Good morning, ladies and gentlemen, and welcome to the NorthWest Healthcare Properties Real Estate Investment Trust First Quarter 2022 Results Conference Call. At this time, all lines are in a listen-only mode. Following the presentation, we will conduct the question-and-answer session. This call is being recorded on May 13, 2022. I would now like to turn the conference over to Paul Dalla Lana, Chairman and CEO. Please go-ahead.

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 together we are pleased to share with you our results for the first quarter of 2022. 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 all of you to the risk factors outlined in our public filings. And now to the quarter. Post completion of the U.S. acquisition, the REIT’s high quality and defensive CAD10 billion portfolio delivered strong financial results highlighted by 1.5% and 15.4% AFFO and net asset value per unit growth, respectively. All well proportionate leverage declined by 320 basis points. Underpinning these results are the REIT's foundational pillars, which include a high-quality defensive portfolio that delivered strong operational results including a 2.2% constant currency SPNOI growth, supported by 97% occupancy and long-term inflation index leases. The completion of the U.S. acquisition previously mentioned in April further enhanced the defensiveness of the REIT's cash flow as a result of improved geographic and tenant diversification, as well as tenant credit quality. The REIT's active development program delivered three new fully leased projects in Q1 with a combined value of CAD103 million at an accretive approximately 6% yield. And with a further CAD306 million under construction and fully committed there looks to be more development conversions coming throughout 2022. These new projects will also improve our overall portfolio quality and advance a number of the REITs sustainability objectives. The REIT continues to advance various capital formation objectives through its pro rata participation in Vital's recent CAD174 million equity offering and an Australian upside of its Australian JV by CAD2.2 billion with GIC. The investment of CAD48 million in Vitals raise will enhance investment in the shows , which have included approximately CAD395 million of acquisitions and new developments at the entity, again building on its strong track record, as well as enhancing future management fee streams in both the institutional joint venture and the Vital manager going forward. Finally, the REIT has progressed its US and UK joint venture initiatives, which are expected to close in Q2 and Q3, respectively. The REIT continues to increase commitments and deploy capital in each of its joint venture platforms with total deployments exceeding CAD5.6 billion, up 19% year-over-year with an additional 4.8 in outstanding capacity available. Post completion of the previously noted joint venture activities, deployed capital and total commitments are forecasted to increase to CAD14.5 billion and CAD7.4 billion, respectively. With target ownership ranging between 20% and 30% across its global capital platforms, the REIT expects to generate significant uplift in both AFFO and NAS on a per unit basis by leveraging its capital light model to fund future growth. Over the next 12 months, we expect management fees to more than double from the current lease CAD 60 million to CAD 120 million, which will both drive accretion and value creation in the manager. The REIT continues to find attractive growth opportunities with CAD 878 million of acquisitions completed year-to-date, including the CAD 753 million U.S. acquisition that closed in April with an incremental CAD 155 million under contract in various markets. Over the last 12 months, the REIT has also created a pipeline of development opportunities exceeding CAD 2 billion that aligns with its global health care precinct strategy. The significant capital generation expected to regional JV formation in the U.K. and the U.S.A., the REIT remains focused on deploying internally generative capital into fee bearing vehicles to enhance returns and accretion. While the macroeconomic environment is creating uncertainty around future inflation and interest rates, the REIT unit remains well-positioned with