Good morning, ladies and gentlemen, and welcome to the NorthWest Healthcare Properties Real Estate Investment Trust first quarter 2024 results conference call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question-and-answer session. If at any time during this call you require immediate assistance, please press star 0 for the operator. This call is being recorded on Wednesday, May 15, 2024. I would now like to turn the conference over to Alyssa Barry, Investor Relations for NorthWest. Please go ahead.
Thank you, operator. Good morning, everyone, and welcome to NorthWest's Q1 2024 conference call. Thank you for joining us today. This call is being recorded, and a replay will be available on our website at www.nwhreit.com. Today's discussion includes forward-looking statements. As always, we want to caution you that such statements are based on management's assumptions and beliefs. These forward-looking statements are subject to uncertainties and other factors that could cause actual results to differ materially from such statements. Please see our public filings on SEDAR+, including our MD&A and financial statements and AIF for discussion of these risk factors. Presenting on today's call are Craig Mitchell, our CEO; Mike Brady, our president; and Stephanie Karamarkovic, our CFO; Tracey Whittall, our Chief Operating Officer, is also present and available for the question-and-answer session. I will now turn it over to Craig for his opening remarks.
Thank you, Alyssa. So good morning, everyone. I'm pleased to share that our Q1 results are consistent with Q4 2023 and are in line with management's expectations. We reported revenue of CAD 134 million, net operating income of CAD 95 million, and maintained a strong occupancy rate of 96.5%. Our performance this quarter reflects strong leasing activities and robust same-property NOI, which is up 6% from Q1 last year. In the first quarter alone, we successfully completed CAD 200 million in property dispositions and the sale of a portion of our investment in unlisted securities, and we've used these proceeds to reduce debt and strengthen our balance sheet. During the last 12 months, we've divested 27 properties and a portion of our AUHPT units for a total proceeds of nearly CAD 700 million.
As we look ahead into the year, we continue to pursue the sale of additional assets globally, and we'll provide further updates on this as available. Efficiency and cost savings remain at the core of our operational focus. We're challenging how we're doing things to drive efficiency across our entire organization. On top of this, we're working hard to improve our capital management, achieving more favorable leverage levels, and strengthening our financial position. Concurrent with the strategic review process underway, we've also enhanced our governance and management team. During the quarter, Tracey Whittall joined as our Chief Operating Officer and Stephanie Karamarkovic as our Chief Financial Officer. Both have been very impressive in a short period of time and strengthened our leadership bench in a very meaningful way. We're extremely pleased to have both on board.
I'd now like to introduce our President, Mike Brady, to provide an update on our strategic initiatives during the quarter. Over to you, Mike.
Thanks, Craig, and good morning, everyone. In terms of our strategic asset dispositions, during Q1 2024, we successfully divested 12 non-core properties, generating total proceeds of CAD 165.2 million. Following the quarter, we further divested an additional property valued at CAD 20.5 million. Proceeds from these sales have gone towards repaying property-level debt and corporate credit facilities, aligning with our broader objectives to streamline the organization and strengthen our financial position. Since mid-2023, we have reduced our proportionate debt by CAD 383 million, reducing it to CAD 3.5 billion. Additionally, during this first quarter, we redeemed an additional CAD 15.3 million from our investment in unlisted securities, bringing our total proceeds from these sales to CAD 150 million. We've now sold approximately 71% of this investment. This has enabled us to fully repay the term debt secured by these unlisted securities in Australasia.
This strategic financial management reflects our commitment to maintaining a robust and adaptable financial framework and continuing NorthWest's progress towards becoming an institutional quality REIT. I'll now turn it over to our Chief Financial Officer, Stephanie Karamarkovic, to share our financial highlights for the quarter.
Hi, everyone. Thank you for the warm welcome over the last month. I really appreciate it. I've been NorthWest's Chief Financial Officer for about 30 days, and there's nothing like diving in during a reporting period. This is a bit of a homecoming for me as I previously worked at NorthWest for 8 years. I'm very pleased to be back, and I look forward to getting to know many of you. Turning over to our financials in more detail, our Q1 revenue from investment properties slightly decreased by 1.3% as compared to Q1 2023 due to strategic asset sales but was partially offset by rental increases across all of our markets. Our NOI of CAD 95 million was essentially flat as compared to the first quarter of last year, however, was 2.7% lower than Q4 2023 as a result of the asset dispositions.
Same-Property NOI of CAD 88.9 million was 6% higher than in Q1 2024, driven primarily by contractual rent increases and indexation. Our portfolio occupancy of 96.5% is underpinned by a weighted average lease expiry of 13.2 years and 84% of leases subject to rent indexation. With our portfolio comprising of more than 1,800 tenants, the REIT's cash flow is highly diversified. It's also worth noting that our global rent collection is 98%. Q1 AFFO per unit was CAD 0.11. After adjusting for interest rate caps that expired during the period, AFFO per unit remained consistent with the past two quarters at CAD 0.09 per unit. Reported G&A for the quarter was CAD 15.5 million, which is CAD 2.5 million higher than the first quarter of 2023 and CAD 3.2 million higher than Q4.
