TORONTO, Sept. 22, 2023 /CNW/ – Northwest Healthcare Properties Real Estate Investment Trust (the ‘REIT‘ or ‘Northwest‘) (TSX: NWH.UN) today announces steps to strengthen its financial position, including financing and disposition initiatives, and a reduction to its monthly distribution. Northwest also announces an update on its previously announced strategic review process. These initiatives are expected to provide the REIT with greater financial strength and flexibility.

Steps Taken to Strengthen Balance Sheet and Financial Position

The REIT today announces:

Extension of Credit Facility

An extension to the maturity date of its US$127.5 million (~$172 million) non-revolving tranche of its secured credit facility pursuant to a credit agreement with a syndicate of Canadian financial institutions by one year, from January 2024 to January 2025.

Australian Unity Healthcare Property Trust (‘AUHPT‘) Unit Sales

Further to the REIT’s press release on July 10, 2023 announcing the settlement agreement between, inter alia, Northwest and Australian Unity Funds Management Limited, Northwest has received gross proceeds from AUHPT unit sales and redemptions of approximately $82 million, which have been used to repay debt. Northwest anticipates it will complete the sale or redemption of the balance of its holdings in AUHPT, expected to generate net proceeds of approximately $110–$120 million, in Q4 2023 and Q1 2024, to be used to repay debt and for general trust purposes.

Near-Term Non-Core Asset Sales

At the outset of 2023, the REIT identified dispositions of certain non-core assets as a key priority for the year. Sales of assets to date have generated gross sale proceeds of approximately $74 million, with additional gross proceeds in excess of $50 million expected to be received in Q4 2023 pursuant to executed and unconditional contracts. Additional assets expected to generate gross proceeds in excess of $100 million are currently under conditional agreement or are being marketed for sale.

The REIT intends to use the proceeds from non-core asset sales, net of transaction costs, to repay debt and for general trust purposes, and will continue to review its portfolio for other non-core asset sale candidates with the intention to apply net proceeds to pay down additional high cost debt.

Changes to Monthly Distribution & Declaration of September Distribution

Management has undertaken an analysis of the REIT’s distribution payments, with a specific focus on expected 2024 operating results and cash flows, including the maturity of the in-place interest rate caps in Q1 2024 (which is expected to decrease the REIT’s AFFO per unit by approximately $0.16–$0.20 per annum).

The Board of Trustees (the ‘Board‘) has carefully considered the results of management’s analysis and advice from the financial advisors regarding the REIT’s distribution payments. The Board today announces an immediate reduction of the REIT’s monthly distribution to unitholders from $0.06667 per unit to $0.03 per unit, or from $0.80 per unit to $0.36 per unit on an annualized basis.

The distribution will be paid on October 16, 2023, to unitholders of record as at September 29, 2023.

The Board and management believe this decision is prudent and in the best interests of the REIT and its unitholders. The distribution reduction is expected to provide the REIT with financial flexibility to continue advancing its short and long-term objectives while exploring strategic alternatives, with maximizing unitholder value being the principal objective.

Update on Strategic Review Process

As announced on August 8, 2023, Northwest has formed a Strategic Review â€ŜCommittee (the ‘Committee‘) of the Board to undertake a broad-based strategic review.

The Committee has engaged Canadian banks, Scotiabank and RBC Capital Markets, and international bank Deutsche Bank Securities, each as co-advisors to provide financial advisory services, and DLA Piper (Canada) LLP as legal counsel to the Committee.

The Committee and its advisors have received a broad range of enquiries from third parties, including expressions of interest and non-binding proposals regarding certain potential asset dispositions. The Committee, following consultation with its financial and legal advisors, has determined to explore, among other strategic initiatives, transactions involving the potential sale of all or part of Northwest’s U.S. and/or Brazil property portfolios.

There is no certainty regarding the results of the Committee’s strategic review or that any particular transaction will be agreed upon or consummated. The REIT does not intend to comment further on the strategic review until it determines that additional disclosure is appropriate or required.

