Good morning, ladies and gentlemen, and welcome to the NorthWest Healthcare Properties Real Estate Investment Trust Third Quarter 2021 Results Conference Call. I would like to remind everybody this call is being recorded today, Friday, November 12, 2021. And I would now like to turn the conference over to Mr. Paul Dalla Lana, Chief Executive Officer. Please go-ahead sir.

Thank you, operator. And good morning, everyone. I appreciate you joining us today. I'm joined by Shailen Chande, the REIT’s Chief Financial Officer; and Peter Riggin, the REIT’s Chief Administrative Officer. Together we are pleased to share with you our results for the third quarter of 2021. First, I'd like to point out that during today's call we may make forward-looking statements as defined under Canadian securities law. While such forward-looking statements reflect management's expectations regarding our business plans and future results, they are necessarily based on assumptions that are subject to uncertainties and risks, which could cause actual results to differ materially. We direct you to all of the risk factors outlined in our public filings. Operationally, during the quarter, the REIT is performing well with its portfolio, 97% occupied by diversified tenant roster of healthcare, service, hospital and life science research tenants. The majority of which are directly or indirectly funded publicly by their respective governments. In the current environment with concerns surrounding rising inflation rates and much of the world is worth filing that over 75% of Northwest rent is directly indexed to inflation. And if inflation proves to be not transitory, then we would expect the same property net operating income growth rates to correspondingly increase. In Q3, the REIT advanced a number of its strategic priorities, including substantial completion of its value creation initiatives in the UK, advancing its ambulatory care and hospital precinct development strategies through its partnership with leading healthcare operators, such as AUHPT in Australia and achieving credit metrics consistent with an investment grade issuer. As previously disclosed, the REIT completed the acquisition of Aspen Healthcare on August 6 for approximately $39 million. The Aspen Group is an independent healthcare provider situated in the UK and was the REIT's tenant at four of its UK properties immediately prior to the acquisition. As result of the transaction, the REIT assumed Aspen's interest in two hospital properties located in Sheffield and Edinburgh with a value of $41.3 million. And obtained control over the operations of eight hospitals located throughout the UK with the intention to sell these operations. During the quarter, the REIT successfully completed the sale of six of eight Aspen OpCos for gross proceeds of $37.2 million and agreed to sell the Claremont OpCo for approximately $33 million in a transaction expected to close in Q4. The sale of the final OpCo is progressing and is expected also to close in 2021. The Aspen on sale transactions have substantially improved the tenant roster and credit quality, lease coverage and lease terms of our UK portfolio and resulted in a regional fair value uplift of $126 million, 100% underpinned by external valuations. Combined with realized gains on the purchase and completed on sales of $32.5 million, the REIT has recorded an overall gain today from the Aspen transactions of $158.5 million. The overall gain is expected to increase by a further $27.5 million to $186 million in total when the final two OpCo sale, previously mentioned, closed in Q4. Since entering the market in January, 2020, the REIT has built a high-quality portfolio of 13 hospitals valued at approximately $800 million. This portfolio is 100% occupied geographically diversified with a Greater London concentration and is fully indexed to inflation with a weighted average lease term of 22 years. The properties are occupied by three of the top five UK hospital operators, including Circle Health, Nuffield Health, and Spire Health. With direct operator relationships and a growing local platform, the REIT has originated an attractive pipeline of follow-on investment opportunities. In the quarter the REIT leveraged these relationships to acquire Woking Hospital operated by Nuffield and its pipeline of opportunities expanded to nearly £100 million of additional actionable opportunities. As the REIT execute executes on the final stages of its UK portfolio repositioning it is now shifting focus to deliver on its UK JV initiative and leveraging its UK portfolio as the basis for a $1.7 billion regional joint venture targeted for the first quarter of 2022. During and subsequent quarter end, the REIT also advanced its ambulatory care and hospital precinct strategies through its partnership with Epworth, one of Australia's largest not-for-profit hospital groups. The REIT building on its 20-year relationship with Epworth that includes the Epworth Eastern precinct and Epworth Freemasons precinct, already, in addition to Epworth Camberwell, which was acquired in Q2, evaluated collectively at more than $800 million, added to the precinct through its long-term Australian joint venture that has said to deliver a state-of-the-art $550 million innovation, education and healthcare hub, excuse me, in Geelong and expanded facilities at the site where Epworth Richmond is located in inner-Melbourne. As part of the transaction, the REIT and its Australian institutional partner have entered into an agreement with Epworth to acquire 50% of Epworth Geelong Hospital and 50% of the 4.2 hectares of adjacent development land, as well as a site at Epworth Richmond for approximate purchase price of $117.4 million. The properties are both located within the Greater Melbourne Area and are 100% occupied by Epworth on new, 20-year, triple net leases, fully indexed to inflation. Both properties are located in areas with a steadily growing population and increased need for critical healthcare infrastructure. With the development of envelope of approximately one million additional square feet across multiple stages over a 10-year period, the estimated total