Commenting on the REIT's second quarter,
"While COVID-19 has created much uncertainty, NorthWest has remained focused on supporting its global operating partners in providing essential healthcare services. The REIT's properties have remained open during this challenging operating environment although some tenants have had to adapt their businesses to align with local government and healthcare guidelines. Despite this, operating performance during the quarter remained defensive with 97.6% of proportionate rent being collected or subject to formal deferral arrangements."
Mr.
"In addition to strong operating performance, the REIT has also been able to advance all of its strategic priorities during the quarter and finds itself well positioned to continue to its partnership with leading global investors and healthcare operators going forward."
2020 Second Quarter Financial and Operational Highlights:
For the three months ended
- Net operating income remained stable at
$69.9 million ; - AFFO per unit of
$0.20 in Q2 2020 ($0.92 per unit on an annualized normalized basis); - AFFO payout ratio of 100% (87% normalized) based on the REIT's
$0.80 per unit annual distribution; - Constant currency cash recurring SPNOI growth of 2.9% in Q2 2020 as compared to Q2 2019, driven primarily by annual rent indexation;
- Portfolio occupancy holding stable at 97.3%, with the international portfolio holding stable at 98.8%;
- Weighted average lease expiry of 14.5 years increased by 0.5 years, underpinned by the international portfolio's hospital and healthcare facilities weighted average lease expiry of 20.5 years;
- Total fee bearing assets under management increased to
$8.4 billion ; - Net asset value per unit of
$12.37 ; and, - Consolidated leverage of 49.6% (including convertible debentures)
Impact of COVID-19:
The defensive nature of the REIT's healthcare real estate portfolio that is 97.3% occupied with more than 80% of the revenues provided directly or indirectly by public healthcare funding, has resulted in the REIT's operating results and portfolio valuations not being significantly impacted by COVID-19. During Q2 2020, 97.6% of the REIT's revenues, on a proportionate ownership basis, were either collected or subject to formal deferral arrangements. In
The impact of COVID-19 continues to affect countries unevenly with some countries progressing through phased re-openings while others struggle to control the wave of the pandemic. Nonetheless, signs of a return to normalcy are beginning to emerge, despite setbacks particularly in the Australian State of Victoria, as evidenced by the re-start of elective surgeries in most of the REIT's global markets.
Select Financial Information:
(unaudited) | Three months ended | Three months ended |
Number of properties | 183 | 183 |
Gross leasable area (sf) | 15 million | 15 million |
Occupancy | 97.3% | 97.3% |
Weighted Average Lease Expiry (Years) | 14.5 | 14.4 |
Net Operating Income | ||
Net Income (Loss) attributable to unitholders | ||
Funds from Operations ("FFO") | ||
Adjusted Funds from Operations ("AFFO") | ||
Debt to Gross Book Value | 49.6% | 49.5% |
As a result of the underlying defensiveness of the portfolio, the REIT continued to execute on its key strategic priorities during second quarter and subsequent to quarter end. Significant achievements included:
- Strategic portfolio acquisition and
UK growth: OnAugust 21, 2020 the REIT completed a$454m (£260m) acquisition of a portfolio of four hospitals located inGreater London, England (the "London Portfolio") . The properties are 100% leased on a long-term (20 year WALE) inflation indexed basis toAspen Healthcare ("Aspen"), a leading English hospital operator. The London Portfolio was acquired at a 6.2% going-in capitalization rate and funded with a$223m (£128m) term loan, a$125m expansion of the REIT's revolving credit facility, and existing liquidity. The addition of the London Portfolio is strategically important as it: (i) increases the scale of the REIT'sUK portfolio to$620m and positions it for further growth and partnership with the region's leading hospital operators; (ii) diversifies the REIT'sUK operator mix and brings its focus into majorUK markets; and (iii) provides the REIT with an attractive portfolio with which to seed a futureUK joint venture. - European joint venture ("European JV") update: In conjunction with its previously announced
$3.1 billion (€2.0 billion) European JV initiative, the REIT entered into a definitive agreement with GIC,Singapore's sovereign wealth fund, to pursue pan-European healthcare real estate opportunities together. Commenting on the European JV,Paul Dalla Lana , said:
"We are pleased to be expanding our partnership with GIC intoEurope . The joint venture will benefit from a high quality initial portfolio and leverages NorthWest's significant regional presence with a goal to building the leading pan-European healthcare real estate platform." - Strategic asset sales: Year to date the REIT has completed three of the four previously announced portfolio disposition transactions, generating
$130m of net proceeds, while adding$273m in fee bearing capital. During the quarter the REIT advanced the remaining disposition transaction, namely the sale of a 70% interest in its$470 million (€305 million) German and Dutch clinic and triple net portfolio which will be used to seed the European JV (the "European Seed Portfolio"). The European Seed Portfolio has been expanded by$196 million (€127 million) to include an additional 5 assets inthe Netherlands and is expected to close in Q3 2020, subject to customary closing conditions. - Deleveraging: While the acquisition of the London Portfolio is expected to temporarily increase the REIT's leverage, the REIT remains committed to its deleveraging strategy and achieving investment grade credit metrics through reaching its target leverage of less than 50% and net debt to EBITDA ratio of 8.0x over the next 12 months. The REIT sees a clear path to achieving these objectives by:
- Executing the sale of the European Seed Portfolio into the European JV which is expected to generate net proceeds of approximately
$160m (€102m) and will reduce proportionate leverage by 300 bp and 0.7x turns of net debt to EBITDA; - Advancing its initial discussions around a
UK joint venture which would be seeded with its$620m UK hospital portfolio, including the recently acquired London Portfolio. The REIT has taken initial steps to identify potential partners and will work to advance this strategic initiative over the short- to medium-term. Assuming a 30% retained interest in the portfolio and target JV portfolio leverage of 65%, this will generate net proceeds of approximately$300m (£172m) and will reduce proportionate leverage by a further 500 bp and 1.1x turns of net debt to EBITDA.
Management and Board Appointments:
The REIT is pleased to announce the appointment of
Additionally, to support its accelerating growth in
Finally, the REIT announces the appointment of Ms.
Commenting on the Management and Board appointments,
"On behalf of NorthWest, we welcome
Q2 2020 Conference Call:
The REIT invites you to participate in its conference call with senior management to discuss our second quarter 2020 results on
The conference call can be accessed by dialing 416-764-8609 or 1 (888) 390-0605. The conference ID is 25119140#. Audio replay will be available by dialing 416-764-8677 or 1 (888) 390-0541. The reservation number is 119140#.
In conjunction with the release of the REIT's second quarter 2020 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 www.nwhreit.com/Investors/Presentations
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Non-IFRS Measures
Some financial measures used in this press release, such as Operating Income, adjusted same-property NOI, FFO, AFFO, Normalized AFFO, Net Asset Value 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. As such, they are unlikely to be comparable to similar measures presented by other real estate companies. These non-IFRS measures are more fully defined and discussed in the REIT's Management's Discussion and Analysis ("MD&A") for the second quarter ending
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", "stabilized" or "continue" or the negative thereof or similar variations. The REIT's actual results and performance discussed herein could differ materially from those expressed or implied by such statements. Such 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 www.sedar.com. 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.
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