NorthWest Healthcare Properties Real Estate Invest 10 Convert Sub Debentures 31 March 2025 T.NWH.DB.G

Alternate Symbol(s): NWHUF | T.NWH.UN | T.NWH.DB.H | T.NWH.DB.I

Northwest Healthcare Properties Real Estate Investment Trust is an open-ended real estate investment trust. The Company is the owner and operator of healthcare real estate infrastructure in North America, Brazil, Europe and Australasia. The principal business of the Company is to invest in healthcare real estate globally. It focuses on the cure segment of healthcare real estate, such as hospitals, medical office buildings, and clinics. Its asset class segmentation includes hospitals and healthcare facilities; medical office buildings; and life sciences, research, and education. It provides investors with access to a portfolio of international healthcare real estate infrastructure of interests in a diversified portfolio of about 196 income-producing properties located throughout major markets in North America, Brazil, Europe and Australasia. Its portfolio of medical office buildings, clinics, and hospitals is characterized by long-term indexed leases and stable occupancies.

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NorthWest Healthcare Properties Real Estate Invest 10 Convert Sub Debentures 31 March 2025

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Post by incomedreamer11on Nov 16, 2022 11:39am

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Post# 35103471

Scotia comments after conference

Q3 Glance: Tough Quarter; Downgrading to Sector Perform

OUR TAKE: Net Negative. NWH reported late last night. One could argue the damage was done yesterday (NWH fell 5% vs. -2% for CAD REITs) possibly on floating rate debt fears. Reported FFOPU of $0.15. Ex. $6.8M of adjusted cost reimbursements (see below), we est. recurring FFOPU of $0.18 fell 6.5% q/q (Q2 = -8.0% q/q) and = 16% y/y erosion, well below our $0.219 and consensus $0.214 (range = $0.20-$0.23). Primary variances = higher interest expense (-$0.02), lower asset management fees (-$0.01), and higher G&A (-$0.01). NWH 60% floating rate debt exposure should fall to 35% on post-q financing.

Disclosed IFRS NAVPU fell $0.22 q/q (-1.5%) to $13.97 (Q2 = -$0.54; -3.7%) on a $15M FV loss (Q2 = $51M FV gain) and $10M f/x loss; cap rate was flat q/q at 5.2% (Q2 = flat) vs our 5.29%.

While we still believe NWH has many positive attributes, we noted the importance of improving per unit growth in our Q2 note, along with lower leverage (admittedly, not easy). As a result of expected downward 2023E revisions, we are downgrading NWH to a Sector Perform rating this morning (from Sector Outperform), with a more fulsome estimate update post c/c today at 10 a.m. ET; dial-in: 1-888 390-0605, ID#73323698.

KEY POINTS

On one hand, NWH’s healthcare portfolio (with contractual rent bumps reflecting recent elevated inflation + one of the longest WALTs in our universe) should outperform if we enter a global recession/economic slowing. Indeed, we note NWH has outperformed the CAD REIT sector by a solid ~9% during COVID (we upgraded to SO just before the pandemic; flat YTD). In addition, perhaps equity requirements on JV acquisitions going forward will decline (theoretically driving higher ROE transactions). On the other hand, higher leverage, contracting asset manager multiples, a smaller-than-expected initial UK portfolio recapitalization (leaving lingering questions over interim elevated leverage) and a couple of consecutive challenging quarters are concerning to us, possibly diluting said “defensiveness” in the minds of investors. We remain quite constructive on NWH’s global asset manager proliferation (we think NWH has a clear competitive advantage) but it may take a bit longer than expected for the benefits to emerge (and therefore lower valuation in the interim). Clearly we will monitor progress on those fronts, in addition to valuation, in terms of revisiting our thesis going forward, given our constructive view on the asset manager longer-term.