NORTHWEST HEALTHCARE PROPERTIES REAL ESTATE INVESTMENT TRUST ANNOUNCES FIRST QUARTER 2024 RESULTS
TORONTO, May 14, 2024 /CNW/ - Northwest Healthcare Properties Real Estate Investment Trust (the "REIT" or "Northwest") (TSX: NWH.UN), a leading owner and operator of healthcare real estate infrastructure in North America, Brazil, Europe and Australasia, announces results for the three months ended March 31, 2024 ("Q1 2024").
For Q1 2024, the REIT delivered another quarter of strong operating results with key highlights as follows:
- Strong operating performance is underpinned by a long-term lease maturity profile with a weighted-average lease expiry ("WALE") of 13.2 years, a global portfolio occupancy rate of 96.5%, and a global rent collection rate of 98%;
- Revenue from investment properties for Q1 2024 of $133.5 million was 1.3% lower compared to Q1 2023 due to asset sales partially offset by contractual and inflationary rental increases;
- Same property NOI ("SPNOI") of $88.9 million for the quarter increased by 6.0% in Q1 2024 compared to Q1 2023 (see Exhibit 3);
- For Q1 2024, the reported Net Loss decreased to $38.6 million from $89.2 million in Q1 2023 primarily driven by fair value adjustments;
- Adjusted funds from operations ("AFFO") per unit for Q1 2024 was $0.11(1) (Q1 2023 - $0.17 per unit), resulting in a payout ratio for Q1 2024 of 80% (Q1 2023 – 121%) (see Exhibit 2);
- The REIT's leverage at 47.7% (52.2% including convertible debentures) at the end of Q1 2024 remains consistent with Q4 2023; and
- Dispositions of $201 million in YTD fiscal 2024, including a portion of the REIT's investment in unlisted securities.
(1) | AFFO per unit of $0.11 includes adjustments in respect of premiums on interest rate caps that expired during the first quarter of 2024. The interest rate cap premiums contributed $0.02 per unit of AFFO during Q1 2024. |
"Our Q1 2024 results are in line with our expectations and are supported by strong leasing, occupancy and Same Property NOI metrics," said Craig Mitchell, Northwest's CEO. "We are pleased with the successful completion of over $200 million in property dispositions and unlisted securities in 2024 to-date. Proceeds generated were used to repay property-specific debt and high-cost corporate facilities."
Craig added, "Our goal is to become an institutional-quality healthcare REIT with a sustainable financial profile, and a balance sheet capable of withstanding interest rate changes and other uncertainties. We are making good progress on this. Northwest's healthcare real estate portfolio is performing well in a sector that is positioned for resilience and growth, and we believe we are well placed to capitalize on the heightened demand for healthcare real estate."
(unaudited) ($000's, except unit and per unit amounts) | Three months ended | Three months ended |
Number of properties | 210 | 233 |
Gross leasable area (sf) | 17,399,185 | 18,637,159 |
Occupancy | 96.5 % | 97.0 % |
Weighted Average Lease Expiry (Years) | 13.2 | 13.6 |
Rent collection rate | 98 % | 98 % |
Net Operating Income | $95,452 | $95,421 |
Net Income (Loss) attributable to unitholders | $(38,617) | $(89,155) |
Funds from Operations ("FFO") | $26,957 | $39,538 |
Adjusted Funds from Operations ("AFFO") | $27,679 | $40,129 |
Debt to Gross Book Value - Declaration of Trust | 47.7 % | 46.7 % |
Debt to Gross Book Value - Including Convertible Debentures | 52.2 % | 50.0 % |
The REIT's SPNOI for Q1 2024 increased by 6.0% 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 additionally supported by a long-term WALE of 13.2 years. These strong operating results came from all regions in the quarter with SPNOI growth coming from North America at 5.9%, Brazil at 4.8%, Europe at 4.3% and Australasia at 7.8%.
