TORONTO, Feb. 12, 2015 /CNW/ - NorthWest Healthcare Properties Real Estate Investment Trust (TSX: NWH.UN) (the "REIT") announced today that, as part of its on-going portfolio optimization strategy, it has completed a series of transactions that improve portfolio quality and position the REIT for growth.
Owen Sound Medical Building
The REIT acquired the Owen Sound Medical Building (1415 1st Avenue West, Owen Sound, Ontario), a new generation medical office building which has been the home of the Owen Sound Family Health Team since 2012 under a long-term lease. This new format design-built medical building was completed in 2012, has a rentable area of 73,500 square feet and is currently approximately 87% leased to predominantly healthcare users. The purchase price for this acquisition was $23.0 million, subject to usual adjustments, and was settled by repayment of an $8 million loan made by the REIT in 2011 to the developers (and which provided the REIT a right of first offer to purchase), the assumption of an existing short term first mortgage of approximately $14 million and the remainder in cash. The acquisition is expected to be immediately accretive.
81-85 The East Mall, Toronto, Ontario
The REIT also acquired a two-building complex located at 81-85 The East Mall in Toronto, containing an aggregate rentable area of approximately 82,000 square feet. One building is substantially occupied by a variety of tenants, including a significant health care user, and the second building is empty, as it undergoes renovation in order to become the future home of the Etobicoke Family Health Team, together with ancillary healthcare uses. It is expected to be substantially occupied in late 2016, after completion of the renovations. The purchase price for the property and the development, including reimbursement of costs, totaled approximately $13.7 million, paid from internal resources. Financing arrangements have been identified and are expected to be completed in due course in the near future.
The property is the REIT's eleventh in the Greater Toronto Area.
Two Development Parcels
The REIT also acquired two land parcels slated for medical office building development, one in Barrie, Ontario and one in St. Albert, Alberta.
The first land parcel is located on Bayview Drive in Barrie, Ontario, and will be the future home of the Barrie Family Health Team. This long-term tenancy is scheduled, along with other identified healthcare users, to take occupancy following the construction of a 3-storey, 79,000 square foot, new generation multi-tenant medical office building. Pre-leasing is well advanced and construction is expected to commence shortly, with the opening of the building scheduled for late 2016. The property is the REIT's first in Barrie, where the REIT has already established its central Ontario office in support of its properties in nearby Collingwood, Orillia, Midland and now Owen Sound.
The second land parcel is located across the street from the Sturgeon Community Hospital in St. Albert, Alberta, which is a 25-minute drive northwest of downtown Edmonton. The 1.4-acre site has been designed for a new generation, "on-campus" medical office building of between 30,000 and 50,000 square feet, and pre-leasing is underway. The property is the REIT's sixth in the greater Edmonton area.
Consideration for the two land parcels, including the reimbursement of costs spent to date advancing development, was approximately $6.8 million, which was funded from internal resources. The REIT anticipates that the cost to complete the development projects will be substantially funded by way of construction financing arrangements, which for Barrie have been identified and are expected to be completed in due course in the near future.
Concurrent with the foregoing acquisitions, the REIT ended its development relationship with NorthWest Value Partners Inc. ("NWVP"), at no cost, resulting in the internalization of development and the hiring of NWVP's development team. The development team has been in place for several years, working on the four acquired projects described above, as well as a number of prospective development opportunities that have also been transferred to the REIT at no additional cost. The REIT's target for internal development activities at any one time is expected to be approximately 5% of enterprise value which as of September 30, 2014 was $1.26 billion.
Also, as part of the transactions, most material related party agreements were terminated and all interparty accounts were settled and repaid.
Each of the transactions described above involved NWVP and since Paul Dalla Lana is the sole shareholder of NWVP and is also a trustee and principal unitholder of the REIT, each of the transactions described herein above is considered a "related party transaction" for the purposes of Multilateral Instrument 61-101 – Protection of Minority Security Holders in Special Transactions ("MI 61-101"). All were, therefore, reviewed, overseen and unanimously recommended for Board approval by a Special Committee of the REIT consisting of three independent trustees. These transactions were not subject to the formal valuation and minority approval requirements of MI 61-101 as neither the fair market value nor the subject matter of any of the transactions represent more than 25% of the REIT's market capitalization.
Said REIT CEO Peter Riggin, "Management and the Special Committee believe that an internalized development platform best positions the REIT to execute on its concurrent strategies of growth and portfolio optimization. It will allow the REIT to lever its extensive healthcare relationships and add its operational and leasing expertise during the development process, with all value creation to the REIT's unitholders, and at yields typically higher than those achievable through acquisition."
Dispositions
The REIT has also recently completed two dispositions in its on-going efforts to recycle capital into higher-quality assets, such as the foregoing acquisitions. Victoria Medical Centre in Hamilton, Ontario and Polyclinique de la Capitale in Quebec City, Quebec are older multi-tenant medical office buildings that had been in the portfolio since 2006 and 2007, respectively. Based on size, building age and tenancy profile, each was considered a non-core holding. They were sold in December, 2014 and January, 2015, respectively, resulting in combined net proceeds to the REIT of approximately $3.6 million after mortgage repayment.
Forward Looking Information
This press release may contain forward-looking statements with respect to the REIT, its operations, strategy, financial performance and condition. These statements generally can be identified by use of forward-looking words such as "may", "will", "expect", "estimate", "anticipate", "intends", "believe", or "continue" or the negative thereof or similar variations. The REIT's actual results and performance discussed herein could differ materially from those expressed or implied by such statements. Such statements are qualified in their entirety by the inherent risks and uncertainties surrounding future expectations, including that the transactions contemplated herein are completed. Important factors that could cause actual results to differ materially from expectations include, among other things, general economic and market factors, competition, changes in government regulations and the factors described under "Risks and Uncertainties" in the REIT's Annual Information Form and the risks and uncertainties set out in the MD&A which are available on www.sedar.com. These cautionary statements qualify all forward-looking statements attributable to the REIT and persons acting on its behalf. Unless otherwise stated, all forward-looking statements speak only as of the date of this press release, and, except as expressly required by applicable law, the REIT assumes no obligation to update such statements.
About NorthWest Healthcare Properties Real Estate Investment Trust
NorthWest Healthcare Properties Real Estate Investment Trust is an unincorporated, open-ended real estate investment trust established under the laws of the Province of Ontario. The REIT holds a portfolio of 74 income-producing properties, with a focus on medical office buildings and healthcare real estate, comprising approximately 4.6 million square feet of gross leasable area located in British Columbia, Alberta, Manitoba, Ontario, Québec, Nova Scotia and New Brunswick.
SOURCE NorthWest Healthcare Properties Real Estate Investment Trust