more than 80% of its revenue indexed to local inflation measures, which include over 99% indexation in its international markets. The REIT's balance sheet is well optimized and post completion of the U.K. and U.S. JVs will have achieved the target debt metrics, while decreasing weighted average interest rates and extending term to maturity, ultimately reducing its sensitivity to interest rate fluctuations as well. During the quarter, the REIT completed a CAD 172 million equity issuance of 12.5 million units at CAD 13.80 per unit price and issued a further CAD 15 million of trust units to NorthWest Value Partners through a private placement on similar terms, which is expected to close in May. Net proceeds were deployed towards the completion of the U.S. acquisition in April and for general corporate purposes. At quarter-end, the REIT's proportionate LTV ratio was 48.8%. As the REIT moved to complete its U.K. and U.S. assets and joint ventures, the capital generated will be deployed to repay shorter-term debt and with longer-term property financing replacing regional short-term debt facilities. Post JV formation, proportionate LTV is expected to decrease to less than 45% with a weighted average interest rate decreasing by 40 basis points to 2.9% and the weighted average term to maturity increasing 1.2 years to just under four years. For the quarter, our results were in line with our expectations were CAD 0.21 per unit of AFFO implied an annualized payout ratio of approximately 95%. Earnings accretion from recent investment and financing activity was as expected, while foreign exchange movements saw the Canadian dollar depreciate by approximately 1.1% over the last year relative to the REIT's average foreign currency exposure. Reported net asset value increased 15% year-over-year to CAD 14.73 per unit, driven by fair value gains across the portfolio and expansion of the global asset management platform. In terms of liquidity, the REIT is well-positioned with over CAD 120 million. This is expected to exceed CAD 290 million as the REIT sees its current U.K. portfolio and future U.S. portfolio into new funds. Operationally, our results were in line with expectations with constant currency cash recurring SPNOI growth of 2.2% largely driven by contractual rent indexation and underpinned by a 97% occupancy and a weighted average lease term of almost 15 years, in all regards, a highly defensive portfolio. Segmentally, I note the following. In Brazil we're on plan with steady 100% occupancy and continued strong current -- cash currency SPNOI growth of 9.9%. Operationally we note that the REIT's major tenant in Brazil Rede D'Or, continues to deliver exceptionally strong results and is among Brazil's top 10 companies by market capitalization. In Canada, we were on plan, continuing solid performance with portfolio occupancy remaining stable at 91%. During the quarter the REIT completed 58,000 square feet of renewal leasing at rates slightly above plan. We continue to focus on regional sustainability initiatives and our ambulatory care and life sciences initiatives, which are gaining momentum and expected to be accretive in the near term. Europe continues to perform well, with constant currency SPNOI growth of 6.9% and occupancy stable at 97.3%. We continue to find good investment opportunity in Europe, allowing us not only to increase scale and critical mass in our existing regions to us, but also to consider opportunities in adjacent markets. In Australia, our largest market, occupancy remained steady at over 99% and delivered constant currency SPNOI growth of 4.6%, with a weighted average lease term of 16 years. And at Vital, the business reported SPNOI growth of 3.4%, driven by the inflationary environment with occupancy similarly stable at 99% and a weighted average lease term of 18 years. I'm pleased with the progress made during and first quarter-end which advanced the REIT's strategic objectives and produced solid operating results. With deep relationships, best-in-class regional operating platforms and strong access to both public and private capital, the REIT continues to transition to an asset-light best-in-class global health care real estate investment manager. I'll now ask the operator to open up the call for questions.

Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. Your first question comes from Frank Liu with BMO Capital Markets. Please, go ahead.

Good morning, Paul and Shailen.

Yes. Hi. Good morning.

Good morning. So congrats on the solid Q1 results and the completion of the US acquisition. Just to follow up on the US side. Looking forward, do you expect to further expand your platform, I mean, in the near term? And in addition to that could you provide some update on bringing a capital partner into the existing US investment?

So, yes and yes. Just to answer that. As we know the US is the largest health care in the market -- market in the world and by extension health care real estate market. So we've gone there expressly for the opportunity to grow and involve the business. Integral to that, of course, is our capital partner in region. And as we've indicated, its right, we have mixed the wording in the beginning of the script, but we expect our US partner to be in the third quarter of this year and to be supportive of future growth initiatives, as we have had with other investment partners in other regions and strategies.

Thanks, Paul. That's great. I guess, like, just turning back to the rising interest rate with the rising rate in mind, do you still consider like unsecured market as an option in the near term? I mean, definitely have a lot of growth initiatives undergoing, but I mean do you still consider unsecured market this year?

I might just turn that over to Shailen to respond to the narrow point around the unsecured market, but I'll start there.

Hi, Frank good morning. So a couple of comments around the balance sheet more generally and then chime in on the unsecured market. As we look through our UK and US JV initiatives, our balance sheet will be very conservatively structured with less than 45% leverage as Paul had previously noted, a fairly substantial weighted average term to maturity increased to more than five years and with relatively limited floating rate debt as may be less than 30%. So we see our balance sheet providing us with lots of flexibility as it stands. We also note that the majority of our assets will be transitioning into long-term capital platforms, which will have independent capital structures. So as we think about, yet unsecured or accessing the unsecured debt markets as well as achieving investment-grade metrics, I think for the most part the business has achieved is the investment-grade metrics objectives. And now, it's a matter of thinking about where unsecured debt could fit in within our capital structure. It's clearly less attractively priced than where it was perhaps six to nine months ago, especially relative to where secured asset pricing is. And if we do see opportunities to access unsecured debt markets, it's likely to be within our capital platform of noting that we have a very conservatively structured corporate balance sheet.

Thanks, Shailen. That makes sense. I mean, I didn't see much color on the AU HPT side which might provide some update, or it has been part of new desk at this time?

I would just refer to our comments from the last call, we continue to be actively considering next steps there and working through that with our capital partner in region. Nothing more than that to update on.

Thanks Paul. I mean, it's very incognito to see the solid organic growth. But just looking at Canada, there's some small like year-over-year decline which is like fairly small. But you comment by the MD&A you mentioned about like some increase in non-recoverable salaries. Do you see something like wage pressure in Canada, or this is just like a typical like year-over-year change on the salary front?

Yes. I'll tackle that. I think the bulk of the change really relates to one specific portfolio situation that we've been working through, so still relatively minor and not illustrative in Canada. We do see maybe more importantly business volumes and activity levels increasing through our portfolio. As you know, there is a level of sort of traffic that exists in our business. And I think, when we consider the first quarter in particular this year, still having some Omicron movements in people, a number of restrictions that were in place, probably slightly impacted the business, not materially, but slightly. And we see sort of as the first quarter sort of reduction in those restrictions and certainly the movement to a more consistent pre-pandemic operating environment happening quite nicely. So, we'd say our portfolio is on a slight uptick in terms of activity and we see that through parking. We see that, a little bit through leasing velocity, and we see that through general activity levels at the properties, as people are returning more fully back to the getting their health care in the ways that they want to get it. So that's one of the things that we've seen sort of clearly, over the course of the last couple of years.

I see. Okay. Thanks Paul. Congrats again on the quarter. I will turn it back.

Thank you.

Your next question comes from Sairam Srinivas with Cormark. Please go ahead.

Thank you, operator. Good morning Paul Dalla and Shailen, and congratulations on a good quarter.

Thank you.

Paul just listing back to your comments on the risks you are seeing out there, and more specifically, just on the higher base and rising inflation environment. Obviously, we see how the public markets are thinking about it, but I was just curious to see how your institutional partners are thinking about this? And has that changed their outlook towards health care real estate? And do you see a more or less capital change in the second going forward?

Yeah. I mean, I think, it's a great question so thank you for that. And obviously, we're at the coal face on all of these issues so to speak and thinking very much about what's changing in the short term. Clearly, I think we see it translating into opportunity for the business, as probably the near-term impact takes maybe a little bit of froth out of the market that, we were experiencing. And again, noting that, there is an incredible amount of capital formation in general coming into alternatives, and in particular coming into health care real estate. So, just having a more balanced market moment, I would say, helps us as a long-term investor really looking for core things. And so we see that positively in terms of some of the more highly leveraged or structured competitors perhaps considering, where they want to go and what they want to do, whereas we're as a very long-term investor looking for high-quality key opportunities in major markets with major partners generally. So that's the tenure that, I would convey maybe. And does that translate into some opportunities for us to perhaps disintermediate anything. That's something we always ask ourselves in these moments. But over the long term, I think the defensiveness of health care real estate, the general capital flows into the alternative asset class “are still the pronounced trends” in terms of capital formation. And in terms of industry moment, I think the trends that I've spoken to before the pandemic in this moment has continued to be impactful on the decision that we see happening in our industry, which is really the core, non-core decision in a very asset-heavy industry. So we consider the sort of short-term pressures as being drivers to that decision and sort of see the moment as being quite constructive. Of course, in all that is at priceable – and yes the combination of rates and higher growth through indexation in our lease can have nuanced effects, but we think probably they balance each other out over time and we're taking the long view in all events. So we're not too fussed about what's happening narrowly in the next month, or quarter, or overnight in the trading environment. As we've also emphasized, the business is increasingly going capital light. And so we're able to use a lot of internal capital to consider in our growth initiatives. So we're not overly sensitive from the equity side of the world which would be the other place to think about it. So a lot in that answer, but I'd just say in general we expect the near-term, sort of, changes and maybe volatility set properly to perhaps drive even better opportunities for us and none of it is enough to sort of change fundamentally the structural sort of capital formation and strategies that we have in the moment knowing what we know today.

