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High health investment yielding units could fetch huge returns

Ron Walter looks at NorthWest Health Care
Bizworld by Ron Walter

An investment yielding 10 per cent return would seem too risky.

Most investors shy away from yields so high above the average market.

Yet NorthWest Health Care Properties Real Estate Investment Trust units might just be an exception to the usual rule.

NorthWest units yield 10 per cent in an environment where six per cent seems darn good.

The company, market value of $1.95 billion, owns or manages 233 properties related to health care on four continents – the Americas, Europe and Australia/New Zealand.

Properties are medical clinics, hospitals and a few life science centres  — all considered recession defensive investments. Average term of lease left is 14 years.
Occupancy is in the 99 per cent area.

That’s the good side of NorthWest Health Care.

The bad side revolves around the debt load. Total debt, including $272 million convertible debentures recently issued, amounts to $3.67 billion. Interest payments in the first three months this year were $51 million.

Cash flow, which is what’s left over after all expenses are paid, was $21 million in that period.

The trust’s payout this quarter was a whopping 123 per cent of available funds. Only cash from depreciation allowances permitted the payout.

Under most circumstances, one would expect a cut in the payout to save cash.

NorthWest might avoid that. Cash from asset sales, expected to net the trust up to $600 million this year, will be used to repay debt.

That debt repayment would reduce debt load to just over $6 billion – still 1.7 times unit holder equity.

The trust has projects in development worth around $500 million to offset lost income from asset sales.

The units have declined from $10.50 in late November to a current $8.07.

Different analysts predict the price within one year will range from $10.71 to $12.50

CAUTION: Remember when investing, consult your adviser and do your homework before buying any security. Bizworld does not recommend investments.

Ron Walter can be reached at

The views and opinions expressed in this article are those of the author, and do not necessarily reflect the position of this publication. 

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