Q3 2021 NorthWest Healthcare Properties REIT Earnings Call

November 12, 2021

Good morning, ladies and gentlemen, and welcome to the Northwest Health care properties Real estate investment Trust third quarter 2021 results conference call.

At this time all lines are in a listen only mode and following the presentation, we will conduct a question and answer session.

If at any time during this call you require immediate assistance. Please press star zero for the operator, I would like to remind everybody. This call is being recorded today Friday November the 12th 2021, and I would now like to turn the conference over to Mr. Paul Dell Atlanta, Chief Executive Officer.

Please go ahead Sir.

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

I'm joined by shale and John <unk>, Chief Financial Officer, and Peter <unk>, Chief administrative officer together, we are pleased to share with you our results for the third quarter of 2021.

First of all I'd like to point out that during today's call. We may make forward looking statements as defined under Canadian Securities Law.

While such forward looking statements reflect management's expectations regarding our business plans and future results. They arent necessarily based on assumptions that are subject to uncertainties and risks, which could cause actual results to differ materially. We direct you to all of the risk factors outlined in our public filings.

Operationally during the quarter. The REIT is performing well with its portfolio, 97% occupied by diversified tenant roster of healthcare service hospitals and life Science research tenants the majority of which are directly or indirectly funded publicly by their respective governments.

In the current environment with concern surrounding rising inflation rates and much of the world. It is worth highlighting that over 75% of northwest trend is directly indexed to inflation and this inflation proves to be not transitory that we would expect same property net operating income growth rates to correspondingly increase in Q.

Three three advanced a number of its strategic priorities, including the substantial completion of its value creation initiatives in the U K advancing its ambulatory care hospital precinct development strategies through its partnership with leading copper healthcare operators, such as airports in Australia, and achieving credit metrics consistent with an investment grade issuer.

<unk>.

As previously disclosed the REIT completed the acquisition of Aspen healthcare on August six of approximately $30 million. The Aspen group as an independent health care provider situated in the UK and west of the tenant at four of its UK properties immediately prior to the acquisition.

As a result of the transaction assumed Aspen interest in two hospital properties located in Sheffield in Edinburgh with a value of $41 3 million and obtain.

Control over the operations of eight hospitals located throughout the U K with the intention to sell these operations.

During the quarter. The REIT successfully completed the sale of six of the eight Aspen op codes for gross proceeds of $37 $2 million and agreed to sell the Clermont opco for approximately $33 million in that transaction.

Auction expected to close in Q4, the sale of our final Opco is progressing as expected also to close in 2021.

Aspen on sale transactions have substantially improved the tenant roster and credit quality lease coverage and lease terms of our UK portfolio and resulted in a regional fair value uplift of $126 million.

100% underpinned by external valuations combined.

Combined with realized gains on the purchase and completed on sales of $32 5 million. The reasons recorded an overall gain to date from the Aspen transactions of $158 5 million.

The overall gain is expected to increase by a further $27 5 million to $186 million in total when the final two opco sales previously mentioned closed in Q4.

Since entering the market in January 2020, the reason has built a high quality portfolio of 13 hospitals valued at approximately $800 million.

This portfolio is 100% occupied geographically diversified with a greater London concentration and is fully indexed to inflation with a weighted average lease term of 22 years. The properties are occupied by three of the top five U K hospital operators, including Circle Health Nuffield health inspire health with direct operator.

Operator relationships and our growing local platform. The REIT has originated an attractive pipeline of follow on investment opportunities.

In the quarter Leverages relationships to acquire a local hospital operated by backfill and.

And its pipeline of opportunities expanded to nearly 100 million pounds of additional actionable opportunities.

As <unk> executes on the final stages of its UK portfolio repositioning is now shifting focus to deliver on its UK JV initiative and leveraging its UK portfolio as the basis for a $1 7 billion regional joint venture targeted for the first quarter of 2022.

During and subsequent to quarter end <unk> also advanced its ambulatory care and hospital precincts strategies through its partnership with efforts one of Australia's largest not for profit hospital groups.

Building on its 20 year relationship with efforts that includes the epworth Eastern precinct and efforts Freemasons precinct already in addition to upwards Campbell LOE, which was acquired in Q2.

Our valued collectively at more than $800 million.

Added to the precinct through its long term, Australia joint venture that is set to deliver a state of the arc $550 million of innovation education, and healthcare Cub hubs excuse me in Geelong and expanded facilities at the site, where afterwards Richmond is located in Sydney and Melbourne.

As part of the transaction the REIT and its Australian institutional partner have entered into an agreement with effort to acquire 50% of effort Geelong hospital at 50% or $4 two vectors of adjacent development land.

Well as an effortless sight that afterwards Richmond.

Approximate purchase price of $117 $4 million. The properties are both located within the greater Melbourne area, and our 100% occupied by upwards.

New 20 year Triple net leases fully indexed to inflation.

Both properties are located in areas with a steadily growing population and increased need for critical health care infrastructure with the development of an envelope of approximately 1 million additional square feet across multiple stages over a 10 year period, we estimated total development cost could be more than $600 million.

