Mr. Craig Mitchell reports

NORTHWEST HEALTHCARE PROPERTIES REAL ESTATE INVESTMENT TRUST RELEASES FOURTH QUARTER 2023 AND YEAR-END RESULTS

Northwest Healthcare Properties Real Estate Investment Trust has released its results for the three months and year ended Dec. 31, 2023.

2023 fourth quarter financial and operational highlights

For the three months (Q4 2023) and year ended Dec. 31, 2023, the REIT delivered strong operating results with key highlights as follows:

• Revenue from investment properties for Q4 2023 and year ended Dec. 31 of $124.0-million and $508.0-million, respectively, was 4.1-per-cent and 12.3-per-cent higher in Q4 2023 compared with Q4 2022, respectively, primarily from rental lease indexation and full year of United States portfolio acquisition.
• Same property net operating income (SPNOI) of $90.9-million was 4.0-per-cent higher in Q4 2023 compared with Q4 2022, and annual SPNOI of $293.4-million increased 3.7 per cent from $283.1-million in 2022.
• Strong operating performance is underpinned by a long-term lease maturity profile with a weighted-average lease expiry (WALE) of 13.3 years, a global portfolio occupancy rate of 97 per cent and a global rent collection rate of 99 per cent.
• Adjustments to investment property fair values, and higher interest expense for variable rate debts resulted in net income (loss) for the Q4 2023 and year ended Dec. 31, 2023, of $(188.9)-million and $(480.7)-million in 2023, respectively, compared with $(135.5)-million and $125.6-million in 2022, respectively.
• Higher interest expense represents an effective weighted-average interest rate (WAIR) of 6.27 per cent as at Dec. 31, 2023, compared with 5.35 per cent as at Dec. 31, 2022.
• Adjusted funds from operations (AFFO) for Q4 2023 was 13 cents per unit (Q4 2022 -- 17 cents per unit), resulting in an AFFO payout ratio for Q4 2023 of 67 per cent (Q4 2022 -- 117 per cent).

"Two thousand twenty-three was about strengthening our business and balance sheet," said Craig Mitchell, Northwest's chief executive officer. "As demonstrated in our financial results, we have an exceptional health care real estate portfolio that is performing well in a sector that is resilient and positioned for growth. It is important to highlight that the constraints we have faced as a company over the past year stemmed from balance sheet leverage and the resulting interest expense. However, our underlying real estate and business fundamentals remain strong.

"Throughout 2023, to strengthen our financial position, the REIT divested of assets valued at over $450.0-million, including non-core investment properties and unlisted securities, with the proceeds used to pay down debt. We also amended, extended, repaid and refinanced total debt facilities valued at over $1.4-billion with 2023 and 2024 maturities.

"These efforts not only immediately positively impact earnings through reducing interest expense, but also enhance the balance sheet. While there is still work ahead of us, we are confident in our ability to continue to unlock value within our portfolio.

"The REIT's high-quality real estate portfolio with long-term leases, is well positioned to capitalize on the heightened demand for health care real estate. As we look ahead, we are optimistic about the future of the real estate health care sector and our position within it."

Same property NOI

The REIT's strong operating performance can be seen in the SPNOI for Q4 2023, which increased by 4.0 per cent over the comparable prior-year period. The property portfolio performed well with 83.1 per cent of the property portfolio rents indexed to inflation and an 87-per-cent lease renewal rate supported by a long-term WALE of 13.3 years. These strong operating results came from all regions in the quarter with SPNOI growth coming from the Americas at 2.5 per cent, Europe at 3.2 per cent and Australasia at 6.5 per cent.

Valuations

During Q4 2023 and year ended Dec. 31, 2023, the REIT recorded a fair value loss on income producing properties of $157.6-million and $571.8-million, respectively. The fair value losses were attributable mainly to cap rate expansions in consideration of the interest rate environments in which the REIT operates. The weighted average capitalization rate increased to 5.9 per cent for the consolidated portfolio, as compared with 5.4 per cent Dec. 31, 2022.

For the year ended Dec. 31, 2023, 82 per cent of the REIT's investment property fair values were determined by independent third party appraisers.

Balance sheet strengthening

During the second half of 2023, the REIT announced a number of initiatives to manage 2023 and 2024 debt maturities and to strengthen the balance sheet, including asset sales and the refinancing and extension of its debt. As at Dec. 31, 2023, the REIT had mortgages and loans payable of $3.6-billion (Dec. 31, 2022 -- $3.8-billion).

Dispositions

During 2023, the REIT divested properties with a fair value of $360.7-million with $162.8-million occurring in Q4. The proceeds were used to repay property level debt, corporate credit facilities and Australasian term debt.

In 2023, the REIT sold or redeemed approximately 63 per cent of its investment in unlisted securities for proceeds of $134.5-million. The proceeds were used towards the full repayment of the Australasian term debt, secured by the underlying unlisted securities. In 2024 to date, the REIT has redeemed additional unlisted securities of $15.5-million.

