Q4 2023 NorthWest Healthcare Properties Real Estate Investment Trust Earnings Call
Operator: Good morning, ladies and gentlemen, and welcome to the Northwest Healthcare Properties Real Estate Investment Trust fourth quarter 2023 consult and conference call. At this time, all lines are in a listen-only mode.
Good morning, ladies and gentlemen, and welcome to the northwest healthcare properties to real estate investment Trust fourth quarter, 2033, defaults and conference call.
At this time all lines are in a listen only mode.
Operator: 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. This call is being recorded on Friday, March 15, 2024. I would now like to turn the conference over to Alisa Barry, Investor Relations, from NorthWest. Please go ahead.
Following the presentation, we will conduct a question and answer session. If at any time. During this call may require immediate assistance. Please press star zero for the operator. This call is being recorded on Friday March 15 2024.
I would now like to turn the conference over to Alisa, Barry Investor Relations from Northwest. Please go ahead.
Alisa Barry: Thank you, operators. Good morning, everyone, and welcome to NorthWest's fourth quarter and 2023 annual financial results conference call. Thank you for joining us today. This call is being recorded, and a replay will be available on our website in due course.
Thank you operator, good morning, everyone and welcome to northwest fourth quarter, and 2023 annual financial results Conference call. Thank you for joining US today. This call is being recorded and a replay will be available on our website in due course today's discussion includes forward looking statements as always we want to caution you that.
Alisa Barry: Today's discussion includes forward-looking statements. As always, we want to caution you that such statements are based on management's assumptions and beliefs. These forward-looking statements are subject to uncertainties and other factors that could cause actual results to differ materially from such statements. Please see our public filings on CDAR Plus, including our MD&A and annual information form, for a discussion of these risk factors. Presenting on today's call are Craig Mitchell, our CEO; Mike Brady, President and General Counsel; and Karen Martin, Interim CFO. I will now turn the call over to Craig for his opening remarks. Thanks, Alicia. Good morning, everyone.
Statements are based on management's assumptions and beliefs.
Forward looking statements are subject to uncertainties and other factors that could cause actual results to differ materially from such statements.
Please see our public filings on SEDAR, plus including our MD&A and annual information form for a discussion of these risk factors presenting on today's call are Frank Mitchell, our CEO, Mike breeding President and General Counsel and Karen Martin interim CFO I will now turn the call over to Craig for his opening remarks.
Okay.
Thanks, Alicia good morning, everyone glad to be on the call.
Craig Douglas Mitchell: Glad to be on the call. Northwest has undergone significant changes over the last seven months. We firmly believe in the resiliency and outlook of the healthcare real estate sector, with an institutional quality portfolio and newly appointed management for being proactive in strengthening our business. In August 2023, we identified opportunities for value creation and implemented a plan, firstly, to refinance several near-term 2023 and 2024 debt maturities. Secondly, to sell select assets, including non-core investment properties and investment in the series of Australia Unity, to use those proceeds to reduce certain high-cost debt. Thirdly, to reduce and review our monthly cash deductions to ensure that it is sustainable.
Northwest has undergone significant changes over the last seven months.
And we believe in the resiliency and outlook on the healthcare real estate sector.
With institutional quality portfolio and our newly appointed management team, we've been proactive in strengthening our business.
In August 2023.
And find opportunities for value creation and implemented the plan.
Seek to refinance several near term 23, and 2024 debt maturities.
Secondly to sell select assets, including noncore investment properties and investment in the series of its trailing unity to use those proceeds to reduce certain high cost debt.
Thirdly to reduce some review months' range tactic to seems to ensure that it is sustainable.
Craig Douglas Mitchell: And finally, further strengthening our governance and our management. We successfully completed all these initiatives in 2023. All in all, the latter half of 2023 was about strengthening our business and our balance. As demonstrated in our financial results, we have an exceptional healthcare real estate portfolio that is performing well in a sector that is positioned for resilience and growth. It is important to highlight that the challenges that we have faced as a company over the past year stem from rising interest rates, which have resulted in a strain on our balance sheet.
And finally further strengthening our governance and our management.
We successfully completed all these initiatives in 2020 is great.
All in all the latter half of 2023 was about strengthening our business and our balance sheet.
As demonstrated in our financial results, we have an exceptional healthcare real estate portfolio.
Well in a sector that is positioned for resilience and growth.
It is important to highlight some of the challenges we face as a company of the past year.
Then from rising interest rates, which resulted in a strain on our balance sheet.
Craig Douglas Mitchell: To strengthen our financial position, we divested assets valued at over $450 million, including non-core investment properties and investment in Australian unity, with the proceeds used to pay down debt. Furthermore, we amended, extended, and repaid total debt facilities valued at over $1.4 billion with 2023 and 2024 maturities. These initiatives underscore our commitment to fortifying our financial positions for sustainable growth. The REIT's strong operating performance is demonstrated by Sane Property's NOI for Q4 2023, which increased by over 4% on a comparable prior year period. The Property Portfolio performed well, with 83% of the Property Portfolio rent indexed through inflation and an 87% lease renewal rate supported by a long lease of 13.3 years. Strong operating results came from all regions in the quarter, with same property NOI growth coming from the Americas at 2.5% positive, Europe at positive 3.2%, and Australasia at positive 6.5%.