When fully developed expects us to be an irreplaceable healthcare freezing akin to its existing ones with airports and eastern.

Suburb of Melbourne.

This acquisition adds to the REIT high quality global development pipeline, which now exceeds more than $1 billion.

And expect it to be a significant driver of growth for both earnings and net asset value over the coming decade.

During this moment of intense focus on global on the global healthcare industry Health care precincts have emerged as a key global health care trend and northwest is in the pole position to capitalize by working hand in hand with key operating partners to deliver on these opportunities.

Which Geelong and enrichment site are prime examples and Australia is currently looking at several opportunities to partner with leading operators universities and research institutions of a similar scale.

Closer to home in Canada, we see emerging opportunities to deliver similar solutions to meet evolving demands of our educational health care and research industries.

In this context northwest is particularly focused on the trend of <unk> services out of hospitals and along with its capital partners is executing actively on an ambulatory care and health care pricing strategies to drive value added development opportunities.

Another key priority events during the quarter was our continued balance sheet optimization with the Paydown and goal of achieving credit grade metrics during the quarter. The REIT close to $25 million private placement to north Westfalia partners. Following on the Q2 capital raising initiatives.

Net proceeds of the issuance of our deployed towards the previously announced acquisition of Dutch Medical office buildings, and the repayment of higher cost debt.

Leverage remained stable quarter over quarter at 49, 8%, primarily driven by the presence of previously disclosed intra quarter transactions subsequent to quarter end, the REIT announced its intention to redeem all of the outstanding series F. Debentures maturing on December 31, 2021, which have a conversion price of $12 80 per unit at our.

Currently in the money the redemptions are expected to occur.

On November 25 2021.

Assuming full conversion of the series F debentures to equity completion of the remaining U K initiatives and seeding of the plant in the UK JV.

Pro forma consolidated and proportionate leverage would further decline by approximately 810 basis points 700 basis with 80 basis points respectively.

Thanks.

For the quarter. Our results are in line with expectations with annualized quarterly adjusted funds from operations of <unk> 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 the accretion of the depreciation of the Canadian dollar over the past year.

Relative to the average foreign currency exposure was a slight drag on earnings on a constant currency basis, <unk> was up 1% year over year, which is particularly notable in the context of the Reits deleveraging activity, which resulted in proportionate leverage decreasing by 780 basis points.

While the Canadian dollar has shown some recent strength.

FX headwinds to unwind at some point and provide hotel, we expect them tied aligned at some point and provide a tailwind to our future earnings.

Well the ASF.

<unk> per unit growth growth was flat <unk> is up actually 18% per year, driven by net investment activity expansion of the reeds global asset management platform and build 10 lease indexation management fees grew 44% to $15 8 million in the quarter under pinned by higher base.

And acquisition fees as a result of both increased assets under management and investment activity overall for global asset management platform continues to provide significant and steady earnings growth and highlight that annual base fees have grown by almost 30% annually since 2019.

Additionally, <unk> value per unit was up 11% to $13 68 per unit.

Driven primarily by strong revaluation gains in both Australia, Australia, Asia and Europe due to the recently completed UK initiatives with significant demand for long leased inflation index assets and increased interest in health care real estate, we see near term potential for continued cap rate compression across our markets leading to meaningful value in the valley.

<unk> increases in the near term <unk>.

Combined with the expansion of the global asset management platform through our plan the UK JV and a growing global development pipeline, we see potential for a further one to $2 of that per unit growth over the next 12 months.

Sustainability initiatives also remain a key priority within the REIT and committing to issue. Its first sustainability report later in 2021.

<unk> believes its sustainability has played an.

<unk> role in defining its past and will continue to do so in the future, particularly as the REIT grows its asset management platform with global institutional investors.

Operationally our results, which are derived from a 192 property $8 5 billion health care infrastructure portfolio 10 ended by leading operators on long term inflation index leases was on plan.

Inherent strength of this portfolio is reflected in our recent operating results with year over year constant currency cash recurring.

SP NOI growth of two 4% again, largely driven by contractual rent indexation and underpinned by 97% occupancy at a weighted average lease term of more than 14 years for the three months ended September 32021, the REIT collected 99% of rent, which is a 10 basis point improvement quarter over quarter.

And is fully recovered.

The minimal impact of Covid in earlier quarters in all regards highly defensive portfolio.

Canada remains stable during the quarter with adjusted year over year cash SPP NOI.

Spread on renewal rates during the quarter was broadly flat with rent collection remaining strong at approximately 98%.

Mentally falling in Brazil, we are on plan with study, 100% occupancy and continued strong year over year cash SPP NOI growth of four 3%.

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

<unk> also focused on getting traction with additional high quality operators and with.

Covid moment to recurring returning to normal and picking and normalcy picking up steam we see a very significant constructive environment and results.

In Europe, we are on plan performing as expected with year over year source currency at C&I growth of two 7% and occupancy at 97%.