During Q1 2024, the REIT recorded a fair value loss on investment properties of $71.7 million. The fair value loss was mainly attributable to changes in valuation parameters, incorporating market evidence, when available, rent reviews across the portfolio, and cap rate expansion in consideration of the interest rate environments in which the REIT operates.
As at March 31, 2024, the weighted average capitalization rate was 6.0% for the consolidated portfolio as compared to 5.9% as at December 31, 2023.
In Q1 2024, the REIT divested 12 properties for total proceeds of $165.2 million. Subsequent to Q1 2024, the REIT divested 1 additional property with a fair value of $20.5 million. The proceeds of these sales were used to repay property level debt, corporate credit facilities and for general trust purposes.
During Q1 2024, the REIT redeemed an additional $15.3 million of its investment in unlisted securities, resulting in the REIT now having sold approximately 71% of its investment for proceeds of $150 million. The proceeds have been used towards the full repayment of the Australasian term debt, secured by the underlying unlisted securities.
Total proceeds from dispositions in Q1 2024 and subsequent to the quarter totaled $201 million.
During the last twelve months, the REIT has divested 27 properties and investments in unlisted securities for total proceeds of $696 million.
As at May 14, 2024, the REIT is actively pursuing the sale of additional assets globally.
Further to the financing update provided in mid-March, the REIT refinanced the terms of its $172.0 million variable rate Australasian secured term loan, extending the maturity by two years. Subsequent to March 31, 2024, the REIT economically fixed the interest rate on $40 million of the outstanding balance at 7.36% for a term of 2 years by entering into interest rate swaps.
In 2024 to-date, the REIT has refinanced and amended mortgages in North America totaling $49.1 million, bearing a weighted average interest rate of 4.95% with new mortgages of $53.6 million, bearing a weighted average interest rate of 6.91% and weighted average term to maturity extended by approximately 3 years. The REIT further amended a mortgage in Europe totaling $12.4 million to extend the maturity date by 1 year.
The weighted average interest rate on debt as of March 31, 2024, is 6.10% as compared to 6.27% at December 31, 2023, including convertible debentures.
Ms. Tracey Whittall was appointed as Chief Operating Officer effective February 26, 2024. Peter Riggin, the former COO, is transitioning into retirement and will remain with the REIT as an advisor until June 30, 2024.
Ms. Stephanie Karamarkovic was appointed as Chief Financial Officer effective April 15, 2024, replacing interim CFO, Karen Martin.
The REIT invites you to participate in its conference call with senior management to discuss the Q1 results on Wednesday, May 15, 2024 at 10:00 AM (Eastern). Participating on the call will be Northwest's CEO, Craig Mitchell; Stephanie Karamarkovic, CFO; Mike Brady, President; and Tracey Whittall, COO.
Investors are invited to join the conference call by phone by using the following URL to register and be connected into the conference call automatically: https://emportal.ink/4aER8Ys. Investors may also access the call by dialing 416-764-8609 or 1 (888) 390-0605. The conference ID is 30046836.
A recording of this call will be made available from May 15, 2024, through May 22, 2024, by dialing 416-764-8677 or 1 (888) 390-0541. The reservation number is 046836#.
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 March 31, 2024, of interests in a diversified portfolio of 210 income-producing properties and 17.4 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.
