Q4 2024 NorthWest Healthcare Properties Real Estate Investment Trust Earnings Call
Speaker Change: Welcome to the knot that child care properties, REIT fourth quarter, and Iran. 'twenty 'twenty four earnings conference call. At this time all lines are in listen only mode. Following the presentation, we will conduct a question and answer session.
Speaker Change: At any time during this call you know quite immediate assistance. Please press Star then zero for an operator. This call is being recorded today Monday March 10, 2025, I would now like to turn the conference over to Mr. Barry Investor Relations for Northwest. Please go ahead.
Speaker Change: Thank you operator, Hello, everyone and welcome to northwest Q4, 'twenty 'twenty four and year end conference call. Thank you for joining US today. This call is being recorded and a replay will be made available on our website at triple W. Dot any W. H reaves Dot com today's discussion includes forward looking statements.
Speaker Change: 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 SEDAR, plus including our MD&A and annual information form for a discussion of these risks.
Speaker Change: Factors.
Please note all currencies referenced today are in Canadian dollars, unless otherwise stated presenting on today's call are Chris Mitchell, our CEO and Stephanie care Markovich our CFO.
Speaker Change: Brady, our president and Tracey with all our Chief operating Officer are also present and available for the question and answer session I will now turn it over to Craig for his opening remarks.
Speaker Change: Thank you Lisa.
Speaker Change: First I'd like to apologize for the line holding this call.
Speaker Change: I would've Pittsburgh resource constrained and couldn't make the deadline and they needed additional time to close out their file in her hand over to our new auditor Deloitte.
It was very frustrating besides a very least quickly as we had thought.
Speaker Change: It's a good message.
Speaker Change: To convey I'll go through that now.
Speaker Change: You will see that all the hard work of the last few years has started to translate into increased earnings and reflects a much stronger balance sheet.
Speaker Change: Q4 2024.
Speaker Change: Unit <unk>.
Speaker Change: <unk>, 9% over Q3, 2024 to 10 cents per unit supporting our payout ratio, which now stands at 92%.
Speaker Change: Strengthening our balance sheet through strategic asset sales and refinancing.
Speaker Change: Earning an investment grade credit rating this January.
Speaker Change: This investment grade rating cannot be underestimated as a pivotal time for us.
Speaker Change: Well, it's definitely will elaborate a series B debentures due on March 31 will be redeemed with existing liquidity.
Speaker Change: In an increasingly volatile world, we're seeing consistent and growing demand for health care across all markets, we operate in as.
Speaker Change: As populations migrate to Metro cities, where we're located we're seeing outsized need for medical facilities.
Speaker Change: We're also seeing a demand for medical classes.
Speaker Change: As a combined educational and clinical facilities with other facilities.
With the rising construction costs over the last few days, we've seen a reduction in healthcare developments.
This is just created more tendon and operator demand for our own assets and increase the economic value of our real estate.
Speaker Change: A great case study of this is our leasing.
Speaker Change: Our robust leasing activity drove exceptional real estate performance.
Speaker Change: The $2 4 million square feet leased in the last 12 months.
Speaker Change: And an 83% tenant retention rate occupancy remains strong at 96%.
Speaker Change: I can say.
Speaker Change: This year above that level, we're a market leader while stands at 13.6 years currently.
Speaker Change: These factors contributed to a consolidated four 9% same store property NOI growth compared to Q4 last year.
Speaker Change: Driven in part by contractual rent increases on nearly 97% of our leases.
Speaker Change: It was a very successful year for asset sales, we sold 52 properties at an average cap rate of six 5%.
Speaker Change: Writing, one 4 billion in gross proceeds.
Speaker Change: These funds were used to repay high cost debt strengthening our balance sheet is definitely will elaborate on this shortly.
Speaker Change: Our gross book value at 31 December was 6 billion using a blended cap rate of six 5%.
Speaker Change: Over the course of 'twenty 'twenty four we have soften our cap rates by approximately 50 basis points.
Speaker Change: It is our view that we're at the bottom of the cap rate softening cycle globally and underlying growth will come through in future periods.
Speaker Change: All this has resulted in a Q4 NAV being $8.55.
