Q1 2020 Earnings Call

May 15, 2020

Operator: Good morning, ladies and gentlemen, and welcome to the NorthWest Healthcare Properties Real Estate Investment Trust Q1 2020 Results 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 assistance, please press star zero for your operator. This call is being recorded on 15 May 2020. I'd now like to turn the conference over to Paul Dalla Lana. Please go ahead.

Good morning, ladies and gentlemen, and welcome to the Northwest Health care property Real estate investment Trust first quarter 2020, <unk> results conference call. At this time all lines are in listen only mode. Following the presentation, we will conduct a question and answer session.

Anytime during this call you require assistance please press star zero for your operator.

Call is being recorded on May 15th 2020.

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 Regan, 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 Q1 2020. 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 expectations regarding our business plans and future results, they aren't necessarily based on assumptions that are subject to uncertainties and risks, which could cause actual results to differ materially. We direct all of you to the risk factors outlined in our public filings. Before getting into the details of the quarter, though, I thought I would offer a few comments on COVID-19 and the impact on our business.

Now, let's turn the conference over to Paul Delano. Please go ahead.

Thank you operator, and good morning, everyone. I appreciate you joining us today.

Joined by Bernard <unk>, President Peter Reagan.

Operating officer and challenge on day to reach Chief Financial Officer together, we're pleased to share with you our results for the first quarter 2020.

First I'd like to point out during today's call. We may make forward looking statements as defined under Canadian Securities law, well such forward looking statements reflect managements expectations regarding our business plans on future results. They aren't necessarily based on assumptions are subject to uncertainties and risks, which could cause actual results to differ materially.

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

Before getting into the details of the quarter, though I thought I would offer a few comments on carbonite team and the impact on our business. The emergence of Koby 19, as a global pandemic last quarter has caused unprecedented hardship throughout the world and pose is perhaps the greatest challenge that our society will ever see.

Paul Dalla Lana: The emergence of COVID-19 as a global pandemic last quarter has caused unprecedented hardship throughout the world and poses perhaps the greatest challenge that our society will ever see. How we respond to this daunting challenge will define the global environment for the foreseeable future and establish a new normal for all of us. Beyond its direct and continuing effects, which are likely to continue through 2020 and into 2021 at a minimum, the COVID pandemic has also served as a reminder of the continued importance of public health. Chronic underinvestment and politicization of this important field is affecting our ability to respond to the pandemic. It is important that we have good information, policy, and procedures to tackle the COVID pandemic. To be successful, we must have a coordinated approach to our efforts.

How we respond to this daunting challenge will define the global environment for the sort of seeable future and establish a new normal for all of us.

Beyond its direct and continuing effects.

Which are likely to continue through 2020 of into 21 at a minimal.

<unk> pandemic has also served as a reminder of the continued importance of public house.

Chronic under investment and politicized nation of this important shield is affecting our ability to respond to that kind of it is important that we have good information policies and procedures to tackle the cobot pandemic to be successful we must have a coordinated approach to our efforts.

Paul Dalla Lana: I'm happy to report that NorthWest and its affiliates are significant supporters of public health, including through the commitments to the Dalla Lana School of Public Health at the University of Toronto, a Canadian and global thought leader providing vital information in the fight against this pandemic. I encourage all of you to consider supporting public health too. Additionally, I wanted to call out the many frontline responders to the pandemic who on a daily basis risk their lives to save ours. Much of this work is being done by the REIT's tenants and their employees who provide essential healthcare services to their communities. I'm in awe of the sacrifices they are making and inspired by the selfless nature in which they are given.

I'm happy to report northwest and its affiliates are significant sports and public health, including through the commitments to the Dell out of school of public health at the University of throttle Canadian and global thought leader, providing vital information and the fight against this bad pandemic I encourage all of you should consider supporting public health too.

Additionally, I want to call out the mini frontline responders to the pandemic do on a daily basis risk their lives to say bars. Much of this work is being done by the reach tenants and their employees, who provide essential health care services to their communities I'm in all.

Of the sacrifices, they're making and inspired by the selfless nature in which there again.

Paul Dalla Lana: As a key partner to the industry, our primary objective at NorthWest is to support them as they confront this demanding moment, as well as for the long term. On behalf of all of us at NorthWest, I want to thank all of the frontline support responders for their hard work and dedication. In the interim, and in this context, our hospital operators and healthcare tenants remain financially strong. While government regulations have resulted in many elective procedures and/or non-essential healthcare services being canceled during the pandemic, we have seen a significant increase in global healthcare spending and a rise in support arrangements put in place to contract for excess COVID capacity. In the UK, for example, the NHS has contracted directly for 100% of the private health system's capacity, including for our six hospitals operated by BMI.

As a key partner to the industry. Our primary objective in northwest is this what them as they confront demanding moment as well as for the long term.

In basketball with us in northwest I want to thank all the frontline support responders.

Their hard work and dedication.

In the interim and in this contest or hospital operators and health care tenets remains financially strong.

Well government regulations have resulted in many elective procedures and or non essential health care services being canceled during the pandemic, we've seen a significant increase in global health care spending and a rise in support arrangements put in place to contract for excess capacity.

In the UK for example, the NHS is contracted directly for 100% of the private health systems capacity, including for our six hospitals operated by the end <unk>.

Paul Dalla Lana: In Australia, state governments have contracted with each of our operators directly, as well as in Germany, we have seen a variety of public incentives introduced to increase COVID capacity in our post-acute care hospital sector and with our partner, MEDIAN. This strong public support of healthcare operators reinforces the defensiveness of the sector and our tenants. Beyond this, we see a significant demand for health services building. One estimate that I've read recently forecasts the current global backlog of demand at more than 28 million surgeries. In the UK alone, its waiting lists have grown by more than 4 million people to more than 8 million during the pandemic. In Australia, they estimate that almost half a million procedures have been added to the waiting list.

And then Australia state governments are contracted with each of our operators directly as well as in Germany. We have seen a variety of public incentives introduced to increase a coke capacity you know our post acute care.

Hospital sector, and we'll start partner median.

This strong public support of health care operators reinforces this reinforces the defensive mess up the sector and our tenants.

Beyond this we see a significant demand for health services building.

One estimates that I've read recently forecasting the current global backlog of demand more than 28 million surgeries.

In the UK alone, it's waiting lists of growing by more than 4 million people to more than 8 million during a pandemic and Australia. They AFS estimate that almost half a million procedures.

Paul Dalla Lana: As a result, we believe that there is significant pent-up demand that will spur a strong recovery for the healthcare industry and by extension, healthcare real estate. Specifically, as it relates to our hospital operators, we believe they are well-positioned to participate in increasing volumes to alleviate these backlogs. Similarly, many of the tenancies in our medical office buildings portfolios are expected to see increased volumes in the months ahead, given the nature of the essential services with relatively inelastic demand that many of them provide. In this context, I'll speak to the near-term priorities of the REIT.

Have been added to the waiting list.

As a result, we believes that there is significant pent up demand that will spur a strong recovery for the healthcare industry and by extension healthcare real estate.

Specifically as it relates to our hospital operators, we believe they are well positioned to participate and increasing volumes to alleviate these backlogs.

Similarly, many of the tenant season, our medical office buildings portfolios are expected to see increased volumes in the months ahead, given the nature of the essential services with relatively inelastic demand that many of them provide.

In this context, all content I'll speak to the near term priorities of the right.

Paul Dalla Lana: Operationally, the REIT is performing defensively as expected, with a well-positioned portfolio that is 97.3% occupied by a diversified tenant roster of hospital, healthcare service, and life sciences research tenants, the majority of which directly or indirectly are funded publicly by their respective governments. This defensiveness was evident in our May gross rent collections of 97% across our 10 largest tenants, predominantly hospitals, which account for approximately 30% of proportional revenue, and approximately 85% across the portfolio at large. The majority of rent deferrals to date have been formally documented and are with smaller tenancies in the REIT's MOB segment, where we have had the opportunity to extend lease term and expect to secure the vast majority of the deferred amounts in due course.

Operationally the read is performing defensively as expected with a well positioned portfolio that is 97.3% occupied by diversified tenant roster of hospital health care service and life Sciences research tenants, the majority of which directly or indirectly I find it publicly by their respective governments there's still.

Offensiveness was evident are not me gross rent collections of 97% across our 10 largest 10, that's predominantly hospitals, which account for approximately 30% of personal revenue.

Approximately 85% across the portfolio at large.

The majority of rent deferrals to date have been formally documented and our with smaller tenants season. There. It sounds to be segment, where we have had the opportunity extended lease term and expect to secure the vast majority of the deferred amounts in due course.

Paul Dalla Lana: In terms of liquidity, the REIT is well positioned with CAD 219 million of cash and available borrowing capacity, which is expected to increase to CAD 363 million upon the funding and completion of its announced Australian asset sales and European seed portfolio sales, both of which are planned to close in Q2. Of note, on 14 May, the REIT also finalized a CAD 82 million increase to its revolving credit line, secured by the recently acquired portfolio of six UK hospitals. The facility is provided by the REIT's Canadian Corporate Banking Syndicate. With 88% of the REIT's 2020 debt maturities complete, and the remaining maturities comprising CAD 40 million in normal course Canadian mortgage renewals, the REIT has also substantially completed its balance sheet activities for the year.

