Q3 2019 Earnings Call

November 15, 2019

Operator 3: Good morning, ladies and gentlemen, and welcome to the Northwest Healthcare Properties Real Estate Investment Trust Q3 2019 results and conference call. At this time, all lines are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. Note that the call is being recorded on Friday, 15 November 2019. Now I would like to turn the conference over to Paul Dalla Lana, CEO of Northwest Healthcare Properties REIT. Please go ahead, sir.

Operator: Good morning, ladies and gentlemen, and welcome to the Northwest Healthcare Properties Real Estate Investment Trust Q3 2019 results and conference call. At this time, all lines are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. Note that the call is being recorded on Friday, 15 November 2019. Now I would like to turn the conference over to Paul Dalla Lana, CEO of Northwest Healthcare Properties REIT. Please go ahead, sir.

Good morning, ladies and gentlemen, and welcome to the Northwest Health care properties Real estate investment Trust third quarter 2019 results in conference call.

First time all lines are in listen only mode. Following the presentation. We welcome Dr. question and answer session and if at any time. During this call you require me to the system placements toss it over the operator.

Colleagues being recorded on Friday November 15th 2019, and I would like to turn the conference over to Paul that a lot of C. O off northwest Health care properties wheat. Please go ahead Sir.

Thank you operator, and good morning, everyone. I appreciate you joining us today I'm joined by Bernard current crowd either its president.

Paul Dalla Lana: Thank you, operator, and good morning, everyone. I appreciate you joining us today. I'm joined by Bernard Crotty, the REIT's President, Peter Riggin, the REIT's Chief Operating Officer, and Shailen Chande, the REIT's Chief Financial Officer. Together, we are pleased to share with you our results for Q3 2019. First, I'd like to point out that during today's call, we may make forward-looking statements as defined under Canadian securities law. While such forward-looking statements reflect management's expectations regarding our business plans and future results, they are necessarily based on assumptions that are subject to uncertainties and risks, which could cause actual results to differ materially. We direct you all to the risk factors outlined in our public filings.

Peter Reagan series, Chief operating officer, and shale in China, The reach Chief Financial Officer together, we're pleased to share with you our results for the third quarter 2019.

First I'd like to point out that during today's call. We may make forward looking statements as defined under Canadian Securities law, well such forward looking statements reflect management's expectations regarding our business plans a future results. They are necessarily based on assumptions that are subject to uncertainties and risks, which could cause actual results to differ materially.

We direct you all to the risk factors outlined in our public filings.

Paul Dalla Lana: For the quarter, our results were in line with our expectations, including annualized quarterly adjusted funds from operations of CAD 0.92 per unit on a normalized basis, implying a payout ratio of 87%. Earnings accretion from recent acquisitions and financing activity, including the CAD 1.2 billion Healthscope portfolio acquisition, which closed late in the Q2, was as expected, but was offset by foreign exchange movements, which saw the Canadian dollar appreciate by approximately 4% over the last quarter relative to the REIT's average foreign currency exposure. In fact, over the past 12 months, we estimate that the relative strength of the Canadian dollar has reduced annualized AFFO by approximately CAD 0.04 per unit.

For the quarter, our results were in line with our expectations, including annualized quarterly adjusted funds from operations of 92 cents per unit on normalized basis, implying a payout ratio of 87%.

Earnings accretion from recent acquisitions and financing activity, including the 1.2 billion dollar how scope portfolio acquisition, which closed late in the second quarter was as expected.

It was offset by foreign exchange movements, which saw the Canadian dollar appreciate by approximately 4% over the last quarter relative to the read Savage foreign currency exposure Soc over the past 12 months, we estimate that the relative strength of the Canadian dollar has reduced annualized yeah. So by approximately four cents per unit.

Paul Dalla Lana: In the context of a lower for longer Canadian and interest rate environment, we expect that these trends will reverse over the balance of 2019 and into 2020, providing further tailwinds to the REIT's earnings going forward. Similarly, net asset value, which was broadly flat over the quarter and impacted slightly by negative foreign exchange movement, offset by an increase in the value of the REIT's asset management platform, in particular, driven by an incremental AUD 1.6 billion commitment in respect of the Australian healthcare joint venture. We see increasing momentum in our asset management platform built around the REIT's strong regional operating businesses, increasing institutional interest in alternative assets such as healthcare real estate, and ultimately a very constructive acquisition environment.

In the context of a lower for longer Canadian an interest rate environment. We expect that these trends will reverse over the balance of 29 team and into 2020, providing further tailwinds to their its earnings going so.

[noise] Similarly, net asset value, which was broadly flat over the quarter.

And sorry, yeah, and impacted slightly by negative foreign exchange movements offset by an increase in the value of the retail asset management platform in particular, driven by an incremental 1.6 billion dollar commitment in respect of the Australia in health care joint venture, we see increasing momentum in our asset management platform filter.

Around the rates a strong regional operating businesses, increasing institutional interest in alternative assets, such as healthcare real estate and ultimately a very constructive acquisition environment. Ultimately over the next 12 months three sees the ability at significant additional third party capital potentially approaching up to $10 billion.

Paul Dalla Lana: Ultimately, over the next 12 months, the REIT sees the ability to add significant additional third-party capital, potentially approaching up to CAD 10 billion, up from CAD 3.6 billion today, in support of a variety of regional investment strategies. It is well advanced on existing announced commitments to build on these numbers. Operationally, our results derive from an expanded 171-property, CAD 6.2 billion defensive healthcare infrastructure portfolio, all having long-term inflation index leases with leading healthcare operators. This strategy is reflected in the REIT's Q3 year-over-year source currency and Canadian dollar cash recurring SP NOI growth of 3.6% and 2.6% respectively, largely driven by contractual rent indexation and underpinned by a 97% occupancy rate and weighted average lease term of almost 14 years.

Up from $3.6 billion today in support of a variety of original investment strategies that is well advanced on existing announced a.

Commitments to build on these numbers operationally our results derived from an expanded 171 property 6.2 billion dollar defensive healthcare infrastructure portfolio, all having long term inflation index leases with leading health care operators. This strategy is reflected in the rates go Q3 year over year.

Source currency in Canadian dollar cash recurring asked in Hawaii growth of 3.6% and 2.6% respectively.

Partially driven by contractual rents indexation and underpinned by a 97%.

Occupancy rates and weighted average shares tenant lease term of almost 14 years. In addition to our focus on operations. The read it back several key strategic initiatives, making substantial progress towards the previously mentioned.

Paul Dalla Lana: In addition to our focus on operations, the REIT advanced several key strategic initiatives, making substantial progress towards the previously mentioned CAD 3 billion of institutional capital commitments targeted for 2019, and identifying a significant pipeline of attractive investment opportunities. Taken together, these initiatives provide the REIT with a significant runway and resources to continue to scale its business in both the near and long term. In Europe, we continue to execute on our growth program by developing new strategic relationships in both the medical office and hospital segments, which have seen accelerated deal flow that our team is converting into accretive acquisitions, including approximately CAD 90 million of transactions closed in Q3 and subsequent to quarter end.

$3 billion institutional cut capital commitments targeted for 2019, and identifying a significant pipeline of attractive investment opportunities taken together. These initiatives provide there. It was a significant runway in resources to continue to scale its business in both the near or long term.

In Europe , we continue to execute our growth programs by developing new strategic relationships and both the medical office and hospital segment, which has seen accelerated deal flow.

At our team is converting into accretive acquisitions, including approximately $90 million or transactions closed in Q3 and subsequent to quarter. It.

Paul Dalla Lana: By way of example, the REIT has added 2 additional Dutch ambulatory care outpatient clinics in Amsterdam and Rotterdam, which were acquired from a local developer, and as part of the transaction, secured a right to a development pipeline from which 3 additional clinics totaling CAD 33 million are under commitment. Similarly, in Canada, the REIT leveraged its exceptionally strong footprint in Alberta to acquire the Cambrian Centre in Calgary, a significant medical office building in close proximity to 2 major hospitals in the city's northwest. As well, an adjacent building to its Queensway Professional Center, providing expansion possibilities across from the Trillium Health Partners Mississauga Hospital. The REIT continues to build scale in Canadian capital markets, successfully executing its largest equity offering of CAD 172 million during the quarter.

Our way of example, three decided to additional Dutch ambulatory care outpatient clinics in Amsterdam, and Rotterdam, which were acquired from a local developer and as part of the transaction secured a right to development pipeline from which three additional connects totaling $33 million are under commitment.

Similarly in Canada, the <unk> leverage its exceptionally strong Alberta to acquire the can't Cambrian Center in Calgary, a significant medical office building in close proximity to two major hospitals in the city's northwest.

And as well in adjacent building to its clean way Queensway professional center, providing expansion possibilities across from the Trillium How partners Mr. Saga Hospital.

