The
The REIT's non-core sales program, announced last quarter, has expanded from
Inclusive of the non-core sales program, its previously announced US JV initiative and the
Operationally, the REIT's high quality and defensive portfolio delivered strong results including 4.4% same property NOI ("SPNOI")1 on a year over year basis. The REIT's portfolio occupancy of 97% is underpinned by a weighted average lease expiry of 14 years and 83% of leases are subject to rent indexation. With a portfolio comprising more than 2,000 tenants the REIT's cash flow is highly diversified.
______________________________ |
1 These are not measures recognized under IFRS and do not have standardized meanings prescribed by IFRS. Further, the REIT's definitions of FFO and AFFO differ from those used by other similar real estate investment trusts, as well from the definitions recommended by REALpac. See "Non-IFRS Financial Measures", Exhibit 1 and Exhibit 2. |
In Q1 2023, revenue and NOI increased by 29% and 24%, respectively. However, as a result of higher interest rates, temporarily elevated leverage, and lower transaction volumes within the REIT's fee bearing capital platforms, per unit AFFO decreased from
Over the course of 2023, the impact of hedging activities, the
Commenting on the REIT's progress advancing its capital raising initiatives,
"The
Mr.
"With anticipated liquidity in excess of near-term requirements, the REIT is considering all options to redeploy capital to maximize unitholder value including through unit buybacks, further deleveraging and opportunistic acquisitions."
Balance Sheet Initiatives:
As at
Subsequent to quarter end, the REIT issued a
Funds Management:
As highlighted above, Northwest has secured an investment from a
The REIT's US joint venture initiative continues to progress, and the REIT remains actively engaged with qualified partners and is working towards commercial terms. Completion continues to be expected in the second half of 2023.
At a target ownership level of between 20% and 30% across its capital platforms the REIT anticipates generating an increased level of growth in both AFFO and NAV on a per unit basis as a result of leveraging its capital light model and internally generated capital to fund growth.
Growth and
The healthcare real estate market continues to adjust to the rapid change in global interest rates over the last 12 months, bid ask spreads are beginning to converge and transaction volumes are beginning to normalize. With that said, the REIT remains highly disciplined with respect to capital deployment and as a result acquisition volume was nil in the quarter.
The REIT had previously identified
The REIT remains constructive on the long-term demand factors that drive value creation in healthcare real estate and with
2023 First Quarter Financial and Operational Highlights:
For the three months ended
- Q1 2023 revenue of
$135.3M up 29.5% YOY; - Q1 2023 AFFO of
$0.17 per unit (see Exhibit 2); - Q1 2023 Same Property NOI increased by 4.4% on a year over year basis, driven primarily by annual rent indexation (see Exhibit 3);
- Strong portfolio occupancy of 97% consistent with last quarter with the international portfolio holding stable at 98.2%;
- Weighted average lease expiry of 13.6 years is underpinned by the international portfolio's Hospital and Health Care Facility Assets' weighted average lease expiry of 18.0 years;
- Total assets under management ("AUM") increased 13.7% year over year to
$10.8 billion ; - Total capital deployed in fee bearing vehicles is
$6.1 billion up 8.9% year over year. Available capacity in existing fee bearing vehicles totals$4.6 billion ; - Net asset value ("NAV") per unit decreased by 1.4% to
$13.16 compared toDecember 31, 2022 (see Exhibit 4); - Consolidated Debt to Gross Book Value Including Convertible Debentures of 50.0% has increased 750 bp year over year and is expected to decrease to 38.2% (1,180 bp) as the REIT completes its
UK and US JVs as well as its non-core assets sales.
Selected Financial Information:
(unaudited) ( | Three months ended | Three months ended |
Number of properties | 233 | 202 |
Gross leasable area (sf) | 18,637,159 | 16,919,499 |
Occupancy | 97 % | 97 % |
Weighted Average Lease Expiry (Years) | 13.6 | 14.6 |
Net Operating Income | ||
Net Income (Loss) attributable to unitholders | ||
Funds from Operations ("FFO") (1) | ||
Adjusted Funds from Operations ("AFFO") (1) | ||
Debt to Gross Book Value - Declaration of Trust (1) | 46.7 % | 40.7 % |
Debt to Gross Book Value - Including Convertible | 50.0 % | 42.5 % |
(1) FFO and AFFO are not measures recognized under IFRS and do not have standardized | ||
Q1 2023 Conference Call:
The REIT invites you to participate in its conference call with senior management to discuss our first quarter 2023 results on
The conference call can be accessed by dialing 416-764-8609 or 1 (888) 390-0605. The conference ID is 64481047#.
