NorthWest Healthcare Properties Real Estate Investment Trust Announces Acquisition of Calgary Office Property and Financial Update

10-07-2010

TORONTO, Oct. 7, 2010 (Canada NewsWire via COMTEX) --

NorthWest Healthcare Properties Real Estate Investment Trust (TSX: NWH.UN) (the "REIT") announced today it has entered into an agreement to acquire Glenmore Professional Centre, located in Calgary, Alberta. The purchase will be the REIT's sixth asset in the Calgary marketplace, is expected to close in the fourth quarter of 2010 subject to customary closing conditions, and is expected to be immediately accretive.

Glenmore Professional Centre is a modern 137,800 square foot class A suburban office building completed in 2007. It is located in south central Calgary, in close proximity to Rockyview General Hospital, one of the four regional hospitals currently serving this city of one million residents. Further, Glenmore Professional Centre is located adjacent to the REIT's Rockyview Health Centre I and II properties, two multi-tenant medical office buildings comprising over 100,000 square feet in aggregate. The building is currently 100% occupied by Bantrel Corporation ("Bantrel"), a subsidiary of Bechtel Corporation, a premier international engineering and construction firm. Bantrel's lease is for a term of 10 years, commencing August 1, 2007, plus two renewal options for five years each. In addition, ancillary revenue is derived from contracted parking with Bantrel and telecommunication and rooftop satellite agreements.

As part of the transaction the REIT is also acquiring a development parcel located immediately adjacent to the building and which currently provides additional parking. Such development parcel will permit an additional second phase office development in excess of 100,000 square feet. Such future development is consistent with the REIT's long term plan to create opportunities for growth through selective development as originally contemplated in the final prospectus dated March 16, 2010 (the "Prospectus") filed by the REIT in connection with its initial public offering (the "IPO").

Glenmore Professional Centre is one of two properties owned by an affiliate of NorthWest Operating Trust in respect of which the REIT was granted a right of first offer to acquire upon closing of its IPO, as more particularly described in the Prospectus.

The REIT will acquire 100% of the shares and units of 1201 Glenmore GP Inc. and 1201 Glenmore LP, respectively, the registered and beneficial owners of Glenmore Professional Centre, for a purchase price of $29.45 million, subject to usual adjustments, to be paid 50% in cash and, subject to regulatory approval, 50% in Class B LP Units (as such term is defined in the Prospectus) based upon current market prices. The purchase price is based upon a valuation of the existing building of $65.5 million (representing approximately a 7% capitalization rate applied to in-place annual net operating income) plus $2.95 million for the development parcel (representing $25 per square foot of buildable area) less an existing first mortgage of approximately $39 million at 5.65% which matures March 31, 2011. The REIT expects to renew or replace this mortgage with longer term debt at lower rates. The approximate $14.73 million cash portion of the REIT's equity investment will be funded from existing resources. Following completion of the acquisition, NorthWest Operating Trust and its affiliates are expected to hold an approximate 32% interest in the REIT through its ownership of Class B LP Units.

As a result of NorthWest Operating Trust's ownership interest in the REIT, in accordance with the REIT's Declaration of Trust, the board of trustees of the REIT appointed a committee of independent trustees to review the terms of the acquisition. This committee has unanimously approved the terms of the acquisition.

This investment will be the REIT's fourth acquisition since its IPO, following the previously announced acquisitions in the third quarter of a property in the Edmonton area and a portfolio of two properties in the Montreal and Quebec City areas, respectively. The aggregate value of such completed acquisitions plus the prospective acquisition of Glenmore Professional Centre (collectively, the "Acquired Properties") would exceed the REIT's previously announced 2010 acquisition objective of $100 million. In addition, the REIT is currently pursuing an active acquisition pipeline, with multiple properties having an aggregate value well in excess of $100 million in varying stages of review, negotiation and due diligence.

Financial Update

The REIT expects that the Acquired Properties will contribute adjusted funds from operations ("AFFO") of approximately $0.12 per unit on an annualized basis, before leasing and capital expenditure reserves. With newer construction and full occupancy, the REIT does not expect to incur any near term leasing costs or capital expenditures. However for this financial update, reserves of 6% of revenue (being the same reserves utilized in the financial forecast included in the Prospectus) in the aggregate for capital expenditures and leasing commissions and tenant inducements have been applied and on this basis the REIT expects that the Acquired Properties will contribute AFFO of approximately $0.09 per unit on an annualized basis. The Acquired Properties also provide other benefits to the REIT's portfolio, including a weighted average remaining lease term to maturity in excess of 9 years, a weighted average building age of less than 3 years, and a weighted average mortgage interest rate expected to be approximately 4.6% (based upon the anticipated renewal rate of the Glenmore Professional Centre mortgage).

The REIT's portfolio contracted occupancy as at September 30, 2010, adjusted for contracted move-in and known move-outs, was 91.5%, including properties acquired in the third quarter of 2010, and 90.9% excluding such acquired properties. The REIT's projected portfolio contracted occupancy as at December 31, 2010 is 92.9%, including the Acquired Properties, and 92.0% excluding the Acquired Properties. The REIT expects to meet or exceed its budgeted lease renewals for the 12 months ending December 31, 2010; however, year-end occupancy is expected to be behind the projection provided for in the Prospectus. This is primarily due to the REIT having elected to not renew specific non-healthcare tenants, delayed new leasing while the REIT finalizes arrangements with the right long term medical tenants, and strategic re-positioning of certain properties. Specifically, properties in Windsor, London, Laval, and Sydney are behind planned occupancy; however, the REIT currently expects occupancy at these properties to increase over the next few quarters.