To strengthen our financial position, we divested the assets that it is a $450 million, including noncore investment properties and investment is trending unity with the proceeds used to pay down debt.
Furthermore, we amended extended and repay total the exclusivity valued at over $1 4 billion with 2023 and 2020 maturities.
These initiatives underscore our commitment to fortify our financial position for sustainable growth.
The rates strong operating performance is demonstrated in same property NOI for Q4 2023.
Which has increased by over 4% on a comparable prior year period.
Property portfolio performed well.
<unk> to say of the property portfolio rents indexed to inflation.
And an 87% leased renewal rates supported by a long while up 13 three years.
Strong operating results came from all regions in the quarter.
With same property NOI growth coming from the Americas at two 5% and a positive Europe positive three 2% in Australasia, a positive six 5%.
Craig Douglas Mitchell: My priority as CEO has been to enhance our investor engagement. This means strengthening our relationships with existing investors and building new relationships. We still have a lot of work to do here, but I assure you that building trust and confidence in NorthWest is at the forefront of our agenda. We're all committed to better transparency and reporting clarity as it relates to our overall business and strategic plans. In summary, we believe our solid operating performance, combined with strong overall sector fundamentals, positions us for sustainable growth. And now, I'd like to introduce our president, Mike Brady, to provide an update on our strategic initiatives during the quarter. Over to you, Mike. Thanks, Craig. And good morning, everyone.
My priority at CDI has been to enhance our investor engagement efforts.
This means strengthening our relationships with existing investors and building new relationships.
We have still a lot of work to do here, but I assure you that building trust and confidence in northwest is at the forefront of our agenda.
We are all committed to better transparency and reporting clarity as it relates to our overall business and strategic plans.
In summary, we believe our solid operating performance combined with strong overall sector fundamentals.
This is the right for sustainable growth.
And now I'd like to introduce our president Mike <unk> to provide an update of our strategic initiatives during the quarter over to you Mike.
Thanks, Greg and good morning, everyone I'll start by providing an overview of our noncore asset sales in 2023, we successfully divested properties totaling $360 million with $162 million transacted in Q4 alone.
Michael Brady: I'll start by providing an overview of our non-core asset sales. In 2023, we successfully divested properties totaling $360 million, with $162 million transacted in Q4 alone. In 2024 year to date, we have sold five additional properties at a fair value of $41 million. Net proceeds were used to repay property level debt, corporate credit facilities, and for general trust purposes. Additionally, during 2023, we sold or redeemed approximately 63% of our investment in unlisted securities, generating $134 million, and this will continue in 2024 to date with further redeemed unlisted securities worth $15 million. Again, net proceeds from these transactions were allocated towards repayment of asset-specific corporate variable rate debt, as well as for general trust purposes.
In 2024 year to date, we have sold five additional properties at fair value of $41 million.
Net proceeds were used to repay property level debt corporate credit facilities and for General Trust purposes.
Additionally, during 2023, we sold or redeemed approximately 63% of our investments in unlisted securities generating a $134 million and continue 2024 to date with further redeemed unlisted securities worth $15 million.
Again net proceeds from these transactions were allocated towards repayment of asset specific corporate variable rate debt as well as for general Trust purposes.
Michael Brady: In 2023, for the third year in a row, the REIT and Vital Healthcare Property, which we manage, participated in the GRESB process, the global ESG benchmark for assessing real estate and infrastructure investment. In the global listed sector, for both healthcare standing investments and healthcare development categories, Vital and NorthWest placed first and second, respectively. In the global sector of healthcare development, which includes listed and unlisted companies, Vital and NorthWest came in first and third place globally.
In 2023 for the third year in a row, the REIT and vital health care property, which we manage participated in the <unk> process. So global ESG benchmark for assessing real estate and infrastructure investments.
In the global listed sector for both healthcare standing investments in healthcare development categories. It's vital in northwest placed first and second respectively.
In the global sector healthcare development, which includes listed and unlisted companies vital in northwest came in first and third place globally.
Michael Brady: The REIT maintained its four-star ESG rating for the development benchmark for the second consecutive year, solidifying its position within the top 20% of global real estate entities in this category. This is a significant achievement for the REIT and provider. In terms of governance, two new trustees were appointed to the board in January, Bobby Julian and Graham Garner.
The REIT maintained its four star ESG ratings for the development benchmark for the second consecutive year.
Solidifying our position within the top 20% of global real estate entities in this category.
This is a significant achievement for the REIT and for vital.
In terms of governance, two new trustees were appointed to the board in January Bobby Julien and Graham Gardener, We welcome Bobby and Graham and appreciate their contributions to the board.
Michael Brady: We welcome Bobby and Graham and appreciate their contributions to the board. Concurrently, we announce the retirement of Robert Barron from the Board of Trustees. On behalf of everyone at NorthWest, we thank him once again for his years of service with the region.
Concurrently we announced the retirement of Robert Burns from the board of Trustees on behalf of everyone at northwest we thank him once again for his years of service with the REIT.