Speaker Change: As you and I are where we currently trade at a substantial discount to our NAV and our focus is on closing that gap.
Speaker Change: As part of a broader simplification strategy, we've now exited seven markets.
Speaker Change: But we're not done yet.
Speaker Change: We still have 200 million and planned noncore dispositions, including our investment in sure.
Speaker Change: And on that front in the last 24 hours.
Speaker Change: <unk> received an updated albeit from a consortium led by KKR at 49.4 P.
Speaker Change: Unit, which.
Speaker Change: Which is expected to be endorsed by the assure a board.
Speaker Change: The all cash offer is successful will result in a material gain of approximately 14 million on todays FX rates.
Speaker Change: Additionally, through asset sales and a disciplined approach to G&A, our global head count is down 20% to approximately 240 people leading to a meaningful reduction in expenses.
Speaker Change: We are continuing to make meaningful strides in ESG I'm very pleased to announce for the second consecutive year, we've been recognized as the global sector leader for ESG across developments the listed health care globally by grades.
Speaker Change: I was a 'twenty 'twenty four the new C suite team has said already extremely well.
And has and will continue to take us from strength to strength.
Speaker Change: Turning to Hill's Sky now or I, just suck Australia's second largest private hospital, operator northwest <unk> 12 of these hospitals.
Speaker Change: In one of our joint ventures.
Speaker Change: All the assets are located is strategically strong medical precincts.
Speaker Change: And as at February 2025, all rent was fully paid.
Speaker Change: For the three months beginning in March we provided a limited rent deferral.
Speaker Change: [noise] abatement deferral of $1 million to $2 million with an 8% coupon.
Speaker Change: This decision reflects our collaborative approach with Daiichi side.
Speaker Change: Importantly, all hospitals remain on long term leases are structured ahead of any bank debt.
Speaker Change: And you saw recently reached new revenue contract increases with all its private health insurers.
Speaker Change: Given the critical role of these hospitals gains correct.
Speaker Change: Given the critical role of these hospitals in Australia as health care system, we continue to work closely with all stakeholders.
Speaker Change: Finally, when I see a transition process, we're working with a global recruitment fan and as expected. We are seeing strong interest in the role I remain on track to step down in the first half of 2025 and <unk>.
Speaker Change: During a seamless transition and appropriate handover.
Speaker Change: We will keep the market fully informed.
Speaker Change: With that I'll hand, it over to Stephanie to provide more details on our financials.
Stephanie: Thanks, Craig and good afternoon, everyone.
Stephanie: The REIT delivered consolidated same property net income net operating income of $73 5 million, which was four 9% higher than Q4 2023, driven by inflationary adjustments on right.
Stephanie: Turning to life capital spend and improved recoveries, reflecting steady and predictable growth in our underlying leases.
Stephanie: Q4, 'twenty 'twenty four F. F O per unit was 10 cents. This compares to 15 cents per unit in Q4, 2023, however, excluding the impact of interest rate caps that expired earlier. This year F. F. O N Q4, 23 was 10 cents per unit in line with Q4 2024.
Stephanie: Adult.
Stephanie: Q4, 'twenty 'twenty four <unk> per unit was 10 cents as well, which is why is that per unit higher than both Q3 and Q4 of last year, excluding the impact of the previously mentioned expired interest rate cap.
Stephanie: They reached an <unk> payout ratio for the quarter with 92% as compared to 100% in Q3 and 102% in the fourth quarter of last year.
Stephanie: The increase in F. F O per unit is driven by improvements in interest expense and G&A, partially offset by lower third party management fees.
Stephanie: General and administrative expenses, including excluding noncash compensation decreased by 2 million compared to Q4 2023.
The decrease over the prior year period is primarily a result of the reads continued efforts to improve operational efficiency by streamlining and simplifying operations and reducing cost, including a reduction in workforce throughout 'twenty 'twenty, four which saw head count decreased from 307 at the end of 2023 to 243.
Stephanie: Hey.
Stephanie: The REIT G&A cost ratio for Q4 was five 8%, which is an improvement of approximately 70 basis points over Q3, 'twenty 'twenty, four and almost 150 basis points over Q4 2023.