In terms of liquidity, the read as well position with $219 million of cash available borrowing capacity, which is expected to increase to $363 million upon the funding and completion.

It's announce Australian asset sales in European CE portfolio sales, both of which are playing to close in Q2.

Nope on May 14 to reach also finalized and 82 million dollar increase to its revolving credit line secured by the recently acquired portfolios acute care hospitals. The facility is provided by the reads Canadian corporate banking syndicate.

And was 88% of the reads 2020 debt maturities complete and the remaining maturities comprising $40 million normal course Canadian mortgage for new was Threed is also substantially completed its balance sheet activities for the year.

Paul Dalla Lana: Additionally, during the quarter, NorthWest enacted its business continuity plan to deal with the pandemic, which allowed the REIT to transition to having all corporate staff working remotely while executing on the REIT's business, as well as implementing enhanced property and facility management protocols at its buildings, all of which have remained open for business. Finally, during and post-quarter end, the REIT also made notable progress on its long-term strategic priorities, including the Australian disposition to our existing institutional JV partner. The REIT finalized and received regulatory approvals in respect of the previously announced sale of a 70% interest in its wholly owned Australia REIT portfolio, generating net proceeds of approximately CAD 64 million. The REIT will retain a 30% interest in the portfolio and will provide asset management and property management services. The transaction is expected to close shortly.

Additionally, during the quarter northwest enacted its business continuity plan to deal with a pandemic, which allowed the reach a transition to having all corporate staff working remotely while executing on the reach business as well as implementing and hats property and facility management protocols that its buildings all of which have remained open for business.

Finally during and post quarter end.

We also made notable progress on its long term strategic priorities, including the Australian disposition to our existing institutional JV partner, the re finalized and receive regulatory approvals in respect of the previously announced sale of a 70% interest and its wholly owned Australia report solely generating net proceeds.

Of approximately $64 million <unk>.

Well over 10% to 30% interest in the portfolio will provide asset management and property management services.

Paul Dalla Lana: In its European JV seed portfolio sale, in conjunction with its $3 billion, EUR 2 billion, European JV, which continues to progress, the REIT advanced the sale of its initial $276 million seed portfolio. While the onset of COVID-19 has impacted timing a little bit, execution of the definitive JV documentation and the closing of the seed portfolio is expected late in Q2 or early in Q3 2020. Deleveraging. Driven by the REIT's strategic asset sales, consolidated leverage is expected to decrease by a further 500 basis points to approximately 45%, supporting a pro forma net debt to EBITDA ratio of 8x and underpinning investment-grade credit metrics.

The transaction is expected to close shortly.

Didn't its European JV seed portfolio sale in conjunction with its 3 billion dollar a 2 billion Euro our European JV, which continues to progress the read advance the sale of its initial $276 million seed portfolio.

Well onset or the onset of cobot 19 has impacted timing a little bit execution of the definitive JV documentation and the closing of the seed portfolio is expected late in Q2 or again Q3 2020.

Deleveraging driven by the read strategic asset sales consolidated leverage is expected to decrease by a further 500 basis points to approximately 45% supporting a pro forma net debt to EBITDA ratio of eight times.

Paul Dalla Lana: For the quarter, our results were in line with our expectations, noting the above deleveraging, 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 investment activity and financing activity was as expected, although foreign exchange movement saw the Canadian dollar appreciate by approximately 3.6% over the last quarter relative to the REIT's average foreign currency exposure, which impacted earnings. In fact, over the past 12 months, we estimate the relative strength of the Canadian dollar has reduced annualized AFFO by approximately CAD 0.05 per unit. In the context of a lower for longer Canadian interest rate environment, we expect that these trends may begin to ease and unwind in 2020, providing a tailwind to the REIT's future earnings.

And underpinning investment grade credit metrics.

[noise] sort of quarter, our results were inline with our expectations, noting above deleveraging, including annualized quarterly adjusted funds from operations of 92 cents per unit on a normalized basis, implying a payout ratio of 87%.

Earnings accretion from recent investment activity and financing activity was as expected, although foreign exchange movements of the Canadian dollar appreciate by approximately 3.6% over the last quarter relative to the rights average foreign currency exposure.

Which which impacted earnings.

In fact over the past 12 months, we estimate the relative strength of the Canadian dollar has reduced annualized EPS. So by approximately five cents per unit.

In the context of a lower for longer can you didn't interest rate environment. We expected. These trends may begin to ease and unwinding 2020, providing a tailwind to their reach future earnings.

Paul Dalla Lana: Net asset value decreased by 4.9% to 1,253 per unit, driven primarily again by a higher Canadian dollar relative to the REIT's foreign assets, with property values largely stable in region. In Europe, we continue to execute on our growth programs by developing new strategic relationships in both the medical office and hospital segments, which have both seen accelerated deal flow that our team has converted into acquisitions. This includes over CAD 230 million in transactions closed in Q1, including the previously announced UK expansion. During the quarter, the REIT also redeemed 2 series of convertible debentures with a combined value of CAD 93 million, including CAD 47.7 million that was converted into 4.2 million units at the holder's option.

Additionally, net asset value decreased by 4.9% to 12 53 per unit driven primarily again by a higher Canadian dollar relative to the reads for assets.

Pretty values largely stable in region.

In Europe, we continue to execute on our growth programs by developing new strategic relationships in both the medical office in hospital segments, which are both seeing accelerated deal. So that our team has converted into acquisitions. This includes over $230 million and transactions closed in Q1, including the previously announced UK expand.

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During the quarter. There. He also redeemed two series of convertible debentures with a combined value of $93 million, including 47.7 million. It was converted into 4.2 million units at the holder's option.

Paul Dalla Lana: Operationally, our results, which are derived from an expanded 183-property, CAD 6.6 billion healthcare infrastructure portfolio, tenanted by leading operators on primarily long-term inflation-indexed leases, were on plan. The inherent strengths in the portfolio were reflected in the REIT's Q1 2020 year-over-year source currency cash recurring SPNOI growth of 2.9%, largely driven by contractual rent indexation and underpinned by a 97% occupancy rate and a weighted average lease term of more than 14 years. In all regards, a highly defensive portfolio. Segmentally, I note the following. In Brazil, we were on plan with steady 100% occupancy and continued strong year-over-year source currency cash SPNOI of 4.6%. Operationally, the REIT's major tenant, Rede D'Or, continues to deliver exceptionally strong results and expand its business, thereby creating potential opportunities for further partnerships with the REIT.

Operationally our results, which are derived from an expanded 183 property 6.6 billion dollar healthcare infrastructure portfolio tenanted by leaving operators on primarily long term inflation index leases were on plan the inherent strengths in their portfolio are reflected in the roots Q1 22.

On a year over year source currency cash recurring SGN NOI growth of 2.9%.

Largely driven by contractual rent indexation, and underpinned by 97% occupancy rate and a weighted average lease term of more than 14 years and all regards a highly defensive portfolio.

Second mentally I know the fall in Brazil, we were on plan was steady 100% occupancy and continued strong year over year source currency cashless Deanna line up 4.6%.

Operationally the rights major tenant reach door continues to deliver exceptionally strong results and expand its business, thereby creating potential opportunities for further partnerships with <unk>.

Paul Dalla Lana: Of note, one existing development totaling approximately CAD 6 million at our largest Brazilian asset was completed at a 7.5% yield during the quarter. The REIT is also focused on gaining traction with additional high quality operators in Brazil and sees a very constructive market in that region post-COVID. Canada performed satisfactorily during the quarter with adjusted year-over-year same property NOI positive of approximately 1%. Portfolio occupancy was on plan at 92%. Leasing activity during the quarter was also on plan, with 18,000 sq ft of new leasing and 58,000 sq ft of renewal leasing completed. The rent spread on renewal leasing was -1.8%, but excluding one deal in Western Canada, the results were positive for the balance of the activity by 1%.

No one existing development totaling approximately $6 million at our largest Brazilian asset was completed at a 7.5% yield during the quarter.

The read is also focused on getting traction with additional high quality operators in Brazil, and she's a very constructive market in that region.

Okay.

Canada perform satisfactorily during the quarter with adjusted year over year same property NOI positive of approximately 1%.

All the occupancy was on plan at 92%.

Leasing activity during the quarter. It was also on plan with 18000 square feet of new leasing and 58000 square feet of renewal leasing completed the rent spread on renewal leasing was negative 1.8%, but excluding one deal in western Canada. The results were positive for the balance of the activity by 1%.

Paul Dalla Lana: Post-quarter, rent collection was 90% in April, and May collection is approximately 85%, with another 6% accounted for because of executed rent deferral agreements. Deferral discussions continue with the remaining tenants, with some waiting as we are for further details of the Canada Emergency Commercial Rent Assistance program. In total, the Canadian operation has executed rent deferral agreements with tenants representing 1.5% of the region's annual gross rent. The vast majority of those on six-month terms. These temporary rent deferral discussions are on a case-by-case basis appropriate for those tenants, as current circumstances are impacting their ability to meet rental obligations. Most of our Canadian tenants will be extraordinarily busy when the healthcare system resumes full service and as they deal with an accumulated backlog of unmet need.