In Europe <unk> continues to exhibit growth agenda by developing strategic relationships in both the medical office and hospital segment.

<unk> translated into accelerated deal flow.

In Australia, the occupancy remains stable, there above 99% and delivered consistent year over year constant currency SD NOI growth of two 9% with a weighted average lease term of almost 17 years at.

That vital business there performed similarly with year over year constant currency SD NOI growth of 4% and occupancy approaching 99% at a weighted average lease term of almost 19 years I.

I am pleased with the progress made during the quarter, which advanced a number of the Reits key long term strategic initiatives as well as producing solid operating results with these deep relationships best in class regional operating platforms and strong access to public and increasingly attractively priced private capital that is well positioned to continue executing on.

Strategic priorities with a focus on growth and balance sheet optimization.

I will now ask the operator to open up the call for questions.

Thank you Sir.

Ladies and gentlemen, we will now begin the question and answer session.

I would like to ask a question. Please press the star followed by the one on your telephone keypad.

And if you would like to withdraw your question. Please press the star followed by the two.

Please standby for your first question.

Your first question comes from Joanne Chen of BMO. Please go ahead.

Hi, good morning.

Angela.

Just maybe.

A couple of quick ones from me, but.

With the sale of some of your units, Australia any health care.

This quarter and I, just kind of wanted to gauge what your strategic thinking is with respect to kind of your remaining interest.

Yeah. So maybe just a point of clarity the sale both units was into our joint venture relationship.

Alright Electively pertain.

17, 3% interest in Australian Unity.

And we are actively considering.

Strategic steps, Sir I can report on that.

<unk> businesses are continuing to look at what to do next.

Okay got it and.

I guess, maybe just on your development pipeline.

Kind of what geographic focus would be alright, Eric medium term no.

I guess has the recent inflationary environment change your thinking.

On that.

Yeah.

Good question.

So the focus for sure builds in Australia, and New Zealand to a slightly lesser extent, where we've had quite a an active pipeline for a long time. We currently have what we call brownfield expansions underway there totaling approximately $350 million today and that's been a number that's been pretty stable in the biz.

For the last little while.

So we see that as sort of a foundational starting point to the development pipe and likely to continue again that 5% to 10% of our portfolio in some form of brownfield expansion, adding to that are our both our ambulatory and precinct development, which will take that number up in region closer to $1 billion.

And likely to be on that steady state basis over the next little while all of those developments are capitalized within our joint venture arrangements or through a vital.

So pre capitalized.

The vast majority of those projects will be pre let and likely to have <unk>.

<unk> arrangements to the ones that we've talked about earlier in the call around that for us.

So we do see an expansion in Australia moving towards.

No that $1 billion Mark on a more steady step basis, and an evolution from brownfield, perhaps to more Greenfield development again, we focus on.

All of the issues, including cost leasing and cost management issues that you mentioned it is a.

A more challenging environment to build things. So most of our projects when we start to have fixed price contracts and third party performance driven contractors in place so pretty prototypical I would think for development.

And we have a long experience in that region.

Those types of projects more than 25 years, when I look at the team. There. So that's that's moving a pace and those opportunities at the precinct level look to be ones that can can come on a pretty recurring basis for the next five or 10 years. So we're quite excited about that set of initiatives I think closer to home. The other focus is encana.

We have at least two and possibly three significant projects that were in that.

Planning phase on.

And those will be more conventional development. So we will obviously require that.

Both.

Both the leasing and I guess cost side of the business to lineup, but we do see a market in the areas that we're focused in for very significant research life science, and education and health care opportunities and so certainly.

We're hoping to Progresso is too.

Both announced spin.

Commencement phase over the next 12 months and we can see some really attractive opportunities I guess around that we've been active in the ambulatory strategy here. We've had we have projects like Lakewood shelf under construction today, we are looking and expecting to see.

Most of the provinces enact.

Ambulatory strategies, which is really driving the camping out of some of their acute care facilities into more.

Or if it's built in purpose suitable facilities. So we start to expect that that could be a nice trend for us in Canada. So those would be the main markets that we're focused and I think we can see on the horizon in Europe and in particularly in the U K some attractive opportunities as we as we grow our capabilities in those markets as well but.

For the near term those are kind of our focal areas.

Alright, great.

Great color, Thanks, and maybe just a little bit more on the specifics.

Could you elaborate a bit more on the fair value.

The U K and just exactly what changes on the valuation parameters.

Thanks.

Okay.

Try it I've got Shayla and looking at me to correct me if I get it wrong. So let me just walk through the journey as.

As you'll recall, we acquired two broadly speaking portfolios theyre somewhat opportunistically the first from <unk>.

Back in early 2020.

That was acquired at approximately a 7% cap rate and more recently in the <unk>.

Summer last years 'twenty 'twenty summer, we acquired our four well tower assets and broadly in the mid fives.

Both of those portfolios now with the new leasing and portfolio activities that we've done.

Transitioning.

BMI in the case was bought by <unk> and merged with Circle, So credit journey and they had Brexit happened and all sorts of stuff in between so that seven thats come in to the mid fours.