<unk> continues to build scale located in capital markets successfully executing its largest equity offering a $172 million during the quarter proceeds from the financing were deployed to repay existing debt and reduced leverage on an earnings accretive basis.

Paul Dalla Lana: Proceeds from the financing were deployed to repay existing debt and reduce leverage on an earnings accretive basis. The REIT also completed significant refinancing initiatives, repaying approximately CAD 435 million of debt with a weighted average interest rate of 5.61% and a weighted average term to maturity of 2 years, and entered into new facilities totaling CAD 543 million with a weighted average interest rate of 3.84% and a weighted average term of 6 years, reducing both overall leverage and weighted average interest rates by 90 and 54 basis points respectively.

We also completed significant refinancing initiatives repaying approximately $435 million of debt with a weighted average interest rate of 5.61.

Percent and a weighted average term to maturity of two years and entered into new facilities totaling $543 million with a weighted average interest rate of 3.84% at a weighted average term of six years, reducing both overall leverage and weighted average interest rates by 90, that's 54 basis points.

Respectively.

Paul Dalla Lana: The REIT remains committed to reducing leverage below 50% over the medium term and has targeted a suite of higher-cost debt for repayment in the remainder of 2019 and during 2020 with similar accretive features using resources from its targeted non-core and Australian JV asset sales, which are also progressing well. Regionally, Brazil is on plan with occupancy steady at 100% and continued strong and predictable income. Year-over-year source currency cash recurring SPNOI growth of 4.5%. Operationally, the REIT's major tenant, Rede D'Or, continues to deliver strong results and expand its business, thereby opening up the possibility of further partnerships with the REIT. Of note, two existing developments totaling approximately CAD 10 million at its HMB property in São Paulo, Brazil, reached substantial completion and will be funded by the REIT at a 7.5% yield in Q4 2019.

The remains committed to reducing leverage below 50% over the medium term and is trying to get a suite of higher cost up for payment in the remainder of spending I see in under a 2020 with similar accretive teachers using resources from its targeted noncore and Australian Jvs itself, which are also progressing well.

Regionally, Brazil is on plan with occupancy study at 100% and continued strong and predictable income year over year source currency cash recurring SDN or growth of 4.5% operationally the rates major tenant read your door continuous delivered strong results and expand its business, thereby opening up the Pos.

Nobody a further partnerships with the right.

No two existing developments totaling approximately $10 million at its each of the property in so Paulo, Brazil reached substantial completion and will be funded by the rate at a 7.5% Yelp in Q4 nights C.

Paul Dalla Lana: Market interest rates in Brazil, driven by a stabilizing economy and progress on domestic fiscal reforms, have stabilized at substantially lower rates, as noted in the REIT's accretive refinancing in Q2. The REIT is also gaining traction with other high-quality operators in Brazil and is actively working on transactions to diversify its investments in the region. In Canada, we were also on plan, continuing solid performance with positive year-over-year cash recurring SPNOI growth of 1.7%. Portfolio occupancy remaining healthy at 92.2%. During the quarter, the REIT completed 76,000 sq ft of renewal leasing at an average annual renewal rate of 4.1% above their expiring rent. The REIT also acquired 145,000 sq ft through the acquisitions that I previously mentioned.

Mark in interest rates in Brazil, driven by stabilizing economy and progress on domestic fiscal reforms have stabilized at substantially lower rates as noted in the region.

[noise] accretive refinancing in the second quarter.

The read is also getting traction with other high quality operators in Brazil and is actively working on transactions to diversify its investments in the region.

In Canada. We were also on plan continuing solid performance with positive year over year cash recurring SPR <unk>, an NOI growth of 1.7%.

Folio occupancy remained healthy at 92.2%.

During the quarter, the Recompleted 76000 square feet of renewal leasing at an average annual our average renewal rate a 4.1% of other expiring right.

We also acquired 145000 square feet to the acquisitions that I previously mentioned.

Paul Dalla Lana: We continue to focus on our ambulatory care initiatives, building on commitments to Lakeridge Health that we announced in Q2 2019, with additional projects under consideration in Ontario and Alberta. In Europe, we were on plan, performing as expected with year-over-year source currency SPNOI being flat and occupancy increasing to 97.1%. As mentioned earlier, we continue to find good investment opportunities in Europe, allowing us to not only build scale and critical mass in both Germany and the Netherlands, but also to pursue opportunities in adjacent markets. Lastly, in Australia, occupancy remained steady quarter over quarter at 99% and delivered consistent year over year source currency SPNOI with a weighted average lease term of 16 years.

We continue to focus on our ambulatory care initiatives building on commitments to like Ridge Hill said, we announced in the second quarter of 19 with additional projects under consideration, Ontario in Alberta.

And in Europe , we were on plan performing as expected with year over year source currency S. T. I know I've been clocks and occupancy increasing the 97.1% as mentioned earlier, we continue to find good investment opportunities in Europe , allowing us to not only build scale in critical mass in both Germany in the Netherlands, but also to pursue opportunities in adjacent.

Markets.

Lastly, in Australia occupancy remained steady quarter over quarter at 99% and delivered comp consistent year over year source currency SDN or why the weighted average lease term of 16 years.

Paul Dalla Lana: At Vital, the business reported strong and on-plan results, again with SPNOI growth of 2.5% and stable occupancy over 99% with a weighted average lease term of more than 18 years. Post quarter-end, Vital Trust held its annual meeting, where 99.9% of the voting unit holders approved amendments to the trust deed, including changes to the managers' fees. The REIT does not expect any material impact to the trust operating results or to the management fees earned by the ANZ manager as a result of this amendment, and views this as an opportunity to further stabilize and expand the platform. We note that Vital is currently trading near an all-time high, reflecting the strong fundamentals of this market-leading business.

Vital the business reported strong and on plan results again with as you know I growth of 2.5% and stable occupancy over 99% with a weighted average lease term of more than 18 years post counter at quarter end Bladex has held its annual meeting where 99.9% of devoting unit holders.

Approved amendments to the trustee, including changes to the managers. These three does not expect any material impact to the trusts operating results or to the management fees earned by the ends at manager as a result of this amendment and use this as an opportunity to further stabilize and expand the platform.

We note that vital is currently trading near an all time high that's something that strong fundamentals of this market leading business.

Continuing in Australia. In addition to the 1.6 billion dollar capital increase of its institutional JV. The right committed to two additional investments totaling approximately $200 million, including the Burnett Institute a life Sciences research facility and the Alfred helps precinct at Melbourne and war top private health.

Paul Dalla Lana: Continuing in Australia, in addition to the CAD 1.6 billion capital increase of its institutional JV, the REIT committed to two additional investments totaling approximately CAD 200 million, including the Burnet Institute, a life sciences research facility in the Alfred Health Precinct in Melbourne, and Waratah Private Hospital. For the balance of 2019, and building on these stable results, ongoing portfolio improvements, and continued supportive trends in the healthcare industry, the REIT will continue to drive internal growth through the completion of its value-added development and expansion projects, totaling approximately CAD 402 million on a consolidated basis or CAD 165 million at our share. As well, the REIT expects a further CAD 400 million of new investment activity to progress as 2019 comes to a close, split broadly among its regions.

Hospital.

For the balance of 29 team and building on these stable results ongoing portfolio improvements and continued support of trends in the healthcare industry. There. It will continue to drive internal growth to the completion of its value added development and expansion projects.

Totaling approximately $400 million to $2 million on a consolidated basis or $165 million that our share.

As well so we expect further $400 million of new investment activity to progress as Tonight seem trading that seemed comes to a close but broadly amongst its regions.

Paul Dalla Lana: Furthermore, we are targeting approximately CAD 350 million of JV asset sales in Australia for early 2020. I am pleased with the progress made during the quarter, which advanced a number of the REIT's key long-term strategic objectives while also producing solid operating results. With deep relationships, best-in-class regional operating platforms, and strong access to public and increasingly attractively priced private capital, the REIT is well positioned to continue executing on its accretive growth while prudently managing its balance sheet and delivering long-term value for unitholders. I'll now ask the operator to open up the call for questions.

Furthermore, we are targeting approximately $350 million, a JV asset sales in Australia for early 2020.

I am pleased with the progress made during the quarter, which had passed a number of the rigs key long term strategic objectives, while also producing solid operating results.

Deep relationships best in class regional operating platforms, and strong access to private or public and increasingly attractively priced private capital the read as well position to continue to execute on its accretive growth, while prudently managing its balance sheet and delivering long term value for unit holders.

No I see operated open up call for questions.

[noise]. Thank you, Sir ladies and gentlemen, if you do have a question. Please press star followed by one I knew Touchtone phone you want to hear a three tone prompt acknowledging you request and should you decide to withdraw your question simply press star followed by too and we do ask that if you're using a speakerphone. Please lets the handset.

