GT Canada Medical Properties REIT announces proposed acquisition of C$170 million portfolio of International Healthcare Real Estate
TORONTO, Sept. 27, 2012 /CNW/ - GT Canada Medical Properties Real Estate Investment Trust (TSX-V:MOB.UN) ("GT Canada") and Northwest Value Partners Inc. ("NorthWest") announced today that they have signed a non-binding letter of intent providing for the acquisition (the "Proposed Acquisition") by GT Canada of a portfolio of international healthcare real estate in Australia/New Zealand, Brazil and Germany as well as the NorthWest international healthcare real estate platform (collectively the "International Assets"), from NorthWest and its affiliates. Concurrent with the closing of the Proposed Acquisition, GT Canada will enter into a series of external management arrangements with NorthWest International Healthcare Properties Management Corporation, an affiliate of NorthWest. The Proposed Acquisition values the International Assets at approximately C$170 million and will be funded through the issuance of approximately C$123 million of equity to NorthWest at $1.87 per unit and the assumption of existing debt of approximately C$47 million. The Proposed Acquisition is expected to be accretive.
The Proposed Acquisition and related management agreements will be described in an information circular to be mailed to GT Canada unitholders in connection with GT Canada's special meeting expected to be held in October 2012 and must be supported by an affirmative vote of a majority of minority unitholders of GT Canada. The Proposed Acquisition follows NorthWest's previously disclosed intentions to reconfigure GT Canada to support NorthWest's international healthcare real estate initiatives following NorthWest's successful takeover bid and acquisition of approximately 82% of GT Canada's units in May 2012 and the planned sale of GT Canada's existing portfolio to NorthWest Healthcare Properties REIT ("NWHP REIT", TSX: NWH.UN).
In connection with the Proposed Acquisition, Paul Dalla Lana, CEO of GT Canada and President of NorthWest commented:
"I am very excited to formalize the next steps for GT Canada and NorthWest International Healthcare Properties. The Proposed Acquisition offers a fantastic opportunity for GT Canada to gain access to a high quality portfolio of international assets, a best-in-class management team and a pipeline of acquisition prospects for future growth. It is expected to be accretive to GT Canada's current operations and offers stability through high occupancies with long-term leases and embedded growth through annual inflation indexation. At the same time, the Proposed Acquisition offers NorthWest Healthcare International Healthcare Properties an opportunity to access public capital markets and put in-place the long-term financial structure that will facilitate its future growth plans. I believe that the international healthcare real estate markets being pursued by GT Canada have the unique proposition of both the defensive, necessity-based healthcare asset class combined with higher yielding international markets including contractual growth. With the conservatively structured vehicle contemplated for GT Canada, the Proposed Acquisition is consistent with GT Canada's objectives of delivering sustainable, growing distributions to unitholders."
The Proposed Acquisition
As part of the Proposed Acquisition, GT Canada will acquire (a) a portfolio of medical office buildings in Berlin and Northern Bavaria, Germany (the "German MOB Portfolio"), (b) the Sabará Children's Hospital in São Paulo, Brazil ("Sabará Children's Hospital"), (c) an approximate 20% interest in Vital Healthcare Property Trust ("Vital"), a healthcare real estate investment fund based in Auckland, New Zealand and listed on the New Zealand Stock Exchange as well as a management fee participation and certain rights in respect of Vital (the "Vital Interest"), and (d) the NorthWest international healthcare real estate platform (the "NWI platform" together with the German MOB Portfolio, Sabará Children's Hospital, and the Vital Interest, the "International Assets"), from NorthWest and its affiliates.
Additional details on the International Assets are provided below:
(a) The German MOB Portfolio
The German MOB Portfolio is comprised of five modern, recently constructed medical office buildings, with an aggregate GLA of approximately 185,000 square feet, located in established healthcare hubs in and around Berlin's city centre and Northern Bavaria. The portfolio carries a weighted average lease term of approximately six years and is approximately 98% occupied, primarily by medical tenancies including doctors, dentists, and pharmacies.