Karen Lynne Martin: I'll now turn it over to Karen to share our financial highlights. Thanks, Mike. Hello, everyone.
I'll now turn it over to Kieran to share our financial highlights.
Thanks, Mike Hello, everyone.
Karen Lynne Martin: I'll begin with the operating highlights for the corridor. For the three months and year ended December 31st, 2023, the REIT delivered another strong operating performance, Operating Results and the key highlights to follow. Revenue from investment properties increased 4.1% in Q4 of 2023 and 12.3% for the year, primarily due to lease indexation and the full year impact of our 2022 acquisition. Rental indexation contributed year over year to a same property NOI increase of 4% in Q4 2023 and 3.7% for the full year.
I'll begin with the operating highlights for the quarter.
For the three months and year ended December 31, 2023, the REIT delivered another strong operating.
Operating results in our key highlights to follow.
Revenue from investment properties increased four 1% in Q4 of 2023 and 12, 3% for the year, primarily due to lease indexation in a fully a full year impact of our 2022 acquisitions.
So on taxation contributed year over year to same property NOI increase of 4% in Q4, 2023, and three 7% for the full year.
Karen Lynne Martin: Strong operating performance was underpinned by a long-term lease maturity profile with a weighted average lease expiry at 13.3 years, portfolio occupancy rate of 97%, and rent collection rate of 99%. In 2023, the REIT was impacted by central banks globally increasing interest rates. This has resulted in higher interest rate expense representing an effective weighted average interest rate of 6.2% as at December 31, 2023, compared to 5.35% as at December 31, 2022. Combined with adjustments to investment property fair values, the REIT had a net loss for the three months and year ending December 31st of $189 million and $481 million, respectively.
Strong operating performance was underpinned by long term lease maturity profile with a weighted average lease expiry at 13, three years portfolio occupancy rate of 97% and rent collection rate at 99%.
And 2023, the rate was impacted by central banks globally, increasing interest rates.
This has resulted in highest or higher interest rate expense, representing an effective weighted average interest rate of six 2%.
At December 31, 2023, compared to $5 three 5%.
And December 31 2022.
Combined with adjustments and that's some property fair values. The REIT had a net loss for the three months and year, ending December 31 of $189 million and $481 million respectively.
Karen Lynne Martin: This is compared to a net loss in Q4 of 2022 of $136 million and a net income of $126 million for the full year 2022. Adjusted Funds from Operations, AFFO, for Q4 2023 was $0.13 per unit. This compares to $0.17 per unit in 2022, resulting in AFFO payout ratios in Q4 of 67% and a, 2023 and 117% in Q4 of 2023. It is worth noting that the $0.13 per unit includes premiums on interest rate caps that expired during the first quarter of 2024, and this contributed $0.04 per unit to AFFO during the fourth quarter of 2023. On November 27, 2023, holders of NorthWest's $125 million Series G Convertible Unsecured Subordinated Ventures were approved to extend the maturity date of the debentures from December of 2023 to March 2025. As of December 31, 2023, the REIT had mortgages and loans payable of $3.6 billion, down from $3.8 billion at the prior year end.
This is compared to a net loss in Q4 of 2022 of $136 million and net income of $126 million for the full year 2022.
Adjusted funds from operations <unk> for Q4, 2023 was <unk> 13 per unit. This compares to <unk> 17 per unit in 2022.
<unk> and <unk> payout ratios in Q4 up 67%.
<unk> and <unk>.
2023, and 117% in Q4 of 2022.
It is worth noting that the 13th per unit per unit includes premiums on interest rate caps that expire during the first quarter of 2024, and that's contributed four cents per unit to <unk> during the fourth quarter of 2023.
On November 27th 2023 holders for northwest 125 million series G convertible unsecured subordinated debentures.
<unk> to extend the maturity date of the debentures from December 2023 to March 2025.
As of December 31, 2023, the re had mortgages and loans payable of $3 6 billion down from $3 8 billion at the prior year end.
And the first three months of fiscal 2024, the read is extended approximately 28% of its non mortgage debt maturing in 2024 and 2025.
Karen Lynne Martin: In the first three months of fiscal 2024, the REIT extended approximately 28% of its non-mortgage debt maturing in 2024 and 2025. This included the extension of $125 million of its revolving corporate debt from 2024 to 2025 and $172 million of its debt from 2025 to 2027. And earlier this week, Vital Trust extended the weighted average term to maturity to approximately four years on $430 million in term debt, of which $177 million was maturing in 2020. The extensions are at the same weighted average interest margin as current financing.
This includes the extension of $125 million of its revolving corporate debt from 24 to 25, and 172 million average debt from 2025% to 2027.
And earlier this week vital trust extended the weighted average term to maturity on our product to approximately four years on $430 million in term debt of which $177 million were maturing in 2025.
The extensions are approximately at the same weighted average interest margin as current financing.
Looking ahead, we are encouraged by the significant progress made to date and the overall performance of our real estate portfolio I will now pass it back to Craig's first closing remarks great.
Alright.