Operator 3: Thank you, sir. Ladies and gentlemen, if you do have a question, please press star followed by one on your touchtone phone. You will hear a three-tone prompt acknowledging your request. Should you decide to withdraw your question, simply press star followed by two. We do ask that if you're using a speakerphone, please lift the handset before pressing any keys. Your first question will be from Frederic Blondeau at Echelon Wealth Partners. Please go ahead.

Operator: Thank you, sir. Ladies and gentlemen, if you do have a question, please press star followed by one on your touchtone phone. You will hear a three-tone prompt acknowledging your request. Should you decide to withdraw your question, simply press star followed by two. We do ask that if you're using a speakerphone, please lift the handset before pressing any keys. Your first question will be from Frederic Blondeau at Echelon Wealth Partners. Please go ahead.

Before proceeding indicate.

And your first question will be from had Blondo echelon wealth partners. Please go ahead.

Thank you and a good morning.

Frederic Blondeau: Thank you and good morning. Shailen, I was just looking at your NOI margin. It was a bit below our expectations at 76.6. I was wondering if you could give us a bit more color on that and maybe tell us about your expectations for next year.

She and then I was just looking at your a in a wide margin. It was a bit below our expectations that 76.6 I was wondering if you could give us a bit more color on that and.

Maybe tell us about your expectations for next year.

Yeah, Thanks, Fred I might do a bit of a deeper dive there and come back to more specifically.

Shailen Chande: Yeah. Thanks, Fred. I might do a bit of a deeper dive there and come back to you more specifically. I'd say there was no material non-recurrents this quarter. I think 76.6, you know, I'll just need to do a bit of a deeper dive into and come back to you on.

I'd say there was no material nonrecurrings this quarter I, certainly think 76.6, Ivan obviously, it's a bit of a deeper dive into it and then come back to you all.

Perfect and a same for a ginny was a bit higher than our expectations.

Frederic Blondeau: Perfect. Same for G&A was a bit higher than our expectations. I was wondering if you could give us, you know, a good run rate here.

Just wondering if you could give us a.

Good good good day run rate.

Shailen Chande: Yeah. I think I'd note that the G&A number includes because we consolidate 100% of Vital Trust, fees that are effectively paid by Vital Trust to Northwest. I can get into a little bit more detail around how that elimination works with you offline. I'd say the G&A number, given that management fees are highly stable but do include some level of activity-based fees on a quarterly basis, and Vital's fees paid to Northwest do fluctuate quarterly, you might see some quarterly volatility there.

Yeah, Yeah, I think they noted that the GE in a number includes eyes.

Because we consolidate 100% of vital trust had the GDP number includes OD fees that are effectively paid by vital trust to northwest I can get into a little bit more detail around how that elimination works with you offline.

I'd say the gene a number I've given that management fees are highly stable, but do you include some level of activity based fees on a quarterly basis.

Vitals fees page northwest do.

Fluctuate quarterly you might see some quarterly volatility there.

Gotcha Gotcha and then.

Frederic Blondeau: Gotcha. Lastly from me, what should we expect in terms of same-property NOI growth for next year, but in local currencies?

Lastly from me, a which we expect in terms of same property and why growth for next year, but in local currencies.

Yeah, I see what you saw this quarter was fairly representative hi, averaging around that 3% to 5% at a run rate.

Shailen Chande: Yeah. I'd say what you saw this quarter was fairly representative by averaging around that 3.5% at a run rate. You know, this quarter specifically, Europe was probably a little bit lower than where you'd see it on a run rate basis. We see that number tracking to about 1% to 1.5%, where it came in broadly flat year over year this quarter. I'd say when you look at Australia and Brazil, given the inflation index nature of the leases and the highly contracted nature of those leases and then related SPNOI, the numbers are relatively stable.

This quarter, specifically I Europe .

It was probably a little bit lower than where you see it on a run rate basis, we see that number tracking to about 1% to 1.5% where it came in broadly flat year over year this quarter.

I'd say when you look at Australia, and Brazil, I, given the inflation index nature of the leases in the highly contracted nature of those leases and related SDN why are the numbers are relatively stable.

Frederic Blondeau: Mm-hmm. That's great. Thank you.

That's that's great. Thank you.

Frederic Blondeau: That's great. Thank you.

Thank you next question will be from Chris Cooper I've seen RBC. Please go ahead.

Operator 3: Thank you. Next question will be from Chris Couprie at CIBC. Please go ahead.

Operator: Thank you. Next question will be from Chris Couprie at CIBC. Please go ahead.

Chris Couprie: Good morning, guys. I just wanted to go back to your comments, Paul, if you could just kind of maybe reiterate some of those, the numbers that you were rhyming off. So just in terms of 2019, your acquisition, I think you mentioned you had some acquisition commitments. Into 2020, I think you said CAD 400 million is a kind of a number that you're, I don't know if that's something that you've got kind of on the table, that's the pipeline or that's your hope for next year. I think you also mentioned something about JV asset sales. Is that Northwest selling properties into a JV or is it sales out of the JV? Thanks.

Good morning, guys.

I just want to go back to your comments, Paul if you could just <unk>.

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So just in terms of 2019.

Acquisition I think you mentioned you had.

<unk> commitments and.

<unk> I think he said.

Okay.

A number that Youre I don't know if that's something that.

On the table that's the pipeline.

Oh for next year.

<unk> JV assets sales is that northwest selling properties into a JV or is it sales out of the JV.

Thanks.

Oh, Okay. If you a few.

Paul Dalla Lana: Okay. A few points there. To the first point, you know, consistent with last quarter where we messaged about CAD 500 million of acquisition activity, for the remaining 2019, and we completed approximately just under CAD 100 million of that in Q3. Four hundred to go. We do expect that to happen, broadly speaking, by the end of the year, yeah, with maybe some small carryover, you know, into January just around closings. That number is a 2019 number. I guess, high visibility on that number. I would think that, you know, that's looking fairly likely at this point.

Oh points there so to the first point, yeah, consistent with last quarter, where we messaged about $500 million of acquisition activity or for the remaining a 29 team and we completed approximately just under 109 of that.

Three so 400 to go we do expect that to happen broadly speaking by the ended the year, yeah with maybe some small carryover into January just around closings. So that number is a 2019 number.

I guess a high visibility on that number so I would think that.

So looking certainly likely at this point.

Paul Dalla Lana: To JV asset sales, we have a combination of a couple non-core assets in Australia and a small amount of non-core assets in Canada that we've identified for outright sale, that would comprise, again, approximately CAD 200 million of assets. Then the balance is really our Northwest Australia 100% owned assets, which are being targeted for one of either of our regional capital platforms. All of those activities are reasonably well at hand, again, with likely late in the year or early next year closings in mind. I think that was the first two. There was, again, a little bit of a question around some of our JV capital activities.

Two jvs itself, we have a combination of.

A couple noncore assets in Australia, and a small amount of noncore assets in Canada that we've identified for outright sale.

That would.

Comprise again, approximately a couple hundred million dollars of assets.

And then the balance is really or northwest Australia.

100% on assets, which are being targeted for one of other of our original capital platforms.

And all of those activities are reasonably well at hand.

Again with a likely.

The year or early next year closings in mind.

So I think that was the first two.

And then there was a game a little bit of a question around.

Some of our JV capital activities. So obviously the highlight of the quarter was increasing our existing Australian JV up to again approximately $3.7 billion Australia.

Paul Dalla Lana: Obviously, the highlight of the quarter was increasing our existing Australian JV up to, again, approximately AUD 3.7 billion, you know, of which, again, including the acquisitions that I've just mentioned, you know, around AUD 2.2 billion has been committed. Again, AUD 1.5 billion or so of capacity in that JV. We are actively and very close to signing off on an additional set of regional JVs, and again, would be targeting, again, approximately AUD 3 billion of additional debt and equity capital commitments in those JVs. That's up from AUD 1.5 to 2 billion that we would have announced last quarter. Those are substantially progressed, and we do expect to be in place by the end of 2019. I think that was the three.

Of which gave including acquisitions that I've just mentioned.

Around $2.2 billion has been committed so again 1.5 or so as of.

Pasadena and that JV.

We are actively and very close to signing off on an additional.

Set a regional Jvs and again would be targeting a gain of approximately $3 billion of additional debt and equity capital commitments in those jvs. That's up from one of that has to 2 billion that we would have announced last quarter. A those are substantially progressed and we do expect it to be in place.

By the end this 2019.

So I think that was a three did I get all the yeah. That's great. So just going back.

Paul Dalla Lana: Did I get all of that?

Chris Couprie: Yeah. That's great. Just going back to make sure I've got this and I understand this correctly. Within the kind of Australian third-party capital, I think AUD 3.6, 3.7 billion, you've said 2.2 of that has been basically deployed, including Healthscope. Was that right?