Post quarter rent collection was 90% in April and May collection is approximately 85% with another 6% accounted for because of executed rent deferral agreement.

All discussions continue with the remaining tenants with some waiting as we are for further data details of the Canada emergency commercial rent assistance program in total the Canadian operation has executed rent to throw agreements with tenants representing 1.5% of the region's annual gross right.

And the vast majority of those are six months terms.

He is temporary and temporary rent deferral discussions are on a case by case basis appropriate for those tenants. This current circumstances are impacting their ability to meet rental obligations. Most of our Canadian tenants will be extraordinarily busy when the healthcare system resumes full service and as they deal with an accumulated backlogs of unmet need.

Paul Dalla Lana: We strongly believe that except for a few smaller convenience and food-oriented operators in our Canadian medical office buildings, most deferred rents will be recovered over time in the vast majority of instances. In Europe, we are on plan, performing as expected with year-over-year source currency SPNOI growth of 2.6% and occupancy increasing to 97.8%. 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, and now the UK, but also pursue opportunities in adjacent markets. Rent deferrals in the European portfolio that are being worked out on a case-by-case basis total less than 1% of the region's annual gross rent.

We strongly believe that except for a few smaller convenience and food oriented operators in our Canadian medical office buildings, most deferred grants will be recovered over time in the vast majority of instances.

In Europe, we're on plan performing as expected with year over year source currency, SPR NOI growth of 2.6% and occupancy increasing Tonight and 7.8% as mentioned earlier, we continue to find good investment opportunities in Europe, allowing us to not only build scale them critical mass in both Germany, and the Netherlands and now the.

Okay, but also pursue opportunities in adjacent markets.

Interfere deferrals in the European portfolio that are being worked on a case by case by case basis totaled less than 1% other regions annual gross right.

Paul Dalla Lana: Lastly, in Australia, our largest market, occupancy remains steady above 99% and delivered consistent year-over-year source currency SPNOI growth of 7.7%, with a weighted average lease term of more than 18 years. At Vital, the business reported similar results with SPNOI growth of 2.5% and again, occupancy at 99% and a weighted average lease term of more than 18 years. As arrangements between respective state governments in Australia and private hospital operators are finalized, we are working with some of our partners to provide short-term rent deferrals until funds are received from the government. Executed deferral agreements total approximately 2.5% of annual total rent for the region, with most deferrals for 2-month periods, and all repayments being made in the balance of 2020.

And lastly in Australia, our largest market occupancy remained steady above 99% and delivered consistent year over year sorts currency espina like growth of 7.7 present with a weighted average lease term of more than 18 years.

The business reported similar results with SGN Allied growth of 2.5% and again occupancy at 99% and a weighted average lease term up more than 18 years.

As far as arrangements between respective state governments in Australia, and private hospital operators are finalized we are working with some of our partners to provide short term rent deferrals until fines or receive said the government.

Execute a deferral agreements total approximately 2.5% of annual total rent for the region with most deferrals for two months periods and all repayments being made in the balance of 2020.

Paul Dalla Lana: Continuing on in Australia, the REIT acquired Burnet Institute, a Melbourne-based life sciences research facility in the Alfred Health Precinct, for approximately CAD 93 million in the quarter. It also completed the disposal of three aged care assets to Vital and two non-core assets to an unrelated third party for a combined sale price of CAD 155 million. I am pleased with the progress made during the quarter, which advanced a number of the REIT's key long-term strategic objectives and also produced solid operating results despite the disruptions and conflicting priorities caused by the COVID-19 pandemic. With deep relationships, best-in-class regional operating platforms, and strong access to public and attractively priced private capital, the REIT is well positioned to continue executing on its strategy.

So anyway on in Australia, The read acquired Burnett Institute, a Melbourne based life Sciences research facility in the offered house precinct for approximately $93 million in the quarter.

It also completed the disposal of three age care assets to vital and two noncore assets to an unrelated third party for a combined sale price of $165 million.

I'm pleased with the progress made during the quarter, which advanced a number of the rights key long term strategic objectives and also produced solid operating results.

Despite the disruption in concept and priorities caused by the code at 19 pandemic with deep relationships best in class regional operating platforms and strong access to public kind of attractively priced private capital. The re is well positioned to continue executing on its strategy.

Paul Dalla Lana: As we have almost CAD 5 billion in JV firepower available today, we expect that when new opportunities arise, both generational and opportunistic, we will be in an excellent position to execute with our partners, and we look forward to that opportunity. I'll now ask the operator to open up the call for questions.

As we have almost $5 billion in JV Hot fire power available today, we expect that when new opportunities arise.

Generate Sean opportunistic we will be in an excellent position to execute with our partners and we look forward to that opportunity.

Operator: Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. Should you have a question, simply press star followed by one on your touch-tone phone. You will hear a three-tone prompt acknowledging your request, and your questions will be pooled in the order they are received. Should you wish to decline from the pooling process, please press star followed by two. If you're using a speakerphone, please lift your handset before pressing any keys. One moment for your first question. Your first question comes from Troy MacLean with BMO Capital Markets. Please go ahead.

I'll now ask the operator to open up the calls or questions.

Thank you ladies and gentlemen, we will now begin the question and answer session should you have a question simply press star followed by one on your Touchtone phone you will hear three to unprompted acknowledging your request and your questions will be pulled in the order. They are received should you wish to decline from the pulling process. Please press star followed by two of using a speakerphone. Please lift your handset before price.

Okay.

One moment for your first question.

Your first question comes from Troy Mclean with BMO capital markets. Please go ahead.

Troy MacLean: Good morning.

Paul Dalla Lana: Morning, Troy.

Troy MacLean: As we kind of emerge from this, you know, looking through the other side, you know, there could be some, you know, maybe distressed investing situations. Is that something that the REIT would look at? You know, if so, would that be more of a JV investment or more for the REIT?

Good morning.

Morning, Troy.

As we kind of emerge from this you know looking through the other side you know there could be some you know maybe distressed investing situation is that something that there would look at and if so would that be more of a a JV investment or more for the Reid.

Paul Dalla Lana: Yeah, that's a good question. I think, you know, that's ultimately a regional answer to that. Obviously, you know, with our current JV commitments, we have the flexibility to pursue opportunistic situations, and we have very flexible capital partners, who have encouraged us to look for, we'll call them special situations. I think, you know, probably any very significant activity is likely to occur in the markets where we have those JVs in place and that firepower available today. I think, you know, what I can say, though, is that outside of Canada, we are starting to see, you know, some shoots of spring, I'll say, and certainly some changing of the moment as

Yeah. That's that's a good question I think you know that's ultimately a regional answer to two to that but obviously you know with our current JV commitments, we have the flexibility to pursue opportunistic situations and we have very flexible capital partners.

I've encouraged us to look for.

We'll call them special situations. So I think probably any varied significantly activity is likely to occur in the markets, where we have those jvs in place in that firepower available today.

And I think you know what I can't say, though is that outside of Canada. We are starting to see you know some shoots of spring I'll say and certainly some changing of the moment as.

Paul Dalla Lana: You know, as countries and economies and health systems by extension start to reopen. You know, in particular, we've seen New Zealand move from full lockdown to very shortly, you know, almost full open, with Australia quite closely behind it. On its own trajectory, you know, we certainly see Germany and other parts of Europe start to reopen again. We do expect to see opportunities in the balance of 2020. I can't give a weighting as to what will be opportunistic or generational, but we expect to see both.

So as a countries and economies and health systems by extension start to reopen you know in particular, we've seen.

New Zealand move from full locked down too.

Shortly you know almost a full open with Australia quite closely behind it and on its own trajectory you know, we certainly see Germany in other parts of Europe start to reopen again. So so we do expect to see opportunities in the balance of 2020.

And I can't give a waiting as to what will be opportunistic or generational, but we expect to see both.

Troy MacLean: Would you potentially sell more wholly owned assets into one of the JVs as a way to increase liquidity? Or is that, you know, probably no transactions in the near term?

And then would you potentially sell more wholly owned assets into one of the Jvs as a way to increase liquidity or is that probably know transaction than the near term.

Paul Dalla Lana: Yeah, I think the answer is yes. I think we have contemplated a UK fund, although that's likely to be a little bit later, you know, in the year, Q3 being targeted, perhaps Q4. Certainly, we would like to see, you know, our UK assets become part of that. That's an area that we have targeted. I think beyond that, Troy, we probably haven't gotten to a point of considering, you know, additional asset sales. Really that would leave us with sort of, you know, two specific European focuses and clearly the Australian focus that we have in place today.

[noise], Yeah I think.

The answer is yes, I think we have contemplated UK signed although that's likely to be a little bit later.

You know in a in the year Q3 being targeted perhaps Q4, and certainly we would like to to see where you can assets become part of that so that's an area that we have targeted I think beyond that Troy, we probably haven't gotten to a point of considering.