Thank you Karen while the strategic review is underway and until such time as we have updates to share on that front management has recognized key action items that can be taken in the near term and remains committed to building a more robust sustainable and profitable business.
Craig Douglas Mitchell: Looking ahead, we are encouraged by the significant progress made to date and the overall performance of our real estate portfolio. I will now pass it back to Craig for his closing remarks. Craig, Thank you, Karen.
Looking ahead.
Through 2024 and into 2025.
Our focus will.
We will be firstly maximize value for our unitholders secondly continued service embedded value within our portfolio.
Craig Douglas Mitchell: While the strategic review is underway, and until such time as we have updates to share on that front, management has recognized key action items that can be taken in the near term and remains committed to building a more robust, sustainable, and profitable business. Jokingly Haired, to 2024 and into 2025. Our focus will be, firstly, to maximize value for our unit holders and, secondly, to continue to service embedded values from within our portfolio. Thirdly, to continue to strengthen our executive team while at the same time managing our G&A.
Thirdly to continue to strengthen our executive teams while at the same time managing our G&A.
Then continued and includes our investment in engagement.
This may become an entrance into institutional quality, great with a sustainable financial profile and our balance sheet capable of withstanding interest rate changes and other uncertainties no matter, what the economy throws at us.
And finally continue should simplify geographic footprint.
Please efficiencies in all our markets. So we can leverage our expertise and do all the things we're really good at.
Northwest will remains committed to delivering value for all our unit holders.
And the decision to announce this quarter.
Craig Douglas Mitchell: Then, continue to improve our investment engagement, become an institutional quality reef with a sustainable financial profile and a balance sheet capable of withstanding interest rate changes and other uncertainties no matter what the economy throws at us. And finally, continue to simplify our geographic footprint and improve efficiencies in all our markets so we can leverage our expertise and do all the things we are really good at. NorthWest remains committed to delivering value for all our unit holders, and the decisions announced this quarter and the solid foundation we're building are essential steps to unlock the significant value of the REAP and maximize value for all our union holders. We believe NorthWest offers unparalleled access to a diversified healthcare portfolio of high-quality and difficult-to-replicate assets.
The solid foundation, we ability our central sticks to unlock the significant value of the rate and to maximize value for all our unit holders.
We believe northcliffe offers unparalleled access to a diversified healthcare portfolio of high quality and difficult to replicate assets.
We believe there is significant value embedded in the late <unk>.
We will continue to crystallize value, where we believe it makes sense.
We are excited about the future of northwest and we thank you for your support.
And with that I'd now like the operator to open up call for questions. Thank you.
Thank you, ladies and gentlemen, we will now conduct the question and answer session. If you have a question. Please press star followed by the number one on your such don't phone you have.
Here at three eight on prop knowledge and your request.
Operator: We believe there is significant value embedded in the REIT, and we will continue to extract value where we believe it makes sense. We're excited about the future of NorthWest, and we thank you for your support. And with that, I'd now like the operator to open up and call for questions. Thank you. Thank you. Ladies and gentlemen, we will now conduct the question and answer session. If you have a question, please press star followed by the number 1 on your touchtone phone. You will hear a three-tone prompt acknowledging your request. If you would like to cancel your request, please press star 2. Please ensure you lift the handset if you are using a speakerphone before pressing any keys.
I would like to cancel your request please press star two.
Please ensure you lift the handset if you're using a speaker phone before bashing any keys.
Your first question comes from the line of sight around three divest from core Mark Securities. Your line is now open.
Thank you operator.
Good morning, everybody.
The northwest.
I think there is a good quarter and you guys.
You guys have already accomplished a lot.
Since we last spoke.
My first question is I don't think dispositions.
Can't this business, Jonathan nomadic hustle PA.
Can you give us some color on the geography geographic.
The geography.
Contribution of each of these dispositions between like Brazil Medica in Ocala.
Sairam Srinivas: Your first question comes from the line of Sairam Srinivas from Cormark Securities. Your line is now open. Thank you, operator. Good morning, everybody. And to Team NorthWest, congratulations.
Alright, so I might just hand over to Mike to answer that question.
Yes, hi.
So the brake.
<unk> is a four in the Americas.
And.
Then in Australasia.
No. Mike My question was more in terms of between the Americas like bought a modem, Brazil versus the U S versus Canada.
Craig Douglas Mitchell: I think it was a good quarter, and you guys have already accomplished a lot since we last spoke. My first question is around the dispositions, just looking at the dispositions done in America so far, can you give us some color in terms of the geographic, What is the geographic contribution of each of these dispositions between Brazil, America, and Canada? All right, sure. I might just hand over the mic to answer that question.
Uh huh.
Within the U S and Canada.
Alright, and can you speak up on journeys.
You know the the kind of investors that are buying these properties are they more than vessels country cut out the user centric users who are buying these assets.
They are.
Institutional investors for the most part.
In one instance, a local developer.
Michael Brady: Yes, hi. So the breakout is four in the Americas and 10 in Australasia. My question is more in terms of the Americas, like were they more in Brazil versus the U.S. versus Canada?
Alright.
I'll turn it back thanks, so much.
