Full Transcript: Northwest Healthcare REIT Q2 2026 Earnings Call

Northwest Healthcare REIT (TSX: NWH ) released second-quarter financial results and hosted an earnings call on Thursday. Read the complete transcript below. APIs provide real-time access to earnings call transcripts and financial data. Visit to learn more.

Access the full call at Summary Full Transcript OPERATOR (Operator) Welcome to Northwest Healthcare REIT second quarter 2026 earnings conference call. At this time, all lines have been placed on mute and 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 0 for the operator.

This call is being recorded today, May 13th. I would now like to turn the conference over to Stephen Hong, Vice President of Investor Relations. Please go ahead. Stephen Hong, Vice President, Investor Relations Thank you, operator.

Good morning, everyone, and thanks for participating in our second quarter results conference call. This is Stephen Hong speaking. Joining me are Zach Bond, CEO; Stephanie Kramarkovich, CFO; Mike Brady, President; Tracey Whittall, Chief Operating Officer; and Dave Casimiro, EVP. Our earnings announcement was released yesterday evening and we posted an updated investor relations presentation on our website which listeners can refer to during the call.

Following comments, we will be glad to take questions from analysts. Today's discussion includes forward-looking statements. As always, we want to caution you that such statements are based on 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 Annual Information Form, for a discussion of these risk factors. During this call, we'll also reference certain non-GAAP financial measures. A reconciliation to the most directly comparable IFRS measure is provided in our MD&A and earnings release. Unless otherwise noted, all amounts discussed today are in Canadian dollars.

With that, I'll now hand it over to our CEO, Zach Bond. Zach Bond, CEO Thanks, Stephen, and thank you everyone for joining us today on the call. This is my fourth earnings call as CEO of Northwest Healthcare REIT, having joined a little over a year ago. Since joining, the senior management team and I, with the support of our board, have been executing on a strategic plan to transform our business centered on four key priorities: 1) simplifying our footprint, 2) strengthening our balance sheet, 3) reducing our cost structure, and 4) disciplined capital allocation.

We are still in the early stages of this transformation, but we are making strong progress across each of these priorities as demonstrated by our results this quarter and our recent activities. Starting with the simplification of our footprint, during the quarter we closed on the remainder of the properties in Europe that were part of our larger transaction with TPG Real Estate. This transaction represented the majority of our invested equity in Europe, generating $145 million of net proceeds as of June 30. Our European property operating business and employees have also been transferred to TPG in Europe.

We are left with just two remaining investments, both of which are efficient to oversee and which we intend to exit in due course. Our substantial exit from Europe, along with the internalization of Vital Trust in New Zealand, clearly demonstrates our commitment to simplifying our business and creating a more focused operating platform. Moving to our balance sheet, at the end of Q2 our LTV on a proportionate basis stands at 47%, down about 900 basis points from a year ago. 4 times a year ago, close to a two-turn reduction.

In addition, we ended Q2 with liquidity of $443 million, giving us significant flexibility to pursue accretive growth. 2 million year over year, with further reductions expected next quarter as the impact of our European sale flows through. As a result of these and other efforts undertaken by the team to streamline operations, we are on track to reduce our G&A by over 30% by year-end. Importantly, with our simplified footprint we can recycle capital with little to no incremental overhead, increasing our platform operating leverage and allowing a greater proportion of property earnings to flow through to unitholders.

Lastly, turning to capital allocation, I committed on my first earnings call that we would be laser focused on disciplined capital allocation. In the past 12 months we have realized approximately $300 million of net proceeds that have been recycled back to North America through a combination of debt reduction and accretive investment. Importantly, during the last several quarters we have demonstrated that we are able to reinvest that capital in opportunities that are accretive for our unitholders, having completed and committed to the following transactions. 04 a unit.

In March we acquired a transitional bed facility in Ottawa on a long-term lease to The Ottawa Hospital. This was our first new acquisition in Canada in almost a decade, and after quarter end we completed or committed to approximately $153 million of additional acquisitions. S. market.

This property is a modern, purpose-built, transit-connected outpatient community health hub located in one of the largest and most dynamic cities in North America. New York City has a very limited supply of dedicated healthcare space and very high barriers to entry. The property brings together a broad range of healthcare services including primary care, specialty care, imaging and diagnostics. The facility is 100% leased to AdvantageCare Physicians, one of New York's largest multi-specialty physician organizations.