That's a nice color, Paul. And obviously, hearing about the cash which part of the business and self-sufficiency there is definitely a positive. Just focusing down on to the US and I know this is a new market for North West so not really getting into the weeds over there. But in terms of asset demand, obviously, the US market has a wide variety of a wide spectrum of assets between like medical office buildings to hospitals and lab facilities. Do you see the REIT focus more on a specific, kind of, asset over there, or is it one to promote a like a wide-based approach to asset procurement in that market?

Yes. I think, over time as you'd expect our strategy will evolve and become maybe a little more pronounced and focused. But I would call out a couple of the big global strategies that we have underway today and then that will inform I think fundamentally our approach to things. So you've heard us talk about healthcare precincts or academic medical centers may be in US Lexicon. So I think that's a pretty natural area of focus for us. The current portfolio is not particularly pronounced in that direction, but that's very much a core strategy for us in that intersection of healthcare, research, education and all of the ancillary things that go on there. We really like that trend. And of course there's many opportunities for that in the US, at a lot of different entry points. So that is likely to be very clear. Equally the other global strategy that we have which is quite pronounced in the US. So we're the leader in this of course is the ambulatory and outpatient environment and that really almost defines the portfolio that we acquired over the last sort of that. And so compared to the first strategy which is that what's happening in hospitals and even higher acuity and connectivity the ambulatory outpatient strategy is as much about what's happening out of hospitals. And so, the US has many, many entry points and opportunities there. We see a lot of natural adjacencies with existing operators in this portfolio and relationships that we think we can develop and of course through the broader industry. So I think those would be a couple of takeaways. Of course, we've come to the industry as you know being an MOB specialist in Canada and have built a very operating business. So over time, I think, it is likely that we would have domestic capability to provide that level of real estate service. And so we focus on that -- in terms of building an operating platform over time. And I think it's logical to expect that that would lead to some critical mass and scale in certain markets given that that -- boots on the ground. And so those are things that we think about in the US all of which are available attractively in good growth markets. And so it's an incredibly deep and liquid market so there's many, many opportunities to consider. We do like the attractive pricing in certain segments. So we'll be focused on those big strategies and then on bringing precision to the best opportunities, in the best geographies over time.

That's great color, Paul. Thank you for that. And my last question and just, kind of, digging in on that US platform building approach. Would you expect G&A to kind of -- and generally in terms of labor and employee costs, kind of, rise in the next couple of quarters, just a factor in building that platform out there?

I don't think so that the current platform is where the current acquisition is big enough I think to support the things that we're doing and to get us moving on board initially. And so that's the benefit of being able to do, let's say, a large portfolio acquisition like this versus an individual investment. So, I think we see a pretty good opportunity to phase in our platform costs in conjunction with this platform and the JV and other growth initiatives. So, I think it will be a little bit more balanced. Of course we never line up perfectly on top of each other, but I wouldn't see a pronounced change in the near-term. I think we have a pretty good feeling of how to build and grow operating platforms as we build and grow businesses.

That’s great color Paul. Thank you for that and I'll turn it back.

Your next question comes from Frederic Blondeau with Laurentian Bank. Please go ahead.

Thank you and good morning. I remember you guys mentioned the $20 billion threshold entering in the new year for the end of this year. I was wondering if we were still on track to get there this year or things have slowed down a bit? And how should we view the growth of the platform for the next 12 to 18 months. It looks like from your previous comments that you're seeing healthy demand for such partnerships. So, I was wondering how we should view the growth from here? Thank you.