Additional asset sales and so really that would leave us with sort of you know a two to specific European focuses and clearly the Australia. It's okay. We have in place today.

Troy MacLean: Just on the CAD 50 million of remaining mortgages to be renewed in 2020, those are all in Canada. I was kinda curious, is there any up-financing potential there? What's the lending rate, the market rate right now, interest rate for commercial mortgages?

And then just under $50 million the remaining mortgages to be renewed in 2020.

Those are all in Canada, it's kind of curious is there any up financing potential there and then what said lending rate marker rate right now <unk> interest rate for from for commercial mortgages.

Paul Dalla Lana: Yeah, those are good questions. I think there's modest up-financing potential on some of these assets. You know, it might be in the CAD 0 to 10 million range. I'll guess put the middle on that around CAD 5 million. What we are seeing is net rates or all-in rates, you know, similar to what we had been seeing over, you know, pre-COVID, if you will. Obviously, the construct of that is very different, given that spreads have widened out a little bit. You know, we're certainly seeing things in the mid threes, you know, on and maybe into the high three-threes in our portfolio for individual Canadian mortgages.

[noise] Yeah. That's a those are good question. So I think theres modest upturn hatching potential long on some of these assets you know it might be in the zero to 10 million range.

Okay I'll split the middle on that around five what we are seeing use is net rates more all in rates.

Similar to what we had been seeing over in pre cobot. If you will obviously the construct to that is very different given that spreads have widened out a little bit. So we're certainly seeing things in the mid threes.

Yeah, well on and maybe into the to high threes in our portfolio for individual comedian mortgages again, noting that those are three or four mortgages that mature in in the fourth quarter early third quarter in that where we see renewing those in the normal course and expect a no issues.

Paul Dalla Lana: Again, noting that those are three or four mortgages that mature in the Q4 or late Q3, and that we're, you know, we see renewing those in the normal course and expect, you know, no issues.

Troy MacLean: You mentioned the UK healthcare fund. I was kinda curious, since you've done a couple big JVs in the last year, you know, are you getting more inbound calls from like institutional capital looking for further JVs? Or, is there anything you can kinda, you know, talk about there?

You mentioned the UK healthcare fund, it's kind of curious since you've done a couple of big a JV is in the last year now are you getting more inbound calls from like institutional capital looking for further jvs or.

Paul Dalla Lana: We have been getting a lot of calls. I think I'd just remind everyone on the call that we ran a pretty meaningful process in 2018 and into early 2019 to establish the first JV that we did in Australia. That involved very extensive discussions with a number of significant global investors. Obviously, we've been maintaining communications with those parties and looking to move them out. I think what we have seen, though, over the balance is there has been an increasing focus on healthcare real estate and an interest in the asset class.

Is there any getting kind of you know talk about there.

[noise], we we have been getting a lot of calls I think I'd just remind everyone on the call that we ran a pretty meaningful process in 2018 entered into early 2019 to establish the first the first JV that we did.

Straight area, and then that involved very extensive discussions with the number as a significant global investors. So obviously weve been and maintaining communications with with those parties and looking to move them out I think what we have seen though over the balance is there has been increasing focus on healthcare real estate and.

Paul Dalla Lana: Certainly, you know, we expect coming through this moment that some of those, you know, some of those tendencies are likely to move even faster and be stronger. I think, you know, in general, we do see, you know, capital formation happening in the asset class, as it's better understood and certainly as it balances relative to perhaps others in the, you know, other asset classes, perhaps, you know. Coming out of this moment, you know, our view is that there is gonna be a significant opportunity to partner with additional long-term capital to grow the business. I think our near-term focus, though, is clearly on executing on what we have underway today.

An interest in the asset class and certainly you know we expect coming through this moment that some of those.

Some of those tendencies are likely.

To to move even faster and be stronger. So I think you know in general we do see capital formation happening in the asset class as it's better understood and I'm certainly as it as it balances relative to perhaps others in the in the other asset classes, perhaps you know and so coming.

How did this movement in our view is that there is going to be a significant opportunity to partner with additional long term capital to grow the business I think our near term focus those came and executing on what we have underway today and so I think I'd I'd just guide that once that's done I think we'll we'll look to look to move on.

Paul Dalla Lana: I think I'd just guide that once that's done, I think we'll look to move on another or new initiatives. Our primary focus today is completing the Europe transaction and being in a position to act there where we see, you know, meaningful opportunity on the ground and in both generational and opportunistic situations.

There are new initiatives, but our primary focus today is completing the Europe transaction and and being in a position to act there, where we see no meaningful opportunity on the ground and in both generational and and opportunistic situations.

Troy MacLean: Thank you. That's good color. I'll turn it back.

Thank you that's good color I'll turn it back.

Operator: Your next question comes from Sébastien Bharlain with Echelon Capital. Please go ahead.

Your next question comes from Sebastian.

Sébastien Bharlain: Good morning. Thank you for taking my questions. In previous calls, you mentioned that traveling a lot in the past years had been key in building the relationships you needed to source deals, you know, with local tenants and operators. I was wondering, or actually, how could the travel bans that we are expected to see for a long time impact your competitive advantage against those new players, if I got this correctly, that you mentioned, perhaps, interested in the healthcare asset class? And perhaps if you could comment on any impact on deal velocity going forward with those bans. Yeah, it's a great question.

[Analyst] (Endurance Capital): Good morning. Thank you for taking my questions. In previous calls, you mentioned that traveling a lot in the past years had been key in building the relationships you needed to source deals, you know, with local tenants and operators. I was wondering, or actually, how could the travel bans that we are expected to see for a long time impact your competitive advantage against those new players, if I got this correctly, that you mentioned, perhaps, interested in the healthcare asset class? And perhaps if you could comment on any impact on deal velocity going forward with those bans. Yeah, it's a great question.

Sharyland with endurance capital. Please go ahead.

Good morning, Thank you for taking my question.

In in previous calls you mentioned that traveling a lot in the past years that Vin key in.

Building relationships you needed to source deals you know with local tenants and ER and operators I was wondering did you or actually out could the travel bans that we are expected to see for a long time impact your a competitive advantage against those new players if I got this correctly.

You mentioned, perhaps a interested in the healthcare asset class and perhaps if you could comment on any.

Backed on deal velocity going forward with those bands.

Paul Dalla Lana: Well, I think like all of us, you know, we are adapting to the environment and to some of the new challenges and maybe ways of doing business with less travel and working remotely. I think the organization has done a great job, you know, of implementing its continuity protocols and really putting ourselves in a position to be effective. I would say at an organizational level, you know, the business is functioning well and our ability to work remotely has been reinforced. I think in terms of the other element that I would call out, we've made a very significant investment, you know, in our regional platforms.

Yeah, It's a great question.

I think like all of US you know, we are adapting to the environment and to some of the new challenges and maybe a ways of doing doing business with less travel and working remotely. So I think the organization has done a great job.

Of implementing it said you know, it's continuity protocols and really.

Putting ourselves in a position to be effective so I would say had an organizational level you know the business is functioning well and and you know our ability to work remote has been enforced reinforced I think in terms of or the other.

Oh admit that I would call that we've made it very significant investment.

Paul Dalla Lana: When we think about the business, obviously, Toronto and the corporate team contributes, you know, to support our regions. Each of our regions has a fully functional investment and clearly asset management and operational management capacity. You know, we haven't seen any relative diminishment of our ability to communicate. I think our partners, at least the ones that we have in place today are equally globally fluent, maybe even ahead of us in some cases. You know, we find ourselves able to communicate, you know, well with them and to talk about and to resolve issues, you know, very much evidenced around the recent transaction that we just completed in Australia and the ongoing transactions that we expect to complete in Europe.

Our regional platforms. So when we think about the business, obviously, Toronto and the corporate team contributes to support our regions, but each of our regions has fully functional investment and and clearly asset management and operational management capacity. So.

You know we haven't seen any you know any relative a diminishment of of our ability to communicate and I think our partners at least the ones that we have in place today are.

Our our equally globally fluent maybe even ahead of us in some cases and so you know we find ourselves able to communicate well with them and to talk about and to resolve issues very much evidenced around the recent transaction that we just completed in Australia and the ongoing transactions that we expect to complete in your.

Paul Dalla Lana: I think, you know, our ability to transact in this moment has been reasonable. I think, you know, we see the, you know, the infrastructure in place to complete new things. I think in terms of sourcing things, that's a different answer. Again, I think I would just refer back to, you know, we have a good network, and certainly we're working with all of the logical people, either directly or indirectly, you know, in our markets and in our portfolio. You know, a hallmark of the healthcare real estate business is that it's a relationship business and a partnering business.

So I think you know our ability to transact in that so it has been reasonable and I think you know we we you know we see the you know the infrastructure in place to complete new things I think in terms of sourcing things. That's a different answer and again I think I would just refer back to.

We have a good network and certainly we're working with all of the logical people either directly or indirectly.

You know in in in our markets in our portfolio.

A hallmark of of the healthcare real estate business is that it's a relationship business and partnering business. So our first line of discussion has been of course with our existing partners and and no. One players in all of our markets that we have pretty direct relationships with and of course, we're able to do that.