Audio replay will be available from
In conjunction with the release of the REIT's first quarter 2023 financial results, the REIT will post a current investor update presentation to its website where additional information on the REIT's investments and operating performance may be found. Please visit the REIT's website at https://nwhreit.com/ to view the latest update.
About
Non-IFRS Financial Measures
Some financial measures used in this press release, such as SPNOI, Constant Currency SPNOI, FFO, FFO per Unit, AFFO, AFFO per Unit, AFFO Payout Ratio, NAV, NAV per Unit, portfolio occupancy and weighted average lease expiry, 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 3 months ended
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, geographic expansion, ESG initiatives, expanding AUM, balance sheet optimization arrangements, and potential acquisitions, dispositions and other transactions, including the proposed
(in thousands of Canadian dollars) | ||
Unaudited | ||
For the three months ended | ||
2023 | 2022 | |
Net Property Operating Income | ||
Revenue from investment properties | $ 135,324 | $ 104,463 |
Property operating costs | 39,903 | 27,396 |
95,421 | 77,067 | |
Other Income | ||
Interest and other | 4,116 | 2,510 |
Development revenue | — | 2,564 |
Management fees | 10,725 | 7,095 |
Share of profit (loss) of equity accounted investments | 3,988 | 5,168 |
18,829 | 17,337 | |
Expenses and other | ||
Mortgage and loan interest expense | 51,648 | 23,387 |
General and administrative expenses | 13,036 | 10,309 |
Transaction costs | 5,020 | 5,599 |
Development costs | — | 2,348 |
Foreign exchange (gain) loss | (7,216) | (594) |
62,488 | 41,049 | |
Income before finance costs, fair value adjustments, and net gain (loss) | 51,762 | 53,355 |
Finance costs | ||
Amortization of financing costs | (2,970) | (2,221) |
Amortization of mark-to-market adjustment | — | 90 |
Class B exchangeable unit distributions | (342) | (342) |
Fair value adjustment of Class B exchangeable units | 1,761 | 34 |
Accretion of financial liabilities | (5,043) | (8,573) |
Fair value adjustment of convertible debentures | 3,198 | 2,850 |
Convertible debenture issuance costs | (21) | — |
Net gain (loss) on financial instruments | (17,192) | 28,970 |
Fair value adjustment of investment properties | (151,561) | 82,341 |
Fair value adjustment of deferred unit plan liability | 3,303 | 211 |
Income before taxes from continuing operations | (117,105) | 156,715 |
Current tax expense | 6,996 | 7,193 |
Deferred tax expense (recovery) | (34,946) | 26,187 |
Income tax expense (recovery) | (27,950) | 33,380 |
Total net income | $ (89,155) | $ 123,335 |
Net income attributable to: | ||
Unitholders | $ (97,486) | $ 88,254 |
Non-controlling interests | 8,331 | 35,081 |
$ (89,155) | $ 123,335 |
Financial Exhibits
Exhibit 1 – Funds From Operations Reconciliation
The REIT calculates FFO based on certain adjustments to net income (computed in accordance with IFRS) as detailed below. The REIT makes adjustments for cost incur with respect to exploring new growth opportunities, establishing joint arrangements, building relationships with healthcare operators and institutional investors, which in management view are not reflective of earnings from core operations or impact the REIT's ability in the long-run to make distributions to Unitholders given their discretionary and strategic nature. In addition, beginning in the quarter ended
FUNDS FROM OPERATIONS | ||||||
Expressed in thousands of Canadian dollars, except per unit amounts | Three months ended | |||||
2023 | 2022 | Variance | ||||
Net income (loss) attributable to unitholders | $ (97,486) | $ 88,254 | $ (185,740) | |||
Add / (Deduct): | ||||||
(i) Fair market value losses (gains) | 162,498 | (114,406) | 276,904 | |||
Less: Non-controlling interests' share of fair market value losses (gains) | 1,299 | 37,559 | (36,260) | |||
(ii) Finance cost - Exchangeable Unit distributions | 342 | 342 | — | |||
