some comments on the Australia liquidation Settlement will see NWH sell its ~$220 mln position in Australian Unity...
NWH is expected to exit its ~$220 mln equity position in Australian Unity Healthcare Property Trust (AUHPT) by the end of 2023. Recall that AUHPT is privately traded Australian REIT, managed by Australian Unity Funds Management (AUFM). NWH initially acquired a 16% stake in AUHPT (whose portfolio of primarily Australian hospitals and medical centres was valued at ~$2.3 bln at the time) in late December 2020 and attempted subsequent tender offers to gain control of the REIT in 2021. Ultimately, these bids did not garner enough support with existing unitholders, leaving NWH with an equity interest valued at ~$220 mln and no path to control. NWH sued AUFM and Dexus (an unitholder supporting AUFM) over the defence tactics employed to counter NWH's offer. The agreement today was the result of a mediation from that dispute which will see NWH exit its position. We expect NWH will be able to exit its position at/near the current carrying value of ~$220 mln, which is roughly in line with AUHPT's NAV.
We expect the sale process will liberate just over $100 mln in net proceeds for NWH; we expect limited impact on our NAV and FFO/u estimates. There is ~$110 mln of debt incurred by NWH supporting the AUHPT position that NWH will repay as the position is sold, leaving expected net proceeds of ~$110 mln from the sale. As NWH realizes the proceeds, we expect it will use it to pay down its credit facilities (which carry higher variable rates). We carry the AUHPT position at NWH's carrying value (i.e., the price where we anticipate them exiting the position), so we see
limited impact on our NAV estimate. NWH's FFO calculation included an adjustment for the liquidation of this position, so investors should expect limited impact on its FFO ahead as well. NWH booked income related to the AUHPT position of just under $0.03 in 2022 and just under $0.01 in Q1 2023.