently owns an approximate 24% interest.

(2)

Vital Trust shown on an attributable basis.  

 

Transaction Details

Under the terms of the Arrangement Agreement, NWH will, among other things, acquire all of the assets of NWI and NWI unitholders will receive 0.208 of a NWH unit for each NWI unit held on a tax-deferred basis.

The combination will be subject to the approval of at least 66 2/3% of the votes cast at special meetings of NWH and NWI voting unitholders to be held on or about May 8, 2015, as well as the approval of a majority of the votes cast at the NWH special meeting, other than votes held by NWI.

The transaction is subject to receipt of applicable orders from the Alberta Court of Queen's Bench, certain regulatory approvals (including approvals from stock exchanges, Competition Act (Canada) authorities, Australia's Foreign Investment Review Board and New Zealand's Overseas Investment Office), as well as other conditions.

The Arrangement Agreement provides for, among other things, customary reciprocal board support and non-solicitation covenants, with "fiduciary out" provisions that allow each party to accept a superior proposal in certain circumstances and a five business day "right to match period" in favour of the other party.  The Arrangement Agreement also provides for a reciprocal termination fee of $17 million if the Arrangement Agreement is terminated in certain specified circumstances.

Prior to closing, holders of NWI's convertible unsecured subordinated debentures may convert their debentures in accordance with their terms and participate in the arrangement on the same basis as other NWI unitholders. Any NWI convertible debentures outstanding at the time of closing will be assumed by NWH, and following closing, holders of the convertible debentures will be entitled to receive trust units of NWH upon conversion based on the exchange ratio contemplated by the transaction. Important details regarding the terms of NWI's convertible debentures are set out in the indenture governing such debentures, which has been publicly filed under NWI's profile at www.sedar.com. Holders of convertible debentures are encouraged to read the full text of the indenture.

Following closing, the NWH board will consist of Martin Barkin, Robert Baron, Bernard Crotty, Paul Dalla Lana (Chair), Brian Petersen, Colin Loudon and David Naylor, a majority of whom are "independent". Senior management of NWH will consist of the individuals who are currently senior management of NWI, while senior management of NWH's Canadian division will consist of the individuals who are currently senior management of NWH.

Northwest Value Partners Inc. ("NWVP"), which currently holds approximately 65% of NWI's voting units, has entered into a customary voting and support agreement pursuant to which, among other things, it has agreed to vote its NWI voting units in favour of the transaction. NWVP is wholly-owned by Paul Dalla Lana, who currently serves as Chairman of NWH and Chairman and CEO of NWI. Following closing, NWVP is expected to hold an approximate 34% interest in the combined REIT and will hold certain contractual rights (including the right to appoint trustees, pre-emptive rights and registration rights) in NWH. The other trustees and senior officers of each of NWI and NWH have also entered into customary support and voting agreements to vote their units in favour of the combination.

The Arrangement Agreement will be filed under each of NWH's and NWI's profiles on SEDAR (www.sedar.com). The terms of the transaction and related matters will also be described in detail in a joint management information circular of NWH and NWI to be filed with the regulatory authorities and mailed to unitholders in accordance with applicable securities laws.

Board Recommendations

NWH's Board of Trustees, based on the recommendation of a committee of independent trustees (the "NWH Independent Committee"), has determined that the combination is in the best interests of NWH and has recommended that NWH unitholders vote in favour of the transaction.  The NWH Independent Committee retained Canaccord Genuity Corp. ("Canaccord Genuity") as its independent financial advisor to provide an independent valuation in accordance with applicable securities laws. Canaccord Genuity determined that, as at March 10, 2015, subject to the assumptions, limitations and qualifications described in the independent valuation, the fair market value of the NWH units is in the range of $10.25 to $11.75 per NWH unit, and the fair market value of the NWI units is in the range of $2.15 to $2.40 per NWI unit. In addition, Canaccord Genuity rendered an opinion to the NWH Independent Committee that, as at March 10, 2015, subject to the assumptions, limitations and qualifications described therein, the consideration to be paid by NWH pursuant to the transaction is fair, from a financial point of view, to the NWH unitholders, other than NWI. Prior to the meeting at which the transaction was approved, Robert Baron, who is a trustee of NWI, resigned as a trustee of NWH.

NWI's Board of Trustees, based on the recommendation of a committee of independent trustees, has determined that the combination is in the best interests of NWI and has recommended that NWI unitholders vote in favour of the transaction.  NWI retained BMO Capital Markets and National Bank Financial Inc. as its independent financial advisors in connection with the transaction, and each of BMO Capital Markets and National Bank Financial Inc. has rendered an opinion to the NWI Board of Trustees that the consideration to be received by NWI unitholders pursuant to the transaction is fair, from a financial point of view, to NWI unitholders.

Advisors and Counsel

BMO Capital Markets and National Bank Financial are acting as financial advisors to NWI.  Goodmans LLP is acting as legal counsel to NWI.

Canaccord Genuity Corp. is acting as financial advisor to NWH and its independent committee. McCarthy Tétrault LLP is acting as legal counsel to NWH and its independent committee.

Peterson & Company LLP provided legal advice to NWI's independent committee.

NWH and NWI have retained Kingsdale Shareholder Services to provide strategic advisory services and act as proxy solicitation agent for this transaction.  Shareholders with questions should contact Kingsdale at 1-877-659-1822 toll free in North America, or collect at 1-416-867-2272 outside of North America or by email atcontactus@kingsdaleshareholder.com.