Stephanie: We expect the G&A the REIT G&A cost ratio to improve further to approximately five 5% by the end of 2025, driven by our ongoing efforts to streamline operations and enhance efficiency.
Stephanie: Interest expense in Q4, 2024, with $36 9 million as compared to $44 3 million in Q3, and $57 1 million in Q4 of 2023.
Stephanie: The decrease relative to prior year and prior quarter and interest expense is attributable to the reduction in total debt outstanding and a lower weighted average cost of debt.
Stephanie: The 500 million bond offering completed on February 18th 2025 at a blended rate of five 3% enabled the repayment of higher cost debt with a weighted average rate of approximately seven 5%. After factoring in the repayment of series G on March 31st.
Stephanie: This refinancing is expected to generate substantial interest savings beginning in Q2 2025.
Stephanie: Yeah.
Stephanie: Gross management fees for Q4, 'twenty 'twenty four were $8 6 million as compared to $11 million in Q3, 24, and $12 3 million in Q4 23.
Stephanie: The decrease in management fees as compared to prior periods is driven by a lower activity based fees and incentive fees.
Stephanie: Gross quarterly management fees. During 2025 are expected to be in line with Q4 levels due to lower levels of activity based fees being earned in the current environment.
Stephanie: As of December 31st 2024 at the proportionate value of their recent investment properties with $4 1 billion down from $4 3 billion at September 30th.
Stephanie: The 105 million decrease was primarily driven by unrealized FX losses due to the appreciation of the Canadian dollar at December 31st.
Stephanie: The reach disposition activity during the year has resulted in the REIT, making significant process progress on its capital management strategy. Since December 31st 2023. The read is reduced proportionate leverage from $3 3 billion to $2 3 billion, Lord proportionate leverage including convertible.
Stephanie: She was down by 112 basis points to 58.1 and T. Kris consolidated leverage by 190 basis points to 50%.
Stephanie: With respect to the REIT near term debt maturities. The REIT only has approximately $269 million of 2025 maturities remaining including 125 million of series B convertible debentures at 144 million of mortgages in Canada and Europe.
Stephanie: As of today. The recent available liquidity is approximately $240 million that is expected to be used to repay series G convertible debentures upon maturity on March 31st.
Stephanie: Looking ahead to 2020 five the momentum we built in 2024 provides a strong foundation for the year and beyond we anticipate our earnings will reflect the impact of our asset dispositions and capital management initiatives and reductions in G&A expenses. However, our work continues in 2020 five the REIT will for.
Stephanie: Focus on further reducing interest expense by transitioning its capital stack to unsecured debt and reducing leverage through additional asset sales. The management team is already addressing twenty-twenty fixed debt maturities and working to extend its weighted average term to maturity.
Stephanie: Our Q4 Investor presentation, which is available on the Investor Relations section of our website provides more details on our portfolio performance financial matrix and 'twenty 'twenty four accomplishments.
Stephanie: And with that I'll now ask the operator to open up for questions.
Stephanie: Thank you we will now begin the question and answer session.
Stephanie: Joined the question queue, you May Press Star then one on your telephone keypad.
Stephanie: Here tone acknowledging your request.
Stephanie: If youre using a speakerphone please pick up your handset before pressing any key.
Stephanie: To withdraw your question. Please press Star then two.
Speaker Change: The first question comes from frankly with BMO capital markets. Please go ahead.
Speaker Change: Good morning, everyone I'm sorry, good afternoon, everyone first of all congrats on achieving the investment grade rating.
Speaker Change: The successful issuance kudos to you guys and my colleague <unk> Morningstar.
Speaker Change: Just wishes with respect that repay.
Speaker Change: $500 million unsecured debentures I wonder how much of those are related to 2026 maturities I mean, you've got a good handle on 2025 maturities I'm just wondering what's your plan with respect to the $880 million that mature in 2006.
Craig: Frank This is Craig here and thanks for that and I. Appreciate your comments. Thanks very much we really appreciate it mark just hand over to Stefan just for a little bit of color and detail to your question.
Stefan: So of the repayments made about 165 million is 2026.
Stefan: And when you look at our debt maturities in 2020 six there is a big portion of that that relates to our Australasia segment.
