Northwest Healthcare Properties Real Estate Investment Trust Reports Second Quarter 2024 Results

Toronto, Ontario--(Newsfile Corp. - August 13, 2024) - Northwest Healthcare Properties Real Estate Investment Trust (TSX: NWH.UN) (the "REIT" or "Northwest"), a leading owner and operator of healthcare real estate infrastructure in North America, Brazil, Europe and Australasia, announces results for the three months ("Q2 2024") and six months ("H1 2024") ended June 30, 2024.

"Year-to-date 2024 has seen significant progress," said Craig Mitchell, CEO of Northwest. "We have addressed more than half of our 2025 debt maturities and executed on strategic initiatives as part of our formal strategic review process which we concluded with the sale of our UK portfolio in August. Our portfolio performance continues to reflect the strong demand for healthcare real estate, especially in SPNOI growth driven by strong occupancy and rent collection. Looking ahead, we expect our recent dispositions to positively impact earnings. Despite challenges such as higher interest rates and construction costs, which are affecting many sectors, our high-quality portfolio focuses on the cure segment - a defensive asset class, and provides attractive risk adjusted returns driven by an aging population. We remain committed to continue simplifying our business, further reducing debt and strengthening our balance sheet. We believe these efforts position us well to ensure sustained growth and value for our unitholders."

Q2 2024 Highlights

Highlights for Q2 2024 and events subsequent to the quarter are set out below:

• Revenue from investment properties was $119.1 million for Q2 2024, a decrease of 6% from Q2 2023 due to the disposition of non-core assets during 2023 and 2024, partially offset by a one-time lease surrender fee of $1.7 million, rent indexation, development rentalization, and higher tenant recoveries;

• Consolidated Same Property Net Operating Income ("SPNOI") was $86 million for Q2 2024, an increase of 4.2% from Q2 2023, reflecting a steady growth in underlying lease rentals (see Exhibit 3);

• Net loss for Q2 2024 was $127 million, an increase of 18% compared to Q2 2023 primarily due to investment property valuation losses, including adjustment of the UK portfolio to its disposition price;

• Adjusted funds from operations ("AFFO") per unit was $0.09 in Q2 2024 as compared to $0.13 per unit in Q2 2023 ($0.06 per unit excluding impact of interest rate caps, which expired in the first quarter of 2024), resulting in an AFFO payout ratio in Q2 2024 of 105% compared to 153% in Q2 2023 (see Exhibit 2);

• The sale of the REIT’s UK portfolio on August 8, 2024 concluded the REIT’s strategic review process as originally announced on August 8, 2023 and discussed further below. From April 1, 2024 through August 8, 2024, the REIT sold 25 properties for total proceeds of $1.1 billion. Since the inception of the non-core assets sales program to date, the REIT sold 46 properties for gross proceeds of $1.4 billion. The proceeds from these sales were used to pay property specific debt as well as balances outstanding on credit facilities.

• The REIT also redeemed a further $20.3 million of its investment in unlisted securities during Q2 2024 (including subsequent events). Since the inception of the non-core assets sales program to date, the REIT has redeemed a total of $170 million of its investment in unlisted securities, with the proceeds used to repay balances outstanding on credit facilities;

• The REIT's leverage at the end of Q2 2024 was 47.9% (52.5% including convertible debentures) as compared to 47.7% (51.9% including convertible debentures) at December 31, 2023. Leverage post-completion of the UK disposition end is 42.0% (47.1% including convertible debentures);

• Continued strong operating performance in Q2 2024 was underpinned by a long-term lease maturity profile with a weighted-average lease expiry ("WALE") of 13.4 years, a global portfolio occupancy rate of 96.5%, and a global rent collection rate of 99%; and

• During Q2 2024, the REIT published its 2023 Sustainability Report which provides a comprehensive overview of the organization's sustainability initiatives, achievements, and future goals. Further, the REIT achieved significant improvement in its Global Real Estate Sustainability Benchmark (GRESB) score, moving from 62/100 in 2022 to 80/100 in 2023. This improvement places the REIT in 2nd place among participating Global Healthcare Listed entities, highlighting the REIT's leadership in sustainability performance.