Investor Conference Call Details

NWH and NWI will host a joint investment community conference call Thursday, March 12, 2015 at 2:00 p.m. (ET). Callers are advised to dial in 10 minutes prior to the start time.

  • Participant Local Toll Free Dial-in Number: (888) 231-8191
  • Participant International Dial-in Number: (647) 427-7450
  • Conference ID: 5527775

About NorthWest Healthcare Properties Real Estate Investment Trust

NWH is an unincorporated, open-ended real estate investment trust established under the laws of the Province of Ontario. The REIT holds a portfolio of 74 income-producing properties, with a focus on medical office buildings and healthcare real estate, comprising approximately 4.6 million square feet of gross leasable area located in British Columbia, Alberta, Manitoba, Ontario, Québec, Nova Scotia and New Brunswick. For more information on NWH, visit www.nwhp.ca.

About NorthWest International Properties Real Estate Investment Trust

NWI is an unincorporated, open-ended real estate investment trust established under the laws of the Province of Ontario.  Including its investment in NWH and Vital Trust, NWI holds interests in a portfolio of 122 income-producing properties, representing an internationally diversified portfolio of medical office buildings and healthcare real estate, comprising approximately 6.6 million square feet of gross leasable area located in Australia / New Zealand, Brazil, Canada and Germany.

Disclaimers

This news release contains forward-looking statements about NWI, NWH and the entity that will result from their combination. Forward-looking statements are typically identified by words such as "expect", "anticipate", "believe", "foresee", "could", "estimate", "goal", "intend", "plan", "seek", "strive", "will", "may", "potential" and "should" and similar expressions. Forward-looking statements reflect current estimates, beliefs and assumptions which are based on NWH's and NWI 's perception of historical trends, current conditions and expected future developments, as well as other factors management believes are appropriate in the circumstances. NWH's and NWI's estimates, beliefs and assumptions are inherently subject to significant business, economic, competitive and other uncertainties and contingencies regarding future events and, as such, are subject to change. NWH and NWI can give no assurance that such estimates, beliefs and assumptions will prove to be correct.

Forward-looking statements in this news release contain those relating to: the extent to which the transaction is expected to be accretive to NWH; the combined REIT's financial position, property portfolio, cash flow and growth prospects; certain strategic benefits, and capital markets, operational, competitive and cost synergies; management of the combined REIT; the proposed timing of the transaction; the anticipated tax treatment of the transaction and NWH's and NWI's anticipated future results.

Numerous risks and uncertainties could cause actual results to differ materially from the estimates, beliefs and assumptions expressed or implied in the forward-looking statements, including, but not limited to: economic and market factors specific to the healthcare real estate industry; general economic and market factors; local real estate conditions; interest rates; the availability of equity and debt financing to the combined REIT; efficiencies and operating costs; tax related matters; reliance on key personnel of NWI, NWH and the combined REIT; increases or decreases in the prices of real estate; the combined REIT's future stability and growth prospects; the combined REIT's future profitability and capital needs, including capital expenditures; development and operating risks; currency risk; project development, expansion targets and operational delays; marketability; additional funding requirements; governmental regulations, licenses and permits; environmental regulation and liability; competition; uninsured risks; contingent liabilities and guarantees; litigation; health and safety; trustees' and officers' conflicts of interest; the failure to satisfy conditions precedent to the completion of the transaction; the ability of the combined REIT to integrate the operations of NWI and its subsidiaries and; the ability of NWI, NWH and the combined REIT to continue to develop and grow and management of the combined REIT's success in anticipating and managing the foregoing factors.

Readers are cautioned that the foregoing list of factors is not exhaustive. Other risks and uncertainties not presently known to NWH and NWI or that NWH and NWI presently believe are not material could also cause actual results or events to differ materially from those expressed in its forward-looking statements. Additional information on these and other factors that could affect the operations or financial results of NWH or NWI are included in reports filed by NWH and NWI with applicable securities regulatory authorities and may be accessed through the SEDAR website (www.sedar.com).

There can be no assurance that the proposed combination will occur or that the anticipated strategic benefits and operational, competitive and cost synergies will be realized. The proposed combination is subject to various regulatory approvals and the fulfillment of certain other conditions, including  unitholder approvals, and there can be no assurance that any such approvals will be obtained and/or any such conditions will be met. The proposed combination could be modified, restructured or terminated.

Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect NWH's and NWI's expectations only as of the date of this presentation. NWH, NWI and the combined REIT disclaim any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

This presentation for contains information provided by each of NWH and NWI. The information concerning each of NWH and NWI contained in this presentation has been provided by NWH and NWI, as applicable. Although neither NWI nor NWH has knowledge that would indicate that any of information about the other is untrue or incomplete, neither NWI nor NWH assumes any responsibility for the accuracy or completeness of information about the other.

Certain information concerning Vital Trust contained in this press release has been taken from, or is based upon, publicly available documents and records on file with regulatory bodies. Although NWI and NWH have no knowledge that would indicate that any of such information is untrue or incomplete, neither NWI nor NWH was involved in the preparation of any such publicly available documents and neither the REIT, nor any of its officers or trustees, assumes any responsibility for the accuracy or completeness of such information or the failure by Vital Trust to disclose events which may have occurred or may affect the completeness or accuracy of such information but which are unknown to NWI and NWH.

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

SOURCE NorthWest International Healthcare Properties REIT


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