Paul Dalla Lana: Our first line of discussion has been, of course, with our existing partners and known players in all of our markets that we have pretty direct relationships with. Of course, we're able to do that easily and directly, and we expect opportunities to come from, you know, those initiatives, you know, relatively shortly and some very attractive ones. As you know, as the moment is demanding, I think all of our partners to look at their posture and their structure, and then again leading them more likely than not to take, you know, a decision that we've been alluding to for a while, which is really, you know, what's core and what's non-core in their business. As we know, you know, real estate in most businesses, and certainly in healthcare, is not core.

Easily indirectly and we expect opportunities to come from you know those initiatives you know relatively shortly and in some very attractive lens as you know as.

As the moment is demanding I think all of our partners to look at there.

Oh, they're posture in their structure and the gain meeting them more likely than not to take you know a decision that we've been alluding to for a while which is really what's core and whats noncore in their business and as we know you know real estate and most businesses and certainly in health care is noncore and so you know we have a very good value proposition in it.

Paul Dalla Lana: You know, we have a very good value proposition and a very good advanced dialogue with all of our partners in that direction. You know, I think we've been really good there. I think in terms of finding opportunistic situations and reaching out, you know, we're picking our spots. You know, working through global investment relationships and global brokerage arrangements is still functioning. I think the bigger challenge there is probably around decision-making and just whether that's owners or boards or other situations, you know, willing to take decisions in the moment. That's a little more cloudy. You know, we continue to try and pick our spots there and find things that we think are transactable, that in the long term and that provide, you know, a good opportunity set.

Very good advance dialogue with all of our partners in that direction. So I think we've been really good there I think in terms of finding opportunistic situations and reaching out you know where we're picking our spots, but you know working through yeah global investment relationships and global.

In global brokerage arrangements is still functioning I think the bigger challenge airs probably around decision, making and just whether that's owners or boards or other situations you know willing to take decisions in a moment and that's a little more cloudy. So you know we continue to try and pick our spots there and financing.

That we think our transactable that in the long term and that provide you a good opportunity set so hopefully that answers your question, but I think at the core that you know where where a global organization with strong regional platforms and had were able to to be fluent in all of our markets. You know 24, seven so that.

Paul Dalla Lana: Hopefully that answers your question. I think at the core of it, you know, we're a global organization with strong regional platforms, and we're able to be fluent in all of our markets, you know, 24/7. That's been our objective over the last number of years.

Sébastien Bharlain: Thank you. Yes, it does help a lot. As a follow-up question, I know there was less focus on Canada in the past years, and I was wondering, and perhaps part of that travel ban impact, but, with the current situation and I know in Quebec this week, they announced a new infrastructure plan, the first phase, targeting especially, healthcare facilities and perhaps MOBs. I was wondering if you were rethinking your focus on different regions, perhaps, more concentration on Canada going forward.

[Analyst] (Endurance Capital): Thank you. Yes, it does help a lot. As a follow-up question, I know there was less focus on Canada in the past years, and I was wondering, and perhaps part of that travel ban impact, but, with the current situation and I know in Quebec this week, they announced a new infrastructure plan, the first phase, targeting especially, healthcare facilities and perhaps MOBs. I was wondering if you were rethinking your focus on different regions, perhaps, more concentration on Canada going forward.

In our objective over the last number of years.

Hey, Thank you, yes, it does help a lot and as a follow up question.

I know there was a less focus on Canada in the past years, and I was wondering and perhaps part of that travel ban impact, but with the current situation and I know in Quebec. This week, they announced a new infrastructure plan and the first phase targeting, especially a healthcare facilities.

And perhaps m. obese and was wondering if you were rethinking your focus on different regions, perhaps a more concentration on Canada going forward.

Paul Dalla Lana: Yeah, that's a good observation. I would go back to a couple calls and just echo some comments that we had made previously about, you know, our Canadian initiatives. What we have seen, including a transaction that we've been involved with at Lakeridge Health, is a growing and changing focus on, you know, on the public health system in Canada and looking for, you know, slightly different facilities and certainly a broader ownership profile. We have been constructive on Canada again for a while and in looking at situations like this in a quote-unquote, you know, a regional health infrastructure. It's not acute care space predominantly, which still tends to be all publicly owned or under a PPP-type structure.

Yeah, that's or it's a good observation I.

I would go back to a couple of calls and just echo. Some some targets that we had made previously about into our Canadian initiatives and what we have seen I mean, including a transaction that we had been involved with it with like rich health is enrolling and changing focus on <unk>.

<unk> on the public health system in Canada, and looking for you know slightly different facilities and certainly a broader ownership profile. So we have been constructive on Canada again for a while them in looking in situations like this in a quote unquote you know a regional health infrastructure, it's it's not acute care space predominately, which still 10.

Paul Dalla Lana: It's everything below that where we are starting to see some of the more global healthcare trends play out. As a result, we have been focused on looking for opportunities and executing on opportunities in that space. We see them actively in our Quebec, Ontario, and Alberta portfolios. Yes, very much we're focused on that. It's hard to quantify the scale of that, but certainly, we think it would be very additive to the existing portfolio over time, and we are quite focused on it. In the moment, though, I think, you know, we haven't, and maybe the, you know, the narrow response to the pandemic will provide some very select opportunities.

To be all publicly owned or or under a P. P. P type structure, but it's everything below that where we are starting to see some of the more global health care trends play out and as a result, we have been focused on on I'm looking for opportunities and executing on opportunities in that space and we see them actively in our Quebec and Ontario.

In Alberta portfolios so.

Yes, very much we're focused on that it's hard to quantify the scale of that but certainly we think it would be very additive to the existing portfolio over time, and we are quite focused on it in the moment, though I think we habit and maybe the you know the narrow response to the pandemic will provide some some very select opportunities we really see it.

Paul Dalla Lana: We really see this as a much bigger, longer-term trend. That's gonna play out as, let's say, public healthcare starts to more closely follow, you know, the global trends of, again, broadly moving things out of acute care settings and into less acute care settings and providing, you know, more cost-effective services and more services. These trends we've been on and constructing on for a while now, and we're hopeful that maybe there'll be a shot in the arm from the COVID moment, but I think it's a much bigger trend that's at stake.

This has a much bigger longer term trend.

Thats going to play out as as let's say public health care starts to more closely follow you know the global trends of.

Getting broadly moving things out of acute care settings and into less acute care settings, and providing you know more cost effective services and more services. So these trends we've been on and constructive on for a while now and we're hopeful that maybe there will be a shot in the arm from from the coded moment, but I think it's a much bigger trend that said stake.

Sébastien Bharlain: Okay, good. Yeah. I had got this incorrectly in the last calls, so thank you for clarifying this. I'll return back to the queue, but just wanna say good job on the quarter results, despite the very tough conditions the market is going through right now. It's good to see.

[Analyst] (Endurance Capital): Okay, good. Yeah. I had got this incorrectly in the last calls, so thank you for clarifying this. I'll return back to the queue, but just wanna say good job on the quarter results, despite the very tough conditions the market is going through right now. It's good to see.

Okay. Good yeah I got this incorrectly in the last calls so thank you for clarifying this I'll return back to the Q, but just when I say good job on on a quarter results. Despite a very tough conditions. The market is going through right now.

Paul Dalla Lana: Thank you.

Operator: Your next question comes from Tal Woolley, with National Bank Financial. Please go ahead.

Good to see.

Thank you.

Your next question comes from tell Willey with National Bank Financial. Please go ahead.

Paul Dalla Lana: Hi, good morning.

Paul Dalla Lana: Hey, Tal. Hi.

Tal Woolley: Just maybe a broader question for sort of after we recover from this. Like if I think of a market like here in Canada, where how do you think the governments are, you know, might make changes to the healthcare system going forward? I think, like, you know, here in Ontario, they're already calling for a big review of long-term care. Obviously hospital crowding still, you know, probably gonna be a sensitive issue for the next at least year or so. Do you think that has, you know, becomes a potential demand driver going forward?

Hi, good morning.

Hi.

Just maybe a broader question or first sort of after we recover from Africa I think.

Market I'd like here in Canada, where how do you think the governments are you know my or make changes to the health care system.

Going forward I think like you know here and I'm sure they're already calling for a big review as long term care and obviously hospital crowding still you know probably going to be offensive issue for.

The next or at least here. So do you think that that has a you know becomes a potential demand driver going forward.

Paul Dalla Lana: Yes. I mean, maybe I try and sort of set the table just building on comments from the last question. You know, I think, Tal, the big trends in healthcare are quite well established, right? That's growing demand and increasing costs. All health systems before COVID, you know, have been grappling with this. Unfortunately, Canada, you know, a little bit limited by its policy, right? Which is really in some ways around a policy of rationing health services, right?

[noise].

Yes, yes, I mean, maybe I'd try and sort of set the table just building on comments from the last question you know I think tell the big trends in health care are quite well established stride and that's growing demand and increasing costs and so all the health systems before coated.

You know I've been grappling with this unfortunately, Canada, you know a little bit limited by it by its policy right, which is really in some ways around that policy of rationing, how services right and so we start with that kind of momentum then you know we overlay.

