Mr. Paul Lana reports

NORTHWEST HEALTHCARE PROPERTIES REAL ESTATE INVESTMENT TRUST PROVIDES UPDATE ON PROGRESS OF ITS UK JOINT VENTURE, NON-CORE SALES PROGRAM AND RELEASES FIRST QUARTER 2023 RESULTS

Northwest Healthcare Properties Real Estate Investment Trust has provided an update on the progress of the U.K. joint venture, its non-core sales program and has released results for the three months ended March 31, 2023.

The U.K. JV is progressing well and as previously announced Northwest has secured an investment from an institutional investor to acquire between 70 per cent and 80 per cent of the net equity in the REIT's U.K. portfolio. The U.K. JV is expected to close on or before June 30, 2023, subject to customary closing conditions and final documentation.

The REIT's non-core sales program, announced last quarter, has expanded from $220-million to approximately $340-million at a weighted average cap rate of approximately 5.75 per cent. Asset sales of $75-million are committed and closing on May 31, 2023, and the balance of sales are expected to close over the course of Q2 and Q3. Proceeds will be used to repay higher-cost debt and are expected to be immediately accretive to AFFO (adjusted funds from operations) per unit.

Inclusive of the non-core sales program, its previously announced U.S. JV initiative and the U.K. JV, the REIT expects to generate between $550-million and $600-million of net proceeds in 2023. Net proceeds from capital recycling initiatives will be used to repay higher-cost debt on an accretive basis.

Operationally, the REIT's high-quality and defensive portfolio delivered strong results, including 4.4 per cent same-property net operating income (SPNOI) on a year-over-year basis. The REIT's portfolio occupancy of 97 per cent is underpinned by a weighted average lease expiry of 14 years and 83 per cent of leases are subject to rent indexation. With a portfolio comprising more than 2,000 tenants the REIT's cash flow is highly diversified.

In Q1 2023, revenue and NOI increased by 29 per cent and 24 per cent, 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 21 cents in Q1 2022 to 17 cents in Q1 2023. During the quarter, the REIT implemented a hedging program to fix the interest rate on $901-million of floating rate, foreign currency debt and for the partial quarter for which the hedges were in place the REIT achieved interest savings of $3.7-million. Beginning in Q2 2023, the full-quarter impact of the hedging program will result in incremental interest rate savings of two cents per unit as compared with Q1 2023.

Over the course of 2023, the impact of hedging activities, the U.K. and U.S. joint ventures, non-core asset sales, and associated capital redeployment is expected to increase per unit AFFO by approximately 20 per cent relative to the current quarter run-rate.

Commenting on the REIT's progress advancing its capital raising initiatives, Paul Dalla Lana, the REIT's chairman and chief executive officer said: "The U.K. JV has entered the final stage and is tracking to close before June 30, 2023. This will enable the REIT to eliminate the transitional capital structure which was put in place to facilitate its strategic U.S. acquisition. Together with the non-core sale program that will see the first closing on May 31 and the $86-million convertible debenture that closed in Q2, the REIT is expecting to generate more than $375-million of net new proceeds in the quarter. After repaying high-cost debt on an accretive basis the REIT anticipates that Q2 capital generation will increase liquidity by more than $125-million."

Mr. Dalla Lana went on to say, "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 March 31, 2023, the REIT reported debt to gross book value (including convertible debentures) of 50 per cent on a consolidated and proportionate basis. As highlighted above the REIT has identified approximately $340-million of directly held non-core asset sales in addition to its commitment to closing the U.K. JV in Q2 2023, and the U.S. JV in H2 2023. Upon completion of these transactions and associated debt repayment the REIT anticipates consolidated and proportionate debt to gross book value to decrease to 38.2 per cent (down 1,180 basis points (bp)) and 47.7 per cent (down 1,000 bp), respectively.

Subsequent to quarter-end, the REIT issued a $86.3-million convertible debenture (including full exercise of the overallotment option) with a 7.75-per-cent coupon that matures on April 30, 2028. Net proceeds of the transaction were used to repay short-term variable rate debt with a weighted average interest rate of 9.3 per cent. The REIT has now refinanced 76 per cent of its 2023 debt maturities, increased its exposure to fixed rate debt (including in-place hedges) to 64 per cent and reduced its weighted average interest rate to 4.7 per cent.

Funds management

As highlighted above, Northwest has secured an investment from a U.K. investor for a 70-per-cent to 80-per-cent investment in the U.K. seed portfolio which is tracking to close on or before June 30, 2023, subject to confirmatory due diligence and final documentation.

The REIT's U.S. joint venture initiative continues to progress, and the REIT remains actively engaged with qualified partners and is working toward commercial terms. Completion continues to be expected in the second half of 2023.

At a target ownership level of between 20 per cent and 30 per cent 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 finance growth.

Growth and capital recycling

The health care real estate market continues to adjust to the rapid change in global interest rates over the past 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 $220-million of directly held non-core assets for sale across the REIT's global platform which has now increased to approximately $340-million. These sale processes have significantly advanced and $146-million of assets in the United States and Germany are now classified as held for sale, including one that is fully committed and closing on May 31, 2023. Net proceeds from asset sales will be allocated to repaying high-cost corporate debt on an accretive basis.

The REIT remains constructive on the long-term demand factors that drive value creation in health care real estate and with $4.6-billion of available fee-bearing capital it is well positioned to execute on new investment opportunities while remaining disciplined in its capital allocation strategies.

2023 first quarter financial and operational highlights

For the three months ended March 31, 2022, the REIT delivered strong operational performance with an increasingly conservative balance sheet across an expanded 233-property, 18.6-million-square-foot defensive acute health care real estate portfolio underpinned by long-term inflation indexed leases. Key highlights are as follows:

• Q1 2023 revenue of $135.3-million, up 29.5 per cent YOY.
• Q1 2023 AFFO of 17 cents per unit.
• Q1 2023 same-property NOI increased by 4.4 per cent on a year-over-year basis, driven primarily by annual rent indexation.
• Strong portfolio occupancy of 97 per cent consistent with last quarter with the international portfolio holding stable at 98.2 per cent.
• 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 years.
• Total assets under management (AUM) increased 13.7 per cent year-over-year to $10.8-billion.
• Total capital deployed in fee-bearing vehicles is $6.1-billion up 8.9 per cent year-over-year. Available capacity in existing fee-bearing vehicles totals $4.6-billion.
• Net asset value (NAV) per unit decreased by 1.4 per cent to $13.16 compared with Dec. 31, 2022.
• Consolidated debt to gross book value including convertible debentures of 50 per cent has increased 750 bp year-over-year and is expected to decrease to 38.2 per cent (1,180 bp) as the REIT completes its U.K. and U.S. JVs as well as its non-core assets sales.

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 Friday, May 12, 2023, at 10 a.m. (Eastern Time).

The conference call can be accessed by dialling 416-764-8609 or 1-888-390-0605. The conference ID is 64481047 followed by the pound key.

Audio replay will be available from May 12, 2023, through May 19, 2023, by dialling 416-764-8677 or 1-888-390-0541. The reservation number is 481047 followed by the pound key.

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 to view the latest update.

About Northwest Healthcare Properties Real Estate Investment Trust

Northwest Healthcare is an unincorporated, open-ended real estate investment trust established under the laws of the Province of Ontario. As at March 31, 2023, the REIT provides investors with access to a portfolio of high-quality international health care real estate infrastructure comprising interests in a diversified portfolio of 233 income-producing properties and 18.6 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 10 offices in eight countries to serve as a long-term real estate partner to leading health care operators.

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