Stefan: And those and that is that within our JV in one of our Jv's expires in November or December of 'twenty, six and so that is a late 'twenty six maturity and that we are already are working on so yeah. I think we have a really good handle on 26th but I will have more news on that over the coming quarter.
Stephanie: Thank you Stephanie I appreciate the color.
Stephanie: I mean, a lot of having to having enough gain has been down and just focusing more on the operational side of things I mean, there is a new disclosure introduced last quarter I believe.
Speaker Change: You all on our renewals you guys down on a year to date basis, no just looking out of the 1 million square foot renewals. During 2024, how does the renewal spread on renewal rate achieved compared to the historical norm.
Speaker Change: Yeah, Greg I'll I'll take that question, we're pretty much market as Darcy so it's reasonably consistent.
Speaker Change: On the spread so at this stage, we don't see any material gains and positive leasing spreads were starting to see a little bit of traction from that from Europe. At this stage for the school market, whose biopsy.
Speaker Change: That's correct.
Speaker Change: And then just sorry, just maybe a bit more color to that.
Speaker Change: Because most of our leases.
Speaker Change: Fixed increases all the in between two and a half as sort of a 4% so that when the lease comes up in five years' time, we're picking up that is nicely already.
Speaker Change: Got it for sure Yeah, you've got to have a lot of indexation, which is good.
Yeah.
Speaker Change: Just touching on your all look if your if you can provide some color you know asking why it goes next year it will be.
Speaker Change: Similar range was 21 four.
Yeah, I think I mean, we are seeing that would tend to write them.
Speaker Change: So we see that as consistent not in the leasing spreads will be consistent.
Speaker Change: Stephanie maybe I hand over to you for the color on the guidance on where we are seeing like for like growth might look like in 2020 this calendar year.
Stephanie: Sure. Thanks, Mike Yeah, I think what I would say is that you know as you alluded to there's a lot of our leases that are index to inflation and we're seeing inflation of course come down in most of our markets and so therefore, I think you know the 3% to 4% is probably more reasonable I'm, a little bit lower than in 2025.
Speaker Change: Got it yeah. That's all my questions. Congrats again, guys I'll turn it back.
Speaker Change: Thank you Frank.
Speaker Change: The next question comes from Himanshu Gupta with Scotiabank. Please go ahead.
Speaker Change: Yeah.
Speaker Change: Thank you and good afternoon.
Speaker Change: Hey, I'm not sure on.
Speaker Change: Very good so on after this would be true.
Speaker Change: You mentioned around $200 million little or no pipeline.
Speaker Change: Is it most near shore or are you, including any of the holdco properties as well.
Speaker Change: It's mainly mainly assure and actually there are some non core properties.
Speaker Change: Then in across all markets in Europe, and the U S and Australia.
Speaker Change: So that that sort of 200, and so let's call that a minimum number not a target number.
Speaker Change: Maybe the the question that.
Speaker Change: We will come off.
Speaker Change: This data does not include anything from Brazil. So it includes all markets ex Brazil.
Speaker Change: And the reason is interest rates to sort of rising in Brazil, and we don't see this is the right time to trade route state in Brazil.
Speaker Change: So we did test the market and the pricing.
Speaker Change: Was not where we wanted today will reflect the dirt is good.
Speaker Change: So exactly 200 is a minimum number.
Speaker Change: That was my follow up question about the view on the beautiful thanks for asking that.
Speaker Change: Okay. So that's good.
Speaker Change: And then on the debt maturity.
Speaker Change: I think 2025 pretty much in the bag, except the mortgages slip on 2026, I think you did mention that you know something that can be converted into unsecured debentures. So.
Speaker Change: Debt maturities can you at all kind of telco it could be resolved to unsecured.
Speaker Change: Maybe sticking on my hand over to you on that thinking.
Speaker Change: So 'twenty 'twenty effect as a mix as I said on the first question a large chunk of that 26 is J V related that which wouldn't be and you know we wouldn't be able to convert that to unsecured.
Speaker Change: But we do have quite a bit of mortgage debt in both Canada, and Europe and I think between the 25 and 26 maturities. We're almost at 400 ourselves million of mortgage maturities in 'twenty five and 'twenty six.