(b) Sabará Children's Hospital
Sabará Children's Hospital, located in São Paulo, is a 104,915 square foot private facility widely regarded as the leading children's hospital in Brazil. The facility is leased to and operated by the region's largest private children's hospital until September 2024. Significantly expanded and redesigned in August 2010, the facility features 72 suites (104 beds), diagnostic centres, operating rooms, and an intensive care unit, along with administrative areas.
(c) The Vital Interest
The Vital Interest represents an interest in trust units and an equity swap arrangement that together provides the holder with economic exposure to approximately 58,000,000 trust units (representing an approximate 20% ownership interest) of Vital Healthcare Property Trust ("Vital"). Vital, based in Auckland, is an NSX-listed investment fund that invests in high-quality, health and medical-related properties in Australia and New Zealand. Vital's real estate portfolio is comprised of 25 medical office buildings and private hospitals located in eastern Australia (approximately 67% of the portfolio and primarily in Melbourne) and New Zealand (approximately 33% of the portfolio and primarily in Auckland), with an aggregate GLA of approximately 1.5 million square feet. Vital's real estate portfolio currently operates at approximately 99% occupancy with a weighted average lease term of 11.4 years. Vital is externally managed by entities owned indirectly by NorthWest and as such GT Canada is also acquiring a management fee participation and certain rights in respect of Vital which will entitle GT Canada to the difference between asset management fees that would be payable by Vital to NorthWest under their existing management arrangements and those that would be payable by GT Canada to NorthWest under the proposed management arrangements.
(d) NWI Platform
The NWI platform represents the value embedded in the formation, infrastructure and platform of NorthWest healthcare international properties and GT Canada's contractual right of first opportunity from NorthWest in respect of certain pre-identified acquisition targets that might meet the REIT's investment criteria.
The Proposed Acquisition values the International Assets at approximately C$170 million and after the assumption of debt implies a net purchase price of approximately C$123 million. The purchase price is subject to customary closing adjustments. The valuation of the International Assets has been initially allocated follows: (a) C$39 million to the German MOB Portfolio, (b) C$36 million to the Sabará Children's Hospital, (c) C$85 million to the Vital Interest (including amounts attributable to the market value of the securities, a premium, the management fee participation and certain rights in respect of Vital), and (d) C$10 million to the NWI platform, based on third-party appraised values for the property assets and current market values for the Vital Interest and NWI platform.
The Proposed Acquisition will be effected through GT Canada's acquisition of the securities of a new limited partnership ("NWI LP") that will be formed by NorthWest to hold the International Assets. In connection with the Proposed Acquisition, NorthWest will acquire approximately 65.8 million class B limited partnership units of NWI LP, each of which will be exchangeable into units of GT Canada on a one-for-one basis. The Proposed Acquisition values the securities being acquired by NorthWest at a price of $1.87 per unit. This is the same price at which NorthWest acquired units of GT Canada in the May 2012 takeover bid, and represents an approximate 7.4% premium to the 20 day VWAP of the GT Canada units on September 25, 2012.
The parties expect to close the Proposed Acquisition concurrently with GT Canada's sale of its existing Canadian medical office building portfolio to NorthWest Healthcare Properties REIT (TSX: NWH.UN) for which it has received disinterested unitholder approval by way of written consent. The transactions are expected to close on or about October 31, 2012 (with an effective closing date of October 1, 2012), subject to the entering into of a definitive acquisition agreement for the Proposed Acquisition and the receipt of all necessary approvals, including the approval of the TSX Venture Exchange and GT Canada's unitholders.
GT Canada intends to present the terms of the Proposed Acquisition to its unitholders for approval at a special meeting to be held in October 2012 in Toronto (the "Special Meeting"). As Paul Dalla Lana currently indirectly owns an approximate 82% interest in GT Canada, and owns and controls NorthWest, the Proposed Acquisition constitutes a "related party transaction" under Multilateral Instrument 61-101 - Protection of Minority Security Holders in Special Transactions and therefore must be approved by the affirmative vote of a majority of minority unitholders of the REIT.