Included in G&A is non-cash compensation expense during Q1 2024 of CAD 2.5 million as compared to CAD 2.3 million in Q1 2023 and a CAD 0.7 million non-cash compensation recovery in Q4. Excluding these impacts of non-cash compensation, G&A in the first quarter was CAD 13 million, which is CAD 2.3 million higher than Q1 2023 but flat as compared to Q4. Debt to GBV remained stable at 47.7%, with a decrease in debt related to asset sales being offset by investment property fair value losses and FX depreciation. We've also taken significant steps in capital management, having refinanced and amended mortgages to achieve more favorable terms, contributing to a more resilient financial structure. The REIT continues to be impacted by higher central bank interest rates globally. Interest expense for the quarter was CAD 55.4 million, which is CAD 3.7 million higher than in Q1 2023 but is CAD 1.7 million lower than in Q4.
The decrease in interest expense as compared to Q4 is due to debt repayments of high-cost debt as a result of proceeds from asset sales, partially offset by the full quarter impact of the extension of the REIT's Series G Convertible Debentures. The REIT's effective interest rate is 6.1% as compared to 5.15% at March 31, 2023, and 6.37% at December 31, 2023. As at March 31, 2024, on a proportionate basis, the REIT had mortgages and loans payable of CAD 3.5 billion, down from CAD 3.6 billion in the prior period and CAD 3.7 million in Q4. During the first three months of 2024, the REIT extended approximately CAD 300 million of its non-mortgage debt maturing in 2024.
This includes the extension of CAD 125 million of its revolving credit facility from November 2024 to March 2025 and the extension of the CAD 172 million Australasian secured loan for an additional 2 years to March 2027. Looking ahead, we're encouraged by the significant progress made to date and the overall performance of our real estate portfolio. And with that, 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. Should you have a question, please press star followed by the one on your touch-tone phone. You will hear a three-tone prompt acknowledging your request, and your questions will be pulled in the order they are received. Should you wish to decline from the polling process, please press star followed by the two. If you are using a speakerphone, please lift a handset before pressing any keys. One moment, please, for your first question. Your first question comes from Sriram Srinivasan with Cormark. Please go ahead.
Thank you, operator. Good morning, everybody. Just looking at the transaction market right now and just tying that with the fair value loss you guys saw this quarter on assets, can you talk about a bit of the transaction outlook, and is this something we should be reading from the fair value loss in terms of market appetite for the assets?
Yeah. So maybe I'll go back in history just to provide a bit of color. The markets are choppy, as you'd appreciate, but we've been very successful with our dispositions. Now, the CAD 700 million that we've sold in the last 12 months, we've sold it adjusted at a cap rate of sub-7%. In the last quarter, the CAD 200 million of sales improved the AUHPT units. At the real estate level, you're selling at a cap rate of just under 7.5%. So we are seeing transactions move. It varies by market. It is choppy, but we are transacting, selling 27 properties. It feels like we're at the top of the interest rate cycle, which is giving everyone a little bit of confidence about how to apply discount rates.
That's good color, Craig. Maybe I missed this in the disclosure, but are there more dispositions out in the pipeline for you guys that you guys are working on right now?
I think we've been very clear. I mean, we're trying to restore our unit prices as close to NAV as possible and increase our earnings. We have some high-cost debt. We've got nearly CAD 400+ million of nearly double-digit interest rates, so we'd like to be able to reduce that. We're looking to strengthen our balance sheet as we've done in the last 12 months. So we're always looking at ways of improving the robustness of this business, whether that be dispositions of units, individual real estate transactions, or efficiencies at the G&A line. So all three parts are open for us.
All right. Maybe just kind of rewinding, almost a year ago now, I guess the entire process of dispositions was also kind of started because of leverage and the urgency to kind of pay down debt. Having now actually refinanced and extended them beyond 2024, at least most of them, does that change your outlook on dispositions? And maybe does that give you more of a breather in terms of the timelines you can execute dispositions in?
No. I think, as I said, we're very focused on increasing our earnings. We're now probably the third quarter at CAD 0.09, so we're very pleased with that. We feel like we've got a good baseline. We need to grow that number. Part of growing that is either ultimately, well, there are three ways: good like-for-like growth. You saw that come through our portfolio. Reducing G&A, there's a big focus on that and efficiency. And then the third one is repaying high-cost debts through dispositions. So there's always an urgency in all transactions, and particularly in this market. Yeah, it's important to us.