Speaker Change: And for the next 12 months as.
Speaker Change: Yeah, I think that's quite a bit there. So are we also have our 'twenty the debentures for 2020 seven debentures, which are available for prepayment in August 26 as well.
Speaker Change: Okay. Thank you.
Speaker Change: And then on Old School, and you would think slip away the colors.
Speaker Change: On the call and the filing says one so some deferred payments for eight weeks or Jamie struggled a bit you mentioned there.
Speaker Change: Also you know the news articles around the portfolio could be sold it'll look like good conditions of the market.
Speaker Change: The question is like what happens in biopsies object conclusions to restructure the message a little.
Speaker Change: Don.
Speaker Change: What is that.
Speaker Change: So yes.
Speaker Change: Short question I'll give you a sort of a longer answer I think the reality is.
In Australia at 68% of all surgeries elective surgeries are done in private hospitals.
Speaker Change: And <unk> is the second largest private hospital, operator, with nearly 5000 5000 beds.
Speaker Change: Our leases.
Speaker Change: Are locked and loaded regardless measures or who runs at Huntsville leases.
Speaker Change: Structurally superior to any bank debt and even the real estate or the operations because it's traded.
Speaker Change:
Speaker Change: I.
Speaker Change: I do think well.
Speaker Change: <unk> will cause potentially happen Hum. It yourself is that 2000 hospital beds on is on balance sheet. So it is not it.
Speaker Change: It doesn't involve any sort of salaries bad so they might look at.
Speaker Change: A partial sale of some of the operating businesses to reduce our debt load and we'll be watching that very very carefully.
Speaker Change: As you can appreciate being the second largest operator.
Speaker Change: In Australia Yeah.
Speaker Change: And great locations, we are getting lots of questions from different operators.
Speaker Change: He is prudent from our perspective is to keep it open engagement with all stakeholders as we go through this crisis.
Speaker Change: Got it that's all.
Speaker Change: Oh, Okay, Oh, and maybe my last question is on the.
Speaker Change: Yeah for full field ratio.
Speaker Change: I think they've done a remarkable job in the last few quarters schnoodle tapping the balance sheet.
Speaker Change: Now on the food side.
Speaker Change: Do you have any I'm impossible, if a hope you all can show for this year.
Speaker Change: You realize some of the industry achieving such work.
Maybe it's definitely my you might kind of view on the policy in our thinking there.
Speaker Change: Sure.
Yeah, I think we're targeting you know between the 80% to 90% range him answer as we get through the year and into 'twenty six and then we do feel that's achievable through some of the interest rate savings you alluded to S. P. N O I grows.
Speaker Change: You know, partially offset maybe by a little bit lower management fees, but we are still feeling confident that we will be able to hit our our policy of the 80% to 90%.
Speaker Change: Awesome. Thank you so much and I'll turn it back.
Speaker Change: Thank you.
Speaker Change: Yeah.
Operator: The next question comes from Giuliano Thornhill with National Bank Financial. Please go ahead.
Giuliano Thornhill: Hey, guys. Good afternoon, I, just wanted to kind of acquisition markets with where rates are and cap rates, which one are you, preferring the U S. Chartered for your Canada. Because eventually you are going to be in a position to allocate some of this capital that you're releasing.
Operator: Yeah.
Operator: Crystal ball questions, you ask well what am I to say, what's quite interesting is if you look at the KKR.
Operator: Okay and studied peak bid for sure that gives you a sense of the amount of capital now look at healthcare real estate.
Operator: They'd be.
Operator: Net tangible assets, which is 49 four P, which is a five 2% blended cap rate.
Operator: We're now starting to see good demand for real estate.
Operator: Do you have specific questions I think cap rates are slightly wider in the U S and they are in Canada.
Operator: That's where we sit today, so you might get them.
Operator: A bit of spread in the U S to Canada, but I think that's still very early days.
Operator: If you ask me that question right now today, that's what I would say that I think also KKR.
Operator: The issue is very interesting for them, just offset a globally and also with Wednesday trends happening.
Operator: And so are you envision our anticipated closing in H two D assure deal.
Operator: Yeah, and assuming as you know.
Operator: Yeah.
Operator: They assure border now given the limited D D.
