Northwest Healthcare Properties is a leading owner and operator of healthcare real estate properties located throughout major markets in Canada, Brazil, Germany, Australia, and New Zealand. It is the largest non-government owner and manager of medical office buildings and healthcare facilities in Canada.
Australia and Asia comprise 55% of Northwest’s total NOI, followed by Americas (28%) and Europe (19%). The REIT operates in seven countries worldwide and has a tenant base of over 2000 quality healthcare companies. Northwest provides holistic services ranging from the sale of a medical office building to leasing new space to individual professional requirements or addressing other evolving healthcare needs.
Northwest’s portfolio consists of high-quality healthcare real estate comprising 189 properties and over 15.5 million square feet of gross leasable area. Its portfolio is worth $7.8 billion. Its portfolio typically consists of medical office buildings, hospitals, and health care facilities characterized by long-term leases and stable occupancy rates. By assets, hospitals and healthcare facilities constitute 58% of Northwest’s total assets.
- Opportunity Score: 52
- Ticker: TSE:NWH.UN
- Sector: Real Estate
- Industry: REIT - Healthcare Facilities
- Market Cap: 2.84B
- P/E: 10.47
- Dividend Yield: 6.13%
- Payout Ratio (TTM): 56.60%
- Canadian Dividend Aristocrat: NO
- Chowder Score: Members Only
- Dividend Growth: Members Only
- Dividend Growth Fit: 1/10
- Dividend Income Fit: 6/10
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Revenue Growth & Market Exposure
Over the years, Northwest Healthcare REIT has developed leading tenant relationships, strategic partnerships with leading healthcare operators, and operational expertise. The REIT has developed strong partnerships with leading healthcare operators in international markets as well and has built leading management platforms in large global cities.
Healthscope Ltd, Median, Rede D’Or, Healthe Care, Alberta Health Services are a few of Northwest Healthcare REIT’s leading tenants by gross rent. Healthcare tenants are generally reluctant to move their locations and hence sign long-term leases which leads to predictable and steady rental income.
Northwest Healthcare REIT has been growing steadily through acquisitions. Northwest’s merger with NorthWest International back in 2015, created a leading global diversified healthcare real estate investment trust and consolidated its position as a strong global player. Northwest Healthcare REIT keeps on entering into strategic transactions from time to time which has expanded its global reach and extensive partnerships. It focuses on the Cure segment of Healthcare Real Estate.
Northwest is well-positioned to benefit from its geographically diversified portfolio of core healthcare real estate assets in stable and growing international markets. Its portfolio is characterized by long-term indexed leases and stable occupancies of more than 97%. Northwest REIT’s AUM has grown to $7.8 billion from just $3 billion in the last five years and by 20% YoY.
The REIT’s business qualified as an essential service provider and 100% of its properties remained open during the pandemic with over 80% of its tenants having government support. Northwest is favorably placed to leverage its leading international platform and existing assets to drive meaningful fee growth. It is focusing on European expansion and Australasian simplification for future expansion. Northwest REIT also had a robust acquisition and development pipeline of $414 million at the end of FY2020.
Northwest Healthcare REIT is a Canadian Dividend Aristocrat and has successfully grown its dividend payouts at the rate of 5.5% CAGR in the last five years. The REIT pays monthly cash distributions. Its payout ratio stands near 38% and it sports a dividend yield of 3.6%. Northwest has a proven track record of 10+ year total shareholder return of 10% CAGR. Its funds from operations have also grown by 31% CAGR in the past five years.
Healthcare real estate is an attractive long-term investment, given its highly defensive nature. Aging populations and rising healthcare expenditures are favorable industry trends supporting future growth. Northwest’s leading position in the healthcare REIT position is better for significant consolidation opportunities and a chance to scale capital relationships. Its global Healthcare Real Estate is estimated to be more than $3 trillion in value. The REIT also stands to benefit from favorable global healthcare projections like $8 trillion in annual global healthcare spend, growing at 4%-7% annually.
Northwest’s highly scalable management platform should continue to drive operating leverage. The REIT is deleveraging towards investment grade metrics with management fee growth of 7.5% and AFFOPU growth of 1%+ in 2020. Northwest REIT’s properties are marked by strong and stable occupancies (~97%) and long weighted average lease term expiry of about 15 years making its cash flow generation very stable.
Northwest has been expanding the length and breadth of its global footprint and strategic partnerships with key international players worldwide which will further help to consolidate its position in leading global markets. Few of the exciting growth opportunities include the completion of Healthscope acquisition, completion of a new $3 billion European JV, geographic expansion into the UK and simplification of its Australasian platform. Supportive healthcare trends, strong relationships, and established local operating platform positions the REIT well to execute on these growth opportunities at scale.
Healthcare is a recession proof industry with high demand despite the economic conditions. Northwest Healthcare Properties competes directly with Chartwell Retirement Residences which is an owner and operator of a complete range of seniors housing communities, providing long term care, assisted living, independent living, and memory care in Canada.
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Healthcare tenants have specialized real estate needs and healthcare REITs are favorably placed to benefit from growing trends like aging population, consolidation and emergence of new treatments. Northwest Healthcare Properties REIT is well positioned to provide customized real estate solutions to the healthcare industry on a global scale.
Its geographically diversified portfolio of core healthcare real estate assets in stable and growing international markets, high quality tenant base and strategic relationships with leading healthcare operators are strong enablers of future growth. A robust acquisition and development pipeline should further support future growth.