Yes, I understand this correctly, so within the kind of Australia.

Third party.

Capital.

I think 3.7.

You said 2.2 of that has been basically deployed including.

Scope it was that right.

Paul Dalla Lana: Correct.

Chris Couprie: Maybe for both the remaining CAD 1.5 billion in Australasia, as well as the new relationships that you expect to enter, how should we think about the pace of deployment of the call it CAD 4.5 billion?

Correct, Okay and then.

Maybe for both the remaining one and a half billion in Australasia.

Well as the new.

Relationships that.

And how should we think about the the pace of deployment.

<unk>.

Yes, I give you know two answers to that I mean, the and the commitments provide us with us for years to deploy that capital.

Paul Dalla Lana: Yeah. I think I'd give, you know, two answers to that. I mean, the commitments provide us with four years to deploy that capital. I think it's very safe to say that there's a 100% likelihood that it would happen in four years. I think in general, I would tease out that we are seeing, you know, an increasing opportunity set in the moment. Again, the overarching trends in healthcare and particularly in the markets that we're in are leading us to believe that that could be substantially quicker. You know, calling out our experience in Australia as an example, we signed the initial JV there just over 12 months ago and deployed, you know, AUD 2.2 billion inside of 12 months.

So I think it's very safe to say that there's 100% likelihood that it would happen in four years, but anything in general I would tease out that we are seeing you know and increasing opportunity set in a moment again, a the overarching trends in health care and in particular in the markets that we're in.

Our leading us to you I believe that that could be substantially quicker.

I'm, calling out our experience in Australia as an example, we signed the initial JV there or just over 12 months ago into play and $2.2 billion and inside of 12 months. So I think we see a real opportunity to to accelerate that again, we don't have.

Paul Dalla Lana: I think we see a real opportunity to accelerate that. Again, we don't have any you know specific timelines in mind other than I think it's gonna be substantially faster than the 4 years that we have to deploy it. Again, a reminder to everyone that these JV capital commitments are also in the same format of the original Australian JV, which are evergreen you know and long-term and have that combination of base and incentive fees that Northwest again largely targeting you know in the case of Australia 70/30 and in the case of other markets you know somewhere around 75/25 type investment program. Just calling out some of those features.

Any.

He a specific timelines in mine other than I think it's going to be substantially faster than the four years that we have to deploy it.

In a reminder, on everyone that that these JV capital commitments are also in the same format of the original Australian JV, which our evergreen.

And long term and have that combination.

Base and incentive fees that said northwest again largely targeting.

No we.

In the case of Australia, 70, 30, and in case of other markets you know somewhere around 70 525 type investment program. So I, just calling out some of those features but I would say that the moment for our business is a.

Paul Dalla Lana: I would say that the moment for our business is, you know, very constructive and we see, you know, high visibility into the opportunities to deploy this capital creatively and quickly.

You know is a in a very constructive and we see no high visibility into.

Well into the opportunities to deploy capital creatively and quickly.

Chris Couprie: Okay. Just two quick ones. With the new potential capital partners, would there be an intent similar to the inception of the Australasian JV, where Northwest kinda seeded the venture with some of its on-balance sheet assets? Would it be a similar kinda setup for the new relationships? Secondly, you know, there's an article where Northwest was highlighted, kinda looking at mental health facilities in Australasia. Just wondering if you can kinda give any color on that market and that opportunity. I'll turn it back. Thanks.

And then just two quick ones.

With the new potential capital partners.

Would there be an intent to similar to the a inception.

JV were northwest kinda seat at the venture.

On balance sheet assets.

Would that be would it be a similar kind of set up for the new new relationships and then secondly.

Oh.

It was highlighted.

Looking at mental health facilities and.

Just wondering kind of give any any color on on that market and that opportunity and now I'll turn it back. Thanks.

Paul Dalla Lana: Sure. Yes. I think the answer is yes, Chris, that the, you know, additional JVs, which are, you know, a pretty direct structure, follow very closely the Australian JV that we have in place and are likely to include, you know, some seed assets, whether those are pending acquisitions or existing portfolio properties of Northwest, as part of the initial startup. I think so that is a yes. Specifically to the mental health opportunity article that you referred to, I might just call it a couple of things.

Sure, Yes, I think the answer is yes, Chris said that the you know additional Jvs I'm sure you know a pretty direct structure follow very closely.

The the Australian JV that we haven't place and are likely to include you know some seed assets, whether those are pending acquisitions or existing portfolio of properties of northwest.

As part of the initial.

Initial startup and I think so that is yes, specifically.

To.

And that's on health opportunity article that you referred to.

I might just call. It a couple of things we have a pretty active portfolio.

Paul Dalla Lana: We have a pretty active portfolio in Australia with that type of modality in it, and you know includes you know large assets like the Melbourne Clinic that was acquired as part of the Healthscope transaction, probably the largest psychiatric hospital in Australia, as well as a number of regional facilities. Certainly you know mental health as a modality, as I said, is experiencing very significant growth. A lot of our operating partners are focusing on that you know in Australia as well. Of course we have an existing and growing relationship with MEDIAN in Germany, and they are very much in the post-acute care world focusing in that area.

In Australia with with that type of.

Modality at it and you know includes large assets like the Melbourne clinic was acquired as part of the whole scope transaction, probably the largest psychiatric hospital and.

In Australia, as well as a number of regional facilities and certainly you know mental health as as it modality as I said is experiencing very significant growth. So a lot of our operating partners are focusing on that.

You know in Australia as well of course, we we have a an existing and growing relationship with median in Germany.

And they are very much in the post acute care world focusing in that area. So we would see that as an area, it's a pretty secular growth and in most.

Paul Dalla Lana: We would see that as an area of pretty secular growth in most of our regions and in healthcare in general. I think, you know, that's something that we're seeing from our operating partners, you know, an increasing focus on. We're certainly, you know, open to supporting them as they target those types of operations.

Yeah, most of our regions and healthcare in general So I think.

Yeah, that's something that we're seeing from our operating partners.

You know a an increasing focus on and so we're certainly.

Open to supporting them as a as they target those types of operations.

Chris Couprie: Thank you.

Thank you.

Thank you next question will be from Palo <unk> National Bank financial Please go ahead.

Operator 3: Thank you. Next question will be from Tal Woolley at National Bank Financial. Please go ahead.

Operator: Thank you. Next question will be from Tal Woolley at National Bank Financial. Please go ahead.

Tal Woolley: Hi, good morning.

Hi, good morning.

Paul Dalla Lana: Hi.

All right.

Tal Woolley: Just wanted to start for the balance of the refinancing activity that you would like to complete, do you have an idea of what we should be penciling in just for what some of the, like, the cash costs attached to that refinancing activity?

Just wanted to start for the balance of the refinancing activity that you would like to complete do you have an idea of what we should be penciling in just for the what some of that I like the cash cost attached to that refinancing activity.

[noise] just SEC if I could.

Paul Dalla Lana: Just a sec, if I could.

Tal Woolley: Yep.

Yes.

[noise] Oh, sorry, so I'd I'd, just give a couple of answers to that as we look down. The line you, we're probably seeing an opportunity to take our weighted average interest rate.

Paul Dalla Lana: Tal, sorry. I'd just give a couple of answers to that. As we look down the line, we're probably seeing an opportunity to take our weighted average interest rate inside around 50 to 60 basis points over the next 12 months. I would see relatively limited cash cost to that, given that, you know, we have a pretty near-term maturity profile that expires naturally over that timeline and gives us, you know, pretty direct access to it.

Inside around 50 to 60 basis points over the next 12 months.

I would see relatively limited cash cost to that given that you know we have a pretty near term maturity profile that expires naturally over that time line and gives US you know pretty direct access to it. So the experience that we had you know it more recently in Brazil, where there was a.

Tal Woolley: Okay.

Paul Dalla Lana: The experience that we had, you know, more recently in Brazil, where there was a reasonable repayment cost that came through, you know, off of what was long-term financing, just, you know, replaced with substantially cheaper, newer, longer-term financing, being, you know, sort of more, the exception than the rule.

A reasonable repayment cost that came through offsets what was long term financing just.

<unk> replaced with substantially cheaper newer longer term financing.

Being sort of more the exception than the rule.

Tal Woolley: Okay. Just coming back to the fee income. I'd like to maybe understand a little bit better conceptually what's been going on this year. Like, when you look at the presentation on page 29, like, year-to-date, your fees look roughly flat, which makes a bit of sense. You've made an adjustment to the Vital fee structure. You've brought on newer fees with the Healthscope opportunity. I can sort of understand that. By the time we get down to your proportionate exposure, though, you're down pretty significantly. I'm just trying to understand what's the shift in the mix of fees that's creating that gap?