Certain leasing costs and capital expenditures have been incurred by the REIT to reposition certain properties for long term stabilization and growth, resulting in such expenses being expected to exceed stabilized reserves in the third and fourth quarters of 2010. One example of this is the REIT's Bathurst Health Centre property, where new improvements and leasing have, in management's opinion, resulted in committed occupancy, by long term medical related tenants, increasing to 95.8% from 67.9% at the time of the IPO. Further, there are solid prospects to lease the building to 100% occupancy, and paid parking is scheduled for introduction during the fourth quarter.

The REIT expects that AFFO for the three months ending September 30, 2010, including properties acquired during such quarter, will be in line with the forecasted AFFO for the same period in the financial forecast included in the Prospectus, calculated in the same manner and utilizing the same reserves as in that financial forecast. Excluding properties acquired during such quarter, AFFO for such period is expected to be approximately 4.2% behind forecasted AFFO, or $0.03 per unit annualized.

The REIT expects that AFFO for the year ending December 31, 2010 (extrapolating the actual results of the seven days ended March 31, 2010 to reflect first quarter 2010 results and including the Acquired Properties), will be in line with the forecasted AFFO for the same period in the financial forecast included in the Prospectus, calculated in the same manner and utilizing the same reserves as in such financial forecast. Excluding the Acquired Properties, the AFFO for such period (otherwise calculated on the same basis as above) is expected to be approximately 3.8% behind forecasted AFFO, or $0.03 per unit annualized.

The REIT expects that annualized AFFO, after accounting for the Acquired Properties (including the expected refinancing of Glenmore Professional Centre) and a projected contracted year-end occupancy of 92.0% for the remainder of the portfolio, would be $0.89 per unit on a fully diluted basis after issuance of the Class B LP units contemplated for the Glenmore Professional Centre acquisition. This represents an increase of 5.5% over the AFFO per unit at the time of the IPO and a 10.7% increase following the exercise of the over-allotment option by the underwriters. On this basis the REIT's payout would be 90% which would be the stated objective in the Prospectus.

In respect of the Head Lease (as such term is defined in the Prospectus) space, approximately 45% has been leased to third parties, including 75% of the space at Rockyview Health Centre II, which is adjacent to Glenmore Professional Centre. The pending stabilization of Rockyview Health Centre II will permit the REIT to consider either increasing its existing credit facility or putting in place new long term fixed rate mortgage financing.

The foregoing update to the financial forecast included in the Prospectus has been prepared using assumptions that reflect management's intended course of action for the REIT for the periods covered, given management's assumption as to the most probable set of economic conditions. The assumptions used in preparing the updated amounts, although considered reasonable at the time of preparation, may not materialize as forecasted and unanticipated events and circumstances may occur subsequent to the date hereof. Accordingly, there is a significant risk that the actual results achieved for the three months ending September 30, 2010 and the 12 months ending December 31, 2010 will vary from the forecast results and the variations may be material. See "Forward-Looking Information" below.

About NorthWest Healthcare Properties Real Estate Investment Trust

NorthWest Healthcare Properties Real Estate Investment Trust is an unincorporated, open-ended real estate investment trust established under the laws of the Province of Ontario. The REIT holds a portfolio of 48 income-producing properties, with a focus on medical office buildings and healthcare real estate, comprising approximately 3.0 million square feet of gross leasable area located in British Columbia, Alberta, Ontario, Québec, Nova Scotia and New Brunswick.

Forward-Looking Information

This press release may contain forward-looking statements with respect to the REIT, its operations, strategy, financial performance and condition. These statements generally can be identified by use of forward-looking words such as "may", "will", "expect", "estimate", "anticipate", "intends", "believe", or "continue" or the negative thereof or similar variations. In particular, statements contained herein regarding the completion of the Glenmore acquisition and all of the statements contained under the heading "Financial Update" constitute forward-looking statements. The REIT's actual results and performance discussed herein could differ materially from those expressed or implied by such statements. Such statements are qualified in their entirety by the inherent risks and uncertainties surrounding future expectations, including that the transactions contemplated herein are not completed. Important factors that could cause actual results to differ materially from expectations include, among other things, general economic and market factors (including changes in interest rates), competition, changes in government regulations, the completion of the Glenmore acquisition, the performance of the Acquired Properties, and the factors described under "Risk Factors" in the Prospectus and the risks and uncertainties set out in the Management Discussion and Analysis dated August 12, 2010 for the quarter ending June 30, 2010, which are available on www.sedar.com. These cautionary statements qualify all forward-looking statements attributable to the REIT and persons acting on its behalf. Unless otherwise stated, all forward-looking statements speak only as of the date of this press release, and, except as expressly required by applicable law, the REIT assumes no obligation to update such statements. Certain statements included in this news release may be considered "financial outlook" for purposes of applicable securities laws, and such financial outlook may not be appropriate for purposes other than this news release.

"Capitalization rate", "AFFO" and "Net operating income" (or NOI) are not measures recognized under Canadian generally accepted accounting principles ("GAAP") and do not have any standardized meanings prescribed by GAAP. Capitalization rate and NOI are presented in this press release because management of the REIT believes that these non-GAAP measures are relevant in interpreting the purchase price of the property being acquired. Capitalization rate, and NOI, as computed by the REIT, may differ from similar computations as reported by other similar organizations and, accordingly, may not be comparable to capitalization rate and NOI reported by such organizations. For additional information regarding each of the foregoing non-GAAP measures, including the definitions thereof, refer to pages 5, 9, 12 and 18 of the REIT's management's discussion and analysis for the three months ended June 30, 2010, a copy of which is filed on www.sedar.com.

SOURCE: NorthWest Healthcare Properties Real Estate Investment Trust

Mike Brady, Senior Vice President, NorthWest Healthcare Properties Real Estate
Investment Trust, (416) 366-2000 ext. 243, or www.nwhp.ca