Speaker Change: On the section 2.7, all the UK takeover code they need to make a big by the seventh of April.
Speaker Change: They then have 28 business days to issues scheme docs that happened before that.
And then once a scheme docs issue you got 60 days to do it.
Speaker Change: All that bring all that together with a lot of Ifs and buts call that 30 journey.
The end of June early July.
Speaker Change: Would be on on current timelines when the vote and cash would flood.
Speaker Change: And then the last question I was just on Brazil, I understand there's probably limited interest now, but do you still kind of view that as noncore and eventually that will.
Speaker Change: You disposed of within your portfolio.
Speaker Change: Yeah. There is limited interest right now today, we're all good clause that suits us yes.
That is very clear from a strategy perspective, we wanted to be asset light globally. So that would mean you know assets off balance sheet. So I think Brazil will come off the balance sheet at some point yes.
Speaker Change: Okay. Thank you.
Speaker Change: Right.
Speaker Change: The next question comes from Pamela <unk> with RBC capital markets. Please go ahead.
Speaker Change: Thanks, everyone.
Speaker Change: Want to come back to health scope for a minute.
Speaker Change: Just wanted to clarify is that on the $2 million of rent that was deferred is that the only amount that will be deferred or can that figure grow.
Speaker Change: That is the only amount that is being deferred Tommy.
Speaker Change: Okay, and then Ken the I forget the 10 week deferral appeared cannot be extended at all or.
Speaker Change: No we have a hybrid payment data 31 off to us.
Speaker Change: Okay, I'm, sorry, you said.
Speaker Change: No kind of big Sandy and without a doubt.
Okay, and then you mentioned some protections in the leases like India then.
Speaker Change: It just so recapitalization and restructuring so can you maybe just elaborate on what that implies or what you were referring to.
Speaker Change: Sure. So we've got 12 12 hospitals. They are all on long term leases with cross termination. So what effect does that means.
Speaker Change: If you don't pay one rent on the smallest hospital, we can terminate them all hospitals. So that's that's a very important structural base.
Speaker Change: And they vary.
Yeah Slim possibility yeah. It is.
Speaker Change: Administrative come in or goes into receivership.
Speaker Change: Rail still has to be paid under all scenarios.
Speaker Change: Because effectively we are in your operating business.
Speaker Change: So there is no safe harbor, where rent cannot be tied.
So under all scenarios rent needs to be paid by any one size. So that's kind of why I say that we have a lot of comfort in the knowledge is the way we restructured our lease.
Speaker Change: It's superior to all bank debt.
Speaker Change: He has cross termination rights with everyone here.
Speaker Change: And to that.
Speaker Change: No matter, who is running hills Cubs I've got to pay the rent.
Speaker Change: I see so India event that are any other operator steps in to.
Speaker Change: To fill their shoes.
Speaker Change: There's no I mean, you can continue to collect the rent as it said.
Speaker Change: That's exactly what I said.
Speaker Change: Into a contractual liability, whereas it is legally binding exactly that's exactly right Greg.
Speaker Change: What is the coverage ratio or what can you sort of.
Speaker Change: If you can provide a range what is the coverage ratio on the leases with a household budget stands at the moment.
Speaker Change: As it stands to that in Q4 was around just under 60%.
Speaker Change: People already should be around 50%, so it's slightly above but nothing material.
Speaker Change: Sorry, you said it's 60.
Speaker Change: Yeah, yeah, 60% rate to EBITDA.
Speaker Change: And that was before we did or the one before that you get over the contract renewals will be shoes.
Yeah.
Speaker Change: That's before and as you know is 50% leased.
Speaker Change: I Love.
Speaker Change: The sweet spot of when we'd like to see yeah.
Speaker Change: John.
Speaker Change: And is that where you are with somebody the other operators across the portfolio.
Speaker Change: That's exactly what it is you're starting to trend down and some of our best assets are now tracking in the mid Thirty's.
Speaker Change: Okay.
Speaker Change: I'm not talking specifically, Australia, New Zealand just to be so consistent but yes, it will start to trend down.
Speaker Change: Yeah, I'm sorry, you said some of them are in the mid thirties.