Your next question comes from the line of Spammy beer from RBC capital markets. Your line is now open.
Michael Brady: within the U.S. and Canada. All right. And can you speak about, in general, the kind of investors that are buying these properties? Are they more investor-centric, or are they user-centric users who are buying these assets?
Thanks.
All right.
Can we can you maybe just talk about it turns on the disposition outlook for the courses over the next few months or over the course of this year, how do you see that cadence sort of trending.
Michael Brady: They are institutional investors for the most part and, in one instance, a local developer. All right, I'll turn it back. Thanks so much.
And then any further updates with respect to.
Whether that May include more U S asset sales more Canada or Brazil.
Pammi Bir: Your next question comes from the line of Pammi Bir from RBC Capital Markets. Your line is now open. Thanks. Good morning.
Brazil or anything.
You can share on that front.
Well thanks for that question I'll go first and then hand over to Mike.
Well I think the first thing we are very focused on dispositions.
Craig Douglas Mitchell: Can we maybe just talk about the disposition outlook for the course of, you know, over the next few months or over the course of this year? How do you see that cadence sort of trending? And then any further updates with respect to, you know, whether that may include more US asset sales, more Canada or Brazil, or anything you can share on that. Look, well, thanks for that question. I'll go first and then hand it over to Mike.
Of noncore assets is probably the first key point.
Secondly, we.
We're doing that.
As we speak.
And we're taking a position in a very conservative position that were only making announcements.
Where we have dispositions, which are all conditions are waived and often.
We're looking at dispositions in the Americas for looking.
Craig Douglas Mitchell: I think the first thing is that we are very focused on dispositions of non-core assets. That's probably the first key point. And secondly, we're doing that as we speak. And we're taking a position, and a very conservative position, that we're only making announcements where we have dispositions where all conditions are waived and are affirmed. We're looking at dispositions in the Americas, we're looking in the United States, we're looking in Europe, and we're looking in Brazil. So in all markets, we're looking at active opportunities. Mike, is there anything else to add to that?
And in America, we're looking in.
In Europe, and we are looking in Brazil in all market.
Looking active ops changes.
Mike is there anything else to add to that.
No I think that covers it well.
Okay, and then maybe just on the Australian unity units.
Do you expect to have exited.
The balance of the ollie's.
In the first half of this year or this quarter at all or just any update there.
Yes.
With the disposal of 63% of the portfolio as at December.
Michael Brady: No, I think that covers it well. Okay, and then maybe just on the Australian Unity units, do you expect to have, you know, exited the balance of the holdings in the first half of this year or this quarter at all? Or just any update that's on there?
In the first two months, we dispose of them all of 7%. So we're now 70% disposed.
About 60 million left.
We would expect that to be the first half of this calendar year.
Okay.
And then just on the I want to come back to the premiums the $11 million at I guess the premiums on those interest rate.
Michael Brady: Yes, so we've disposed of 63% of the portfolio as at December. In the first two months, we disposed of another 7%, so we're now 70% disposed. We've got about $60 million left. We would expect that to be in the first half of this calendar year. Okay. And then just on the, I want to come back to the premiums, the $11 million is, I guess, the premiums on those industries that you adjusted for and have to pull this quarter. Can you just explain the rationale there for that adjustment? And then, and then any code you can share in terms of, you know, what the implications are for Q1. Because I think, as you mentioned, they expired, and I want to get a sense of what that looks like.
Adjusted for an ethical this quarter.
Just explain the rationale there for.
For that adjustment and then and then just any color you can share in terms of what the implications are for Q1, because I think as you mentioned the expired. So just wanted to get a sense of what that looks like.
Yes, sure maybe I might just kind of scanning to answer that question.
Sure Yeah, we actually mentioned it on the Q.
Q3 call as well and when you look at the premiums we are paying the premiums over time, if we had bought the caps and pay for it upfront they would've been adjusted in the ASI flow so continuing that when we're paying over time.
Karen Lynne Martin: Yes, sure. Maybe I might just hand over to Karen to answer that question. Sure. We actually mentioned it on the pre-Q3 call as well. When you look at the premiums, we are paying the premiums over time. If we had bought the caps and paid for them up front, they would have been adjusted in the AFFO.
It was adjusted into the anti follow all of the caps have expired as of February.
They were running about four four cents per quarter.
We replaced those with forward, starting swaps, which will kick in when the caps expire.
Okay.
Around that just to round that out so if you look at our results.
Karen Lynne Martin: So continuing that, when we're paying over time, it was adjusted into the AFFO. All of the caps have expired as of February. They were running about $0.04 per quarter, and we replaced those with forward starting swaps which will kick in when the caps expire. Okay, around that, just around that out. So if you look at our results, you know, stripping out those caps, we're sitting at nine cents per quarter, which is consistent with key. We mentioned that, perhaps in key three, nine cents as well, probably the key underlying number to be focused on. Yeah, yeah, so that force that adjustment disappears in Q1.
Stripping out those caps were sitting at nine cents per quarter, which is consistent with Q3.
<unk> got some <unk> nine as well, it's probably got the key underlying nominally to be focused on.
Yes, so that <unk> that adjustment disappears.