Okay.

And then just pulling back to that the fee the fee income I just.

I'd like to maybe understand a little bit better conceptually, what's been going on this year, but when you look at the presentation on page 29 like year to date your fees look roughly flat, which makes it a sense you've made an adjustment to the vital.

The vital few structure you brought on newer fees with the help scope.

Opportunity and so I can sort of understand that by the time, we get down to your proportionately exposure, though you're down pretty significantly and so I'm just trying to understand.

So what's the what's the shifting the mix of fees, that's creating creating that gap.

Maybe maybe I could take that just at a high level. So picked up a couple of points, but I might suggest that that theres a more detailed response from shown to walk through that just at the highest level. What I would say as you know we've had last 12 months fees of about $40 million through the business. That's that's up pretty significantly you know over 12.

Paul Dalla Lana: Maybe I could take that just at a high level, so pick up a couple of points, but I might suggest that there's a more detailed response from Shailen to walk through that. But just at the highest level, what I would say is, you know, we've had the last 12 months fees of about CAD 40 million through the business. That's up pretty significantly, you know, over 12 months. You know, clearly the construct of those fees is broadly split between Vital and our new Australian JV. Clearly over that period, you know, our fees from Vital would be approximately flat or a little bit, but, you know, in that there or thereabouts level, and all of the new JV fees are new.

Tal Woolley: Mm-hmm.

Paul Dalla Lana: That's up pretty significantly, you know, over 12 months. You know, clearly the construct of those fees is broadly split between Vital and our new Australian JV. Clearly over that period, you know, our fees from Vital would be approximately flat or a little bit, but, you know, in that there or thereabouts level, and all of the new JV fees are new. The JV's only been in existence for 12 months, so those would be all new fees and pretty significant ones given, you know, big transactions like Healthscope and obviously now AUD 2.2 billion of run rate assets and growing. I just highlight that, you know, the last 12 months, you know, is up materially over the 12 months before that.

<unk>.

You know clearly the construct of those fees is broadly split between vital in our new Australian JV. So clearly over that period, you know our fees from vital would be approximately <unk> or a little bit but in that there or thereabouts level and all.

All of the new JVC is our new the JV has only been existence for 12 months. So those would be all new season and pretty significant ones given.

Paul Dalla Lana: The JV's only been in existence for 12 months, so those would be all new fees and pretty significant ones given, you know, big transactions like Healthscope and obviously now AUD 2.2 billion of run rate assets and growing. I just highlight that, you know, the last 12 months, you know, is up materially over the 12 months before that. You know, to the Vital comment, I think I'd just be very direct to say that although, you know, we did renegotiate our Vital fee agreements, and those were concluded in October at the AGM, you know, that fee arrangement now includes a different construct, which, you know, is a slightly lower base fee. Very meaningful activity-based fees.

Big transactions like how scope and obviously now $2.2 billion of Runrate assets and growing so I'd just highlight that you have the last 12 months you know is up materially over the 12 months before that.

Paul Dalla Lana: You know, to the Vital comment, I think I'd just be very direct to say that although, you know, we did renegotiate our Vital fee agreements, and those were concluded in October at the AGM, you know, that fee arrangement now includes a different construct, which, you know, is a slightly lower base fee. Very meaningful activity-based fees. You know, based on how we see the business going forward and its business prospects, which are also, you know, very constructive in the Australia and New Zealand markets and include, you know, a very active pipeline, you know, we would expect those fees to grow going forward, you know, and also continue to be, you know, meaningful in the context of the overall business.

You know to the vital comment I think I'd just be very very direct to say that although we did renegotiate or are vital see agreements.

And those were concluded in October the G M.

See arrangements now includes a different construct which it was a slightly lower base fee.

But very very meaningful activity based fees and so you know based on on how we see the business going forward and that's business prospects, which are also very constructive in the Australia, New Zealand markets and include.

Paul Dalla Lana: You know, based on how we see the business going forward and its business prospects, which are also, you know, very constructive in the Australia and New Zealand markets and include, you know, a very active pipeline, you know, we would expect those fees to grow going forward, you know, and also continue to be, you know, meaningful in the context of the overall business. I think I might just call out those two overarching points. If I look down the line and without being too prescriptive about it, I think the great business opportunity that we have is to build out this asset management business.

Very active pipeline, we would expect those fees to grow going forward.

You know in and also continue to be meaningful in the context of the overall business. So I think I might just call those two overarching points, if I look down the line and without.

Paul Dalla Lana: I think I might just call out those two overarching points. If I look down the line and without being too prescriptive about it, I think the great business opportunity that we have is to build out this asset management business. I sort of highlighted that, you know, based on the CAD 3.6 billion in committed capital that we have at the JV and the almost CAD 2 billion that we have at Vital today, you know, we see an opportunity to double that over the coming years, and certainly more likely sooner than later. I would think that, you know, broadly speaking, you know, we see an equal opportunity to double our asset management fees over that period.

Being too prescriptive about it I think the great business opportunity that we have is to build up this asset management business and that sort of highlighted that you know based on the $3.6 billion in committed capital O. <unk> JV and they almost $2 billion that we have a vital today you know, we see an opportunity to double that.

Paul Dalla Lana: I sort of highlighted that, you know, based on the CAD 3.6 billion in committed capital that we have at the JV and the almost CAD 2 billion that we have at Vital today, you know, we see an opportunity to double that over the coming years, and certainly more likely sooner than later. I would think that, you know, broadly speaking, you know, we see an equal opportunity to double our asset management fees over that period. I would just highlight that, you know, over time, I think the business is going to generate, you know, again, approximately CAD 40 million of last twelve month fees, you know, growing substantially and potentially doubling as we deploy what we see as these increasing capital commitments.

Out over the coming.

Over the coming years, and certainly more likely sooner than later and so I would think that broadly speaking you know, we see an equal opportunity to double our asset management fees over that period. So I would just highlight that overtime I think the business is going to generate.

Paul Dalla Lana: I would just highlight that, you know, over time, I think the business is going to generate, you know, again, approximately CAD 40 million of last twelve month fees, you know, growing substantially and potentially doubling as we deploy what we see as these increasing capital commitments. That those fees are highly recurring in nature given, you know, the permanency of those JV and Vital capital commitments as well as the construct of the fees. I'd just say that, you know, that's probably a part of the business that has very significant growth attached to it and very significant accretion attached to it, given that our business has substantially invested in its platforms today and has the people and relationships in place to deploy that capital with fairly, you know, limited additional G&A.

Okay, and approximately $40 million of last 12 months fees.

Growing substantially and potentially doubling as we deploy what we see as these increasing capital commitments and that those fees are highly recurring in nature given.

Paul Dalla Lana: That those fees are highly recurring in nature given, you know, the permanency of those JV and Vital capital commitments as well as the construct of the fees. I'd just say that, you know, that's probably a part of the business that has very significant growth attached to it and very significant accretion attached to it, given that our business has substantially invested in its platforms today and has the people and relationships in place to deploy that capital with fairly, you know, limited additional G&A. I think that's probably something from the business that you know has changed a lot over the last 12 months as we've you know accessed more and varied institutional and public capital through Vital. I think it's a very important point, but the starting point is quite positive right now.

Permanency as those JV and vital capital commitments as well as the construct as the fees. So I'd just say that that's probably a an you know a part of the business that has very significant gross attached to it and very significant accretion attached to it given that our business has substantially invested in its.

Platforms today.

Has the people and relationships in place to deploy that capital was fairly.

Limited additional DNA, so that's probably something from the business that is has changed a lot over the last 12 months as we as you know as we as access to more and varied.

Paul Dalla Lana: I think that's probably something from the business that you know has changed a lot over the last 12 months as we've you know accessed more and varied institutional and public capital through Vital. I think it's a very important point, but the starting point is quite positive right now.

Institutional and and public capital survive. So I think it so that's very important point, but the starting point is is quite positive right now.

Okay and then just my last question just on the Canadian business I'm, Sorry earlier, you had mentioned you're maybe looking at trimming your portfolio by how much in Canada.

Tal Woolley: Okay. Just my last question, just on the Canadian business. Sorry, earlier you had mentioned you're maybe looking at trimming your portfolio by how much in Canada?

Paul Dalla Lana: Yeah. We've identified approximately CAD 100 million of non-core assets, again, in the continuation of our major market focus and major asset focus. I think that's been a long-standing, you know, program here in Canada. I would think that, you know, over the next little while, we see an opportunity to take that capital and recycle it into, you know, again, more core type assets that we believe have higher growth and better returns. We've started to do that obviously with things like Cambrian and the Lakeridge Ambulatory Care Center. We see more of that opportunity in Canada, a little bit more recycling than anything else.

Yeah, we've identified approximately $100 million of noncore assets again in a continuation of our major markets focus and major assets focus I think that's been a longstanding.