Broadly speaking similar destination for the.

For the.

Well tower portfolio, which we added to with the two on balance sheet assets in the third asset that we acquired from left field. So collectively the journey involved I think a lot of corporate activity in the case of BMI circle, and <unk>, which has ended up with a large investment grade tenants.

The ultimate owner of that business and then the transition of our Aspen leases to the combination of not field inspire mature and established existing leading operators in the UK. So.

New leases on our new long term so all in all a pretty wholesale reset of those portfolios but.

We entered Opportunistically at good times, and we were able to convert.

And two into a.

Our new long term partners.

These long term inflation index leases triple net the way, we like them. So that's sort of the journey.

And the destination is broadly speaking four and a half I think gone on where we've ended up.

Hi, Joanne maybe the only thing I'd add to that.

Is that really the catalyst for us was around.

Replacing the tenants in the <unk>.

Those assets.

Ultimately triggered the requirements for an external valuation on it.

Had those external evaluations completed trigger those fair value gains.

Got it okay.

And I guess, just one last one from me but.

I guess.

I asked this last quarter, but are you getting any closer than that.

Luckily accessing the unsecured market.

Okay.

Credit metrics.

Got it.

Yeah, Joanne I'll jump in there.

Yes. Thanks for that question and you are spot on that our credit rating our credit metrics are very much circling investment grade metrics I would note that we have kept a relatively flexible balance sheet.

With a fair amount of debt maturity in 2022, that's really primed for a roof.

For permanent asset level finance on either an unsecured basis.

Through the AG markets or I put it into our perspective U K and a regional JV. So we very much been working to balance sheet positioned for an investment grade.

Rating and related.

Accessing of those markets.

Got it okay.

That's it from me. Thank you very much guys I'll turn it back.

Your next question comes from Mario Sorry of Scotiabank. Please go ahead.

Hey, good morning.

Okay.

Back to the.

Uhm P T.

What was kind of overriding rationale.

Further distinguish it from the northwest perspective.

Sorry, so the overriding rationale for us maintaining our a 17, 3% percent stake or what we do next.

No I'm sorry, just the overriding rationale for solving some of the units to your to your partner.

Yeah. Thanks, So I would say the way between the put and call arrangement that we had entered into home.

And.

Just a finalization of the JV terms you know the initial investments were made on our balance sheet. So it was really just a.

Just moving them into their long term goal. So that's that's all just the natural cycle of things that haven't happened in the third quarter, which is when all of that.

Related things transpired so it happened in a normal time in the normal course.

Weiss was expected so nothing unexpected there it was always contemplated to be.

With our joint venture partner and just worked out that August was the time that happened.

Got it okay, Okay, and then maybe a call to your comment on.

Further one to $2.

<unk> presented upside over the next 12 months you took some pretty solid fair value gains this quarter.

Okay.

Hi.

Yes, the petrol upside remains pretty attractive pretty significant when you can change.

For you quarter over quarter in terms of.

<unk> brought upside whether it's you know cap rates, we expect the cap rates.

Crusher it could be more than you expected last quarter.

It just seems like Youre, your surfacing value, but the potential value creation remains intact.

Curious.

Combinations.

Some thoughts in terms of what's changed quarter to quarter.

Yes.

I think.

Theres, maybe teva so your share right to the trend for sure that cap rate.

Cap rate movement has continued to compress we're expecting sort of 10 basis points across the portfolio. We generally take a lot of those marks in the fourth quarter. So it's pretty natural time say that set that.

The conservative end of things just to be fair to everyone that has a very proud moment and we are seeing very meaningful cap rate movement in all of our markets. So just call that out we still have a chunk to go in the U K, which is the balance of that of the non aspen portfolio that will get marked as well so theres some pretty discrete elements to.

But broadly speaking.

A further 10 basis points, and maybe a little bit more depending on where things end up at year end.

Second one is development again with both developments completing in the pipe getting restocked and with some of the new things like airports, we see a meaningful.

Moment happening through through the development book and again those are materially wider than stabilized values those transaction somewhere 75 to 100 basis points wider on average broadly committed and that book is getting quite chunky and then the last area is through the asset manager.

And I think we're on the cusp of completing a number of big initiatives.

The business areas growing meaningfully over the year and is forecasted to grow very meaningfully in the next year. So I think taken together all of those things give us some confidence that certainly went to two and perhaps even more are going to be possible in the near term.

That's great color. Thanks, Paul My last question just come to.

For unit growth, Okay. Okay, you bet.

On the call the normalized vehicle for you to 92.

That's been pretty consistent if we go back to Q2 of 19, it's kind of been at that level.

Can you highlight some characters.

That intervening time period.

With the pressure on that number. So for example, the D V breakdown.

Done.

The balance sheet in a good shape post UK health care fund.

And the currency has been a bit tougher as well, which clearly can't predict going forward.

But with the.

The amount of repositioning of the portfolio that you've accomplished that.

What's the Delevering likely done now like where we're in the priority scale does kind of inching up debt.