The household blender out with some of your other operators yeah, Okay. Yeah.
Speaker Change: Yeah, Yeah. Okay last one for me just in terms of you know as you think about 2025, you mentioned a couple of hundred million of dispositions, including Assura, maybe that's a minimum number.
Speaker Change: Where would you ideally like to see leverage.
Speaker Change: Get to by the end of this year.
Speaker Change: And Craig I know you may not be here to see true Mike.
Speaker Change: In terms of your budgeting process what are you thinking.
Speaker Change: No I think.
Stephanie: I'll have a crack at the answer then I'll hand over to Stephanie.
Speaker Change: We tripled.
Speaker Change: Pretty proud of that I think you know that's the bottom of the wrong I don't think in a perfect world we want to be.
Speaker Change: That strong triple B low one notch higher high so what that means we need to move on.
Speaker Change: To improve all our metrics.
Speaker Change: What is that the absolute debt down interest rate coverage up a percentage of unsecured debt secured debt, you'll see us on library.
Speaker Change: A plan to reduce you know more.
Speaker Change: We used it was an unsecured debt.
Speaker Change: And really just simplify the capital structure about the risk, which ultimately will bring our cost of capital down.
Speaker Change: You know that 50% should be denied.
Speaker Change: And I'll give you a hard number that 50% would ideally be closer to 45 the news today.
Speaker Change: Right.
Speaker Change: Got it.
Speaker Change: Maybe Sydney.
Speaker Change: Add to that no I think you got it.
Speaker Change: Thanks, very much I'll turn it back.
Tommy: Thanks Tommy.
Tommy: Once again, if you have a question. Please press Star then one the next question comes from Dean Wilkinson with CIBC. Please go ahead.
Dean Wilkinson: Thanks afternoon, everyone.
Tommy: Hey, just.
Speaker Change: Two quick ones for me Craig just on the assure I just wanted to confirm that your shares there are free from any lockups in and are in the event that the KKR a successful that's a transaction you can support.
Speaker Change: 100% thing, so with where we have no lockups, where you can support any one.
So yes.
Speaker Change: Perfect makes it easier and.
Speaker Change: All of the help scope in the event that something changes in the in the ownership structure. There is there anything in the JV that you know, which would have some sort of either a drag along or a shotgun or any other clauses that might get triggered that would give you either rights or hopefully not back you went to a position.
Speaker Change: Yeah. That's a great question no there's no dragging tag wipes them in any in any way from that there is no termination rights for the joint venture as a result of this so it's all very clean and very often.
Speaker Change: I like being an open that's all I had thanks guys.
Speaker Change: No I appreciate that.
Charles Fisher: The next question comes from Charles Fisher with Mackenzie investments. Please go ahead.
Charles Fisher: Hi, everyone and thanks for the update that was super helpful. Congrats on the strong quarter I, just want to talk a little bit more about the because if we get some more color on the insurers in Australia for other operators and I'll kind of stick, we briefly but just wanted to get more color. After you know the second operators, having these tough negotiations with insurers clearly.
Charles Fisher: It's fair to assume that some of the other operators would would also being tough negotiation position. So just wanted to see about getting your view on kind of all the other operators are facing potential negotiations with with those insurers.
Charles Fisher: Yeah. Thanks, Charles I appreciate the question I.
Charles Fisher: I just got back in time.
Charles Fisher: If you look at before Covid.
Charles Fisher: So we've taken those steps so roughly 45% of Australians had private health insurance.
Charles Fisher: The reason that percentage is so high is because once we earn over certain tax bracket. If we don't have health insurance.
Charles Fisher: Get stung with additional tax of one you know, 1.8%. So therefore, a drag it really forces. It died down private health insurance.
And before Covid.
Charles Fisher: Roughly the industry says that the healthy sure it's paid out 90% of the premiums to the private hospital places so that was kind of a posture.
Our longtime COVID-19 and that there's a dislocation with that that ratio.
Charles Fisher: That payout ratio now stands at eight 5%.
Charles Fisher: So there's been a drop in it that from from 90 to 85, so it's really a huge amount of conversation, but at a government level and the relationship between individual operators and insurers to close that gap.
Charles Fisher: And the market. The operator is looking for that are you five to go to 80%.