Q1 effectively.
That's exactly right, yes, okay.
Okay.
And then just last for me.
The.
The lease in Brazil with that hospital.
A bar a hospital I think it's coming due just any any thoughts.
What what that May look like or any any you're expecting it to get renewed or anything.
Yes, Amit.
I take that I was actually in San Paolo.
In late January.
Craig Douglas Mitchell: That's exactly right. And then, just last one for me, the lease in Brazil with that hospital, the Sabara Hospital, I think it's coming due. Just any thoughts on, you know, what that may look like or any, are you expecting it to get renewed, or can you consider it? Yeah, so I might take that. I was actually in San Paolo in late January, and that Sabara is a 16-story hospital, a children's hospital, actually. It's a very full, very, very active hospital, good rent, good margins.
That that so bars, a 16 story.
The hospital.
Children's hospital actually eats.
Full very active hospital, good rent EBITDAR margins that expires the lease expires in October we are in active negotiations as we speak so I would expect there will be a renewal there yes.
Thanks, very much I'll turn it back.
Ladies and gentlemen, I've said in mind or should you have any questions. Please press star one on your telephone keypad.
Craig Douglas Mitchell: That expires, the lease expires in October, we are in active negotiations as we speak, so I would expect there will be a renewal there, yes. Thanks very much. I'll turn it back on. Ladies and gentlemen, as a reminder, should you have any questions, please press star 1 on your telephone keypad. Your next question comes from the line of Himanshu Gupta from Scotiabank. Your line is now open. Thank you, and good morning.
Your next question comes from the line of Himanshu Gupta from Scotiabank. Your line is now open.
Thank you and good morning.
So just looking at the debt maturities I'm.
I'm looking at this year first and then we'll get to the next year. So in 2020 food Oh when is the next large debt maturity now.
Himanshu Gupta: So just looking at the debt maturities, I'm looking at this year first, and then we'll get to the next year. So in 2024, when is the next large debt maturity? Actually, we've pushed that off now into 2025.
Actually we've pushed that off now into 2025.
So okay. So stretched balance of 2024, it's just normal course mortgage renewals, which we expect to.
Refinance.
As we go.
Karen Lynne Martin: So for the balance of 2024, it's just the normal course mortgage renewals, which we expect to refinance. Okay, so that $125 million is now pushed to March, I think, next year. So it's not much to renew this year from a debt perspective. That's correct. Okay, how do you talk about the next year, which is obviously a very big year. You know, if I look at America and Europe, almost $500 million plus. Do we have a sense here?
Okay. So that $125 million is all pushed too much I think the next year or so so it's not much.
To renew this year from a debt perspective.
That's correct.
Yes.
Next year, which is obviously you have a big year.
So if I look at you know Americas, and Europe, almost $500 million plus.
We have a sense is it company in the first half of the year or the second half of the next year.
The bulk of the maturities in 2025 are in the first half of the year.
And then to the ones you specifically mentioned they those facilities are asset backed and we do expect to be able to refinance one.
Craig Douglas Mitchell: Is it coming in the first half of the year or the second half of the next? The bulk of the maturities in 2025 are in the first half of the year, and for the ones you specifically mentioned, those facilities are asset-backed, and we do expect to be able to refinance. Craig here.
Okay. Okay.
I'm not sure. This is Craig Craig here. So this this is a big big focus of us.
So you can always seen in the first two months of this year, we find 228% of the non mortgage debt. So you're right. There's a big focus is not so much 2020 forward five is really the first half of 2025.
Craig Douglas Mitchell: So this is a big, big focus of us. You can already see in the first two months of this year, we've fined 28% of the non-mortgage debt. So you're right, our big focus is not so much 2024 expires, it's really the first half of 2025. Got it.
Got it okay and.
I'm glad you know for example, if I look at the Americas, the expiring rate of that is like each one might call it 8% plus.
Craig Douglas Mitchell: Okay. And Greg, you know, for example, if I look at the Americas, the expiring rate of debt is like 8.19, call it 8% plus. Do you think the renewal rate is likely to be higher than this or very similar to this? Can you talk about the margins embedded?
Do you think the then whether it is likely to be higher than this are very similar to districts.
Can you talk to the margins embedded.
That's right, yes. So you know like do you see like further headwind when you renew this debt next year based on what Youre seeing right now.
Craig Douglas Mitchell: That's right. Yeah. So you know, like, do you see any further headwinds when you renew this debt next year based on what you're seeing right now? So what we see right now, if I look at mortgage debt from a margin perspective, I don't see any material expansion of mortgage debt. Yes, we need to bring that leverage down a little bit. But if you look at Vitaway as an example, it's nearly $500 million worth of refinances we just did in the last two months, and they were existing margins. So the margins will be consistent.
So what we see right now if I if I look at.
Mortgage debt from a margin perspective, I don't see any material expansion.
Of mortgage debt, yes, we need to bring that leverage down a little bit, but if you look at by the way as an example, maybe 500 million worth of.
All our refineries, we just gauging the last two months and there are existing margins.
So the margins will be consistent we have a lot of <unk>.