This quote normalized.

Greg when you would go into 2022.

Yeah. That's an excellent question I, maybe go back and look at that sort of on a constant leverage basis that ninety-two might've been over a dollar if I'm recalling shown so.

There's eight tenths of Delevering and that number if we want to say it like that plus some of the other.

So you mentioned around.

A little bit of a.

FX environment on average, it's not huge but it's around the edges. I think looking ahead, we would see similar levels of growth in the next couple of years comfortably.

Again, the business is moving to a more asset light model. So certainly the heavy equitation of the business for growth and Delevering that has happened in the last little bit is likely to come off as we move assets into our Jv's, which obviously offer.

It kind of accretion on top of that.

Asset level returns so.

That's the theme for us over the next couple of years, and we really do hope to be able to unlock pretty meaningful <unk> growth, but certainly heading up above 92.

And I would expect over a couple of years heading up over one dollar would be a pretty reasonable target.

Okay.

Thanks, Paul.

Yes.

Ladies and gentlemen, as a reminder, if you would like to ask a question. Please press star one now.

Mr Della Lana there are no further questions from our phone lines, Sir I'll turn the conference back over to you.

Okay, well, thank you everyone and on behalf of northwest Health care properties. We appreciate your time and listening into our first quarter 'twenty one earnings call have a great day. Thank you.

Yeah.

Ladies and gentlemen, this concludes the conference call for today, we thank you for participating and ask.

Could you please disconnect your lines.

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Good morning, ladies and gentlemen, and welcome to the northwest Healthcare property Real estate investment Trust third quarter 2021 results conference call.

At this time all lines are in a listen only mode and following the presentation, we will conduct a question and answer session.

Any time during this call you require immediate assistance. Please press star zero for the operator, I would like to remind everybody. This call is being recorded today Friday November 12, 2021, and I would now like to turn the conference over to Mr. Paul Hello, Atlanta, Chief Executive Officer.

Please go ahead Sir.

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

Im joined by shale in China Chief.

Chief Financial Officer, and Peter <unk>, Chief administrative officer together, we are pleased to share with you our results for the third quarter of 2021.

First I would like to point out that during today's call. We may make forward looking statements as defined under Canadian Securities model.

All such forward looking statements reflect management's expectations regarding our business plans and future results. They arent necessarily based on assumptions that are subject to uncertainties and risks, which could cause actual results to differ materially. We direct you to all of the risk factors outlined in our public filings.

Operationally during the quarter. The REIT is performing well with its portfolio, 97% occupied by diversified tenant roster of healthcare service Hospital in life Science research tenants, the majority of which are directly or indirectly funded publicly by their respective governments.

In the current environment with concerns surrounding rising inflation rates and much of the world. It is worth highlighting that over 75% of northwest rent is directly indexed to inflation and this inflation proves to be not transitory that we would expect same property net operating income growth rates to correspondingly increase in Q3.

Three the REIT advanced a number of its strategic priorities, including the substantial completion of its value creation initiatives in the U K advancing its ambulatory care hospital precinct development strategies through its partnership with leading Harper healthcare operators, such as airports in Australia, and achieving credit metrics consistent with an investment grade issuer.

As previously disclosed the REIT completed the acquisition of Aspen healthcare on August six or approximately $30 million.

Aspen group as an independent healthcare provider situated in the U K and western tenant at four of its UK properties immediately prior to the acquisition.

As a result of the transaction assumed Aspen is interested to hospital properties located in Sheffield in Edinburgh with a value of $41 $3 million and obtain control over the operations of eight hospitals located throughout the U K with the intention to sell these operations.

During the quarter. The REIT successfully completed the sale of six of the eight Aspen op codes for gross proceeds of $37 2 million and agreed to sell our Clermont opco for approximately $33 million.

And that transaction expected to close in Q4, the sale of our final Opco is progressing as expected also to close in 2021.

The Aspen on sale transactions have substantially improved the tenant roster and credit quality lease coverage and lease terms of our UK portfolio and resulted in a regional fair value uplift of $126 million, 100% underpinned by external valuations combined.

Combined with realized gains on the purchase and completed on sales of $32 5 million. The reasons recorded an overall gain to date from the Aspen transactions of $158 $5 million. The overall gain is expected to increase by a further $27 5 million to $186 million in total when the final.

Two opco sales previously mentioned close in Q4 <unk>.

Since entering the market in January 2020, the Reis has built a high quality portfolio of 13 hospitals valued at approximately $800 million.

With direct operator.

Operator relationships and our growing local platform Rede has originated an attractive pipeline of follow on investment opportunities in.

In the quarter Leverages relationships to acquire looking hospital operated by Brookdale and.

And its pipeline of opportunities expanded to nearly 100 million pounds of additional actionable opportunities.

As <unk> executes on the final stages of its UK portfolio repositioning is now shifting focus to deliver on its UK JV initiative and leveraging its UK portfolio as the basis for a $1 $7 billion regional joint venture targeted for the first quarter of 2022.