development cost should be more than $600 million. When fully developed, the REIT expects this to be an irreplaceable health precinct akin to the existing ones with Epworth in suburb of Melbourne. This acquisition adds to the REIT’s high quality global development pipeline, which now exceeds more than $1 billion and is expected to be a significant driver of growth for both earnings and net asset value over the coming decade. During this moment of intense focus on the global healthcare industry, healthcare precincts have emerged as a key global healthcare trend in Northwest as in the pole position to capitalize by working hand in hand with key operating partners to deliver on these opportunities, of which Geelong and legal Mickleham site are prime examples. In Australia, the REIT is currently looking at several opportunities to partner with leading operators, universities, and research institutions of a similar scale. And closer to home, in Canada, we see emerging opportunities to deliver similar solutions to meet evolving demands of our educational, healthcare and research industries. In this context, NorthWest is particularly focused on the trend of decanting services out of hospitals and along with its capital partners is executing actively on an ambulatory care and health care precinct strategies to drive value out of development opportunities. Another key priority advance during the quarter was our continued balance sheet optimization, with the paydown and rewards achieving credit grade metrics. During the quarter, the REIT closed a $25 million private placement to NorthWest Value Partners following on the Q2 capital raising initiatives. Net proceeds of the issuance were deployed towards the previously announced acquisition of Dutch Medical Office Buildings and the repayment of higher cost debt. The REITs leverage remained stable quarter-over-quarter at 49.9% primarily driven by the presence of previously disclosed inter-quarter transactions. Subsequent to quarter end the REIT announced its intention to redeem all of the outstanding Series F debentures maturing December 31, 2021, which have a conversion price of $12.80 per unit and are currently in the money. The redemptions are expected to occur in November 25, 2021. Assuming full conversion of the Series F Debentures to equity, completion of the remaining UK initiatives and seeding of the planned UK JV, the REIT's pro-forma consolidated and proportionate leverage would further decline by approximately 810 basis points and 780 basis points, respectively. For the quarter, our results are in-line with expectations with annualized quarterly adjusted funds from operations of $0.92 per unit on a normalized basis, implying a payout ratio of 87%. Earnings accretion from recent investment and financing activity was as expected, although the appreciation of the Canadian dollar over the past year relative to the REIT's average foreign currency exposure was a slight drag on earnings. On a constant currency basis, AFFO per unit was up 1% year-over-year, which is particularly notable in the context of the REIT's de-leveraging activity, which resulted in proportionate leverage decreasing by 780 basis points. While the Canadian dollar has shown some recent strength, FX headwinds to unwind at some point and provide a tail we expect them to unwind at some point and provide a tailwind to our future earnings. Well, AFFO per unit growth was flat. AFFO was up actually 18% per year, driven by net investment activity, expansion of the REITs global asset management platform and built in lease indexation. Management fees grew 44% to $15.8 million in the quarter underpinned by higher base and acquisition fees as a result of both increased assets under management and investment activity. Overall, the global asset management platform continues to provide significant and steady earnings growth and highlight that annual base fees have grown by almost 30% annually since 2019. Additionally net value per unit was up 11% to 1,360 per unit, driven primarily by strong reevaluation gains in both Australasia and Europe due the recently completed UK initiatives. With significant demand for long lease inflation index assets and increased interest in healthcare real estate, we see near-term potential for continued cap rate compression across our markets leading to meaningful valuation increases in the near-term. Combined with the expansion of the global asset management platform to our plan UK JV and a growing global development pipeline we see potential for a further $1 to $2 of NAV per unit growth over the next 12 months. Sustainability initiatives also remain a key priority within the REIT and committing to issue its first sustainability report later in 2021. The REIT believes that sustainability has played an important role in defining its past and will continue to do so in the future, particularly as the REIT grows its asset management platform with global institutional investors. Operationally, our results which are to derived from 192 property; $8.5 billion healthcare infrastructure portfolio tended by leading operators on long-term inflation index leases was on plan. The inherent strength of this portfolio is reflected in the REIT's operating results with year-over-year constant currency cash recurring SPNOI growth of 2.4%, again largely driven by contractual rent indexation and underpinned by 97% occupancy and a weighted average lease term of more than 14 years. For the three months end September 30, 2021 the REIT collected 99% of rent, which is a 10 basis point improvement quarter-over-quarter, and is fully recovered from the minimal impact of COVID in earlier quarters. In all regards a highly defensive portfolio. Canada remained stable during the quarter with adjusted year-over-year of cash SPNOI reduction of approximately 1%. Portfolio occupancy was stable at 91% and leasing activity during the quarter was also strong with 24,000 square feet of new leasing and 53,000 square feet of renewal leasing completed. Despite our renewal rents during the quarter was broadly flat with rent collection remaining strong at approximately 98%. Segmentally, I note the following

