Good day, and welcome to the NorthWest Healthcare Properties REIT First Quarter 2025 earnings conference call. At this time, all lines are in a 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 then zero for an operator. This call is being recorded today, Thursday, May 15th, 2025. I would now like to turn the conference over to Ms. Alyssa Barry, Investor Relations for NorthWest. Please go ahead, ma'am. Thank you, Operator. Good morning, everyone, and welcome to NorthWest First Quarter 2025 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 annual information form for a discussion of these risk factors. Please note all currencies referenced today are in CAD unless otherwise stated. Presenting on today's call are Craig Mitchell, our CEO, and Stephanie Karamarkovic, our CFO. Mike Brady, our President, is also here and available for the question-and-answer session. I will now turn it over to Craig for his opening remarks. Thank you, Alyssa. Good morning, everybody, and thank you for joining us today. We entered 2025 with a clear plan to simplify the business, strengthen our balance sheet, and grow earnings. I'm pleased to report that our first quarter result reflects meaningful progress on all those fronts. We increased AFFO per unit by 15% over the same period last year, consistent with Q4 and marking what we believe is a new sustainable base. Our payout ratio now sits at 92%. These results reflect discipline execution, cost control, and the underlying strength of our real estate. We've also completed over CAD 260 million in non-core asset sales year to date, continuing to execute on our capital allocation strategy. These proceeds were used to reduce debt and enhance our liquidity position, giving us greater financial flexibility as we move through the year. Operationally, we're delivering. Same property NOI increased by 4.5% with steady contributions across all regions. This was driven by inflation-indexed leases, capital upgrades, and improved cost recoveries. Our global portfolio continues to demonstrate strength at a 96.5% occupancy rate, underpinned by strong tenant retention at 89% and a weighted average lease expiry of 13.6 years. These metrics speak to the quality and resilience of our portfolio, especially in the context of continued global uncertainty. Over the past 12 months, we've also made real progress on deleveraging. Proportionate debt is down by CAD 1 billion, including the sale of our Assura estate post-quarter end, our full exit from the U.K. at a 20% premium to the December book value. Turning to Healthscope, Australia's second-largest private hospital operator, NorthWest owns 12 of their hospitals in our Galaxy joint venture. As mentioned on our call in March, following sector margin pressures exacerbated by its capital structure, Healthscope requested temporary relief from its lender syndicate and landlords, including NorthWest. During the quarter, the REIT and Healthscope reached a partial rent deferral arrangement, not abatement, for a period from March 1, 2025 to May 11, 2025, and since quarter end has agreed to provide a further partial rent deferral until July 18, 2025, totaling CAD 2.3 million at the REIT's proportional share. As of today, all rent owing to the REIT from Healthscope has been paid, and Healthscope continues to meet all lease obligations. Healthscope has continued to an orderly transition of control to lenders, who will continue the sale process while Healthscope Hospitals continue to operate with over AUD 100 million of current cash available for operations. A first-stage sale process has begun with 10 bidders participating. We will keep you updated during the sales process. Lastly, we're in the final stages of our CEO recruitment. The board is working diligently, and we will share more on this soon. In the meantime, I am here and will ensure a smooth and seamless transition. With that, I will turn it over to Stephanie to walk through the financials. Thanks, Craig, and good morning, everyone. Q1 marked another strong quarter of operational and financial performance. We delivered consolidated same property net operating income of CAD 73.8 million, up 4.5% year over year, with every region contributing positively: North America up 4.1%, Brazil 4.8%, Europe 2.1%, and Australasia 5.3%. SPNOI growth was driven by inflationary adjustments on rent, rentalized capital spend, and improved operating cost recoveries. Leasing performance remained strong. Nearly 280,000 sq ft of leasing was completed in the quarter, with an 89% renewal rate. This speaks to tenant satisfaction and operational stability. Q1 2025 FFO was CAD 0.11 per unit, excluding the impact of accelerated amortization of financing costs on debt repaid