The lease has approximately 11 years remaining and includes contractual annual rent escalations, providing durable, predictable and growing cash flows for Northwest Healthcare REIT. We also announced as part of our quarterly results that we signed a definitive agreement to acquire a Canadian outpatient property in Burlington, Ontario. The property is 99% leased to a diverse mix of healthcare providers with long-term operational and densification upside at the property. Together, these acquisitions totaling approximately $153 million are being acquired at a going-in cap rate of over 7% and are expected to be immediately accretive to earnings.

These transactions demonstrate our ability to identify accretive, high-quality healthcare real estate investments across North America. Our pipeline continues to grow in both Canada and the United States, giving us confidence that our strategy to refocus and grow the portfolio in North America is highly executable. So we are making tangible progress across all four of our strategic priorities, and we are confident that momentum will continue over the coming quarters. 2%.

1% and a WALE of over 13 years, one of the longest of the Canadian REITs. These metrics continue to reflect the defensive nature and long-duration income within our portfolio. In addition to supporting the delivery of critical healthcare services, many of our assets are located in dense urban markets where there's meaningful long-term embedded value. As a demonstration of this, in July we received City of Toronto approval for our rezoning application at Fairview Health Centre.

This approval allows us to develop 980,000 square feet of buildable area led by 100,000 square feet of medical space. The balance of the project can be market-rate residential without the need for any affordable housing component. We're very pleased that our team was able to achieve this result. It provides us with significant optionality and, over time, the potential to create meaningful incremental value for unitholders.

Before I wrap up, a quick comment on Healthscope. As has been publicly reported, a consortium comprising four operators is in active diligence with the receiver to acquire all of Healthscope's remaining assets and operating business. This consortium has both our support and that of the other major landlord. As we have previously indicated, we have a committed transaction in place with Calvary, a large, high-quality, not-for-profit Australian hospital and senior housing operator, to step into a new lease on all 12 of our properties, subject to lender and receiver approval.

We anticipate further information before our Q3 earnings release and we'll keep everyone informed as the process continues. Encouragingly, performance in our Australian hospitals keeps improving and, from a liquidity standpoint, we continue to see institutional capital return to the market. Last week an institutional investor agreed to acquire a hospital in suburban Melbourne. The property was acquired for $291 million Australian dollars, equating to a low-5% cap rate.

We view this as an encouraging data point for asset values and market liquidity, and we anticipate further transaction activity as hospital operating performance keeps getting better and the Healthscope situation moves towards resolution. In addition, Stephanie will highlight, after quarter end we successfully refinanced all the debt secured by our Healthscope assets on attractive terms, demonstrating the availability of funding for high-quality Australian healthcare infrastructure. So to summarize, here are a few takeaways.

First, we're making real progress across each of our strategic priorities, and the improvement in our reported metrics this quarter demonstrates that. Second, our portfolio continues to perform as it should, generating stable and growing cash flows underpinned by critical healthcare assets with significant long-term upside. And third, we remain disciplined in our approach to capital allocation and are demonstrating our ability to identify accretive opportunities to recycle capital and grow the business. We are pleased with both the strategic progress we are making and the underlying performance of the business.

During this quarter, Northwest Healthcare REIT is becoming a simpler, stronger, and more focused company with an improved balance sheet, a more efficient cost structure, and a growing pipeline of attractive investment opportunities. With that, I'll hand it over to Stephanie to talk about financial results. OPERATOR (Operator) We are now opening the question-and-answer session. If you'd like to ask a question, please press star followed by one on your telephone keypad.

If you would like to withdraw your question, please press star followed by one again. Thank you. Your first question comes from the line of Jonathan Kelcher from TD Cowen. Your line is now open.

Please go ahead. Jonathan Kelcher, Analyst at TD Cowen Thanks. Good morning. First question, just on your pipeline, the acquisition pipeline.

Zach, you talked about it being pretty active. S. vs. Canada?

Zach Bond, CEO At the moment, it's probably—I would—I mean, again, it fluctuates day to day. S. at the moment in terms of acquisitions. It's really a reflection—I mean, look, if we could do everything in Canada, we may well do that.

I think the challenge is obviously a lot of the healthcare assets and infrastructure is sort of single-payer owned. S. tends to be where we find more acquisition opportunities, or development opportunities. In terms of where we would do strategic transactions like we did with RVH, those are all here in Canada.

S. development. Are there any states that you would—that you're maybe looking to add to or, conversely, stay away from? Zach Bond, CEO Yeah, it's interesting, Jonathan.