Program here in Canada. So I would think that you know over the next little while we see an opportunity to take that capital and recycle it into you know gain more core type assets that we believe has.

Higher growth and better returns and we started to do that obviously with things like Cambria and the Lake Rich Oh.

Krych ambulatory care centers, so we see more of that opportunity in Canada, so little bit more recycling than anything else.

Tal Woolley: Long term, 'cause like when you look at the structure of the various regions now, like Canada does stick out a little bit versus the others, you know, just in terms of like shorter weighted average lease term, that kind of thing. Do you need to be in Canada longer term, or is this a business that, you know, like I guess, yeah, is Canada core to the long term? Because it certainly seems like your marginal investment dollar is outside.

And long term because like when you look at the structure of the various regions now like Canada stick out a little bit versus the others I'm interested in terms of like shorter weighted average lease term that kind of thing.

Do you do you need to be in Canada, the longer term or is this a business.

You know.

Like I guess, yeah, if Canada core to the long term because it certainly seems like your marginal investment dollars outside.

Yeah, I mean, I think I would answer sat in a in a few ways right. It again as the overall the answer is yes, Canada is core to the business and and we like the business here.

Paul Dalla Lana: Yeah, I mean, I think I would answer that in a few ways, right? Again, the overall answer is yes, Canada's core to the business and we like the business here. You know, given that we've been at it for 15 years and it's a more mature business, we have a very specific focus as we've mentioned historically to major markets and larger assets. Increasingly, you know, we are seeing the opportunity to find, you know, assets with that longer duration, more index type features. Again, that really is coming out of some of the overall healthcare trends that we see and the opportunity to do things with our regional health authorities like the Ambulatory Care Center program.

Given that we've been at it for 15 years and it's a more mature business. We have you know a very specific focus as we've mentioned historically too you know major markets and and larger assets. An increasingly you know are seeing the opportunity to find you know.

Assets with that longer duration more index type features and again that really is coming out of some of the you know some of the overall health care trends that we see and the opportunity to do things with our regional health authorities like the ambulatory care Center program, we've clearly had an active investment stride.

Paul Dalla Lana: You know, we've clearly had an active investment strategy in Quebec that follows the Quebec CLSC clinics as an example, which are very similar. We're starting to see trends in Ontario and Alberta as an example that offer us those opportunities going forward. I think increasingly we see opportunities to deploy, you know, into, you know, slightly more infrastructure like assets in Canada, and we're very focused in doing that. Clearly, you know, the moment for health policy and as a result sort of healthcare opportunities is still stylized relative to some of our other markets.

As you go back that follows that [noise].

The Quebec CRC clinics as an example, which are very similar and we're starting to see trends in Ontario in Alberta, as an example that offer us those opportunities going forward. So I think increasingly we see opportunities to deploy a you know into slightly more infrastructure like assets.

In Canada, and we're very focused in doing that clearly you know the moment for health policy and as a result sort of health care opportunities is still stylized relative to some of our other markets.

Paul Dalla Lana: We do see these trends starting to change and so certainly we're optimistic that we'll be able to use our, you know, essentially front row seat here with prime relationships with all of these health authorities and governments and related parties to drive, you know, some more differentiated investment. I think, you know, that would be our feeling about Canada. We're also very focused on looking for expansion opportunities within our existing portfolio and have identified, you know, good opportunities at places like 30 Merton and 1849 Yonge in downtown Toronto. We've called out 149 College and 5 Fairview Mall Drive to, you know, see real expansion opportunities in Alberta.

But we do see these trends starting to change and so certainly we're optimistic that we'll be able to use our you know essentially front row seat here with prime relationships with all of these health authorities and governments and related parties to drive.

Some more differentiated investment so I think.

That that would be our feeling about Canada. We're also very focused on when looking for expansion opportunities within our existing portfolio and as identified.

Good opportunities at places like 30, Merton and 18 49 young in downtown Toronto, which called out.

When 49 college and five Fairview mall, a fairly drives to see no real expansion opportunities in Alberta, our portfolio and the addition of Cambridge and opens up a number of an interesting adjacent to use two large.

Paul Dalla Lana: Our portfolio and the addition of Cambrian opens up a number of interesting adjacencies to large hospitals and really more infrastructure like assets and we just continue to chip away at it. I think, you know, again, we're probably as constructive as we've ever been on Canada in the moment, noting that clearly it still lacks some of the broader private opportunities that we see in other regions.

The large hospitals and really more infrastructure like assets and and we just continue to chip away at it. So I think you know gain were probably.

As constructive as we've ever been on on Canada in a moment, noting that.

Clearly, it's still lack some of that the broader.

Private opportunities that we see in other regions.

Tal Woolley: Okay. Thanks, Paul. That's great.

Okay. Thanks, Paul that's great.

Thank you.

Operator 3: Thank you. Ladies and gentlemen, as a reminder, if you do have a question, please press star followed by one on your touch-tone phone. Your next question will be from Mario Saric at Scotiabank. Please go ahead.

Operator: Thank you. Ladies and gentlemen, as a reminder, if you do have a question, please press star followed by one on your touch-tone phone. Your next question will be from Mario Saric at Scotiabank. Please go ahead.

Ladies and gentlemen, as a reminder, if you do have a question. Please press star followed by one on your Touchtone phone.

Your next question will be from Mario Saric at Scotiabank. Please go ahead.

Hi, good morning.

Mario Saric: Hi. Good morning.

Just time, yeah, the near term acquisition activity wanted to clarify the 400 million.

Paul Dalla Lana: Hi.

Mario Saric: The near-term acquisition activity, wanted to clarify the CAD 400 million expected by January, is that NWH share or gross?

Expected by January is not NW, each year or groups.

Paul Dalla Lana: Yeah, that's gross, Mario. Again, hard to break down per share, but you know, again, probably at least 50% of that going into our JVs and 50% direct if I had to start as a starting point.

Yeah that sets growth scenario.

[noise] and again hard to break down at share, but you know game, probably at least 50% not going into our jvs and 50% direct if I had to start as a starting point.

Mario Saric: Got it. Okay. When we look at the potential regional funds, the CAD 3 billion target, I think, Paul, you mentioned a 75-25 kind of 25% co-invest general structure. This backs on to Chris's earlier question. When we think about NWH's net equity requirement to that CAD 3 billion over time, kind of between like fresh new capital versus seeding assets, and how do you go about determining the optimal composition of that?

Okay and then.

When we look at the the potential regional funds the 3 billion.

Our target I think Paul you mentioned.

70, 525 kind of 25% Coinvest journalist structure.

And this box on to Christians earlier question, when we think about and WH is kind of how you think window, which is net equity requirement.

To that 3 billion overtime.

Hi between like fresh new capital versus seating assets and how do you.

How do you go about determining the optimal composition of <unk>.

Yeah, Okay, and just following you know our.

Paul Dalla Lana: Yeah. Again, just following, you know, our Australian experience as an example, I think we would see, you know, again, approximately, you know, 10 to 15% of that initial investment coming through a seed portfolio. Obviously our, you know, substantial amount of our, initial and near-term equity would be provided by that seed portfolio. Again, on a CAD 3 billion dollar, you know, debt and equity number looking 75, 25, and again, you know, probably 60 to 65% levered, you know, you start to get some equity figures there that, you know, sort of back into it. I'd highlight we're feeling, you know, reasonably confident that between non-core asset sales, and JV asset sales, that we have, you know, the capital to take the next steps in all of our JVs.

Australian experience as an example.

I think we would see you know.

Again approximately.

10% to 15% of that initial investment coming through a seed portfolio.

Obviously are substantial amount of our initial in near term equity we'd be provided by that see portfolio.

And again on a 3 billion dollar debt and equity number looking at 70 525.

And again, probably 65 to 60% to 65% Levered you start to get some some equity figures there that said.

Sort of back into it so I'd highlight we're showing a reasonably confident that between noncore asset sales.

[noise] and JV asset sales that we have seen that the capital to take the next steps and all of our JV. So I think that's probably the.

Paul Dalla Lana: I think that's probably the way that we would see it, you know, in that sort of a 12 to 18 month view, if I had to look at it that way.

The way that we would see it in that sort of a 12 to 18 months you decide to look at it that way.

Mario Saric: All right. Okay. That makes sense. The 60% to 65% LTV, you know, for an asset class that is as stable as the assets you're buying, what's the governor there in terms of kind of optimal LTV? Like, could it be higher than 60% to 65%? Like why-

Right, Okay that makes sense any of the 60% to 65% LTV you know for NASA cost Uh huh.

Stable was the off that you're buying what's the governor there.

In terms of kind of optimal LTV.

Could it be harder than 60 to 65.

Yeah. That's if you think of our regions. The Marriott I think you know again and just highlighting that.