Some financial measures used in this press release, such as SPNOI, FFO, FFO per Unit, AFFO, AFFO per Unit, AFFO Payout Ratio, NAV and NAV per Unit 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 months ended March 31, 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 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, balance sheet optimization arrangements, and the REIT's pursuit of becoming an institutional quality REIT with a sustainable financial profile. 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. 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) and Comprehensive Income (Loss) | |||
(in thousands of Canadian dollars) | |||
Unaudited | |||
For the three months ended March 31, | 2024 | 2023 | |
Net Property Operating Income | |||
Revenue from investment properties | $ 133,545 | $ 135,324 | |
Property operating costs | 38,093 | 39,903 | |
$ 95,452 | $ 95,421 | ||
Other Income (loss) | |||
Interest and other | 3,403 | 4,116 | |
Management fees | 3,850 | 10,725 | |
Share of profit (loss) of equity accounted investments | 3,315 | 3,988 | |
$ 10,568 | $ 18,829 | ||
Expenses and other | |||
Mortgage and loan interest expense | 55,433 | 51,648 | |
General and administrative expenses | 15,537 | 13,036 | |
Transaction costs | 2,367 | 5,020 | |
Foreign exchange (gain) loss | (13,730) | (7,216) | |
$ 59,607 | $ 62,488 | ||
Income before finance costs, net gain (loss) on financial | $ 46,413 | $ 51,762 | |
Finance income (expense) | |||
Amortization of financing costs | (5,180) | (2,970) | |
Class B exchangeable unit distributions | 63 | (342) | |
Fair value adjustment of Class B exchangeable units | (205) | 1,761 | |
Accretion of financial liabilities | (4,008) | (5,043) | |
Fair value adjustment of convertible debentures | (5,975) | 3,198 | |
Convertible debenture issuance costs | (27) | (21) | |
Net gain (loss) on financial instruments | 5,612 | (17,192) | |
Fair value adjustment of investment properties | (71,703) | (151,561) | |
Loss on disposition of investment properties, net | (5,192) | — | |
Fair value adjustment of unit based compensation liabilities | 355 | 3,303 | |
Income (loss) before taxes | $ (39,847) | $ (117,105) | |
Current tax expense | 2,766 | 6,996 | |
Deferred tax expense (recovery) | (3,996) | (34,946) | |
Income tax expense (recovery) | $ (1,230) | $ (27,950) | |
Net income (loss) | $ (38,617) | $ (89,155) | |
Net income (loss) attributable to: | |||
Unitholders | $ (47,607) | $ (97,486) | |
Non-controlling interests | 8,990 | 8,331 | |
$ (38,617) | $ (89,155) | ||
Financial Exhibits
Exhibit 1 – 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 REIT's MD&A (see "Performance Measurement" and "Funds From Operations").
FUNDS FROM OPERATIONS ("FFO") | ||
Three months ended March | ||
2024 | 2023 | |
Net income (loss) attributable to unitholders | $ (47,607) | $ (97,486) |
Add / (Deduct): (1) | ||
Fair market value losses (gains) (2) | 79,124 | 163,525 |
Finance cost - Exchangeable Unit distributions | (63) | 342 |
Revaluation of financial liabilities | 4,008 | 5,043 |
Unrealized foreign exchange loss (gain) | (14,043) | (6,600) |
Deferred taxes | (4,590) | (34,530) |
Transaction costs | 3,077 | 5,020 |
Net loss on disposal of investment properties | 4,404 | — |
Convertible Debenture issuance costs | 27 | 21 |
Internal leasing costs | 358 | 494 |
Property taxes accounted for under IFRIC 21 | 135 | 401 |
Net adjustment for lease amortization | (125) | (82) |
Other FFO adjustments | 2,252 | 3,390 |
FFO (2) | $ 26,957 | $ 39,538 |
FFO per Unit - Basic | $ 0.11 | $ 0.16 |
FFO per Unit - Diluted (3) | $ 0.11 | $ 0.16 |
Adjusted weighted average units outstanding (4) | ||
Basic | 245,381,166 | 242,870,623 |
Diluted (3) | 246,703,287 | 246,584,256 |
(1) | FFO is not a measure recognized under IFRS and does not have standardized meanings prescribed by IFRS. See Performance Measurement. The adjustments to determine FFO have been presented on a proportionate basis. |
(2) | Included in FFO is $6.7 million related to interest rate caps, the impact of which is $0.02 per unit. |
(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 March 31, 2024 (March 31, 2023 - 1,710,000 Class B Units). |
Exhibit 2 – 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").