Selected Financial Information:

Same Property Net Operating Income ("SPNOI")

The REIT's consolidated SPNOI for Q2 2024 increased by 4.2% over the comparable prior year period mainly due to inflationary adjustments on rents, rentalised capital spend and improved recoveries reflecting a steady growth in our underlying lease rentals and additionally supported by a long-term weighted-average lease expiry ("WALE") of 13.4 years.

On May 8, 2024, the REIT executed lease amendments on six hospitals in the UK with total square footage of approximately 255 thousand square feet, extending the lease maturity from nine years to 25 years. As part of the amendment, the REIT recognized a $1.7 million lease surrender fee in respect of one of the hospital properties and concurrently entered a lease with a new tenant.

SPNOI within the REIT's geographic regions increased 3.2% in North America, an increase of 4.6% in Brazil, an increase of 1.3% in Europe and an increase of 6.6% in Australasia.

Valuations

During Q2 2024, the REIT recorded a fair value loss on investment properties of $172.4 million, compared to $140.4 million in Q2 2023. The fair value loss was mainly attributable to revaluation of the UK portfolio to its disposition price, change in valuation parameters, incorporating market evidence when available and rent reviews.

As of June 30, 2024, the weighted average capitalization rate was 6.0% for the consolidated portfolio, compared to 5.9% as at December 31, 2023.

Sales of Non-Core Investment Properties and Unlisted Securities

In H1 2024, the REIT disposed of investment properties for total proceeds of $399.6 million on an IFRS basis, $70.6 million of which had been reclassified as assets held for sale during the year. The property dispositions represented 16 properties in North America, six properties in Australasia, and one property in Europe, with the proceeds used to pay directly attributable debt as well as balances outstanding on credit facilities.

The REIT used the proceeds from the sale of the US properties during H1 2024 to repay $207.9 million of the related term debt bearing an effective interest rate of 6.61%, decreasing the REIT's US debt balance to $188.0 million as at June 30, 2024.

During H1 2024, including the subsequent events period, the REIT sold approximately $35.8 million of its investment in unlisted securities. The proceeds were used towards repaying balances outstanding on credit facilities.

Subsequent to Q2 2024, on August 8, 2024, the REIT's UK portfolio was sold to Assura PLC ("Assura"), a publicly-listed REIT on the London Stock Exchange (LSE: AGR) for total consideration of $885 million, consisting of $708 million of cash and $177 million in shares of Assura, calculated on a 30-day VWAP basis. The REIT's stake in Assura equates to approximately 8% of Assura's public float and is subject to certain disposal restrictions for a period of six months following August 8, 2024. The net cash proceeds from the sale of the UK portfolio will be used to repay debts with a weighted average interest rate of 7.9%.

Since originally announcing the REIT's formal strategic review process on August 8, 2023, the REIT has sold 46 properties and investments in unlisted securities for total proceeds of $1.6 billion. The proceeds from these sales have been used primarily towards the repayment of debt. The completion of the sale of the REIT's UK portfolio concluded the REIT's strategic review process as originally announced on August 8, 2023. See news release dated August 8, 2024.

Capital Management Update

During Q2 2024, the REIT refinanced and amended mortgages in Europe totaling $33.3 million, extending the weighted average term to maturity by approximately five years and increasing weighted average interest rates on these mortgages by 58 basis points.

Further, during the quarter (including the subsequent events period), with respect to the REIT's Australasian secured term loan, the REIT repaid $11.2 million (NZ$13.5 million) of the outstanding balance and also entered into interest rate swaps on a notional value of debt of $83.3 million (NZ$100 million) for a term of two years resulting in a reduction in the effective interest rate on the balance of the secured term loan by approximately 80 basis points.