Paul Dalla Lana: We start with that kind of moment, and then, you know, we overlay what's happening in COVID, which has essentially been a full stop on anything that is elective or non-essential, which again, just builds a huge wall of demand, which was already big in Canada, you know, whether we define it by waiting lists or other things. We know that, you know, Canada is doubly challenged by the nature of its, you know, facilities and system in that, you know, we predominantly deliver healthcare through acute care settings, which are very expensive.

What's happening in coated which has essentially been a you know at a full stop on anything that is elective or non essential which again just builds a huge wall of demand, which was already big in Canada, [laughter], you know, whether we need to find out by waiting lists or other things.

And we know that.

<unk>, Canada is definitely a challenged by the nature of its you know facilities and system in that you know, we predominantly deliver house care through acute care settings, which are very expensive. So I'd just start with that and say, okay. If you build backlog.

Paul Dalla Lana: I just start with that and say, okay, if you build the backlog and, you know, the underlying demand outside of the COVID backlog is growing, you know, it should lead us to more rational and quicker, you know, implementation of whether it's policies or opportunities to provide those services. That is what should happen. I think unfortunately, you know, in Canada, we have a limitation on, you know, we don't have a private operating space, so there aren't, you know, a slew of private operators. There are a small number of individual physician groups that provide operating services to that backlog fundamentally. There is a constraint, you know, both in terms of willingness to use added capacity and the existence of added capacity.

And.

And you know that they're the underlying demand outside of the code good backlog is growing.

It should lead us to more rational and quicker in you know implementation of of whether its policies are opportunities to to provide those services.

So that that is what should happen I think unfortunately, you know in Canada. We have a limitation on you know we don't have a private operating space. So there aren't a slew of private operators or a small number of individual physician groups that provide operating services to that backlog fundamentally.

So there is a constraint you know both in terms of willingness to to use added capacity and the existence of added capacity. So our expectation is that you know the trends were leading to some of those things to start happening in any event and that clearly with more pressure you know they should accelerate those trends.

Paul Dalla Lana: Our expectation is that, you know, the trends we're seeing, leading to some of those things to start happening in any event, and that clearly with more pressure, you know, they should accelerate those trends and lead to opportunities. Whether it's for us, that can be an opportunity to own with the government in a different type of facility, many of which we have in Quebec as an example already today, or for new types of facilities like ambulatory care facilities that we're building with Lakeridge Health as an example.

And lead to opportunities and why there for us that can be an opportunity to own with the government in a different type of facility many of which we have in Qubec. As an example, already today or for new types of facilities like ambulatory care facilities that were building with acreage held as an example, what I'm not optimistic about yet is that there.

Paul Dalla Lana: What I'm not optimistic about yet is that there is going to be an opportunity for private operations like we see in other parts of the world, which would be the full relief valve and the real ability to do, you know, almost all the work except for the most acute care work, which is really what we see around the world in the private health system that exists today. I just call that out that I haven't got a sense of the willpower for that to change, but the big trends are supporting, you know, broadly speaking, getting as much as we can out of acute care settings into lower cost and less acute care settings. To really ultimately, I think, provide some level of operating flexibility as to how that happens. That's, I think the trajectory we're on.

He is going to be an opportunity for private operations like we see in other parts of the world, which would be the full really fell and the real ability to do you know almost all the work except for the most acute care work, which is really what we see around the world in the private health system that exist today. So I just called that out that I have it.

Got a sense of the will power for that to change, but the big trends are supporting you know broadly speaking getting as much as we can out of acute care settings into lower cost and most acute care settings and to really ultimately I think provide some level of operating flexibility as to how that happens and so that's like I said.

Paul Dalla Lana: I just don't see the political dialogue happening yet to get into the operating space today. That's gonna take a while. I think from a Northwest perspective, we're still quite optimistic that there'll be a number of facilities, opportunities like the Lakeridge opportunity, like the ones we have in Quebec with CLSC and other types of provincial infrastructure like that. You know, that's a meaningful opportunity for us, and so we're very happy to have, you know, provincial government covenants in our transactions.

The trajectory wanted just don't see.

The political dialogue happening yet to get into the operating space today, and that's going to take awhile. So I think from the northwest perspective, we're still quite optimistic that there'll be a number of facilities opportunities like that acreage opportunity like the ones, we have in Quebec, let's see overseas and other types of.

Of of provincial infrastructure like that and that's a meaningful opportunity for us and so we're very happy to have <unk> provincial government Governor and government covenants and in our transactions of course, you know if and when it ever opened up to broader operating pasta.

Paul Dalla Lana: Of course, you know, if and when it ever opened up to broader operating possibilities, and we've had some dialogue of that in Alberta and certainly in BC where the Brian Day case has been winding its way through the system, and is really due to be heard. I think it would be being heard right now if it weren't for this moment. You know, there is some possibility that, you know, we could see some operations, but we still see that as being quite incremental to the Canadian business.

Abilities, and we've had some dialogue about in Alberta, and certainly NBC, where there were the Brian de cases been winding its way through the system and it is really due to be heard I think it would be being heard right now if it works for this moment you know there is some possibility that you know we could see some operations, but we still see that has been quite.

Paul Dalla Lana: I guess as a consumer of health, I would just say that, you know, the future in Canada looks like lots of backlogs for a long period of time right now. That is gonna lead to some more need for different types of facilities and perhaps, you know, some rationalization of the approaches that our provincial governments are bringing to that. But I'm not optimistic today that there's going to be a wholesale change in the systems or the way that we deliver healthcare in Canada. I think that's the environment that we see.

Incremental to the Canadian business, So I guess as a consumer of health I would just say that you know the future in Canada looks like lots of backlogs for a long period of time right now and so that is going to lead to some more need for different types of facilities and perhaps some rationalization of the upper.

Which is set that are provincial governments are bringing to that but I'm not optimistic today that there was going to be a wholesale change in this in the systems or the way that we deliver healthcare in Canada. So I think that's the environment that we see.

Tal Woolley: Okay. In Australia and New Zealand, you know, the shareholder vote at Vital didn't sort of go the way you wanted. You were hoping it would go. How are you gonna proceed from here to optimize the portfolio then?

Okay.

And then in Australia, New Zealand Ah you know the shareholder vote, if idled in a sort of go the way you want to you were hoping it would go how are you Gonna proceed from here to optimize the portfolio huh.

Paul Dalla Lana: Maybe two issues in that. I would just call out that the vote on the Vital dual listing didn't proceed, although a vast majority of Vital unit holders were in favor of that. You know, again, more than two-thirds of the voters excluding us. You know, so almost 90% including us, you know, voted in favor. It was a little bit frustrating to not be able to have that dual listing, which would have brought, you know, the larger Australian capital more efficiently into the business. For the time being, Vital continues as a strong listed entity. You know, it continues to trade well.

[noise] yeah, yeah. So maybe two two issues in that I would just call out that will vote on the vital dual listing didnt precede although a vast majority.

Of all quite old unit holders were in favor of that you know again.

More than two thirds of the of the voters excluding us so almost 90% in including US you know voted in favor. So it's a little bit frustrating to not be able to to have the dual listing which would have brought you know the larger Australian capital more efficiently into the business, but for the time.

I'm being a vital continues as as you know as a strong listed entity. If it continues to trade well I think it's about 98 today in a very difficult environment of course and continues to have access to those New Zealand retail and institutional capital and the slack demand of international capital, which we think is enough.

Paul Dalla Lana: I think it's above NTA today in a very difficult environment, of course, and it continues to have access to both New Zealand retail and institutional capital and a select amount of international capital, which we think is enough to be supportive of, you know, its strategy to continue to incrementally grow the business over time. That's our intention going forward. Obviously, the whole viability of the business didn't hinge on the dual listing. It just was a step that would've made it more, you know, more efficient and capable of growing even faster. I think, you know, we still see a strong platform there with a long-term set of arrangements that are advantageous to the REIT and to NorthWest, and we intend to build and grow those over time.

To be supportive of you know that strategy to continue to incrementally grow the business overtime and a and so that's our intention going forward, obviously, though the whole viability of the business didn't didn't hinge on the dual listing. It just was a step that would have made it more.

In a more more efficient and capable of growing even faster, but I think we still see a strong platform there with a long term set of arrangements that are that are advantageous to the return to northwest and and we intend to build and grows over time.

Tal Woolley: Okay. Then just lastly, obviously, like since the last down cycle we had in the economy, you know, the portfolio of assets you have has changed quite dramatically. But I'm assuming like your due diligence work going through, you know, building up the portfolio, you know, you probably had a better sense of how some of these assets and the cap rates involved have, you know, sort of fared over the course of a downturn and another recovery. Can you offer like any sort of color just on how you expect the cap rates may move for your various geographies and asset classes?

Okay, and then just lastly.

Roughly like since the last down cycle, we had an economy that you are the portfolio of assets you have has changed quite dramatically.

But I'm assuming like your due diligence we're.

Going through a you know building up a portfolio you are probably had a better sense of how.

Some of these assets and the cap rate involved.

Ah you know sort of fair to over the course.

Have a downturn in and then a recovery.