ADJUSTED FUNDS FROM OPERATIONS | ||
Three months ended | ||
2024 | 2023 | |
FFO | $ 26,957 | $ 39,538 |
Add / (Deduct): | ||
Amortization of transactional deferred financing charges | 2,785 | 2,079 |
Unit-based compensation expense | 2,549 | 2,346 |
Straight-line revenue | (1,186) | (647) |
Leasing costs and non-recoverable maintenance capital expenditures | (3,426) | (3,187) |
AFFO | $ 27,679 | $ 40,129 |
AFFO per Unit - Basic | $ 0.11 | $ 0.17 |
AFFO per Unit - diluted | $ 0.11 | $ 0.16 |
Distributions per Unit - Basic | $ 0.09 | $ 0.20 |
Adjusted weighted average units outstanding: | ||
Basic | 245,381,166 | 242,870,623 |
Diluted | 246,703,287 | 246,584,256 |
(1) | FFO and AFFO are not measures recognized under IFRS and do not have standardized meanings prescribed by IFRS. See Performance Measurement. 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 March 31, 2024 (March 31, 2023 - 1,710,000 Class B Units). |
Exhibit 3 – 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").
SAME PROPERTY NOI | |||
Three months ended March 31, | |||
2024 | 2023 | Var % | |
Same property NOI (1) | |||
North America | $ 21,252 | $ 20,069 | 5.9 % |
Brazil | 14,763 | 14,090 | 4.8 % |
Europe | 21,433 | 20,548 | 4.3 % |
Australasia | 31,451 | 29,186 | 7.8 % |
Same property NOI (1) | $ 88,899 | $ 83,893 | 6.0 % |
Impact of foreign currency translation | — | (255) | |
Straight-line rental revenue recognition | 724 | 945 | |
Amortization of operating leases | (40) | (42) | |
Lease termination fees | 69 | 31 | |
Other transactions | (548) | (534) | |
Developments | 3,225 | 1,731 | |
Acquisitions | — | — | |
Dispositions | 2,632 | 9,063 | |
Intercompany/Elimination | 491 | 590 | |
NOI | $ 95,452 | $ 95,422 | — % |
Exhibit 4 – Net Asset Value ('NAV') per Unit
"NAV per Unit" or sometimes presented as "NAV/unit" is an extension of NAV and defined as NAV divided by the number of units outstanding at the end of the period. NAV and NAV/unit is more fully defined and discussed in the REIT's MD&A (see "Performance Measurement" and "Part IX – Net Asset Value").
Q1 2024 | Q4 2023 | ||||
Total Assets | $ 7,383,601 | $ 7,628,615 | |||
less Total Liabilities | (4,412,857) | (4,543,347) | |||
less Non-controlling interests | (1,062,992) | (1,090,956) | |||
Unitholders' equity | 1,907,752 | 1,994,312 | |||
Add/(deduct): | |||||
Goodwill | (37,298) | (38,566) | |||
Unit-based compensation liabilities | 16,731 | 15,161 | |||
Deferred tax liability | 399,850 | 409,269 | |||
less NCI | (90,184) | 309,666 | (91,490) | 317,779 | |
Financial instruments - net | (28,950) | (19,483) | |||
less NCI | 5,481 | (23,469) | 5,524 | (13,959) | |
Exchangeable Units | — | 8,721 | |||
Global manager valuation adjustment (1) | 373,826 | 378,220 | |||
Net Asset Value ("NAV") | $ 2,547,208 | $ 2,661,668 | |||
Adjusted units outstanding ('000s) - period end (2) | 245,759 | 245,002 | |||
NAV per Unit | $ 10.36 | $ 10.86 | |||
(1) | Global manager includes the European and Australasian asset management operations. |
(2) | 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 per unit measure that includes the Class B LP Units in basic units outstanding/weighted average units outstanding. |
SOURCE Northwest Healthcare Properties REIT
Craig Mitchell, CEO, [email protected]; Stephanie Karamarkovic, CFO, [email protected]; Alyssa Barry, Investor Relations, [email protected]
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