NorthWest Health Prop Real Est Inv Trust TSE: NWH.UN, referred to on its earnings call as Vital Infrastructure Property Trust, reported first-quarter results that management said reflected steady operating performance, progress on cost reduction and continuing efforts to recycle capital into North American healthcare infrastructure opportunities.
Chief Executive Officer Zach Vaughan said the trust delivered same-property net operating income growth of 3% year-over-year, or 4% excluding the impact of higher property expenses tied to outsourcing facility management work in the Canadian portfolio. Vaughan said the result was at the upper end of the trust’s target range.
“We’ve continued to make progress as we simplify our business, lowering costs ... and recycling capital to be redeployed back here,” Vaughan said.
European asset sale expected to reduce leverage
Management highlighted the previously announced sale of a 32-property portfolio in Europe as a key source of near-term balance sheet flexibility. Vaughan said the Netherlands portion of the portfolio closed at the end of April, while the remaining German assets are expected to close in the second quarter.
The trust’s share of net proceeds from the full transaction is expected to be about $145 million. Vaughan said those proceeds are expected to be used to reduce leverage and support future growth.
The trust reported available liquidity of more than $400 million, before considering additional proceeds from future capital recycling. Vaughan also noted that the trust’s lockup period related to public shareholdings in New Zealand ends in late August, creating another potential source of liquidity, though he said during the question-and-answer session that the trust is “not under any pressure” to sell those units unless doing so makes economic sense.
Portfolio performance remains stable
During the quarter, the trust completed approximately 324,000 square feet of leasing activity. Vaughan said portfolio occupancy ended the quarter above 96%, with a weighted average lease term of more than 12 years, which he described as the longest in the REIT sector.
Chief Financial Officer Stephanie Karamarkovic said proportionate same-property NOI rose 3% year-over-year to $57.4 million, supported by contractual rent escalations, rentalized capital expenditures, higher parking income and improved cost recoveries. She said North American same-property NOI continued to be affected by higher operating costs, primarily from the transition to outsourced facilities management that took effect in November 2025.
Funds from operations were $0.11 per unit in the quarter, compared with $0.10 in the first quarter of 2025 and $0.12 in the fourth quarter. Adjusted funds from operations were $0.10 per unit, unchanged from a year earlier and down from $0.12 in the prior quarter.
Karamarkovic said the deconsolidation of Vital Trust following the internalization of its management structure at the end of 2025 affected year-over-year comparisons. Beginning in 2026, the trust accounts for its ownership interest in Vital Trust as an equity-accounted investment, with AFFO reflecting cash distributions received rather than its proportionate share of underlying operating results. She said the change reduced AFFO by $1.7 million, or $0.007 per unit, compared with the first quarter of 2025.
The AFFO payout ratio was 87% in the quarter, improved from 92% in the same period last year.
Management points to lower costs
Karamarkovic said proportionate general and administrative expenses, excluding unit-based compensation and severance, were $10.6 million in the quarter, compared with $11.6 million in the fourth quarter and $11.7 million in the first quarter of 2025.
She said G&A is trending in line with expectations as the trust captures savings from platform simplification efforts, including the internalization of Vital Trust and the European portfolio sale. As a significant portion of the European platform transitions to TPG in the second quarter, management expects further reductions in regional G&A.
By the end of 2026, Karamarkovic said the trust expects run-rate G&A, excluding unit-based compensation and severance, to be about $35 million per year, representing an approximate $12 million, or 25%, decline from 2025.
Net asset value per unit was $7.55 as of March 31, unchanged from December. Karamarkovic said NAV was affected by $35 million of fair value losses, primarily related to transaction price adjustments on European assets held for sale, and $26 million of mark-to-market losses on Vital Trust units. These were partially offset by $42 million of unrealized foreign exchange gains on net equity.
Balance sheet and maturities
The trust’s proportionate leverage was 52.7% at quarter-end, according to Karamarkovic. Debt to adjusted EBITDA was 8.6 times, down from 8.7 times on a comparable basis at Dec. 31. The weighted average interest rate was 4.76%, with more than 86% of debt fixed rate or hedged, and the weighted average term to maturity was 2.3 years.
At March 31, the trust had approximately $380 million of remaining 2026 maturities at its proportionate share. Subsequent to quarter-end, it repaid $65 million of Canadian mortgages and $16 million of European mortgages, reducing near-term maturities to approximately $300 million. The remaining maturities include $206 million of term loans in the Australian joint venture maturing late in the fourth quarter. Karamarkovic said the trust is in active discussions with the lending syndicate and expects to renew the facility early in the third quarter.
Growth pipeline and Healthscope update
Vaughan said the trust reactivated growth activities in Canada during the quarter, including closing on a transitional care facility long-term leased to The Ottawa Hospital. The trust also advanced a development with Royal Victoria Regional Hospital in Barrie, Ontario, where it received zoning approval in April. Vaughan said that once completed in 2029, the property is expected to generate about $9 million of annual NOI, or almost $0.04 per unit, under fully contracted long-term income supported by government credit.
He said the trust is advancing discussions with health systems in Ontario, Alberta and Manitoba, and has an active pipeline of follow-on acquisitions of standing assets across Canada. In the United States, Vaughan said the trust is reviewing several opportunities involving large, long-term leased critical healthcare assets and is in discussions with potential strategic operating partners.
Asked by Sairam Srinivas of ATB Cormark Capital Markets about acquisition timing and leverage, Vaughan said the pipeline is “very active” and that it would be “safe to assume a couple of hundred millions of acquisitions this year,” funded through recycling proceeds and existing liquidity. He said leverage could tick up in a quarter before declining as proceeds are repatriated, but that longer-term leverage targets remain flat.
On Healthscope, Vaughan said the trust continues to work with the receiver and creditors toward a resolution that would secure a previously disclosed transaction with a new operator. He said the transaction would allow all of the trust’s hospitals to transition to a top-tier not-for-profit operator, with a nominal initial financial impact and potential participation in longer-term hospital profitability.
Vaughan said a collective proposal from several operators, including the trust’s potential new partner, was submitted in April to acquire Healthscope’s remaining hospitals. He said lenders and the receiver are actively engaging on the proposal, which management views as progress toward a resolution.
About NorthWest Health Prop Real Est Inv Trust TSE: NWH.UN
Northwest Healthcare Properties Real Estate Investment Trust provides investors with access to a portfolio of high-quality healthcare real estate. The company provides investors exposure to a well-diversified portfolio of healthcare real estate located in the greater areas of cities such as Australasia, Brazil, Germany, and Canada of which Australasia derives a majority of revenue to the company.
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