Can you offer like any sort of color just on how you expect the cap rates may move or your various geography and I classes.

Paul Dalla Lana: Yeah. Maybe I just start with the quarter where I think like a lot of you know issuers, we've reported relatively flat or unchanged cap rates for the quarter. Relatively minimal impact to date. In fact, in the quarter and in the weeks you know up till now, we've seen a number of transactions completed, including a couple of our own, where you know let's say historically agreed pricing has held, and things have gotten done. Just noting in our case, that's you know three meaningful you know Australia REIT transactions and you know the current European joint venture transaction. You know some meaningful data points that I think at least our assets are holding up reasonably well so far.

Yes, Yeah, maybe I'll just start with the quarter, where I think like a lot of.

You know issuers, we reported relatively flat or unchanged cap rates for the quarter.

So relatively minimal impact to date in fact in the quarter in in that in the weeks.

Up till now we've seen a number of transactions completed including a couple of our own where in lets say historically agreed pricing has held.

And things have gotten done and just noting in in our case sense you know Threed meeting. So you know Australia read transactions and.

The.

Current into European joint venture transaction. So you know some meaningful data points that I think at least our assets are holding up.

Paul Dalla Lana: I think looking down the line, you know, I think like most investors, we are, you know, prepared for a little bit of movement in that, certainly more relative than not. We could see, you know, a little bit of weakness in cap rates over the balance of the year, more just trying to mark to market, if you will.

I'm reasonably well so far.

I think the looking down the line you know I think like most.

Investors, we are prepared for a little bit of movement in that and it certainly more relative than not.

And so we could see a little bit to have weakness in cap rates over the balance of the year.

Paul Dalla Lana: I think really for our asset class, just given the wave of interest and demand and given our own view of where we think it positions relative to other asset classes, and maybe even given some of the long-term impacts of, you know, almost 0% interest rates for, in my opinion, for a reasonably long time now, just given the stimulus and some of the things that have come through the economy and likely continue to weakness for, you know, well into 2021, it's hard for me to see big marks coming.

Or just trying to mark to relative market. If you will but I think really for our asset class just given the wave of interest in demand in it and given our own view of where we think it positions relative to other asset classes and maybe even given some of the long term impact of.

Almost zero percent interest rates for in my opinion for a reasonably long time, now and just given the stimulus and some of the things that have come through.

The economy and likely continued weakness for well into 2021, it's hard for me to see big marks coming and I guess, most importantly started the underlying fundamentals, which we believe you know as as.

Paul Dalla Lana: I guess most importantly, sorry, the underlying fundamentals, which we believe, you know, as business and economies are liberalized, you know, will lead to a very big, you know, pent-up demand in the healthcare system and one that's, you know, not really inelastic in a way, right? I mean, we talk about elective procedures, but, you know, ultimately, you know, these are people getting, you know, again, very important healthcare services and not things that they can easily put off, whether that's having knees and hips replaced, whether that's having, you know, other types of health services. You know, our own view is that the underlying demand for healthcare is gonna grow very quickly. I think that will have to be reflected.

Business and economies are liberalized, who will lead to a very big pent up demand in health care system, and one that you know not.

We really are inelastic and away right I mean, I'm, a we talk about elective procedures, but.

Ultimately you know these are our people getting.

You know again, I'm very important healthcare services and not things that they can easily put off whether that's having knees and hips replace whether that's having no. Other types of of health services. So you know our own view is at the underlying demand for health care is going to grow very quickly and so I think that.

Paul Dalla Lana: All that in a bucket, you know, I think we're gonna see modest impacts in our asset class and in particular our assets. We've been quite active, as you know, about working the portfolio over the last year and, you know, really have narrowed it down to focus on, you know, the highest quality set of assets that we can have. We have a small number of things that naturally in this moment come under portfolio review, so we may, you know, find that, you know, a small number of additional non-core things that we might do as a result of some thinking.

We'll have to be reflected so all that in a bucket.

I think we're going to see modest impacts in or asset class and and in particular, our assets. We've been quite active as you know about working the portfolio over the last year.

And you really have have narrowed it down to focus on a you know that the highest quality set of assets that we can have we have a small number of things that naturally in the small that come under portfolio reviews. So we may find out you know a small number of additional noncore things that we might we might do.

Paul Dalla Lana: By and large, we like our portfolio, and we think it is pretty good to withstand, you know, the moment and it's, you know, and possibly even end up in a higher demand phase. Again, we're not super fussed about, you know, any quarterly marks that might come out as a result of that.

As a result of some thinking but by and large we like our portfolio and we think it is pretty good to withstand.

You know the momentum and its you know and possibly even and up in a in a higher demand say so again, we're not superfast about you know.

Tal Woolley: Okay. Thanks very much, guys.

Any quarterly marks it might come under result to that.

Paul Dalla Lana: You're welcome.

Operator: Your next question comes from Chris Couprie with CIBC. Please go ahead.

Okay. Thanks, very much guy.

Yeah look.

Your next question comes from Chris Capri with RBC. Please go ahead.

Chris Couprie: Good morning. You had an interesting slide in your presentation, just kind of drawing a line between the types of assets you're focused on, the cure versus the care type of healthcare real estate. I guess, notwithstanding the aged care transaction with the Vital, maybe can you just explain the rationale as to what it is you like about the cure versus the care type of real estate?

Good morning.

Yeah and interesting slide in your presentation I'm, just kind of drawing a line between a that the types of assets you're focused on Nick care versus the they care.

Type of healthcare real estate.

So I guess notwithstanding that the the aged care a that age care transaction with the vital is there maybe he can just explain the rationale as to what it as you like about the care versus the care type of real estate.

Paul Dalla Lana: Yeah.

Paul Dalla Lana: I mean, assuming you're not the operator and just the owner.

Chris Couprie: I mean, assuming you're not the operator and just the owner.

Assuming you're not assuming you are I mean, I assume you're not the operator, and just and just the owner.

Paul Dalla Lana: Right. Yeah, I think maybe, but it starts with that comment, Chris. I think that's a great question. Our business is really 99% focused in the cure space, which is distinct from care. I think we start by seeing care, you know, fundamentally, at least as a real estate lens, as close to an operating business. You know, it's a much lower margin business. It's subject to, you know, significant regulatory complexity and significant funding challenges. You know, that's just led to, you know, again, the care moment. It's a huge industry and it's one that's gonna grow and has lots of latent demand and many of the big trends lead to, you know, participation in growing need for care space.

Right right, Yeah, I think maybe but it starts with that comment Chris. Thanks, That's a great question. So yeah, our businesses is really 99% focusing the care space.

Which is distinct from care I think we start by seeing care.

Fundamentally at least as a real estate lens as close to an operating business.

You know, it's it's a much lower margin business. It sounds like a subject to you know significant regular regulatory complexity and significant finding challenges.

And so you know that's just led to getting the care moment, it's a huge industry and it's one that's going to grow and has lots of late demand and many of the big trends lead to you know took participation in.

Paul Dalla Lana: As we've seen, it's not particularly well-funded, and it's very difficult for operators to make money, which when touches into the real estate space, tends to lead to a blurring of the lines. We start by sort of liking the care space because we have a clear distinction between operators and real estate and the ability, you know, and our portfolio is an example with, you know, 2 to 3 times average rental coverage across the portfolio, highs at more than 6 times in Brazil, and certainly above 2 times in any of the transactions we've done, for example, in the post-acute care space in Germany or in the UK in our recent hospitals.

Growing need for care space, but as we've seen it's not particularly well funded and it's very difficult for operators to make money, which when touches into the real estate space tends to lead to a blurring of the line. So we start by sort of like Invacare space, because we have a clear distinction between operators and real estate.

And the ability you know and in our portfolio as an example, with you know you know two to three times average rental coverage across the portfolio highs at more than six times in Brazil, and certainly above two times and in a the transactions. We've done for example of in the post acute care space and.

Paul Dalla Lana: Much higher coverage, much more profitable businesses underlying and as a result, much more able to withstand moments like this and general operating variabilities that exist in all businesses. We kinda start there. That's number one. Number two, I think we have, you know, a belief in major markets and in sort of constellations of healthcare infrastructure, like campuses. You know, when we look at a campus, and we've had some good examples in the deck around, you know, our precinct in Melbourne with at South Eastern Hospital, you know, these can be, you know, CAD 5 billion-dollar campuses with all sorts of infrastructure. We really like the opportunity to participate in that broad range of facilities from the private and even the public hospital.

In Germany or in the UK and our recent hospitals, so much higher coverage much more profitable businesses underlying and as a result, much more able to withstand moments like this and general operating variabilities that existed in all businesses. So we kind of start there. That's number one number two I think we'd have a.

You know a belief in major markets, and then sort of constellations of of healthcare infrastructure like campuses and so you know when we look at a campus and we've had some good examples in the DAC around you know precinct in Melbourne with apples Eastern a hospital. These can be you know 5 billion dollar.

Our campuses with all sorts of infrastructure and we really like the opportunity to participate in that broad range of facilities from the private and even the public hospital of course, we would love to doubling public hospitals, and we think that bad in the medium to longer terms are real possibility for our business, but we also like to own in Detroit care centers outpatient facilities.