In Brazil, we were on plan with steady 100% occupancy and continued strong year-over-year cash SPNOI growth of 4.3%. Operationally, the REIT's major tenant, Rede D'Or, continues to deliver exceptionally strong results and expand its business thereby creating potential opportunities and huge partnerships with the REIT. The REIT also focused on getting traction with additional high quality operators and with COVID moment recurring returning to normal and picking – a normalcy picking up speed we see a very significant constructive environment in result. In Europe, we are on plan and performing as expected with year-over-year source currency at SPNOI growth of 2.7% and occupancy at 97%. In Europe, the REIT continues to exhibit its growth agenda by developing strategic relationships in both the medical office and hospital segments, and continues to translate it into accelerated deal flow. And last in Australia, the occupancy remained stable there above 99% and delivered consistent year-over-year constant currency SPNOI growth of 2.9% with a weighted average lease term of almost 17 years. At Vital, the business there performs similarly with year-over-year constant currency SPNOI growth of 4% and occupancy approaching 99% and a weighted average lease term of almost 19 years. I am pleased with the progress made during the quarter, which advanced a number of the REIT's key long-term strategic initiatives, as well as producing solid operating results. With these deep relationships best-in-class regional operating platforms and strong access to public and increasingly attractively priced private capital, the REIT is well positioned continue executing on its strategic priorities with a focus on growth and balance sheet optimization. I will now ask the operator to open up the call for questions.

Thank you, sir. Your first question comes from Joanne Chen of BMO. Please go ahead.

Hi, good morning.

Hi Joanne.

Just maybe a couple of quick ones from me, but with the sale of some of your units in Australian Unity healthcare subsequent to quarter-end, I just kind of want to get gauge with your strategic thinking with respect to kind of your remaining interest?

Yes. So maybe just point of clarity that the sale of those units was into our joint venture relationship, so again collectively we retain 17.3% interest in Australian Unity, and we're actively considering next strategic steps there. I can't report on that, but the business is continuing to look at what to do next.

Okay. Got it. And I guess maybe just on your development pipeline, kind of what geographic focus would be over the near-to-medium term, and I guess has the recent inflation environment changed you're thinking on that front?

Yes. Thanks, good question. So the focus for sure builds in Australia and New Zealand to a slightly lesser extent where we've had quite an active pipeline for a long-time. We currently have what we call brownfield expansions underway there totaling approximately $350 million today. And that's been a number that's been pretty stable in the business for the last little while. So we see that as sort of a foundational starting point to the development pipe and likely to continue again at 5% to 10% of our portfolio in some form of brownfield expansion. Adding to that are both our ambulatory and precinct developments, which will take that number up in region closer to $1 billion and likely to be on a steady state basis over the next little while. All of those developments are capitalized within our joint venture arrangements or through Vital. So pre-capitalized and the vast majority of those projects will be pre-lab and likely to have similar arrangements to the ones that we've talked about earlier in the call around Epworth. So we do see an expansion in Australia moving towards that $1 billion mark on a more steady-step basis and an evolution from brownfield perhaps to more Greenfield developments. Again we have focused on all of the issues including cost and leasing and cost management issues that you mentioned. It is a more challenging environment to build things. So most our projects when we start have fixed price contracts and third-party performance driven contractors in place. So pretty prototypical, I would think for development. And we have a long experience in that region…

For sure.