during the quarter following our bond issuance. This compares to CAD 0.09 per unit in Q1 2024, excluding the impact of interest rate caps that have since expired. Q1 2025 AFFO was $0.10 per unit, up 15% from Q1 2024, and consistent with Q4, excluding the impact of previously mentioned interest rate caps. Our payout ratio continues to trend lower, landing at 92% this quarter, down from 105% a year ago. The increase in AFFO per unit is driven by improvements in interest expense and G&A, partially offset by lower NOI from disposition activity and third-party management fees. On the cost side, we're maintaining our focus. General and administrative expenses, excluding non-cash comp, decreased by $1.1 million compared to Q1 2024, driven by lower headcount and a more streamlined operating structure. Our Q1 G&A cost ratio came in at 6.7%, reflecting the seasonal impact of certain front-loaded corporate costs. Looking ahead, we still expect this ratio to normalize to approximately 5.5% by year-end as our efficiency initiatives continue to take hold. Gross management fees for Q1 2025 were CAD 8.6 million, consistent with Q4 but lower than Q1 2024, where management fees were CAD 10.6 million. The decrease in management fees as compared to prior year reflects lower levels of activity-based fees being earned in the current environment. Interest expense decreased to CAD 35.1 million this quarter, down from CAD 55.4 million in Q1 2024. This reflects a lower weighted average interest rate and a reduction in total debt. We're proud to have achieved an investment-grade rating from Morningstar DBRS in February. This paved the way for our inaugural CAD 500 million unsecured debenture offering, with proceeds used to refinance higher-cost debt, including the REIT's 10% Series G convertible debentures, which were repaid on March 31. The REIT's asset sales of over CAD 260 million, including the post-quarter sale of Assura in early April, helped reduce our proportionate leverage to 55.9% and consolidated leverage to 48.6%. These are meaningful reductions that strengthen our balance sheet and will support earnings growth in future quarters. During and post-quarter, the REIT proactively refinanced and extended several 2026 debt facilities, including its revolving credit facility and Australasian term loans. As a result, our economic weighted average interest rate declined by about 52 basis points to 5%, and we extended our average weighted average term to maturity to 3.3 years. Importantly, the REIT has only approximately CAD 96 million of 2025 maturities remaining, comprised of mortgages in Canada and Europe. Of the REIT's 2026 proportionate debt maturities of approximately CAD 420 million, over 50%, or approximately CAD 230 million, is maturing in the fourth quarter of 2026. As of today, the REIT's available liquidity is approximately CAD 270 million. We've entered the year with real momentum. Our strategic repositioning is gaining traction, and we're committed to driving sustained earnings growth and value creation for our unit holders. Our Q1 investor presentation, which is available on the Investor Relations section of our website, provides more details on Q1 portfolio performance, financial metrics, and our accomplishments. I'll now pass it back to the Operator to open up the call for questions. Thank you. We will now begin the question-and-answer session. To join the question queue, you may press star then one on your telephone keypad. You will hear a tone acknowledging your request. If you're using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star, then two. Our first question will come from Frank Liu with BMO. Please go ahead. Good morning, guys. Hey, Frank. Hey, Frank. I just want to firstly touch on Healthscope. I believe HSL is trying to prevent the business closure while exploring for a potential new buyer. Craig, probably, yeah, you probably have the best knowledge of the Australian healthcare system than any of us here. Do you think any operators in Australia would be interested to buy at least a portion of their hospitals?. In any cases, do you think the government will step in to keep these hospitals running?. Yeah. Frank, thanks for your question. Firstly, yes, the hospitals are staying open and they're operational, and there's over CAD 100 million of liquidity to ensure that. In addition to that, as lenders have taken control, they will provide another CAD 100 million of facilities if required. All the hospitals, all 38 hospitals are staying operational. To your second question, yes, it's a very, very good portfolio. Round one bids came in a couple of weeks ago, and there were 10 active bidders in that round. We know a lot of those, and they're Australian