During and subsequent to quarter end <unk> also advanced its ambulatory care and hospital precinct strategy through its partnership with Apple one of Australia's largest not for profit hospital groups three building on its 20 year relationship with efforts that includes the epworth Easter increasing and efforts Freemasons precinct already in addition to upward.

Campbell, LOE, which was acquired in Q2.

Our valued collectively at more than $800 million.

Added to the precinct through its long term, Australia joint venture that is set to deliver a state of the art $550 million of innovation education and healthcare Cub hubs.

Excuse me and Geelong and expanded facilities at the site, where airports Richmond is located in Sydney and Melbourne.

As part of the transaction the REIT and its Australian institutional partner have entered into an agreement with airport to acquire 50% of effort Geelong hospital at 50% or $4 two vectors of adjacent development land as well as in our site.

Words, Richmond for approximate purchase price of $117 $4 million. The properties are both located within the greater Melbourne area, and our 100% occupied by effort on new 20 year Triple net leases fully indexed to inflation.

Both properties are located in areas with a steadily growing population and increased need for critical health care infrastructure with the development of <unk>.

<unk> of approximately 1 million additional square feet across multiple stages over a 10 year period, we estimated total development cost could be more than $600 million.

When fully developed expects us to be an irreplaceable healthcare freezing akin to its existing ones with airports and eastern <unk>.

Suburb of Melbourne.

This acquisition adds to the REIT high quality global development pipeline, which now exceeds more than $1 billion.

And expect it to be a significant driver of growth for both earnings and net asset value over the coming decade.

Enrichment site are prime examples.

In Australia <unk> is currently looking at several opportunities to partner with leading operators universities and research institutions of a similar scale.

Closer to home in Canada, we see emerging opportunities to deliver similar solutions to meet evolving demands of our educational health care and research industries.

Another key priority events during the quarter was our continued balance sheet optimization with the paydown and below are achieving credit grade metrics during the quarter. The REIT close to $25 million private placement to north of Australia partners. Following on the Q2 capital raising initiatives.

Net proceeds of the issuance of our deployed towards the previously announced acquisition of detriment of office buildings, and the repayment of higher cost debt.

Currently in the money the redemptions are expected to occur in.

On November 25 2021.

Assuming full conversion of the series of debentures to equity completion of the remaining U K initiatives and seeding of the plan in the UK JV the <unk> pro forma consolidated and proportionate leverage with further declined by approximately 810 basis points 700 basis with 80 basis points respectively.

Thanks.

While the Canadian dollar has shown some recent strength.

FX headwinds to unwind at some point and provide hotel, we expect them tied aligned at some point and provide a tailwind to our future earnings.

Well the ASF.

<unk> per unit growth growth was flat <unk> was up actually 18% per year, driven by net investment activity expansion of the rigs global asset management platform and build 10 lease indexation management fees grew 44% to $15 8 million in the quarter underpinned by higher base.

Additionally, <unk> value per unit was up 11% to $13 68 per unit.

Driven primarily by strong revaluation gains in both Australia, Australia, Asia and Europe due to the recently completed U K initiatives with significant demand for long leased inflation index assets and increased interest in health care real estate, we see near term potential for continued cap rate compression across our markets leading to meaningful value in the valley.

<unk> increases in the near term <unk>.

Combined with the expansion of the global asset management platform through our plan the UK JV and a growing global development pipeline, we see potential for a further one to $2 a barrel per unit growth over the next 12 months.

Sustainability initiatives also remain a key priority within the REIT and committing to issue. Its first sustainability report later in 2021.

<unk> believes its sustainability has played an important role in defining its past and will continue to do so in the future, particularly as the REIT grows its asset management platform with global institutional investors.

Operationally our results, which are derived from a 192 property $8 5 billion health care infrastructure portfolio tenanted by leading operators on long term inflation index leases was on plan.

Inherent strength of this portfolio is reflected in our recent operating results with year over year constant currency cash recurring.

SP NOI growth of two 4% again, largely driven by contractual rent indexation and underpinned by 97% occupancy at a weighted average lease term of more than 14 years for the three months ended September 32021, the recollect at 99% of rent, which is a 10 basis point improvement quarter over quarter.

That is fully recovered.

The minimal impact of Covid in earlier quarters in all regards a highly defensive portfolio.

Canada remains stable during the quarter with adjusted year over year cash SPP NOI.

<unk> of approximately 1% portfolio occupancy was stable at 91% and leasing activity. During the quarter was also strong with 24000 square feet of new leasing at 53000 square feet of renewal leasing completed the spread on renewal rates during the quarter was broadly flat with rent collection remaining strong at approximately 98.

<unk>.

Mentally I note the solid in Brazil, we are on plan with steady, 100% occupancy and continued strong year over year cash SPP NOI growth of four 3% opt.

<unk> also focused on getting traction with additional high quality operators and with.

Covid moment to recurring returning to normal and picking and normalcy picking up steam we see a very significant constructive environment and results.