…those types of projects, more than 25 years when I look at the team there. So that's – that's moving a pace and those opportunities at the precinct level look to be ones that can come on a pretty recurring basis for the next five or 10 years. So we're quite excited about that sort of initiatives. I think closer to home, the other focus is in Canada, we have at least two and possibly three significant projects that we're in sort of planning phase on. And those will be more conventional development. So we'll obviously require the, both the leasing and I guess cost side of the business to line up. But we do see a market in the areas that we're focused in for very significant research lead science and education and healthcare opportunities. And so certainly we're hoping to progress those to both announcement and commencement phase over the next 12 months. And we can see some really attractive opportunities. I guess around that we've been active in the ambulatory strategy here. We've had – we have projects like Lakeridge Health under construction today. We are looking and expecting to see most of the provinces enact ambulatory strategies, which is really driving decanting out of some of the acute care facilities into more purpose built and purpose suitable facilities. So we start to expect that that could be a nice trend for us in Canada. So those would be the main markets that we're focused in. I think we can see on the horizon in Europe and in particularly in the UK, some attractive opportunities as we grow our capabilities in those markets as well. But for the near-term, those are kind of our focal areas.

Right now that's great color. Thanks. And maybe just a little bit more on the specifics; could you elaborate a bit more on the fair value gain in the UK and just exactly what changes were on the valuation parameters that you mentioned?

Yes. I'll try and I've got Shailen looking at me to correct me if I get it wrong. So let me just walk through the journey. As you recall, we acquired two broadly speaking portfolios there, somewhat opportunistically the first from BMI back in early 2020, that was acquired at approximately 7% cap rate. And more recently in the summer last year of 2020 summer, we acquired our four well tower assets and broadly in the mid-5s. Both of those portfolios now with the new leasing and portfolio activities that we've done transitioning BMI and the case was bought by and merged with Circle. So quite a journey and we had Brexit happen and all sorts of stuff in between. So that seven is coming to the mid fours. Broadly speaking similar destination for the well tower portfolio, which we added to with the two on balance sheet assets and the third asset that we acquired from Nuffield. So collectively the journey involved, I think a lot of corporate activity in the case of BMI/Circle and which has ended up with a large investment grade tenative the ultimate owner of that business. And then the transition of our Aspen leases to the combination of Nuffield and Spire, which are established existing in the leading operators in the UK, so – and new leases on new long-term. So all-in-all a pre-wholesale reset of those portfolios, but we entered opportunistically at good times, so we were able to convert into good and new long-term partners on these long-term inflation index leases, you know, triple net the way we like them. So that's sort of the journey and the destination is broadly speaking, 4.5 I think on where we've ended up.

And Joanne, may be the only thing I would add to that is that really the catalyst for us was around replacing the tenants in those assets which ultimately triggered the requirement for an external evaluation and have those external evaluations completed trigger those fair value gains.

Got it. Okay. and I guess just one last one from me, but I guess, I think, I asked this last quarter, but are you getting any closer with respect to possibly accessing the unsecure market now that, of course, you're giving investment grade in credit metrics?

Yes, Joanne I'll chime in there. Yes, thanks for that question. And you are spot on that our credit rating there – our credit metrics are very much circling investment grade metrics. You know that we have kept a relatively flexible balance sheet.

Yes.

With a fair amount of debt maturity in 2022. That's really primed for permanent asset level finance on either on unsecured basis through the IG markets or I've put into our perspective UK and regional JV. So, we’ve very much been working the balance sheet position for an investment grade rating and related accessing of those markets.

Got it. Okay. Now that's it for me. Thank you very much, guys. I'll turn it back.

Your next question comes from Mario Saric of Scotia Bank. Please go ahead.

Hi, good morning.

Hi, Mario.

Just coming back to the AUHPT, what was kind of the overriding rationale for the disposition from the NorthWest perspective?