Paul Dalla Lana: Of course, we would love to own public hospitals, and we think that in the medium to longer term is a real possibility for our business. We also like to own ambulatory care centers, outpatient facilities, you know, and life sciences and MOBs, and even admin buildings that support all of this. It really creates a constellation of opportunity that's connected and ties together. Those two big things really drive our direction to the healthcare space fundamentally. We see them as more infrastructure-like in its core, harder to replace, and as a result, you know, better long term, you know, net lease assets that we seek to do. That's probably the sum of it.

You know and life sciences, and them obese and even had been buildings that support all of this so it really creates a constellation of opportunity that's connected.

And and ties together, so those two big things really drive our direction to the care.

Space fundamentally and so we see them as more infrastructure like in its core harder to replace and as a result.

Better long term you know net leased assets that we that we seek to do so that's probably some of it.

Chris Couprie: Okay. Thanks for that color. Just maybe, how are you thinking about Brazil right now? Obviously, currency is being a bit of a drag, but at the same time, does it set up an opportunity to buy? I think you've said in the past that you're kinda comfortable with your weight, with your relative weight there, but just any current thoughts?

Okay. Thanks for that color.

And just maybe I'm missing at how are you thinking about about Brazil, right. Now, obviously currency is being a bit of a better that drag but up at same time does it set up an opportunity. The by I think you've said in the past year kind of comfortable here way, where your relative weight, there, but just a and any any a any.

Paul Dalla Lana: Yeah. I might start by saying, in general, in the COVID moment, probably Brazil is a little bit behind some of the trends that we're seeing in Canada. It's just maybe coming into its moment right now. That's probably our number one focus is just to make sure that we have a handle on our operators, both of which are strong and well-capitalized and respective leaders in their businesses. We do expect, again, given the funding availability and structures in Brazil to find opportunities. I think we've always said in proportion to the business, we can see opportunities in Brazil.

Current thoughts.

Yeah, let's start by saying in general in the coated moment, probably Brazil is a little bit behind some of the trends that we're seeing in Canada and and so it's just maybe coming into its moment right now.

So that's probably our number one focus is just to make sure that we have a handling operators both of which are our strong well capitalized and respected leaders in their businesses.

We do expect again, given the funding availability and structures in Brazil to find opportunities and so I think we've always said in proportion to the business, we can see opportunities in Brazil.

Paul Dalla Lana: Certainly we have high visibility into, you know, our major partner, Rede D'Or, who's a, you know, a fantastic business, and we are in dialogue with them on, you know, some specific situations which could come into the portfolio. I think the other part of the business that is interesting is we've seen, you know, other operators emerge that offer, you know, potentially good counterparties for us and have grown and scaled and become, you know, let's say, mature enough to interface with a long-term lease like the one that we would be looking for. I think we're constructive once we get a broader handle around the moment there and just how things are gonna go for the time being. I think that's probably the answer.

Certainly we have high visibility into you know our major partner reagent or you know, it's a fantastic business and we are in dialogue with them on on some specific situations, which could come into the portfolio.

I think the other part of the business that is interesting as we've seen.

Other operators emerge that that offer potentially good counterparties for us and have grown and scaled and become.

Let's say mature enough to interface with that with a long term.

Lease like the one that we'd be looking for so I think were constructive once we get a broader handle around the moment there and just how things are going to go for time being so I think that's probably be answer.

Paul Dalla Lana: Relative to other parts of the business where we see, you know, where we have significant capacity and we're in earlier days maybe of our investment programs, I think we still see relative growth happening significantly outside of Brazil, and Brazil being a little more selective for the time being.

But relative to other parts of the business, where we see where we have significant capacity and were in earlier days maybe of our investment programs I think we still see relative growth happening significantly outside of Brazil, Brazil, being a little more selective could that be.

Chris Couprie: Thanks very much.

Thanks very much.

Operator: Your next question is a follow-up from Sébastien Bharlain with Endurance Capital. Please go ahead.

Your next question is a follow up from Sebastiane Shine with insurance capital. Please go ahead.

Sébastien Bharlain: Yes, thank you. Concerning the NCIB, I noticed the transactions that occurred at the beginning of this quarter. I was wondering how should we think about the benchmark you're using? Is it a discount to NAV to entice you to go forward with that plan? Or is it a discount to NAV against perhaps other opportunities that you have to invest in the JVs right now?

[Analyst] (Endurance Capital): Yes, thank you. Concerning the NCIB, I noticed the transactions that occurred at the beginning of this quarter. I was wondering how should we think about the benchmark you're using? Is it a discount to NAV to entice you to go forward with that plan? Or is it a discount to NAV against perhaps other opportunities that you have to invest in the JVs right now?

Yes. Thank you three concerning the B and C. IB so I noticed the transactions that a cure it at the beginning this quarter.

I was wondering what how can how should we think about the benchmark you are using a is it a discount to any v. two.

To entice you to.

Go forward without plan or is it not [laughter] discount to any v. against perhaps other opportunities that you have to investing in the JV is right now.

Paul Dalla Lana: Yeah. Hi. A good question. I think both. Again, I think we look at our investment opportunity set holistically. I think, you know, in the moment, obviously we've prioritized liquidity in our business. I think like many, as our number one priority. That's probably the governor on any of the investment and capital allocation discussions that we might make. Clearly though at, you know, CAD 9 a unit or whatever it's been averaging over the period, and certainly in times when it's been well below that, you know, we do see a fundamental disconnect around value of the business, and certainly, you know, a relatively attractive opportunity as a result. I think, you know, that's the triangle that we're working in.

Yeah, Hi.

Good question I think both.

So again I think we'd look at our investment opportunity set Holistically I think you know in the moment, obviously, we prioritize liquidity in our business I think like many as there are number one priority. So that's probably the governor on on any of the investment capital allocation discussions that we might make on.

Clearly, though at Oh, you know $9 that unit or whatever it's been averaging over over the period and certainly in times when it's been well below that you know we do see a fundamental disconnect around around value of the business and certainly.

Relatively attractive you know opportunity as a result, so I think you know that's the triangle that we're working in obviously, our intention was it to be fundamentally buying back our equity.

Paul Dalla Lana: Obviously, our intention was to be fundamentally buying back our equity, you know, coming into 2020, but ultimately, you know, with a very disciplined lens to, you know, to capital allocation and liquidity. Again, hoping that the market doesn't present us too many opportunities. We don't see it as a defining feature in what we're doing, but, you know, if it does, of course, then, we're prepared to act. We take a very disciplined approach to it, would be my answer. Relative to other things that might exist, for the mid and long term in the business, which is really our ultimate focus.

You know coming into 2020, but ultimately you know you know with a very disciplined lens to you know to capital allocation and liquidity and it gained hoping that that the market doesn't present as do many opportunities. We don't see at a defined sure they're doing but you know if it does of course then.

Then we're prepared to act until we take a very disciplined approach to be at my answer.

And relative to other things that that that might exist.

For the mid and long term in the business, which is really our ultimate focus.

Sébastien Bharlain: Okay, should we expect more buybacks if the price stays at these levels, say CAD 9 to be specific?

[Analyst] (Endurance Capital): Okay, should we expect more buybacks if the price stays at these levels, say CAD 9 to be specific?

Okay. So should we expect more buybacks if the price stays at these levels say $9 to be specific.

Paul Dalla Lana: I don't think I can be quite that specific, out of fairness to the lawyers.

I don't think I can be quite that specific items.

Paul Dalla Lana: Okay.

[Analyst] (Endurance Capital): Okay.

Paul Dalla Lana: I would just say that, you know, our overwhelming intention is not to be in that situation. We'll hopefully, between a combination of us doing our job and you helping us to get the results out in the right frame, we'll see. In that moment, I'll just leave it like that. You know, again, obviously if we see a big disconnect between value and you know what we can do within the context of our liquidity, we are prepared to act.

As to the lawyers, but I'll try that.

There are overwhelming intention is not to be a in that in that situation and we're hopeful that between a combination of us doing our job in new helping us to get the results hotel in the right frame.

Well in that moment I'll just leave it like that but you know again, obviously, if we see a big disconnect between between value and and and you know what we can do within the context of our liquidity we are prepared to act.

Sébastien Bharlain: Fair enough. Thank you again.

[Analyst] (Endurance Capital): Fair enough. Thank you again.

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Operator: Ladies and gentlemen, as a reminder, should you have any questions, please press star one. There are no further questions at this time. Please proceed.

Fair enough. Thank you again.

Ladies and gentlemen, as a reminder, should you have any questions. Please press star one.

There are no further questions at this time. Please proceed.

Paul Dalla Lana: Okay. Well, thank you all for participating in our Q1 earnings call. On behalf of the NorthWest team, we wish you health and safety in the moment. Thank you.

Okay, well. Thank you all for participating in our inner UQM to earnings call on behalf of the northwest team.

We wish you a health and safety in the moment. Thank you.

Operator: Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines. Have a great day.

Ladies and gentlemen, this concludes your conference call for today, we thank you for participating in asset you. Please disconnect your lines have a great day.

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