Paul Dalla Lana: Yeah, that's if you think of our regions, Mario. I think you know, again, and just highlighting that you know that we have 65-ish in Australia as a starting point. You know, if we looked into the European direction, obviously it could be higher, highly constructive financing markets there. It really comes back more to just sort of us looking for an aggregate level of equity commitment as we look at the JVs there. And a little bit the opposite, let's say in Brazil, if we looked in that direction and thinking that you know, in general, we've run lower leverage there, although the moment today is highly constructive. I think that's a bit of a blended number between you know, two quite different regions.

That we have 65 ish in Australia as a starting point.

If we looked in to the European direction, obviously, it could be higher highly constructive financing markets. There. So it really comes back more to your cerus looking for an aggregate level of equity commitment as we look at the JV is there.

In a little bit the opposite let's say in Brazil, if we look in that direction thinking that in general we bring more leverage there. Although the moment today is highly constructive so I think thats a bit of a blended number.

Between two quite different regions, but ultimately you know again.

Paul Dalla Lana: Ultimately, you know, again, you know, we see debt, you know, being, you know, an accretion tool to the original investments, particularly so in Europe, you know, where we would see financing in our JVs, you know, in the, you know, certainly sub 2% and maybe close to 1% level for long-term financing. You know, we would see financing in Brazil, you know, very much similar to what we've just done, you know, which was sub 4% for again, approximately a 12-year duration financing in the Rede D'Or financings that we just completed in Q2.

We see a debt being you know.

Accretion tool to the original investments, particularly so in Europe , where we would see financing in our Jvs you know in that certainly sub two and maybe close to 1% level for long term financing.

And we would see financing in Brazil, very much similar to what we've just done you know.

Which was up 4% for again approximately 12 your duration financing and.

In the reached or.

Financings that we just completed in the second quarter. So I think those would be data points are obviously very regional but Oh I think in all cases, you know certainly.

Paul Dalla Lana: I think those would be data points that are obviously very regional, but you know, I think in all cases, you know, certainly allowing us to drive both near-term and long-term accretion through those investments.

Allowing us to drive both near term and long term accretion through those investments.

Mario Saric: Okay. As you approach realization or finalization of these funds, presumably the fee structures become more visible. Are there any kind of notable differences in the fee structures anticipated with these funds versus your existing funds in Australia?

Okay, and then as a.

As you approach realization, we're finalization of these oh, presumably the fee structures become.

More visible or are there any notable differences and the fee structures into speed with these funds versus.

Your existing funds in Australia.

No I would say that our experience Australia is highly representative and a.

Paul Dalla Lana: No, I would say that, you know, our experience in Australia is highly representative and, you know, if you'll recall, we spent a lot of time thinking about, you know, not just socializing partners, but also thinking about structure and the types of things that we, you know, wanted in our agreement. I would say that, you know, we're, you know, quite focused on maintaining those types of things in the new things that we're doing. I'd highlight that, you know, again, that type of construct is what we're looking to.

If you recall, we spent a lot of time thinking about.

No not just not just socializing partners, but also thinking about structure and the types of things that we.

You want it in our agreements. So I would say that were quite focused on maintaining those types of things in the new things that we're doing so.

Yes.

That type of.

That type of construct is.

Two.

Okay and just my last question on on the asset managers out of the business.

Mario Saric: Okay. Just my last question on the asset management side of the business. When you look at your experience in Australia, is there anything that you can take from that in relation to kind of future fundraising and future funds? Does that increase the efficiency of deployment? Or are there any kind of lessons learned that may be surprising for you that you think will benefit the organization going forward?

When you look at your experience.

In Australia is there anything that you can take from that in relation to kind of future fund raising and feature funds.

<unk> decreased the efficiency of deployment or are there any kind of lessons learned there may be surprising for you.

Got you think will benefit the organization going forward.

Oh, that's a great question.

Paul Dalla Lana: Oh, that's a great question and I'd try to answer that a couple ways, and I think there's lots to learn all the time. You know, we're growing and maturing, as we go through this. I think what we've learned is that a couple things. One, from a operator perspective and maybe a healthcare trend perspective, you know, it's a highly conducive moment in the industry right now to our business. Again, we have just an incredible amount of need and opportunity for real estate capital. We see that trend accelerating very quickly, and obviously, that drives our thinking to make sure that we have the types of commitments and capacity to pursue large things like Healthscope and varied things.

Try to answer that a couple ways I think theres lots to learn all the time. So you know we're growing and maturing.

As we go through this but I think what we've learned.

You know is that a couple of things one.

You know from a operator perspective, and maybe a health care trends perspective, you know, it's a highly conducive moment in the industry right now to our business again, we have just a an incredible amount of of need and an opportunity for real estate capital. So we see that trend accelerating very quickly and obviously that.

Hi, guys are thinking to make sure that we have you know the types of those commitments and capacity.

To pursue large things like how scope and and varied thing. So I think you know the general ceiling is said there will be an increasing number of large opportunities.

Paul Dalla Lana: I think, you know, the general feeling is that, you know, there will be an increasing number of larger opportunities. We're getting that feeling from, you know, both our existing and potential operating partners, as an example, and really seeing an opportunity, you know, at the deployment phase to be able to do that. Certainly at the capital phase, I think, you know, the experience we've had in Australia is quite validating. Obviously, we've been able to find, you know, a very significant partner that is, you know, I think considered to be, you know, one of the more thoughtful and capable investors globally, and that's allowed us to, you know, piggyback on that relationship and experience.

We're getting that ceilings from both our existing and potential operating partners as an example, and really seeing an opportunity.

At the deployment phase to be able to do that.

Certainly at the capital say as I think you know the experience we've had in Australia is quite validating obviously weve been.

Been able to find.

A very significant partner that that is.

I think considered to be one of the more thoughtful and capable investors globally and that's allowed us to piggyback on on that relationship an experience certainly we have behind the scenes built the infrastructure and really that's been a five year journey or or more that we have been.

Paul Dalla Lana: Certainly we have, you know, behind the scenes, built the infrastructure and really that's been a five-year journey or more that we've been on around putting platforms in place with people, structures, and resources to be able, you know, to leg these things out. I feel that, you know, sort of it's just a real sweet spot moment for, you know, our business in all three of those elements. The answer would be, you know, to strike while the iron's hot and to move, you know, definitively and aggressively as we did in things like Healthscope last year and to be able to, you know, take advantage of myriad opportunities in front of us. I do think, you know, that's our experience.

On around putting platforms in place with people and structures in resources to be able.

To leg these things out so I feel that.

Sort of its just a real sweet spot moments for you know our business in all three of those elements and so the answer would be just straight while they are it's hot and to move definitively and aggressively as we did in things like how scope last year and to be able to.

Take advantage of Marietta opportunities in front of us So I do think.

You know that's that's our experience, but ultimately it does come down to local investing and being able to find good opportunities and deploy that capital on a case by case basis and.

Paul Dalla Lana: You know, ultimately it does come down to you know, local investing and being able to find good opportunities and you know, deploy that capital you know, on a case-by-case basis. Certainly we're set up for that and know you know, better than ever you know, how our partners and potential partners are thinking about those opportunities. Clearly they're looking to us to originate and to underwrite and to operate these types of investments, and we have the capacity to do that now.

Certainly we're set up for that and no better than ever you know, how our partners and potential partners or thinking about.

Those opportunities to clearly, they're looking to us to originate and to underwrite and to add to operate. These these.

These types of investments and we have the capacity to do that now.

Mario Saric: Got it. When, you know, when you think about this sweet spot or conducive moment that you're seeing today and tomorrow, like what are the risks that you think about in terms of the longevity of that sweet spot moment going forward?

Got it and.

When.

When you when you think it with this sweet spot or conducive movement.

But you're seeing today and tomorrow. The <unk> what are the what are the risks that you think about in terms of the longevity.

Of that sweet spot.

Moving going forward.

Paul Dalla Lana: Yeah, that's a great question, and I think I'd answer that in a few ways. I mean, again, I think the movement into alternatives is a pretty, you know, again, it's an established trend, but certainly one that has lots of runways and comes off the back of, you know, a long cycle in conventional assets and certainly, you know, reasonable market maturity, in most core markets. Certainly in general, we see a very, you know, midterm opportunity, you know, in the alternative space, not just healthcare, but certainly in healthcare. I think other big trends in our industry are, you know, even longer than that.

Yeah, that's a great question and I think I'd answer that in a few a cement again I think the movement into alternatives as a pretty.

You know again, it's an established trend, but certainly one that has lots of runways and comes off the back of.

For a long cycle in conventional assets and then certainly know.

Reasonable market maturity.

In most core market. So certainly in general we see a very you know a very you know mid term opportunity you know and the alternative space not just health care, but certainly in health care I think are the big trends in our industry are are you know even longer than that as we have sleeves mentioned care really is coming in.