Post completion of the Q2 2024 asset sales, including subsequent events, consolidated leverage has decreased to 47.1% and the REIT has reduced 2024 and 2025 debt maturities by approximately $780 million to approximately $628 million as at the date of this press release. Management has been actively engaging with lenders to refinance or extend the REIT's remaining 2025 debt maturities and while it anticipates significant progress will be made in respect of this effort during the third quarter, there is no assurance the REIT will be able to complete such refinancing or extension on terms favourable to the REIT or at all.

The weighted average interest rate on debt as of June 30, 2024, was 6.04% (5.71% post completion of the UK disposition), as compared to 6.27% at December 31, 2023.

Corporate Presentation

Download the Company's Updated Corporate Presentation:
https://www.nwhreit.com/investors/unitholders/presentations

Upcoming Q2 2024 Results Conference Call

The REIT will be hosting its Q2 2024 conference call on Wednesday, August 14, 2024, at 10:00 a.m. ET. The dial-in numbers for the conference call are as follows:

North America (toll free): 1-844-763-8274

Overseas or local (Toronto): 1-647-484-8814

A replay will be available until September 14, 2024, by accessing:

US Toll Free: 1-877-344-7529
International Toll Free: 1-412-317-0088
Canada Toll Free: 1-855-669-9658
Replay Access Code: 9526679

About Northwest

Northwest provides investors with access to a portfolio of high-quality international healthcare real estate infrastructure comprised as at August 13, 2024, of interests in a diversified portfolio of 186 income-producing properties and 16.1 million square feet of gross leasable area located throughout major markets in North America, Brazil, Europe and Australasia. The REIT's portfolio of medical office buildings, clinics, and hospitals is characterized by long-term indexed leases and stable occupancies. Northwest leverages its global workforce in eight countries to serve as a long-term real estate partner to leading healthcare operators. For additional information please visit: www.nwhreit.com.

Non-IFRS Measures

Some financial measures used in this press release, such as SPNOI, FFO, FFO per Unit, AFFO, AFFO per Unit, AFFO Payout Ratio, and Proportionate Investment Properties are used by the real estate industry to measure and compare the operating performance of real estate companies, but they do not have any standardized meaning prescribed by IFRS.

These non-IFRS financial measures and non-IFRS ratios should not be construed as alternatives to financial measures calculated in accordance with IFRS. The REIT's method of calculating these measures and ratios may differ from the methods of other real estate investment trusts or other issuers, and accordingly may not be comparable. Further, the REIT's definitions of FFO and AFFO differ from the definitions recommended by REALpac. These non-IFRS measures are more fully defined and discussed in the exhibits to this news release and in the REIT's Management's Discussion and Analysis ("MD&A") for the three months ended June 30, 2024, in the "Performance Measurement" and "Results from Operations" sections. The MD&A is available on SEDAR+ at www.sedarplus.ca.

Forward-Looking Statements

This press release may contain forward-looking statements with respect to the REIT, its operations, strategy, financial performance and condition. These statements generally can be identified by use of forward-looking words such as "may", "will", "expect", "estimate", "anticipate", "intends", "believe", "normalized", "contracted", or "continue" or the negative thereof or similar variations. Examples of such statements in this press release may include statements concerning the REIT's position as a leading healthcare real estate asset manager globally, including with respect to its sustainability efforts, impact of asset sales, including but not limited to, the disposition of the UK portfolio, balance sheet optimization arrangements, the REIT's commitment to simplifying its business and further reducing its debt and the related anticipated impact on unitholder value, and the REIT's expected progress on the refinancing or extension of its remaining 2025 debt maturities. The REIT's actual results and performance discussed herein could differ materially from those expressed or implied by such statements. The forward-looking statements contained in this press release are based on numerous assumptions which may prove incorrect and which could cause actual results or events to differ materially from the forward-looking statements. Such assumptions include, but are not limited to (i) assumptions relating to completion of anticipated dispositions and deleveraging transactions; (ii) the REIT's properties continuing to perform as they have recently, (iii) various general economic and market factors, including exchange rates remaining constant, local real estate conditions remaining strong, and interest rates remaining at current levels or decreasing; and (iv) the availability of equity and debt financing to the REIT and the REIT's ability to refinance, or extend the maturity of, its existing debt. Such forward-looking statements are qualified in their entirety by the inherent risks and uncertainties surrounding future expectations, including that the transactions contemplated herein are completed. Important factors that could cause actual results to differ materially from expectations include, among other things, general economic and market factors, competition, changes in government regulations and the factors described under "Risks and Uncertainties" in the REIT's Annual Information Form and the risks and uncertainties set out in the MD&A which are available on SEDAR+ at www.sedarplus.ca.