operators, and they are very interested in the whole or part of the portfolio. The whole portfolio and the part portfolio and the part includes all of our portfolio. Got it. I mean, that means there's a high possibility that the hospitals will stay open, and then it just starts changing hands when they finalize the deal. That's exactly right. The hospitals will stay open, and there will be a change of ownership away from the Brookfield-sponsored fund to a new owner. Right. And then probably. We probably expect that to be by sort of think of it around Q3. It'll take three to four months for that process to play out. Right. I assume there would not be any changes to the in-place leases because these leases are long-term leases, right?. That's exactly. We have contractual rights, and we'll ensure that we protect our contractual rights. Got it. So $2.7 million, that's the deferral. What's the total amount of NOI you guys are generating on a proportionate basis from HSL?. I know it's 5.4% of revenue. Yeah. On an annualized basis, it's about CAD 24 million, which is our proportionate share over a 12-month period. Yeah, we provided a CAD 2.3 million deferral, which we get back on the 31st of October to be repaid. Right. Right. And then other obligations are currently being paid?. They're fully current. They paid their rent on the 1st of May. Perfect. Thanks for the clarity here. Thank you, Frank. Thanks. Just a couple of following questions quickly. Probably Stephanie has better knowledge of this. I mean, is Q1, I guess the G&A side should come down a little bit for the rest of this year. I know you noticed the 5.5% of the REIT, but on a dollar value basis, I guess what's kind of the run rate for the year? Because I know it's fluctuating a little bit quarter over quarter. Yeah. I'm not going to speak to a run rate per se. I think the 5.5% is the clarity I want to give, but that is as a reduction of cost coming down, which is driven by headcount reductions and inefficiencies. Right. In terms of straight-line rent, I know this is always picking up in Q1, so I assume it is going to burn off throughout the year, as usual. I think the Q1 straight-line rent is fairly consistent with our run rate. Yeah. I do not think there is anything abnormal in there. Okay. Got it. Okay. Perfect. Thank you, guys. I'll turn it back. Thank you, Frank. The next question will come from Dean Wilkinson with CIBC. Please go ahead. Thanks. Morning, everyone. Maybe sticking on the HSO, which I imagine is going to be a common theme. Stephanie, in the 229 of the equity-accounted investments, how much of that figure is specific to your 30% ownership in the trust?. Just give me a second here. It is about CAD 160 million. About 160. Okay. I guess just because what has been going on in Etsy and Flux, you did not need to take any charge against that, or how should we be thinking about that going forward?. Yeah. We had in Q1, we had all the 12 properties desktop appraised by valuers. That sits in our books at about CAD 400 million with a cap rate of about 5.3%. At this stage, it's been softened a bit, Dean, but there's been no material change. Okay. I guess under a new ownership structure, how would your involvement in that look?. Would you go pari passu on that 30%? Would you have to come up with equity, or just how is that sort of going to work?. Yeah. There is no change, and there is no equity we would put in. Our 30% would stay, so we would put no equity. We would just negotiate and work out who the new owner of the business is. There is no equity injection for us. Okay. So really, it's just a change to the 70% ownership?. No. It's because the 70% is GIC, 30% is us, so the fund doesn't change. It just becomes the HSO, who is our current relationship, would be another party, whoever that party is. Okay. Gotcha. Whoever that would be, that'll come in time. Okay. Perfect. Last one. Just on the sale of the Assura units, and I assume not wanting to wait for a potential bid, taking the cash makes sense. Are you able to shelter that gain, or do you think that there may be some form of a distribution that has to come with the lift that you got there? Hi, Dean. Yeah. We do not anticipate there was no cash tax payable by the REIT as a result of the gain realized through our holding structure, and we do not anticipate having to pay any special distribution as a result. Perfect. I like no special distributions. It's easier to model. That's it for me. I'll hand it back. Thanks. Thank you. The next question will come from Sharan Srinivas with CoreMark Securities. Please go ahead. Thank you, Operator. Good morning, NorthWest. Good morning. Craig, just only a question for you. Going back last year, your guidance