In Europe, we are on plan and performing as expected with year over year source currency have C&I growth of two 7% and occupancy at 97% in Europe <unk> continues to execute its growth agenda by developing strategic relationships in both the medical office and hospital segments and continues to translate it into accelerated deal flow.

And last in Australia, the occupancy remains stable, there above 99% and delivered consistent year over year constant currency SD NOI growth of two 9% with a weighted average lease term of almost 17 years.

At vital business there performed similarly with year over year constant currency, SPP NOI growth of 4% and occupancy approaching 99% at a weighted average lease term of almost 19 years I.

Strategic priorities with a focus on growth and balance sheet optimization.

I will now ask the operator to open up the call for questions.

Thank you Sir.

Ladies and gentlemen, we will now begin the question and answer session.

I would like to ask a question. Please press the star followed by the one on your telephone keypad.

And if you would like to withdraw your question. Please press the star followed by the two.

Please standby for your first question.

Your first question comes from Joanne Chang of BMO. Please go ahead.

Hi, good morning.

Angela.

Yes.

A couple of quick ones from me, but.

With the sale of some of your units, Australia any health care.

Quarter end this call I wanted to.

What are your strategic thank you Ken.

This tactic.

Remaining interest.

Yeah. So maybe just a point of clarity the sale of those units into our joint venture relationship. So collectively we retain.

17, 3% interest in Australian Unity.

And we are actively considering our next strategic step Sir can report beyond that.

Okay businesses, continuing to look at what to do next.

Okay got it and.

I guess, maybe just on <unk>.

Development pipeline.

Kind of what geographic focus would be.

Eric medium term.

Has the recent inflationary environment change your thinking.

On that front.

Yeah.

Good question.

So the focus for sure builds in Australia, and New Zealand to slightly lesser extent, where we've had.

A active pipeline for a long time, we currently have what we call brownfield expansions underway, there totaling approximately $350 million today and thats been a number that's been pretty stable in the business for the last little while.

And likely to be on a steady state basis over the next little while all of those developments are capitalized within our joint venture arrangements or through a vital.

So pre capitalized in the vast majority of those projects will be pre let and likely to have.

Similar arrangements to the ones that we've talked about earlier in the call around that for us.

So we do see an expansion in Australia moving towards.

That $1 billion Mark on a more steady state basis in an evolution from brownfield, perhaps to more Greenfield development again, we focus on.

All of the issues, including Kaufmann leasing and cost management issues that you mentioned it is at.

A more challenging environment to build things so.

Most of our projects when we start have fixed price contracts and third party performance driven contractors in place so pretty prototypical I would think for development.

And we have a long experience in that region.

Canada, we have at least two and possibly three significant projects that were in that.

Sort of planning phase on.

And those will be more conventional development. So we will obviously require.

Both.

Both the leasing and I guess cost side of the business to lineup, but we do see a market in the areas that we're focused in for very significant research life Science, and education and health care opportunities and so certainly we are.

We're hoping to progress us too.

Both announced spending.

Commencement phase over the next 12 months and we can see some really attractive opportunities I guess around that we've been active in the ambulatory strategy here.

We have projects like language health under construction today, we are looking at and expecting to see.

Most of the provinces enact.

Ambulatory strategies, which is really driving decanting out of some of that acute care facilities into more.

Purpose built.

Purpose suitable facilities. So we start to expect that that could be a nice trend for us in Canada. So those would be the main markets that we're focused and I think we can see on the horizon in Europe and in particularly in the U K some attractive opportunities as we as we grow our capabilities in those markets as well, but for the near term those are kind of our <unk>.

Clarence.

Alright Thats great.

Great color, Thanks, and maybe just a little bit more on the specifics.

Could you elaborate a bit more on the fair value.

The UK and Germany.

Correctly, which handles on the valuation parameters.

Thanks.

Okay.

I'll try it I've got Shayla and looking at me to correct me if I get it wrong. So let me just walk through the journey.

As you'll recall, we acquired two broadly speaking portfolios theyre somewhat opportunistically the first from.

Back in early 2020.

That was acquired at approximately a 7% cap rate and more recently in the <unk>.

Summer last years 'twenty 'twenty summer, we acquired our four well tower assets and broadly in the mid fives.

Both of those portfolios now with the new leasing and portfolio activities that we've done.

Transitioning.

BMI in the case was bought by <unk> and merged with Circle. So credit journey, we had Brexit happened and all sorts of stuff in between so that seven thats come in to the mid fours.

Broadly speaking similar destination for the.

For the.

Well tower portfolio, which we added to with the two on balance sheet assets in the third asset that we acquired from left field. So collectively the journey involved I think a lot of corporate activity in the case of <unk>, which has ended up with us a large investment grade tenant is the ultimate owner of that business and then the transition.

End of <unk>.

Our aspen leases to the combination of not field inspire mature and established existing leading operators in the UK. So.

New leases on our new long term so all in all a pretty wholesale reset of those portfolios, but we entered opportunistically at good times, and we were able to convert.

Into into good and new long term partners.

These long term inflation index leases triple net the way, we like them. So.

The journey.

