Northwest sells UK portfolio for £500 million (C$885 million) at a 5.9% cap rate
Since the beginning of the formal strategic review, the REIT has sold assets for gross proceeds of approximately C$1.6 billion
Northwest's Board concludes formal strategic review process
Northwest is committed to continued asset sales to simplify the business and strengthen the balance sheet, aiming to become an institutional-quality REIT
Toronto, Ontario--(Newsfile Corp. - August 8, 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, is pleased to announce that it has sold its UK portfolio for gross proceeds of £500 million (C$885 million). The completion of this strategic sale transaction concludes the REIT's previously announced strategic review process.
Sale of UK Portfolio
The REIT's UK portfolio was sold to Assura PLC(1) ("Assura"), a publicly-listed REIT on the London Stock Exchange (LSE: AGR) for total consideration of £500 million (C$885 million), of which 80%, £400 million (C$708 million), was paid in cash with the remainder paid in shares of Assura valued at £100 million (C$177 million) calculated on a 30-day VWAP basis. The REIT's stake in Assura equates to approximately 8% of Assura's public float.
The sale price of the REIT's UK portfolio represents a cap rate of 5.9%. Debt totaling C$690 million, with a weighted average interest rate of 7.9%, will be repaid with the net proceeds from the transaction. Management anticipates the transaction will be accretive to Adjusted Funds From Operations ("AFFO")(2) by approximately 6 cents per unit on an annualized basis.
Conclusion of Formal Strategic Review
The completion of the sale of the REIT's UK portfolio marks the culmination of the strategic review and concludes the REIT's formal strategic review process, originally announced on August 8, 2023. As previously announced by the REIT, the strategic review process was led by a committee of independent trustees of the REIT (the "Committee") with the Committee engaging 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.
As a result of the REIT's strategic review process and actions taken by the Board of Trustees of the REIT while the strategic review process was underway, Northwest undertook the following actions:
divested properties for proceeds of C$1.4 billion at a blended cap rate of 6.5% and investments in unlisted securities for proceeds of C$0.2 billion;
actively managed debt maturities in advance of asset sales
reduced outstanding debt (including convertible debentures) from C$4.2 billion to C$3.0 billion, and decreased consolidated debt to gross book value (including convertible debentures) to 47.6%;
continued to strengthen corporate governance and the composition of the management team;
improved liquidity through a revised distribution policy; and
enhanced disclosure and investor engagement.
Dale Klein, Non-Executive Chair of the Board, stated: "The management team, in collaboration with the Board, remains committed to maximizing value for unitholders by continuing to execute on identified initiatives. This includes a commitment to further asset sales in order to continue to simplify the business and strengthen the balance sheet. These strategic actions will help us to continue deleveraging as we work towards our goal of becoming an institutional-quality REIT."
Craig Mitchell, CEO of Northwest, added: "We are pleased with the progress on the accretive dispositions completed over the last year and the positive impact they have had on our balance sheet. We remain committed to achieving favourable leverage levels and continuing to strengthen our financial position.
Our focus on cure assets and social infrastructure, along with investments in care and life sciences will continue to drive our future growth.
Additionally, we are committed to operational efficiency by streamlining operations and reducing costs to ensure efficient and effective operations. We believe these efforts will support our strategic initiatives and yield greater cost savings in the coming quarters.
We are in the right asset class, meeting the growing demand for quality healthcare facilities. We are excited about the future and are building a solid foundation for growth in healthcare real estate."
Upcoming Q2 2024 Conference Call
The REIT will be hosting its Q2 2024 conference call on Wednesday, August 14, 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
A replay will be available until September 14, 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: 9526679
(1) Further information on Assura is available on the investor relations section of their website (https://www.assuraplc.com/investor-relations) (2) AFFO is a supplemental non-IFRS financial measure. See "Non-IFRS Measures" below.
About Northwest
Northwest 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.
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 extent to which the sale of the UK portfolio is expected to be accretive to AFFO per unit, the potential future sale of assets, plans to continue deleveraging and simplifying the business, the REIT's goals of becoming an institutional-quality REIT and expected operational efficiencies and cost savings.
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's ability to complete future asset sales and deleverage, the REIT being able to realize operational efficiencies and cost savings, interest rates remaining stable or decreasing, the REIT's properties continuing to perform, and currency exchange rates remaining stable.
Although the forward-looking statements contained in this news release are based on assumptions that management of the REIT believe are reasonable, 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 risks that the REIT will be unable to realize the accretion, deleveraging, cost savings and other goals noted in this news release, as well as the business and industry risks identified in the REIT's annual information form and MD&A filed under the REIT's SEDAR+ profile at www.sedarplus.ca.
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.
Non-IFRS Measures
Some financial measures used in this press release, such as AFFO 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 should not be construed as alternatives to financial measures calculated in accordance with IFRS.
The REIT's method of calculating these measures may differ from the methods of other real estate investment trusts or other issuers, and accordingly may not be comparable. Further, the REIT's definition of AFFO differs from the definition recommended by REALpac.
Additional information regarding the REIT's non-IFRS measures, including definitions and reconciliations to the most directly comparable IFRS measure, where applicable, can be found in the REIT's Q1 2024 Management's Discussion and Analysis ("MD&A"), in the 'Performance Measurement' and 'Results from Operations' sections. The MD&A is available on the REIT's SEDAR+ profile at www.sedarplus.ca.
