NorthWest Healthcare Properties REIT Announces $200 Million Equity Financing
TORONTO, Feb. 22, 2021 (GLOBE NEWSWIRE) -- NorthWest Healthcare Properties Real Estate Investment Trust (TSX: NWH.UN) (“NorthWest” or the “REIT”) announced today a public offering, on a "bought deal" basis, of 15,820,000 trust units (the “Units”) at a price of $12.65 per Unit (the “Offering Price”) representing gross proceeds of approximately $200,123,000 (the "Public Offering"). The Public Offering is being made through a syndicate of underwriters co-led by Scotiabank, RBC Capital Markets, and BMO Capital Markets.
The REIT has also granted the underwriters the option to purchase up to an additional 2,373,000 Units to cover over-allotments, if any, exercisable in whole or in part anytime up to 30 days following closing of the Public Offering.
Concurrently with the Public Offering, the REIT has also entered into an agreement to sell 395,257 to 1,976,285 trust units to NorthWest Value Partners Inc. (“NWVP”), NorthWest's largest unitholder, on a non-brokered private placement basis at the Offering Price for gross proceeds of approximately $5 million to $25 million (the “Private Placement”, and together with the Public Offering, the “Offering”). NWVP currently holds an approximate 15.3% interest in NorthWest and is wholly-owned by Paul Dalla Lana, CEO of the REIT. Upon closing of the Private Placement, which is expected to occur in April 2021, NWVP will hold an approximate 14.3% to 15.0% effective interest in the REIT through ownership of trust units and Class B LP units (or approximately 14.1% to 14.8% assuming the exercise in full of the over-allotment option).
The REIT intends to use the net proceeds from the Offering to repay $196 million of corporate debt with a weighted average interest rate of approximately 6.1%, and the remainder, if any, to fund future acquisitions, to repay additional revolving debt and for general trust purposes.
Pro forma the Offering and the intended use of proceeds, NorthWest's proportionate leverage is expected to be reduced by 440 bps from approximately 58.2% (including transaction activity announced subsequent to Q3 2020) to approximately 53.8%, assuming low-end of the Private Placement range of $5 million.
As previously disclosed, the relative outperformance of healthcare infrastructure assets since the onset of COVID-19 combined with decreasing interest rates globally have driven the demand for the REIT’s assets which is expected to result in positive revaluation gains (the “Revaluation Gains”) to investment properties of between $125 million and $175 million (net asset value increase of approximately $0.70 to $1.00 per unit) in Q4 2020. The anticipated valuation increase is underpinned by third-party, independent property valuations consistent with the REIT’s valuation policy and remains subject to internal review, finalization of the REIT’s December 31, 2020 financial statements and completion of its year-end audit.
The REIT continues to execute on its capital recycling initiatives with plans to complete its United Kingdom joint venture (“UK JV”) in H2 2021. The UK portfolio is a highly defensive portfolio of scale, leased to leading UK hospital operators under long-term inflation indexed leases with the potential for approximately $85 million of value creation opportunity. The completion of the UK JV, the expected Revaluation Gains and conversion of in-the-money convertible debentures (NWH.DB.E and NWH.DB.F) into trust units would further de-lever the REIT’s balance sheet thus improving and approaching investment grade credit metrics as the REIT would exceed its target proportionate leverage of less than 50% and net debt to EBITDA of less than 8.0x. The strong balance sheet and additional acquisition capacity from the UK JV net proceeds, along with third party commitments of $8.5 billion and undeployed capital of $4 billion, would provide the REIT with financial flexibility and capacity to capitalize on a robust global acquisition pipeline.
The Public Offering is subject to normal regulatory approvals, including approval of the Toronto Stock Exchange, and is expected to close on or about February 26, 2021. The Private Placement is expected to close shortly after closing of the Public Offering.
The Units issued under the Public Offering will be offered pursuant to the REIT's base shelf prospectus dated November 27, 2020. The terms of the Offering will be described in a prospectus supplement to be filed with securities regulators in all provinces and territories of Canada and may also be offered by way of private placement in the United States.
The securities offered have not been registered under the U.S. Securities Act of 1933, as amended, and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements. This press release shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of the securities in any jurisdiction in which such offer, solicitation or sale would be unlawful.