was essentially around mid-2025 is when you're looking to kind of transition. Considering we're still in that leadership search phase right now, do you think that timeline shifts for you?. No, it doesn't. I'm still looking to step down in mid-2025. I'm also still ensuring a seamless transfer to the new CEO. So we're still on track for that timing. Fair enough. Maybe just broadly on the transaction market, now that we're slowly heading into the mid of the year and maybe then towards the end, are we seeing a lot of transaction stakes?. Are you seeing opportunities to now go on the offense compared to the defense that you saw last year?. You kind of almost go around the world with that question. The only market that seems to be opening up and seems to have some transaction would be Europe, right?. There seems to be interest in Europe. Okay. Is that something you'll probably look at in terms of opportunities?. Look, too early to say. I suppose what is interesting with the Assura transaction, when KKR put a 100% bid, they bid a 5.2% cap all cash. That sort of underpins that increased activity in Europe. Maybe just going to the HSO part of the transaction, and I think this is a regular theme of all questions. The assets that you do not currently own, that is a 38-hospital portfolio, are there hospitals that you could probably think about bidding for?. No. I mean, there are some great hospitals in our portfolio that we do not own, but I think with our exposure with 12 hospitals, I cannot see us naturally, at this stage, increasing that exposure. All right. Thank you. I'll turn it back. Thank you. The next question will come from Giuliano Thornhill with National Bank Financial. Please go ahead. Hey, guys. Good morning. Hey. Good morning. Just going back to HSL, I'm just wondering, Craig, if we could have your thoughts on where do you think the issue is with the Australian healthcare kind of structure right now?. What could the Australian government do that would help operators, and what would kind of resolve the current kind of profitability situation that's there?. Thanks for that question. If I go back before COVID, the health insurers were paying roughly 90% of their fees they were getting from members to the private hospital industry. During COVID, that 90% dropped down to 82%. Effectively, they were giving increases which were below inflation. However, during COVID and post-COVID, the cost base with nurses and consumables were increasing above inflation. That is sort of a negative squeeze. There is a lot of pressure on the insurers to increase that 82%- 84% or even as high as 86%. That delta from 82%- 86%, as an example, is another $1 billion worth of revenue into the private hospital market. That is where the push is. The center-left government was the government in Australia. We just had an election. They won by a landslide. We're seeing a consistent political view on that basis, and that's where I think we'll see some more revenue come from the health insurers into the private hospital market. The only way to kind of get from that 82-86, 89 area, would that just be healthcare reform or tax reform to kind of change the structure?. How much?. Yeah. It'd be more healthcare reform. It's more putting pressure on the insurers to basically give the money to the private hospitals. That process has started. So Healthscope have had quite a few wins late last year and some increases as high as 10% from insurers. That will continue, I believe, in 2025 and beyond. It's not really a reform. Whether it happens or not, the health minister, effectively, said if the industry doesn't come to its own positive solution, the government will start putting some mandates in place. That's what they've publicly said. Whether they do it is an interesting question, but that's where the pressure is coming from. Yeah. Thanks. And then of the 10 bidders, how much of those are operators versus PE?. That's right. Craig just don't want to comment. No. I'm thinking I think eight, seven or. Is it more?. Seven or eight. The majority were operators, right?. Yeah. Do you have a lot of say in who takes over the operations of your portfolio?. Are you involved a lot in that process?. Yeah. Ultimately, it's not our decision, but yes, we're an influence of that, and we are talking to all the operators and how they bid. Okay. Just my last question is just, how are you weighing the bids, the benefits of keeping, I guess, the portfolio intact, your portfolio intact versus potentially breaking it up to different operators, but potentially keeping fair values the same? On one hand, you might have lower rent by keeping it intact to one person, but on the other hand, at least fair values stay the same, but it