Comments by National Bank 12:55 PM EDT, 07/11/2023 (MT Newswires) -- NorthWest Healthcare Properties REIT is expected to exit its ~$220 million equity position in Australian Unity Healthcare Property Trust (AUHPT) by the end of 2023, notes National Bank. 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 billion 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 million 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 this week was the result of a mediation from that dispute which will see NWH exit its position. National Bank expects NWH will be able to exit its position at/near the current carrying value of ~$220 million, which is roughly in line with AUHPT's NAV.
Analyst Tal Woolley expects the sale process will liberate about $100 millon in net proceeds for NWH; with limited impact on NAV and FFO/u estimates.
After the failure to close the UK JV transaction, liquidating non-core assets should help reduce balance sheet leverage, Woolley writes. NWH is also looking to sell $340 million of non-core, on-balance-sheet properties. That pool could expand if needed to lower leverage/enhance liquidity.
With units now yielding 12.5%, the distribution level is also likely to take on increased focus with investors. National is not expecting the board to take action on the distribution near term.
NWH is rated Sector Perform, with an $8.50 target price.