And the destination is to broadly speaking four and a half I think on on where we've ended up.

Hi, Joanne maybe the only thing I'd add.

Is that really the catalyst for us was around.

Replacing the tenants in the <unk> in those assets, which also had a triggered the requirements for an external valuation.

Have those external valuations completed trigger those fair value gains.

Got it okay.

And I guess, just one last one from me but.

Yes.

I asked this last quarter, but are you getting any closer than that.

<unk>.

Unsecured market.

Okay.

Credit metrics.

Got it.

Yes, Joanne I'll jump in there.

Yes, Thanks for that question and Ed you are spot on that our credit rates. Our credit metrics are very much circling investment grade metrics I would note that we have kept a relatively flexible balance sheet.

With a fair amount of debt maturity in 2022, that's really primed for a permanent asset level finance on either an unsecured basis.

It through the markets or put into our perspective U K and a regional JV. So I will be very much been working to balance sheet positioned for an investment grade.

Rating ad related.

Accessing of those markets.

Got it okay.

That's it for me. Thank you very much guys I'll turn it back.

Your next question comes from Mario Sorry of Scotiabank. Please go ahead.

Hey, good morning.

Okay.

Coming back to the.

Uhm PT.

What was kind of the overriding rationale.

The distribution from the northwest perspective.

Sorry, so the overriding rationale for us maintaining our a 17, 3% percent bank or what we do next.

No sorry, just the overriding rationale for selling some of the units to your to your partner.

Well.

Thanks.

The weight between the put and call arrangement that we had entered into home.

<unk>.

Just the Finalization of the JV terms. The initial investments were made on our balance sheet. So it is really just.

Just moving them into their long term goal. So that's that's all just a natural cycle of things that happened to happen in the third quarter, which is when all of that.

Related things transpired so it happened in a normal time in the normal course.

That.

As expected so nothing unexpected there it was always contemplated to be.

With our joint venture partner and just worked out that August was the time that it happened.

Got it okay. Okay.

And then maybe Paul to your comment on.

Further one to $2.

Preceded upsides.

Over the next 12 months.

You took some pretty solid fair value gains this quarter.

Okay.

Hi.

Yes.

It remains pretty attractive.

And when you can change.

For June quarter over quarter in terms of.

Magnitude of that upside, whether it's cap rates expected cap rates.

Crusher could be more than you expected last quarter.

Okay. It just seems like Youre your search.

The value, but the potential value creation of our base of attacks or towards curious com.

Competition, just want to hear some thoughts.

What's changed quarter to quarter.

Yes.

Thank.

There is maybe <unk> <unk> to the trend for sure that cap rate.

At the Conservative end of things just to be fair to everyone.

Probably a moment and we are seeing very meaningful cap rate movement in all of our markets. So just call that out we still have a chunk to go in the UK, which is the balance of that of the.

Non aspen portfolio that will get marked as well so theres, some pretty discrete elements to that but broadly speaking.

Further 10 basis points.

It may be a little bit more depending on where things end up at year end second.

Second one is development again with both developments completing in the pipe getting restocked and with some of the new things like airports, we see a meaningful.

And I think we're on the cusp of completing a number of big initiatives.

Okay, Great color. Thanks, Paul My last question just to.

Hey, good unit growth okay. Okay.

You mentioned on the call the normalized vehicle per unit 92.

Sure.

That's been pretty consistent if you go back to <unk>.

Q2 of <unk>, it's kind of been at that level.

Doctors.

That intervening time period.

With the pressure on that number so for example, the DB breakdown.

Got it.

And the good shape post UK health care funds.

And the currency has been a bit tougher as well, which clearly can't predict going forward.

But with.

With the amount of repositioning of the portfolio that you've accomplished.

And what's the Delevering likelihood now like where.

We're in the priority scale does kind of inching up that site to site.

This growth normalized April.

Greg when you will go into 2022.

Yes, it's an excellent question and maybe go back and look at that sort of on a constant leverage basis that 92 might have been over $1. If I'm recalling show so.

Eight tenths of Delevering and that number if we want to say it like that plus some of the other effects that you mentioned around a little bit of a.

Negative FX environment on average, it's not huge but it's around the edges. I think looking ahead, we would see similar levels of growth in the next couple of years comfortably.

Accretion on top of that.

Asset level returns so.

That's the theme for us over the next couple of years, and we really do hope to be able to unlock pretty meaningful <unk> growth, but certainly heading up above 92.

I would expect over a couple of years heading up over one dollar would be a pretty reasonable target.

Okay.

Thanks, Bob.

Yes.

Ladies and gentlemen, as a reminder, if you would like to ask a question. Please press star one now.

Mr Della Lana there are no further questions from our phone lines, Sir I'll turn the conference back over to you.

Okay, well, thank you everyone and on behalf of northwest Health care properties. We appreciate your time and listening into our first quarter 'twenty one earnings call have a great day. Thank you.

Ladies and gentlemen, this concludes the conference call for today, we thank you for participating and ask.

That you. Please disconnect your lines.

Sure.

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