(iii) Revaluation of financial liabilities | 5,043 | 8,573 | (3,530) | |||
(iv) Unrealized foreign exchange loss (gain) | (6,756) | 1,817 | (8,573) | |||
Less: Non-controlling interests' share of unrealized foreign exchange loss (gain) | 156 | (171) | 327 | |||
(v) Deferred taxes | (34,946) | 26,187 | (61,133) | |||
Less: Non-controlling interests' share of deferred taxes | 377 | (7,901) | 8,278 | |||
(vi) Transaction costs | 5,020 | 5,697 | (677) | |||
Less: Non-controlling interests' share of transaction costs | — | 303 | (303) | |||
(vii) Convertible Debenture issuance costs | 21 | — | 21 | |||
(viii) Net adjustments for equity accounted investments | (814) | 240 | (1,054) | |||
(ix) Internal leasing costs | 494 | 906 | (412) | |||
* Property taxes accounted for under IFRIC 21 | 401 | — | 401 | |||
(xi) Net adjustment for lease amortization | (82) | (72) | (10) | |||
(xii) Other FFO adjustments | 3,971 | — | 3,971 | |||
Funds From Operations ("FFO") (1) | $ 39,538 | $ 47,328 | $ (7,790) | |||
FFO per Unit - Basic | $ 0.16 | $ 0.21 | $ (0.05) | |||
FFO per Unit - fully diluted (3) | $ 0.16 | $ 0.21 | $ (0.05) | |||
Adjusted weighted average units outstanding (2) | ||||||
Basic | 242,870,623 | 226,324,317 | 16,546,306 | |||
Diluted (3) | 246,584,256 | 237,987,041 | 8,597,215 | |||
(1) | Other FFO adjustments include items that, in management's view, are not reflective of recurring earnings from core operations. For the three months ended | ||||||
(2) | FFO is not a measure recognized under IFRS and does not have standardized meanings prescribed by IFRS. See Performance Measurements | ||||||
(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 | ||||||
(4) | Diluted units includes vested but unissued deferred trust units and the conversion of the REIT's Convertible Debentures that would have a dilutive effect |
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 makes certain adjustments as detailed below in calculating its FFO and AFFO, which in management view are not reflective of earnings from core operations or impact the REIT's ability in the long-run to make distributions to Unitholders given their discretionary and strategic nature. The REIT's AFFO definition differs from the REALpac Guidance in that, when calculating AFFO, the REIT does not make an adjustment to AFFO for amortization financing charges. The REIT's method of calculating AFFO also differs from other issuers' methods and may not be comparable to similar measures used by other issuers.
ADJUSTED FUNDS FROM OPERATIONS | |||||
Expressed in thousands of Canadian dollars, except per unit amounts | Three months ended | ||||
2023 | 2022 | Variance | |||
FFO (1) | $ 39,538 | $ 47,328 | $ (7,790) | ||
Add / (Deduct): | |||||
(i) Amortization of marked to market adjustment | — | (90) | 90 | ||
(ii) Amortization of transactional deferred financing charges | 2,079 | 1,332 | 747 | ||
(iii) Straight-line revenue | 715 | 533 | 182 | ||
Less: non-controlling interests' share of straight-line revenue | (1,337) | (427) | (910) | ||
(iv) Leasing costs and non-recoverable maintenance capital expenditures | (3,314) | (2,737) | (577) | ||
Less: non-controlling interests' share of actual capex and leasing costs | 117 | 106 | 11 | ||
(v) Unit-Based Compensation Expense | 2,346 | 1,648 | 698 | ||
(vi) Net adjustments for equity accounted investments | (15) | (243) | 228 | ||
Adjusted Funds From Operations ("AFFO") (1) | $ 40,129 | $ 47,450 | $ (7,321) | ||
AFFO per Unit - Basic | $ 0.17 | $ 0.21 | $ (0.04) | ||
AFFO per Unit - fully diluted | $ 0.16 | $ 0.21 | $ (0.05) | ||
Distributions per Unit - Basic (3) | $ 0.20 | $ 0.20 | $ — | ||
Adjusted weighted average units outstanding: (2) | |||||
Basic | 242,870,623 | 226,324,317 | 16,546,306 | ||
Diluted | 246,584,256 | 237,987,041 | 8,597,215 | ||
Notes | ||||||||||||
(1) | FFO and AFFO are not measures recognized under IFRS and do not have standardized meanings prescribed by IFRS. See Performance Measurement section in the REIT's MD&A. | |||||||||||