Reconfiguration of GT Canada
The Proposed Acquisition represents the first step in GT Canada's reconfiguration to support an international healthcare real estate initiative.
Upon completion of the Proposed Acquisition, GT Canada will change its name to "NorthWest International Healthcare Properties REIT". In addition, on closing GT Canada and NorthWest will enter into a number of other contractual arrangements, including (i) a put / call agreement pursuant to which GT Canada and NorthWest will grant each other the respective right to put / call, at any time and from time to time within 24 months from the closing of the Proposed Acquisition, any or all of trust units and/or securities exchangeable into trust units of NorthWest Healthcare Properties Real Estate Investment Trust, a Canadian public real estate investment trust listed on the Toronto Stock Exchange, held by NorthWest, (ii) an asset management agreement pursuant to which an affiliate of NorthWest will become the asset manager of GT Canada, (iii) a property management agreement pursuant to which an affiliate of NorthWest will become the property manager of GT Canada, and (iv) a development agreement pursuant to which an affiliate of NorthWest will become the exclusive developer for GT Canada. Further details about these agreements and the Proposed Acquisition will be set forth in the information circular to be mailed to GT Canada unitholders in connection with the Special Meeting.
Description of the Asset Manager
In 2011, NorthWest founded NorthWest International Healthcare Properties Management Corporation ("NWI") to focus on establishing an international healthcare real estate platform, with an initial focus on Australia/New Zealand, Brazil and Germany. Since then it has acquired C$170 million in healthcare real estate assets and, utilizing the experience it gained in the consolidation of the Canadian healthcare real estate market, NWI has either built out or acquired regional platforms in each of its core markets and assembled a globally diverse team focused exclusively on healthcare real estate. Concurrently, it has also sourced a pipeline of attractive acquisition opportunities which it believes may provide significant growth opportunities going forward.
About NorthWest Value Partners Inc. ("NorthWest")
NorthWest is a private real estate investment firm based in Toronto, Canada. Since 1992, NorthWest has established an exceptional track record of successfully acquiring, developing, operating and building value in real estate across Canada and internationally. NorthWest has a significant focus in healthcare real estate including founding and capitalizing both NorthWest Healthcare Properties REIT (NWH.UN/TSX) which is focused on the Canadian market and NorthWest International Healthcare Properties which is focused on international markets. Through these vehicles, NorthWest has investments in C$2.5 billion of healthcare real estate assets and developments and is focused on accretively growing its portfolio in each of these markets.
Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
Certain statements contained in this news release may contain projections and "forward-looking statements" within the meaning of that phrase under Canadian securities laws. When used in this new release, the words "may", "would", "should", "could", "will", "intend", "plan", "anticipate", "believe", "estimate", "expect" and similar expressions may be used to identify forward-looking statements. Those statements reflect NorthWest's and GT Canada's current views with respect to future events or conditions, including matters relating to the Proposed Acquisition, accretion, distributions, acquisition opportunities and future growth prospects. By their nature, forward-looking statements reflect management's current views, beliefs and assumptions and are subject to certain risks and uncertainties, known and unknown, including, without limitation, risks disclosed in GT Canada's annual information form dated as of August 14, 2012 and risks to be disclosed in the information circular to be mailed in connection with the Special Meeting. Many factors could cause actual results, performance or achievements to be materially different from any future results, performance or achievements that may be expressed or implied by these forward-looking statements. Neither NorthWest nor GT Canada intend to nor assume any obligation to update these forward-looking statements whether as a result of new information, plans, events or otherwise, unless required by law. Completion of the Proposed Acquisition is subject to a number of conditions, including but not limited to, the entering into of a definitive acquisition agreement, TSXV acceptance and majority of the minority unitholder approval.
SOURCE GT Canada Medical Properties Real Estate Investment Trust