Charles Fisher: So we're now starting to see some really good traction from that perspective jobs.
Charles Fisher: Now and you're saying good negotiations by House code with the many bang and the alliances.
Charles Fisher: Everyone takes a different approach I think Brookfield took a a reasonably a sledgehammer to a to peanut approach.
Charles Fisher: That didn't go down well I think the tone and approach has changed dramatically from last year to this year, which has really helped them get some good negotiations.
Charles Fisher: In addition to that the assure that the shares right now of saying, we will give you a sugar hit a one time okay. Good.
Charles Fisher: The market, saying well no I don't want to show you hit.
Charles Fisher: One of the sustained increases everyone's pushing for more than 85% go to the idea of eggs in payout ratio.
Charles Fisher: So, we're saying that right across the board and different groups are getting different wings, but yet you're getting them with up to 10% and I spoke to one operator yesterday. They go to a 10% increase from this year. So these are meaningful numbers.
Charles Fisher: Does that help them Charles is a bit of color.
Charles Fisher: Yeah, that's super helpful. Thanks, I appreciate it and then just one more little.
Charles Fisher: One more on my side, just on going back to Brazil again, obviously.
Charles Fisher: Obviously, you mentioned that you didn't get kind of values were where you thought you know they should be priced at but just wanted compared to book value for Brazil.
Charles Fisher: Are these you know credible bids are they all cash cost from shares mix, just trying to get a sense of kind of where book values lie.
Charles Fisher: Yeah, Yeah, so for Brazil, we expect to Brazil, or if you went to one January 2024.
Charles Fisher: At the end of the calendar year, 'twenty pool, they're expecting base rates to be $9 75 per cent, it's a different world we live in anywhere else.
Charles Fisher: It does right now close to $13 two 5%. So it's been a big material shift to be honest with inflation running sort of in the mid fours. The bids we were getting.
Charles Fisher: Playing cash because they were all give you X now best endeavors.
Charles Fisher: Now I'll pay it as a full quarters or six quarters.
Charles Fisher: Are you on the normal mountain if the real amount so it just.
Charles Fisher: If raw perspective. It is two two structured we know the real estate.
Charles Fisher: In great demand because some of our largest tenants.
Charles Fisher: Turning to buy them at reasonable prices, but still.
Charles Fisher: Bid ask spreads gapped it it's just a matter of timing.
Charles Fisher: Okay, and just for my benefit they sold or be sold assets in Brazil successfully thus far.
Charles Fisher: In general no we already do we basically we've only got eight assets in Brazil.
Charles Fisher: We only put us more assets on the market roughly it was about 30 million Ted.
Charles Fisher: But so that's so the answer that did not sell through was so nothing so we at some point the Brazilian masses will come off balance sheet I think it was.
Charles Fisher: And could you mind me some questions.
Charles Fisher: Okay, great. Thank you very much appreciate it and congratulations on the strong quarter.
Speaker Change: Thank you Joe.
Speaker Change: This concludes the question and answer session I would like to turn the conference back over to Craig Mitchell for any closing remarks. Please go ahead.
Speaker Change: Yeah.
Speaker Change: Well thanks for all your questions today, I really appreciate it and great questions a lot of thoughts being put into it and apologies again for them pushing out this.
Speaker Change: The presentation for a couple of days you can imagine how frustrated we were oh.
Speaker Change: I'd like to extend my appreciation to all our employees our partners our investors for your continued support and their continued support as we move through 2025, we are executing on a clear strategy.
Speaker Change: Looking to strengthen our balance sheet.
Speaker Change: And to drive operational excellence and create long term value for our investors.
Speaker Change: <unk> Foundation in place our leadership focus on execution and our portfolio are positioned for growth. We are confident in our path ahead.
Speaker Change: Are there any further questions. Please don't hesitate to reach out to me and have a great day. Thank you everyone.
Speaker Change: This brings to close today's conference call.
Speaker Change: Connect your lines. Thank you for participating and have a pleasant day.
Speaker Change: Okay.
Speaker Change: [music].
Speaker Change: Yes.
Speaker Change: Okay.
Speaker Change: Mhm.
Speaker Change: [music].