Hey, Craig. Probably my last question is, you've spoken about the REITs market you're looking to kind of lighten up on, and obviously, Brazil's one of them. Is that still a candidate you guys are looking to offload? And would you say that the current fair value, where it is today on the balance sheet, kind of represents where those assets should be sold at, or what you'd be looking for them from a seller's point of view?
Yeah. So the real estate we sold in the first quarter that we just announced, they held our books at fair value at Q4. I think we're at the cycle now where cap rates have started to stabilize. You might see a little bit of softening in cap rate, but nothing material. So I think you're at a point in the cycle where capital values are starting to stabilize.
All right. So what I'm basically reading is that the fair value reduction or the revision that you saw was mainly a function more of interest rates being harmed on cap rates rather than actually the NOI number on the assets that they can generate. Would that be fair to say?
That's fair to say. NOI is strong with good indexation. That rent collection of 98%, that's four years in a row of 98%. So the cash flows are strong, really. The valuation assumptions is either the discount rate or on the term of cap rate or the initial cap rates, what's driving it, not the underlying cash flows.
That's brilliant, Craig. I'll turn it back. Thank you.
Thank you.
Ladies and gentlemen, as a reminder, should you have a question, please press star followed by the 1. Your next question comes from Frank Liu with BMO Capital Markets. Your line is now.
Good morning, everyone, and congrats on your appointments, Stephanie and Tracey.
Good morning, Frank. How are you?
Good, good. Thank you. It's good to see the new disclosures within the supplemental schedules. With the new segments laid out, could you just briefly comment on the organic growth you're expecting over, let's say, a year and two years across North America, Brazil, Europe, and Australasia?
Yeah. I'll talk to Frank as Craig at a high level. On a proportionate basis, we saw 5.4% like-for-like growth or a consolidated basis of 6%. I think that is elevated. I think if you look forward where we are in the inflationary environment globally, I think you can assume, particularly in the next 12 months or so, 4% like-for-like growth on a blended basis. Pretty hard to give you but that's a reasonable assumption. Of course, most of the markets, if I forward out two years, that's a little bit harder depending where because 84% is indexed to inflation. You're still in that 3%-4% if you want to go out sort of two years if we think the interest rates globally are going to come down. So think about 4% the next 12 months, 3%-4% the year after.
Appreciate your comments on the disclosure. I think we've really tried to listen hard to the investment community late last year. We're also open to comments to try and get the best disclosure and make our business as easy to value as possible.
Of course. Yeah. It's always good to see some improvements, and that may help with our modeling perspective and better understanding your business. Since we're covered on the last NOI, I guess so there's no upside, right? I mean, 3%-4% I mean, 4% next 12 months, 3%-4% in two years. Is there any upsides you want to count? Maybe I can switch my question to this way.
No. No. We've got a reason if you look at on our management presentation, we've got our expiry profile. It's very, very benign. So I don't expect any major outliers, whether it be downtime, termination income, or the likes. So don't expect any outliers.
Got it. Perfect. Thanks for the color. Just want to briefly follow up on a news that came out in March related to Healthscope. I guess they were planning to ask landlords for rent relief for some of the assets, some of their underperforming hospitals. I'm just curious if you have had any conversation with management at Healthscope, and should we expect any impact to NorthWest?
Sure. Okay. No, that's a good question. Maybe just for the broader audience, maybe a bit of background for everyone. Healthscope, they're a critical provider of healthcare services in Australia. They're the second-largest private hospital operator in Australia behind Ramsay. They're working with the government at the moment trying to increase their revenue rates they're getting from the insurers. At the moment, they're facing negative jaws. In effect, what I mean by that is their cost base, whether it be PP&E, nursing, is going up at a higher rate than they're getting from revenue from the insurers. So that negative draws, they're kind of working with the industry and government to close that down. The owners of Healthscope is these Brookfield Partners. Yes, they have come with a proposal to the banks and landlords to restructure their debt and their corporate structure.
Very clearly, we and the banks have rejected any initial proposal. We'll always consider to support them in return for any lease enhancements. I think it's important to note that we've got very strong leases with no covenant defaults in all their leases. But it is also very important to note as well that Healthscope has met all their lease obligations, and they have zero amount of rent outstanding. And again, just to give it the quantum of the proportional rent, they're 3.5% of our rent roll on a proportionate basis. So I think it's bringing it all together. The conversations will continue, and I think this will sort of play out over time.
Okay. That's great. I mean, I don't have any further questions. I'll turn it back. Have a great weekend, guys.
There are no further questions at this time. I will now turn the call over to Alyssa for closing remarks.
Thank you very much. On behalf of the NorthWest team, thank you for participating in today's call, and we're looking forward to speaking with you again in August for our Q2 results. Should you have any questions, please feel free to reach out to us directly. Have a wonderful rest of your week.
Ladies and gentlemen, this concludes your conference call for today. We thank you for participating with us. Please disconnect your line.