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

Scotia update

[incomedreamer11]

Announces CEO's Retirement in Mid-2025

OUR TAKE: Mixed. We expect NWH unit price to underperform the sector tomorrow.

Tonight, NWH announced CEO Craig Mitchell's planned retirement in July 2025. We think the Street had started liking current CEO and the news of his retirement will lead to uncertainty in the near-term. This comes as a surprise to us as he assumed the CEO position only in August 2023. We think Mr. Mitchell has done a tremendous job in the current turnaround, and the company would have been fortunate to have him stay a little longer. NWH has commenced a recruitment search and hired a professional executive recruitment firm, with an intention to ensure a smooth transition.

NWH is currently trading at 17% discount to NAV. See our recent note titled “2025 Debt Maturities Largely Tackled: Valuation Discount Should Narrow on Improved Risk-Reward”. We will be buyers of any weakness tomorrow.

KEY POINTS

We note that Mr. Mitchell lives in Sydney, Australia and has been on the road for most of the time since assuming this role. He has played an important role in the turnaround and is ready to hand over the reins to the new CEO, who he believes should be based in Toronto (less Air Miles for the new CEO). Good to see that Mr. Mitchell will remain on the Board of Vital Healthcare (listed in New Zealand), as a NWH representative until December 2025, to support continuity in the Australasia region.

Mr. Mitchell joined NWH in 2018 as CEO for Australia and New Zealand, was a member of the global management team and assumed a global leadership role when he was named President in 2020. After founder and former CEO Paul Dalla Lana stepped down, and strategic review was initiated in August 2023, Mr. Mitchell was appointed as interim CEO and later became permanent CEO in October 2023.

In his last one year or so, he has largely tackled the wall of 2024 & 2025 debt maturities and was successful in asset dispositions of over $1.5B including recent UK portfolio sale of $0.9B. We note that at the start of the year, 2024-25 debt was 60% of total debt (which included $1.6B expiring in 2025). Pro forma UK sale, only 28% of total debt was due which includes 25% expiring in 2025. After refinancing update, we estimate 2025 debt maturities only make up ~10% of total debt which too is largely property-level debt, and we see renewal in normal course.

[joeychen0513]

It seems that it needs more time to digest this "CEO retirement" news as the market dislikes...Should see more clearer picture with the upcoming earning after the strategic review with UK assets liquidation, and only earning improvement will be the strong convinction to the market and turning point to go north again, esp. if we can see some big insider buying...

[Matteo93]

I think it's more about 10Y/long end yields rising in a bear steepener situation, but i still would say even as much as long bonds have sold off, what matters most for operating is corp credit and that is still in great shape. It's the real tell. Nevertheless the 10Y rising affects their bottom line the most so obviously that's why we have seen it sell off. Bide your time collect the