Sorry. So, the overriding rationale for us maintaining our 17.3% stake or what we do next? Sorry.

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

Well, yes, thanks. So, sorry. The way between the call arrangements that we had entered into Hume and just that the finalization of the JV terms, the initial investments were made on balance sheet. So, it’s really just moving them into their long-term home. So that's all just a natural cycle of things that happened in the third quarter, which is when all of the bid-related things transpired. So, it happened in the normal time in the normal course and was expected. So, nothing unexpected there, it was always contemplated to be with our joint venture partner and just worked out that August was the time that it happened.

Got it. Okay. That's good. And then maybe Paul to your comment on further $1 to $2 of nine per unit upside over the next 12 months, you took some pretty solid fair value gains this quarter in the UK. Yet that potential upside remains pretty attractive and pretty significant. Has anything changed for you quarter-over-quarter in terms of the magnitude of that upside, whether it's expected cap rates, the compression could be more than you expected last quarter? It just seems like you're surfacing the value, but the potential value creation remains intact. So, it’s a curious combination. Just want to hear some thoughts in terms of what's changed quarter-over-quarter, if anything.

Yes, I think there is maybe obviously sure rate to the trend for sure that cap rate movement has continued to compress, we're expecting sort of 10 basis points across the portfolio. We generally take a lot of those markets in the fourth quarter. So, it's pretty natural time to say that’s at the conservative end of things, just to be fair to everyone, it is a very prime moment and we are seeing very meaningful cap rate movement in all of our markets. So just call that out. We still have time to go in UK, which is the balance of the non-Aspen portfolio that will get marked as well. So, there is some pretty discrete elements to that, but broadly speaking, a further 10 basis points and maybe a little bit more depending on where things end up at year end. Second one is development, again with both developments completing and the pipe getting restocked and with some of the new things like Epworth we see a meaningful moment happening through the development book. And again, those are materially wider than stabilized values. So, transaction somewhere 75 to a 100 basis points wider on average, broadly committed, and that book is getting quite chunky. And then the last area is through the asset manager. And I think we're on the cusp of completing a number of big initiatives, the business area is growing meaningfully over the year and is forecasted to grow very meaningfully in the next year or so. Taken together all of those things give us some confidence that certainly one to two and perhaps even more are going to be possible in the near term.

That's a great color. Thanks, Paul. My last question just comes to AFFO per unit growth. I think you mentioned on the call, the normalized AFFO per unit $0.92. That's been pretty consistent if we go back to Q2 of 2019, it's kind of been at that level. You highlighted some factors in that intervene time period but with the pressure on that number. So, for example, the JV that you've done, the balance sheet is in really good shape, both the UK health care fund and the currency has been a bit tough as well, which clearly you can't predict going forward. But with the amount of repositioning of the portfolio that you've accomplished, like where and what's the de-levering that we've done now, like where in the priority scale does kind of inching up that $0.92 disclosed, normalized AFFO per unit rank when you are going into 2022?

Yes, it's an excellent question. I maybe go back and look at that sort of on a constant leverage basis that $0.92 might have been over $1 if I'm recalling Shailen.

Yes.

So, there's eight times of de-levering in that number if we want to say it like that, plus some of the other effects that you mentioned around a little bit of a negative FX environment on average, it's not huge, but it's around the edges. I think looking ahead, we would see similar levels of growth in the next couple of years comfortably. Again, the business is moving to a more asset-light model. So, certainly, the heavy equitization of the business for growth and deleveraging that has happened in the last little bit is likely to come off as we move assets into our JVs, which obviously offer a significant accretion on top of the asset level returns. So, that's the theme for us over the next couple of years. And we really do hope to be able to unlock pretty meaningful AFFO growth, but certainly heading up above $0.92. And I would expect over a couple of years heading up over $1 would be a pretty reasonable target.

Okay, thanks Paul.

Mr. Dalla Lana, there are no further questions from the phone line, sir. I'll turn the conference back over to you.

Okay. Well, thank you everyone. And on behalf of NorthWest Healthcare Properties, we appreciate your time listening into our third quarter 2021 earnings call. Have a great day. Thank you.

Ladies and gentlemen, this concludes the conference call for today. We thank you for participating and ask that you please disconnect your lines.