Yes good question. So, I think in today's call and in the materials we put out pretty clear visibility into that just around $14 billion of capital -- $14 billion $15 billion of capital formation through the US and UK JV initiatives. I guess the other initiative that we have at a slightly earlier stage is the health care precincts develop its core initiatives that we have underway in Australia and that's a $5 billion initiative or so. So, there's the $20 million and we do expect those to be in place this year. In terms of deployment of the capital, I think we continue to see an attractive set of regional risk-adjusted return opportunities, all of which fits within those capital platforms. So, it's really a question about execution. And I think we have a pretty good track record of being able to find good opportunities and deploy capital as evidenced by the recent JV upside in Australia as an example. So, I think we're feeling reasonably constructive about the go-forward environment and I wouldn't change anything from the first quarter call other than saying we're increasingly focused on using internal capital in being let's say priority. And again we think each of my comments just a little bit earlier on the market moment that there is certainly good opportunities, but I think we're being sort of more precise about how we're doing them in the next little bit as we go through this moment. So, I'm not sure that that leads to any different pacing, but ultimately, those are things that we're thinking about today.

No, that's totally fair. And then in terms of your development activity, it looks like you guys were able to generate solid returns in Q1. I was wondering, how should we view expect the build on cost from here? I guess, on the CAD300 million under construction.

Yeah. Everything under construction is pretty locked in. As you know, …

Yeah.

…that this is a bit development light in that it's -- the majority of it is Brownfield expansion where we have 100% lease commitments and return on cost contracts. Of course in those contracts all of them are fixed-price or lump-sum contracts. So we're really managing the moment which is not a small thing, but sort of we have lots of experience in this and there's nothing particularly exotic. So we would see that, circa 5.5% to 6% development yield holding comfortably through the piece. And again, I'd just say that, this is a continuation of the development light program that we see that exists within the space, continuously. And we have lots of track record and experience in sort of delivering on these things. On the newer sort of more health care precinct things, we're like a lot of others looking very, very closely at cost. I mean, clearly, the environment for construction and development is challenging in the moment. So again, we bring all of our thinking about de-risking as much as we can. I'd say there's lots of new thinking about procurement models out there and being able to get things done, probably limited capacity more than costs being a driver and our thinking about project formation we do expect close that in CAD2 billion to CAD3 billion pipeline, that we have mentioned a number of highly attractive significant projects coming over the next little bit and certainly this year. We've been spending a lot of time and energy on that. And we see it as a great long-term strategy, but we've been doing a lot of work to put ourselves in a position to generate attractive opportunities. So, in addition to the Brownfield, sort of, expansion program which is continuous in our business and likely to be circa 5% of the overall hospital portfolio being reinvested and improved overtime which is a number that we've seen continuously now. We start to add some of these bigger Greenfield opportunities that just have a lot of longer lead times that are more significant and very attractive projects. And we're quite focused on bringing low-risk fully led or nearly fully led versions of these to the market over the rest of the year. So, I do think that we'll start to see more visibility into that sort of CAD2 billion to CAD3 billion initiative as the year advances. And we're again being driven as we know by incredible demand by our providers, and by educational institutions, and by research institutions for space and some of the best precincts in campuses in the world. So we're quite excited about this. And we see it as a long-term trend. And we've been working very hard now for a couple of years to get this to a position. And we see this coming nicely into the rest of the business over the balance of the year. So -- but managing it and executing on it is the key risk in all our markets in the moment. So again, we're making sure that, we're driving and crossing Is and Ts as needed and that we have the appropriate level of risk management and structure in place to allow us to proceed both in terms of leasing, but also in terms of price-protected contracts and all of the contingencies that you need to be comfortable.

Got it. Thanks a lot.

Your next question comes from Scott Berson with CIBC. Please go ahead.

Thanks and good morning gentlemen. So you've covered a lot of ground in this call and you disclosed excuse me -- the disclosures on growth. So I'm just wondering if capital recycling forms any part of the internally sourced capital strategy?