In 2024 to date, the REIT divested five non-core properties at fair value of $41.8-million, with proceeds used to repay asset specific and corporate variable rate debt, and for general corporate purposes.

Capital management

During 2023, the REIT refinanced, amended and extended $1.0-billion of term debt and credit facilities. The REIT further executed a new term loan for total proceeds of $140.0-million maturing in 2025 and completed a public offering of $86.3-million aggregate principal amount of Series I convertible debentures, which included the exercise in full of the overallotment of $11.3-million. The weighted average interest rate on debt as of Dec. 31, 2023, is 6.27 per cent as compared with 5.35 per cent at Dec. 31, 2022, including convertible debentures which had a weighted average interest rate of 7.88 per cent in 2023 and 5.92 per cent in 2022.

On Nov. 27, 2023, holders of Northwest's $125.0-million Series G convertible unsecured subordinated debentures passed an extraordinary resolution approving certain amendments to the debentures, including an extension of the maturity of the debentures from December, 2023, to March, 2025.

In the first three months of 2024, the REIT extended approximately 28 per cent of its non-mortgage debt maturing in 2024 and 2025. This includes the extension of $125.0-million of its revolving corporate debt from 2024 to 2025, and $172.0-million of debt from 2025 to 2027.

On March 13, 2024, Vital Healthcare Property Trust extended the weighted average term to maturity to approximately four years for $430.0-million of term debts, of which $177.0-million were maturing in 2025. The extensions are at approximately the same weighted average interest margins as current financing.

Governance milestones

Corporate governance

On Aug. 8, 2023, Northwest appointed Dale Klein (formerly lead independent trustee) as the REIT's non-executive chair. Laura King, trustee, was appointed chair of the REIT's compensation, governance and nominating committee. Maureen O'Connell, trustee, was appointed chair of the audit committee.

On Jan. 30, 2024, Northwest announced the retirement of Robert Baron from the board of trustees, effective Jan. 29, 2024. Also on Jan. 30, 2024, the board appointed Robert "Bobby" Julien and Graham Garner to the board.

Management team

On Aug. 8, 2023, Mr. Mitchell was appointed interim CEO and Mr. Brady was appointed president. On Oct. 23, 2023, Mr. Mitchell was announced as the REIT's permanent CEO.

In February, 2024, Tracey Whittall joined as the REIT's new chief operating officer (COO). She will be based in the Toronto corporate office and has more than 20 years of leadership experience in the financial industry. Previously, Ms. Whittall was chief operating officer at Flexiti, a leading financial services company. Before joining Flexiti, Ms. Whittall had a 22-year career with CIBC, one of Canada's largest banks.

Mr. Mitchell, Northwest's chief executive officer, states: "Northwest is very pleased to have Tracey join the Northwest team and we would also like to extend our gratitude to Peter Riggin, our outgoing COO, for his valuable contributions to the REIT during his tenure. Peter originally joined the Northwest family in 2004 as senior vice-president, acquisitions, with the REIT's predecessor company, where he was later appointed CEO in 2010. At Northwest, Peter held a number of important, strategic executive roles, including the REIT's managing director -- Canada, and chief administrative officer, among other roles. We would like to thank Peter for his many years of great leadership, and we wish Peter all the best in his retirement after 20 years of service for Northwest."

2023 ESG global ranking

In 2023, the REIT and Vital (which is managed by Northwest) participated in the GRESB Real Estate Assessment for the third year running.

Northwest and Vital were GRESB sector leaders in the Global Listed Sector's Healthcare Standing Investments and Healthcare Development categories (Vital and Northwest came in first and second place respectively). In the global sector, health care development, Vital and Northwest came in first and third place, respectively. These results for the REIT and Vital demonstrate Northwest's commitment to ESG best practices.

Q4 2023 conference call

The REIT invites you to participate in its conference call with senior management to discuss the company's fourth quarter 2023 results on March 15, 2024, at 10 a.m. ET.

Investors are invited to access the call by dialling 416-764-8609 or 1-888-390-0605. The conference ID is 42243950 followed by the pound key.

Audio replay will be available from March 15, 2024, through March 22, 2024, by dialling 416-764-8677 or 1-888-390-0541. The conference replay ID is 243950 followed by the pound key.

Vital Healthcare Property Trust

On Feb. 15, 2024, Vital also announced its financial results for the half year ended Dec. 31, 2023. Details on Vital's financial results are available on Vital's website.

About Northwest Healthcare Properties Real Estate Investment Trust

Northwest Healthcare Properties 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 Dec. 31, 2023, of interests in a diversified portfolio of 219 income-producing properties and 17.7 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 approximately 300 employees in 10 offices in eight countries to serve as a long-term real estate partner to leading health care operators.

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