is split up. No. Very good question. We're modeling, as you appreciate, we're looking at all scenarios. Our preferred would obviously keep all 10 together, but we're considering the latter as well to make sure we're clear. Okay. Thank you, guys. No. Thank you. The next question will come from Tammy Burr with RBC Capital Markets. Please go ahead. Good morning. Hi, everyone. Just as the lenders work through the sale process now, what's your sense of or have they provided a timing or a timeline on the process over the next few months?. Nothing hard set, but they're sort of talking about round two bids in the end of July. I would expect July and final bids in that Q3, the next quarter or two. There are no hard deadlines yet. Okay. Just, I guess, with Healthscope, the lenders, I suppose here, will be making some or will need to make some concessions. The insurers need to step up on the reimbursements. How do you see or what sort of concessions do you think yourselves or perhaps other landlords involved in this whole process might need to make, whether it is with Healthscope or with other potential tenants?. Very good question. I do not know the answer to that. I think really that is just going to be a negotiation, so I would rather not have that negotiation on the speakerphone. Got it. I guess if you look back in past circumstances, maybe not with NorthWest, but when there have been tenant issues in these types of healthcare tenant situations, what sort of range have you seen in terms of the rent adjustments that have been made?. I realize it's going to be a very big range, but. Yeah. Look, really, we ultimately look at the rent affordability. Ideally, what we're looking for is on a long-term trend basis, the rent is between 40% and 50% of EBITDA of the individual hospital. That is what we're kind of working towards and trying to understand. We will look at that, and then we will also look at the lease structure as well. We will look at the duration of the lease. We will look at the fixed bumps, whether they are open CPI or they are capped. We will look at whether there are market reviews and caps and collars. Those are the ranges. I cannot think of an example where we have actually cut the rent at all, to be honest. I am just trying to think off the cuff in the last seven years. Okay. Last one for me, just in terms of the disposition side. Can you maybe just comment on how much you're looking to sell, perhaps over the next one to two years as you continue to work toward your leverage targets?. Yeah. Sure. Let me pass over to Stephanie for that one. Hi. Yeah, we have about CAD 58 million of assets held for sale. Sub-quarter, we sold about CAD 12 million of that. That's the identified things. I think there's another CAD 200 million-CAD 300 million of assets that we would look to either dispose of or sell into a fund over the coming year or two, but that'll also be at the decision of whoever's next in charge. We're looking to target, though, our leverage closer to 50% on a proportionate basis, and so that's the target. Okay. Is that spread across some of the geographies or more specific to one?. It's somewhat spread. Yeah. I would rather not comment at this time, but. We haven't been specific, Palmy. I think the balance sheet's in great shape. We've got the investment-grade rating. We've got the debt duration. Over that medium term, we'd like to see that proportionate debt down a couple hundred basis points more. To do that, there are various levers. If you use the asset sale lever, that's kind of CAD 300 million-ish in sales. That really would depend on the market where we can get the best pricing so we don't have any NAV dilution. Thanks very much. Craig, I'll turn it back. Thank you. The next question is a follow-up from Giuliano Thornhill with National Bank Financial. Please go ahead. Hey, guys. Just had one follow-up on what's the HSO rent coverage right now, and how does it compare to the Australasia segment as a whole?. Their coverage would probably have them going to top me in the 60% range, in the 60s. It is above that range, that 40%-50% range. If I look at the Australasia and if I split New Zealand and Australia, New Zealand is now within that range. I think it's right on 50% or just over 50%. I think Australia is now sort of mid-50%. It is starting to come down. We had a trough probably mid-last year from an earnings perspective, and the earnings is picking up across the board on all of our hospitals. We are coming back into that range of where we're very comfortable. This will conclude our question-and-answer session as well as our conference call for today. Thank you for your participation. You may now disconnect your lines and have a pleasant day.