Craig Douglas Mitchell: We have a lot of high-cost debt in 2025. You can see the way the average is near nearly 8%. That will be our focus for repayment of that high-cost corporate debt. All right, okay. And, you know, if we are not successful in selling the Brazil or US portfolio, do you see that, you know, Americas and Europe getting renewed at kind of similar margins? That's exactly right.
High cost debt in 2025, you can see the wide averages knee ice descent.
That will be a focus for timing of that.
High cost corporate debt.
Got it okay.
And you know.
If we are not successful in selling the Brazil or the U S portfolio.
So do you see that you know the Americas and Europe, getting the new kind of similar margins as you mentioned.
That that that's that's exactly right.
Craig Douglas Mitchell: Okay, okay, fantastic. Okay, so thanks for that. And maybe just turning to the same property and why growth is, I think, pretty strong this year. All right, so my question is that, especially in your U.S. portfolio, are there any tenants on the watch list, or how are your tenants performing in your U.S. portfolios? You know, our tenants are performing well. You know, if you look at our rent collection, we're at 99% for the year and the quarter. So, good rent collection.
Okay, Okay fantastic.
Okay. So thanks for that and maybe just turning to same property NOI growth I think pretty strong this year.
Almost a dozen Copa severe so my question is that especially in your U S portfolio.
Are there any tenants.
On the watch list or how are your tenants performing in the U S portfolio.
Yeah Bob.
Tenants are performing well.
If you look at our rent collection, we're at 99% for the year.
In the quarter so.
Good rent collection.
Craig Douglas Mitchell: You know, we're only got 4.2% of the portfolio expiring in calendar 2024, and we talked about Sabara lease being a big part of that. But, you know, we are seeing, you know, increasing profitability across the business at different speeds. I'd say, you know, the UK's performing very well.
We've only got four 2% of the portfolio expiring in calendar 2024.
And we talked about some of our lease was a is a big part of that.
Again, we are seeing.
<unk> seen increased profitability.
Our cost of business a different stage I'd say on the U K.
Craig Douglas Mitchell: Australia, you know, is coming off a low base, and we're getting good collections out of our US portfolio. Particularly focused on our US portfolio are more medical office buildings rather than hospitals, and again, good collections in Brazil as well, if possible. Okay. And maybe just one last one. I think in January, some of those class B units were converted into the, you know, the trust unit. Any, any color on that?
Very well, Australia is coming off a low base.
And we're getting good collections out of our U S portfolio.
<unk> focus in our U S portfolio is more medical office buildings rather than.
Hospitals.
And again, good collections in Brazil as well.
Awesome Okay.
Maybe just one last one.
I think in January.
The class B units were converted into the you know the.
Plus units.
Any any color on that.
Michael Brady: May Mike maybe just talk about the simplification of that for us, but Hannah, do you mind? Okay, those Class B units were owned by one investor, and they exercised their rights pursuant to the Declaration of Trust, a very simple transaction to exchange Class Bs for regular trust units, and it does simplify things for us because that now extinguishes all outstanding Class Bs. Okay, fair enough. Okay, thank you guys, and I'll turn it back. Thank you. Thank you. Your next question comes from the line of Matt Cornack from National Bank Financial. Your line is now open. Hi all.
Maybe Mike maybe you just talk about it simplification of that for us, but Hello to you Mike.
Okay.
Those class B units were owned by one investor and they exercise their rights pursuant to the declaration of trust very simple transaction exchange Cosby's for regular trust units.
And it does simplify things for us because that.
Extinguishing all.
Outstanding Class B units.
Okay.
Okay. Thank you I'll turn it back.
Thank you.
Thank you. Your next question comes from the line of Matt Carnac from National Bank Financial Your line is now open.
Matt Cornack: Just in terms of the organic growth outlook for 2024, I mean, it's safe to say you don't have much in the way of lease maturities, and it sounds like in the Americas, we're likely to see a renewal in Brazil. So occupancy should be somewhat stable. Can you give a sense as to, I mean, the spreads on new leasing seem to be in the 1% or so range, but where CPI or your expectation is, should we see similar growth to what we saw this year? Yes. So Matt,
Okay.
Just in terms of.
The organic growth outlook for 2024, I mean is it safe to say.
Don't have much in the way of lease maturities and it sounds like in the Americas.
To see a renewal in Brazil.
So occupancy should be somewhat stable can you give a sense as to the.
The spreads on.
New leasing it seem to be in the 1% or so range.
Where CPI or your expectation is should we see similar type growth what we saw this year yet.
Craig Douglas Mitchell: Craig here, you're right, not a lot of leases by profile, but we saw very high retention in our Canadian portfolio at 83%, the leasing spreads, you know, market equals passing effectively, so you're not going to see any positive or negative reversion on the leasing spreads. So you know, I think we'll see indexation, indexation of Aussie is tapering down from 23 to 24 as the economy slows, but you're still going to get that positive growth. So I still expect it to be, you know, north of 3%. And it's not a huge driver because of the nature of your leasing profile, but is your view that the market, May, if indexation comes down, could potentially outstrip the growth and you'd get more on turnover leasing, or should we expect that the portfolio is going to kind of track inflation from a growth standpoint?