Continuing Strong Portfolio and Platforms

The REIT’s portfolio continues to perform well. Operationally, the REIT’s high quality and defensive portfolio continues to deliver strong results, including 5.1% same property net operating income growth through Q2 of 2023 on a year-over-year basis, portfolio occupancy of approximately 96%, a weighted average lease expiry of approximately 13.5 years and approximately 83% of leases are subject to rent indexation, as of Q2 2023. With a portfolio comprising more than 2,000 tenants in 8 countries, the REIT’s cash flow is highly diversified across its 231 properties.  The REIT currently believes that global partnerships will remain a strategic backbone of the REIT and are likely to be significant to the REIT’s future success, one notable example being Northwest’s interest in NZX-listed Vital Healthcare Property Trust.

Summary

Craig Mitchell, Northwest’s Interim CEO commented: ‘Since the release of the REIT’s Q2 2023 financial results, management has been actively working to review the REIT’s distribution policy with the objective of positioning the REIT for future success. The decision to reduce the REIT’s monthly distribution based on management’s analysis, as well as advice from the Strategic Review Committee’s financial advisors, coupled with today’s announcements pertaining to the extension of certain near term debt maturities and proceeds generated from non-core asset and unit sales, are each anticipated to significantly improve the REIT’s near term financial flexibility.’

‘The Board supports the management team as they focus on fortifying the REIT’s balance sheet’ said Dale Klein, Non-Executive Chair of the Board.

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 June 30, 2023 of interests in a diversified portfolio of 231 income-producing properties and 18.5 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 over 300 professionals in ten offices in eight countries to serve as a long-term real estate partner to leading healthcare operators.

Forward Looking Information

Certain statements contained in this news release constitute forward-looking information within the meaning of applicable securities laws. In some cases, forward-looking information can be identified by such terms such as ‘may,’ ‘might,’ ‘will,’ ‘could,’ ‘should,’ ‘would,’ ‘occur,’ ‘expect,’ ‘plan,’ ‘anticipate,’ ‘believe,’ ‘intend,’ ‘estimate,’ ‘predict,’ ‘potential,’ ‘continue,’ ‘likely,’ ‘schedule,’ or the negative thereof or other similar expressions concerning matters that are not historical facts. The forward-looking information in this news release includes statements regarding the REIT’s distribution policy, the Committee’s strategic review process, including the potential for any transaction involving the REIT or its assets, including the Brazilian or U.S. portfolios, the sustainability of the REIT’s distributions, the REIT’s operating results and cash flows, the annualized impact of interest rate caps, fund formation initiatives, the strategic review process being undertaken by the REIT, the REIT’s commitment to global partnerships, the potential sale of assets, including non-core assets and the proceeds therefrom, the AUHPT settlement and the expected use of proceeds thereof.

The REIT has based these forward-looking statements on factors and assumptions about future events and financial trends that it believes may affect its financial condition, financial performance, business strategy and financial needs. These assumptions include, but are not limited to, those relating to the REIT being able to achieve its operating results and cash flows, interest rates remaining stable or decreasing, the REIT’s properties continuing to perform, and the completion of various transactions (including related to the Brazil and U.S. portfolio sales, the AUHPT settlement, and non-core asset sales) on the terms currently contemplated.

Although the forward-looking statements contained in this news release are based upon assumptions that management of the REIT believe are reasonable based on information currently available to management, there can be no assurance that actual results will be consistent with these forward-looking statements. Forward-looking statements necessarily involve known and unknown risks and uncertainties, many of which are beyond the REIT’s control, including, among other things, the risk that the REIT’s business will be unable to generate the income needed to sustain the new distribution, the transactions described above not being completed on the terms proposed and generating the expected net proceeds, no transaction or other changes will result from the strategic review process and other risks identified in materials filed under the REIT’s profile at www.sedar.com from time to time. The forward-looking statements in this news release relate only to events or information as of the date hereof. Except as required by applicable Canadian securities laws, the REIT undertakes no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, after the date on which the statements are made or to reflect the occurrence of unanticipated events.

SOURCE NorthWest Healthcare Properties Real Estate Investment Trust

For further information: Please contact: [email protected], or Andrew Greig, Investor Relations, [email protected], (416) 366-2000 Ext. 2202; Craig Mitchell, Interim CEO, Craig.mitch[email protected]; Shailen Chande, CFO, [email protected]