NorthWest Healthcare Properties Real Estate Investment Trust continues to build on its status as the dominant non-government healthcare building owner with a purchase this week of a medical centre in London, Ont.
Toronto-based NorthWest acquired the Springbank Medical Centre, a 53,100 square foot medical office building, for $24 million.
The newest acquisition, which will immediately add to earnings, is fully leased. The property was acquired free and clear of mortgage financing, with the equity being funded from existing resources. NorthWest has entered into a commitment for a two-year, $13-million floating rate mortgage loan secured against this property, which is expected to fund early in the second quarter.
The London acquisition marks the REIT’s third acquisition in London and its 24th asset in Ontario.
It is also NorthWest’s 61st acquisition since the real estate company began operations in 2004, said Mike Brady, a Senior Vice-President with NorthWest Healthcare.
Brady has been with NorthWest since the very beginning, first as an outside consultant, and since 2006 as a full-time employee. He has been involved in the purchase of every medical center by NorthWest as the company relentlessly grew to become Canada’s largest non-government owner of medical buildings.
Being First Paid Off
“We were the first to consolidate this asset class in Canada, we are up to 61 properties and we have acquired them one at a time and it takes time and you have to be patient and diligent at it,” he said.
With the release of its fourth-quarter financials last month, NorthWest said the value of its assets is now $1 billion. The company dwarfs its competitors in the medical real estate space, an estimated five to six times the size of its closest rival. “I think there is a reward for being first mover,” said Brady.
NorthWest typically purchases its medical buildings from private investors. “Very, very few in all of our times of doing acquisitions have come from what you would describe as institutional real estate players.”
Most of its assets are in the provinces of Alberta, Ontario, Quebec and Nova Scotia and the REIT is looking to add properties in provinces such as New Brunswick and British Columbia where it owns just a few facilities.
Having clusters of centres close to one another provides various benefits. “First of all relationship,” explained Brady. “This is very much a relationship business in knowing the health authorities and the different players in the healthcare industry which by constitutional legislation is provincial and is often broken out into sub-regions within each province. And then there are operational efficiencies.”
Demographics are also on NorthWest’s side as the population grows older with the aging of the baby boomers and the demand for healthcare rises.
At the end of 2011, NorthWest completed its first full year of operations as a public REIT. It was a busy and successful one, according to its CEO Peter Riggin.
“Through accretive acquisitions of approximately $250 million which added almost one million square feet, and same property improvements and value enhancements, our assets for the first time exceeded $1 billion and the overall quality of our portfolio continued to improve,” he said with the release of the year-end results. “At the same time, we maintained a conservative 50% debt to gross book value ratio while increasing our weighted average mortgage term to 5 years and reducing our weighted average mortgage interest rate to 5.22%.”
NorthWest’s acquisitions have not only solidified its status as the biggest player in the medical building space, it has increased the “REIT’s market capitalization and, therefore, the liquidity of our units to the benefit of our unitholders,” said Mr. Riggin.
After its year end, NorthWest added to its liquidity to allow for further acquisitions by increasing its revolving credit facility to $50 million, reducing its borrowing rates and extending its term until March 2014.