(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 and diluted per unit measure that includes the Class B LP Units in basic and diluted units outstanding/weighted average units outstanding. There were 1,710,000 Class B LP Units outstanding as at | |||||||||||
(3) | Distributions per units is a non-IFRS ratio calculated as sum of the distributions on the REIT's units and finance costs on Class B LP Units. Management does not consider finance costs on |
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 | ||||||||||||||
In thousands of CAD | Three months ended | |||||||||||||
2023 | 2022 | Var % | ||||||||||||
Same property NOI (1) | ||||||||||||||
$ | 28,677 | $ | 28,154 | 1.9 % | ||||||||||
18,297 | 17,549 | 4.3 % | ||||||||||||
27,333 | 25,451 | 7.4 % | ||||||||||||
Same property NOI (1) | $ | 74,307 | $ | 71,154 | 4.4 % | |||||||||
Impact of foreign currency translation on Same Property | — | (546) | ||||||||||||
Straight-line rental revenue recognition | 519 | (78) | ||||||||||||
Amortization of operating leases | (42) | (55) | ||||||||||||
Lease termination fees | 31 | — | ||||||||||||
Other transactions | 308 | 612 | ||||||||||||
Developments | 4,248 | 3,460 | ||||||||||||
Acquisitions | 15,460 | 2,114 | ||||||||||||
Dispositions | — | (4) | ||||||||||||
Intercompany/Elimination | 590 | 410 | ||||||||||||
NOI | $ | 95,421 | $ | 77,067 | 23.8 % | |||||||||
Notes: | |
(1) Same property NOI is a non-IFRS measure, defined and discussed in the REIT's MD&A. | |
(2) NOI is an additional IFRS measure presented on the consolidated statement of income (loss) and comprehensive income (loss). NOI is defined and discussed in the REIT's MD&A. |
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").
Expressed in thousands of Canadian dollars, except per unit amounts | ||||||||||
Q1 2023 | Q4 2022 | |||||||||
Total Assets | $ 8,418,407 | $ 8,514,000 | ||||||||
less: Total liabilities | (4,812,433) | (4,772,025) | ||||||||
less: Non-controlling interests | (1,265,778) | (1,285,128) | ||||||||
Unitholders' equity | 2,340,196 | 2,456,847 | ||||||||
Add/(deduct): | ||||||||||
(39,059) | (39,612) | |||||||||
Deferred unit plan liability | 22,547 | 23,837 | ||||||||
Deferred tax liability | 409,871 | 443,935 | ||||||||
less NCI | (107,908) | 301,963 | (109,584) | 334,351 | ||||||
Financial instruments - net | (20,821) | (38,124) | ||||||||
less NCI | 6,007 | (14,814) | 13,624 | (24,500) | ||||||
Exchangeable Units | 14,484 | 16,245 | ||||||||
Global Manager valuation adjustment | 576,318 | 576,318 | ||||||||
Other | — | — | ||||||||
Net Asset Value ("NAV") | $ 3,201,635 | $ 3,343,486 | ||||||||
Adjusted Units Outstanding (000s)- period end (1) | 243,345 | 242,358 | ||||||||
NAV per Unit | $ 13.16 | $ 13.80 |
Notes | ||||||||
(1) | Under IFRS the REIT's Class B LP Units are treated as a financial liability rather than equity. The REIT has |
Exhibit 5 – Proportionate Management Fees
"Proportionate Management Fees" is a non-IFRS financial measure defined as the REIT's total management fees earned from third parties adjusted to be reflected on a proportionately consolidated basis at the REIT's ownership percentage (see "Performance Measurement" "PART III – RESULTS FROM OPERATIONS – NET INCOME").
Expressed in thousands of Canadian dollars | Three months ended | |||||
2023 | 2022 | Variance | ||||
Base fee | $ 8,384 | $ 7,893 | $ 491 | |||
Incentive and performance fee | 4,236 | 4,799 | (563) | |||
Trustee fees | 307 | 269 | 38 | |||
Project and Acquisition fees | 5,375 | 3,293 | 2,082 | |||
Other fees | 3,470 | 3,118 | 352 | |||
Total Management Fees | $ 21,772 | $ 19,372 | $ 2,400 | |||
less: inter-company elimination | (11,047) | (12,277) | 1,230 | |||
Consolidated Management Fees | $ 10,725 | $ 7,095 | $ 3,630 | |||
add: fees charged to non-controlling interests | 7,805 | 8,852 | (1,047) | |||
Proportionate Management Fees | $ 18,530 | $ 15,947 | $ 2,583 | |||
SOURCE
© Canada Newswire, source