Thanks. It does. Although, I think I would put that in around the edges set of parameters and it might be CAD200 million or CAD300 million of assets that we think would be maybe not in our core strategies or perhaps offer some opportunities. We've had numbers like that through the business historically. And so we're always looking to optimize portfolios. No massive shifts, so in terms of key geographies or key segments that we're in that type of thinking.

And would you consider putting any capital in ahead of selling them, or you're selling this -- whom would you sell?

It's a great question such a granular answer is required to do that. But, of course, we're always looking to optimize the price of things that we would sell. And if there are compelling investment opportunities to do that, we would do them naturally as an owner. So I'd just say it like that. The things that we might sell today, I mean, the portfolio in general does not have a huge capital requirements. So it is a relatively stable portfolio just to call that out. So other than a few things here and there like everyone has in 225 assets, we're pretty confident that there aren't big capital bogies that are driving our decisions per see.

Thanks Paul. I appreciate the patience

No worries.

Your next question comes from Pammi Bir with RBC Capital Markets. Please go ahead.

Thanks. Good morning. Just wanted to go back to the comments on doubling the management fees within 12 months, I think you said CAD120 million. Some of that of course should be driven by the new JV formations coming up. But can you maybe just talk about what other assumptions on capital deployment are baked into that figure?

Hey, Pammi, yeah, I mean I come at that at a high level and say we've, obviously, put out some guidance in terms of where we see our capital formation and new capital formation coming from principally around the UK and the US. So those will clearly be new fee-bearing streams. And then incrementally to that within our existing, I mean our existing facilities and commitments, we really model out normal course deployment averaging around four to five years of deployment of those total size of facilities, which is really a target for those -- for each of those individual funds. So I'd say it's really bringing on the UK and the US and then continuing to deploy our existing capacity over that I mean, four to five-year run rate.

Okay. But just in terms of the next 12 months getting to that -- I presume that was an annualized figure of CAD120 million that's predominantly just in the anticipating UK and US JV formations?

Correct. I mean, within our existing bonds.

Yeah. We have significant capacity in our European JV and the new capacity in our Australian JV and a capital ready vehicle in Vital as well. So all of those taken with an average of let's say one-quarter of the capacity being deployed each year.

Okay. And Paul just one last one just considering how you've allocated capital in both the public and the private markets over the years. I'm just curious, whether any dislocation in the public markets we're seeing has or it might maybe peak your interest? And if so, if you care share any of the particular geographies that might look more interesting today.

Yes, it's a great question. I mean again, maybe I'd call out a couple at a high level where we're seeing sort of attractive risk-adjusted returns. We probably do see at the margin, a moment in Brazil coming in particular, with our existing operators. And that's certainly in the 7.5% to 8% kind of cap rate range today offers us some attractive opportunities. And I think we've always said, that we like that portfolio in proportion to the rest of the business. So, as the business is growing, there's probably some incremental capacity there as well. We have attractive partners and some attractive reinvestment opportunities that we're considering. So that would be at the higher yield standpoint. The rest, I think follows sort of a very informed set of strategies. We do see Europe, is offering continue in the moment, a continued sort of risk-adjusted set of returns again still relatively attractive debt terms available in Europe, not quite the sub-1% ones that we had before and relatively attractive yields in the segments that we're focused in. The US, as a newer market of course screens very well. And again, we've talked about the average entry point of the portfolio we've seen in that 5.5% cap rate range, we're certainly seeing opportunities between that and a little bit above that, in some of the more full profit activities that we consider. So those would be a few examples. Again, we know that we have a very significant business in Australia and New Zealand and a very evolved business. So, we certainly consider those precinct development opportunities and some of the specific things, that we have on with our partners there equally attractively again noting that those are the most core things that we're doing, and fit within these very core capital platforms that we have there. So I wouldn't want to deemphasize that. We see still a lot of opportunity in that market over time. But I think at the margin, trying to differentiate, I pick those three themes as areas of incremental focus.

Thanks so much. I’ll turn it back

There are no further questions at this time. Please proceed.

Okay. Well, thank you, operator. We appreciate the call and everyone's participation today. I wish everyone, a good rest of the day. Thank you very much.

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