Yes.
<unk>.
Craig Hey, Youre right not long lease expiry profile.
We saw very high retention in the Canadian portfolio to 83% the leasing spreads.
Market growth path, and you're effectively not going to see any possible old Navy cruisers.
And on the leasing spreads so yeah, I think we will see you know.
Indexation.
Indexation of all of his.
It is tapering down from 23 to 24 as the economy slows, but you're still going to get that positive growth.
So I still expect it to be you know more.
3%.
And it's it's not a huge driver because of the nature of your leasing profile, but is your view that market rents.
Hey.
Indexation come down essentially outstrip the growth in you'd get more on turnover lead thing or should we expect that the portfolio.
Kind of track in line with inflation from a growth standpoint, I think I think we need to just make the assumption that tracks in line with inflation.
Craig Douglas Mitchell: I think we need to just make the assumption it tracks in line with inflation, Matt. Okay, and then just on capital allocation and some of the decisions around what to sell, are there any major kind of tax considerations that would limit you in terms of, What would be a logical? Portfolio or properties to sell, and, I mean, how much of that figures into what you can ultimately do at this point? No, there's no major limit to tax and affecting our tax deferred.
Okay.
And then just on capital allocation and some of the decisions around.
What to sell are there any major kind of tax considerations that would limit you in terms of.
What would be a logical.
Portfolio, our properties to sell it.
I mean, how much of that kickers into what you can ultimately do at this point.
No there's no major limiter to tax and affecting our tax deferred.
Craig Douglas Mitchell: Of course, you know, we do manage that carefully, and we do take that into consideration, but I don't see that as a limit to anything anyway. Okay, great. Thanks. Again, a side reminder, if you have a question, please press star 1.
Of course, we do manage that carefully and we do take that into consideration, but I don't see that as a limiter in any way.
Okay, great. Thanks, guys.
Again, I say reminder, if you have a question. Please press star one.
Operator: There are no further questions at this time. Oh, we have one question from David Ellis from Research Capital. Your line is now open. If you strip out the interest rate cap, David, it's about 100%. So $0.09 a quarter, if you strip out that $0.04 interest rate cap we talked about, it runs at 100% of AFS. And how do you see that in the future, going into... Look, I see it's coming off a low base. You know, we need to repay high-cost debt that will drive earnings per share growth, and that will reduce our pay rate ratio to be below 100%. And do you have a policy on where you want it to go or where you think it should go? Look, yeah, it really should be sitting in that 80 to 100% range where the policy should be.
There are no further questions at this time, but we have one question.
From David Ellis from research capital or Lane is now open.
I have missed this at the beginning but what's your payout ratio and your dividend now.
If you strip out the.
To strike that David is about a 100% so nine not nine cents a quarter. If you strip out that four cents an interest rate cap, we talked about which ones are 100% of our control.
And how do you see that in the future going into the future.
Look I see us coming off a low base you know we need to retire high cost debt that will drive them at least to shake laws and that.
Reduce our payout ratio to be below 100%, it's Alex here.
And do you have a policy on.
Do you want it to go or where do you think it should go.
Yeah.
It really should be sitting in that.
80% to 100% range, where the policy should be.
Craig Douglas Mitchell: So we're at the higher end of that range. But then, on the flip side, we're also coming on a very low base, which is why we said that 36 cents annualized late last year and we brought it down to that level. And again, I may have missed that; are you still looking for any further asset sales? Yes, we are. We are still looking for further asset sales. We transacted nearly $500 million in the last year.
So where the irony that range, but then on the flip side. We're also telling you on a very low base, which is why we said in that 36 cents annualized and late last year, and we brought it down to that level.
And then again I may have missed that you're still looking for any further asset sales.
Yes, yes, we are.
We are still looking for further asset sales.
<unk> $500 million.
And the last last year.
Craig Douglas Mitchell: We're still looking to do that to reduce leverage and bring down that high-cost debt interest rates and also simplify our geographic footprint. Thank you very much. Thank you. There are no further questions at this time. I will now turn the call over to Craig Mitchell. Please continue.
We're still looking to do that to reduce leverage brings.
<unk> done that on cost.
Although interest rates and also some supply geographic footprint.
Thank you very much.
Thank you.
There are no further questions at this time I will now turn the call over to Craig Mitchell. Please continue.
Craig Douglas Mitchell: Well, thank you, everyone. I really appreciate everyone's time this morning. We've got a new investor update deck. Appreciate everyone needs any additional comments you want to make to that. We're very focused on increasing our transparency in our business and our financial numbers.
Well. Thank you everyone I really appreciate everyone's time this morning.
You would have noted that we've got a new investor update.
<expletive>.
Appreciate everyone needs any additional comments you want to make to that.
We're very focused on increasing transparency of our business and our financial numbers.
Craig Douglas Mitchell: And I appreciate everyone's time today. And thank you very much. Have a great day. Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect. www.NorthWestEconomy.com
Appreciate everyone's time today and thank you very much have a great day.
Ladies and gentlemen, this concludes today's conference call. Thank you for your participation you may now disconnect.
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