Coming from a background of starting my career in office, moving to apartments and hospitality, you tend to focus on certain kind of key markets. I think in this case we're probably biased towards the East Coast down to the Southeast in terms of market. But it's not a specific state-by-state strategy. It's more asset- and area-specific and what the underlying user is doing in the building, really.

But I would also note it's all skewed—everything we're pursuing right now is really skewed towards outpatient versus inpatient. Jonathan Kelcher, Analyst at TD Cowen Okay. And then lastly for me, just on dispositions, how should we think about that for the balance of the year? Zach Bond, CEO In terms of properties or— Jonathan Kelcher, Analyst at TD Cowen Well, both, I guess.

Properties and the Vital New Zealand. Zach Bond, CEO Yeah, I mean, Mike, I can. Mike's here so he can give you the kind of update on timing. Mike Brady (President) Yeah, hi Jonathan, we're no longer subject to any restrictions with respect to our holdings in the New Zealand entity.

Having said that, we don't have anything to announce today. I think we'll be opportunistic about it. But certainly now having that available as a source of liquidity obviously is something we'll explore. Jonathan Kelcher, Analyst at TD Cowen Okay.

And on the property side? Zach Bond, CEO On the property side, I think probably dispositions that are kind of actively under evaluation would be the balance of our German clinics potentially. And, you know, timing that would probably be a. To the extent that happened, I think it would likely be a Q4 event.

Jonathan Kelcher, Analyst at TD Cowen Okay. So if just sort of put everything together, if I were to think about it, if you. You've kind of used all the cash that you've got back from the European sales year, announced acquisitions, and if you were to announce more, we should probably think about the New Zealand shares as a funding source. Zach Bond, CEO Yeah, I think New Zealand, Europe are certainly a source of funding for us.

Jonathan Kelcher, Analyst at TD Cowen Okay, thanks. I'll turn it back. OPERATOR (Operator) Your next question comes from the line of Siram Srinivas from ATB Capital Markets. Your line is now open.

Please go ahead. Siram Srinivas, Analyst at ATB Capital Markets Thank you, operator. Zach, Stephanie, congratulations on the quarter. Just thinking about dry powder, looking ahead.

I know you mentioned all the cash in the European acquisitions probably deployed, but how would you think about leverage looking forward? And where should we think about leverage in the next 12 months? Stephanie Hi, I can take that one. Yeah, so I think, you know, our kind of mid to long term target of leverage is around that 50% or 8 times debt to EBITDA.

You know, that will kind of vary up and down as we recycle capital and then redeploy. But we're really targeting that 50%, which is what we feel, you know, comfortable on a long term basis given the underlying credit and quality of our portfolio. So, yeah, I think that would be what I would target. Siram Srinivas, Analyst at ATB Capital Markets And maybe just looking at the quantum of acquisitions ahead at this point, can you comment on what that number would look like?

Would it be another 100 million of acquisitions to come? Zach Bond, CEO Yeah, I think we sort of gave, I think, soft guidance to. We think sort of 250 million for the year was kind of a target. So I think that's probably a pretty good range to be.

So certainly another 50 million of acquisitions before the end of the year is a safe assumption. Siram Srinivas, Analyst at ATB Capital Markets Perfect. And Zach, what's your view on Fairview Health center and what's the long term plan here for that development? Zach Bond, CEO Oh, Fairview.

So, you know, look, Fairview is one of our better performing assets. It is, it is kind of a critical health hub. You know, I think longer term we are, there is a need for larger community health operators in that general area. And so we are talking to some of them.

So I think once we sort of resolve what we're doing on the health side, we'll figure out how to plan for the rest of it, which is likely to be residential. So either we would sell the excess land net of the medical or possibly partner with someone who would sort of take charge of the residential. But it's still early days. Siram Srinivas, Analyst at ATB Capital Markets Yeah, makes sense.

Totally. Thanks. I'll turn it back. Thanks.

OPERATOR (Operator) Your next question comes from the line of Himanshu Gupta from Scotiabank. Your line is now open. Please go ahead. Himanshu Gupta, Analyst at Scotiabank Thank you and good morning.

Zach, in your prepared remarks, I think you pointed to a transaction activity Melbourne Hospital at low 5 cap rate. If I heard it right, how does that compare to how does your cap rate of pricing compare to transactions you have seen in the last one year, the last two years? Just trying to get a sense of how competitive or desirable the market is. Zach Bond, CEO Yeah, this is in Australia.

Look, we continue to see assets trade. I mean, out of Vital Trust, they have been trading assets. Again, it's very asset specific, depending on the operator and the profitability of the asset.