These cautionary statements qualify all forward-looking statements attributable to the REIT and persons acting on its behalf. Unless otherwise stated, all forward-looking statements speak only as of the date of this press release, and, except as expressly required by applicable law, the REIT assumes no obligation to update such statements.

Exhibit 1 - Funds From Operations Reconciliation

FFO is a supplemental non-IFRS industry wide financial measure of a REIT's operating performance. The REIT calculates FFO based on certain adjustments to net income (computed in accordance with IFRS) as detailed below. FFO is more fully defined and discussed in the MD&A (see "Performance Measurement" and "Funds From Operations").

(1) FFO is not a measure recognized under IFRS and does not have standardized meanings prescribed by IFRS. See Performance Measurement in MD&A. The adjustments to determine FFO have been presented on a proportionate basis.
(2) Included in FFO for the three and six months ended June 30, 2024 are nil and $6.7 million related to interest rate caps (three and six months ended June 30, 2023 - $13.2 million and $15.2 million), the impact of which is nil and $0.03 per unit, respectively (three and six months ended June 30, 2023 - $0.05 per unit and $0.06 per unit, respectively).
(3) Diluted units include the impact of vested deferred trust units and the convertible debentures, that would have a dilutive effect upon conversion.
(4) Under IFRS the REIT's Class B LP Units are treated as a financial liability rather than equity. The REIT has chosen to present an adjusted basic and diluted per unit measure that includes the Class B Units in basic and diluted units outstanding/weighted average units outstanding. There were no Class B Units outstanding as at June 30, 2024 (June 30, 2023 - 1,710,000 Class B Units).

Exhibit 2 - Adjusted Funds From Operations Reconciliation

AFFO is a supplemental non-IFRS financial measure of a REIT's operating performance and is intended to reflect a stabilized business environment. The REIT calculates AFFO as FFO, plus/minus certain adjustments as detailed below. AFFO is more fully defined and discussed in the MD&A (see "Performance Measurement" and "Adjusted Funds From Operations").

(1) FFO and AFFO are not measures recognized under IFRS and does not have standardized meanings prescribed by IFRS. See Performance Measurement in the MD&A. The adjustments to determine FFO and AFFO have been presented on a proportionate basis.
(2) Diluted units include the impact of vested deferred trust units and the convertible debentures, that would have a dilutive effect upon conversion.
(3) Under IFRS the REIT's Class B LP Units are treated as a financial liability rather than equity. The REIT has chosen to present an adjusted basic and diluted per unit measure that includes the Class B Units in basic and diluted units outstanding/weighted average units outstanding. There were no Class B Units outstanding as at June 30, 2024 (June 30, 2023 - 1,710,000 Class B Units).

Exhibit 3 - Constant Currency Same Property NOI

Constant Currency Same Property NOI, sometimes also presented as "Same Property NOI" or "SPNOI", is a non-IFRS financial measure, defined as NOI for investment properties that were owned for a full reporting period in both the current and comparative year, subject to certain adjustments including: (i) straight-line rental revenue recognition; (ii) amortization of operating leases; (iii) lease termination fees; and (iv) non-recurring transactions that are not expected to recur (v) excluding properties held for redevelopment and (vi) excluding impact of foreign currency translation by converting the foreign currency denominated SPNOI from comparative period at current period average exchange rates. SPNOI is more fully defined and discussed in the REIT's MD&A (see "Performance Measurement").

(1) Same property NOI is a non-IFRS measure, defined and discussed in the REIT's MD&A.

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