Paul Dalla Lana: As we've mentioned, you know, healthcare really is coming into a moment of peak demand, and that demand looks like it's coming over the next, you know, 30+ years, just to highlight sort of, you know, that bulge that's coming through a system. Obviously, that is driving, you know, at the margin, you know, a whole bunch of change. I think that change, you know, we're very focused on. When we think about risks, it's the risk of what's being done in buildings and how the buildings look like, you know, over time. We're quite focused on that. Again, we've called out a couple key trends that we do see, you know, a huge movement to, you know, outpatient and ambulatory care, and just more things happening outside of hospitals.

To a moment as peak demand in that demand looks like it's coming over the next to see 30 plus years just to highlight sort as you know that that bulged, it's coming through a system. Obviously that is driving you know at at the margin you know a whole bunch of change and I think that change.

We're very focused on so when we think about risks at the risk of what's being done in buildings and what type of buildings look like you know overtime and so we're quite focused on that again, we've called out a couple of key trends that we do see you know huge move into you know outpatient ambulatory care and just more things happening outside of.

Hospitals, so I think we're super well position there in terms of having those operating experience is starting with the hard learnings in our Canadian portfolio, but being a real estate company first being able to build and developed and and round out the offerings of a campus. If you will from any of those buildings.

Paul Dalla Lana: I think we're super well positioned there in terms of having those operating experiences, starting with the hard learnings in our Canadian portfolio, but being a real estate company first, being able to build and develop and, you know, round out the offerings of a campus, if you will, from any of those buildings, and being inclined to do that, not just purely capital provision. What's happening in hospitals is higher acuity and change, right? Everything that comes out of a hospital, what comes back in, is even higher acuity. We really see a great opportunity through, you know, the capital expansion plans at our hospitals to continue to provide incremental capital there and to have, you know, facilities modernized and improved. It's a very nice moment where you have things happening in both directions.

And big inclined to do that not just purely capital tourism.

And then what's happening in hospitals is higher acuity and change right. So everything that comes out of a hospital. What comes back end is even higher acuity. So we really see a great opportunity through you know the capital expansion plans at our hospitals to to continue to provide incremental capital there and to house.

Facilities modernized and improve so it's a very nice moment, where you have things happening in both directions. Obviously, there are lots of Disruptors and all that and you know there's technology there's clearly.

Paul Dalla Lana: Obviously, there are lots of disruptors in all that and, you know, there's technology, there's clearly, you know, a lot of desire to see care even being into the care side of the equation, but those are big trends we still see, you know, huge fundamental demand coming through, you know, the hospitals and pure infrastructure that we have. You know, I think that's where we focus on risk. Clearly behind that, you know, we look very closely at our operating partners, you know, and, you know, that's both top-down as a covenant and bottom-up as a rent affordability and real estate usability sort of thinking. We're thinking about that in a few different ways.

A lot of desire to see carry them and to bring it into the into the care side of the equation, but those are big trends, we still see huge fundamental demand coming through the hospitals and cure infrastructure that we have so.

I think that's where we focus on risk clearly behind that we looked very closely at our operating partners, you know and and that's both top down as a covenant and bought them up as a rent affordability and real estate usability sort of thinking so we're thinking about that in a few different ways.

Paul Dalla Lana: So far, at least in our portfolio, we have, you know, high rent coverage and I just highlight that the vast majority of our investment, you know, are in regions that are both public and private, and I guess just in general have lower business risk than perhaps a market like the US where, you know, it's truly a private market and you have, you know, much more business risk throughout the system. Again, you know, all of our markets are public and private and have just a lower level of or more defensiveness akin to what we've seen in Canada. Those are some thoughts.

But so far at least in our portfolio, we have high rent coverage and and I'd just highlight that the vast majority of our investment are in regions that are both public and private and I guess just in general have lower business risk than perhaps a market like the U.S., where it's truly a private market and you have.

Yes.

It's more business risk throughout the system again, all of our markets are public and private and have just a lower level as or more defensiveness akin to what we've seen in Canada. So.

Those are some thoughts it's a bit of a general discussion, but I think I'd just combine all of it to say.

Paul Dalla Lana: It's a bit of a general discussion, but I think I just combine all of it to say, you know, we see a very dynamic moment in the industry and good operating partners are pursuing it aggressively and really creating opportunities for us to provide, you know, from acquisition capital to, you know, big things like Healthscope, to, you know, expansion capital and everything in between. We're looking to round that out, you know, with, you know, related facilities if you wanna think of it that way. We just see that opportunity gaining pace, in all of our markets. It does feel like a good moment. I think in terms of relationships and platform sophistication, the ability to execute, you know, we've got a deep team here.

We see a very dynamic dynamic moment in the industry and good operating partners are pursuing it aggressively and it really creating opportunities for us to provide from acquisition capital to big things like Healthscope to expansion capital and everything in between and we're looking around that out you know with.

Related facilities that you want to think of it that way and we just see that opportunity gaining pace.

In in all of our markets. So.

It does feel like a good momentum and I think in terms of relationships.

And and platform sophistication the ability to to execute we've got a deep team here, we've invested heavily in those resources over the last Tina since inception, but certainly internationally since we've we've been focused on it and we really do have the leading platforms and all of our international markets. So we're.

Paul Dalla Lana: We've invested heavily in those resources over the last, you know, well, since inception, but certainly internationally since we've been focused on it, and we really do have the leading platforms in, you know, all of our international markets. You know, we're ready to go and being quite discerning about what we do, but just seeing lots of good opportunities.

We're ready to go and being quite discerning about what we do but just seeing.

Lots of good opportunities.

Okay. Thanks Rubicon.

Mario Saric: Okay. Yeah, thanks for the color.

Thank you.

Operator 3: Thank you. Next question will be from David Rothschild, Private Investor. Please go ahead.

Operator: Thank you. Next question will be from David Rothschild, Private Investor. Please go ahead.

Next question will be from David Rothschild to private Investor. Please go ahead.

Thank you for taking my call [noise].

David Rothschild: Thank you for taking my call. Mine are two simple questions. Your FFO was CAD 0.23 and your AFFO was CAD 0.22. What was it last year in the same quarter?

Minor too simple question you asked that always 23 cents in your aircraft or was 22.

What was it last year in the same quarter.

David just bear with US all a hold will come back to that as we go maybe.

Paul Dalla Lana: David, just bear with us. We'll come back to that as we go. Maybe I could start with your second question if it's, and we'll come back to you as we go through that.

I can start with your second question if its Oh, we'll come back to of as we go through that no. The bulk is on the same question what are the ones last year.

David Rothschild: No. Those are both on the same question to what it was last year.

Paul Dalla Lana: Mm-hmm. Yeah, sorry, David. I might ask that you give me a call offline. I'm not seeing the numbers that you're seeing, so perhaps we can just go on that offline.

<unk>.

Yes, sorry, David I might ask that you give me a call offline I'm not seeing the numbers that you're seeing so perhaps you can just going on offline.

Okay.

David Rothschild: Okay.

Did you have any further questions Sir.

Operator 3: Did you have any further questions, sir?

Operator: Did you have any further questions, sir?

David Rothschild: No.

No.

Operator 3: Thank you. Ladies and gentlemen, once again, if you do have any questions at this time, please press star followed by one on your touchtone phone. At this time, Mr. Dalla Lana, we have no other questions registered. Please proceed.

Operator: Thank you. Ladies and gentlemen, once again, if you do have any questions at this time, please press star followed by one on your touchtone phone. At this time, Mr. Dalla Lana, we have no other questions registered. Please proceed.

Thank you.

Ladies and gentlemen, once again, if you do have any questions. At this time. Please press star followed by one on your touched on from.

And at this time missed the dollar lineup, we have no other questions whether Sir please proceed.

Okay, well. Thank you operator, I think that we ended the call I'd like to appreciate everyone for joining and following north or South kept properties third quarter release. Thank you. Thank you, Sir ladies and gentlemen. This doesn't do you conclude your conference call for today. Once again, thank you for attending and at this time, we do ask that you. Please disconnect your lines have yourself.

Paul Dalla Lana: Okay. Well, thank you, operator. I think that is the end of the call. I'd like to appreciate everyone for joining and following Northwest Healthcare Properties Q3 release. Thank you.

Operator 3: Thank you, sir. Ladies and gentlemen, this does indeed conclude the conference call for today. Once again, thank you for attending, and at this time, we do ask that you please disconnect your lines. Have yourself a great weekend.

Operator: Thank you, sir. Ladies and gentlemen, this does indeed conclude the conference call for today. Once again, thank you for attending, and at this time, we do ask that you please disconnect your lines. Have yourself a great weekend.

Great weekend.

[noise].

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