Activist fund manager launches campaign to buy 14 hospitals from troubled Northwest

Activist fund manager launches campaign to buy 14 hospitals from troubled Northwest

An activist fund manager has launched a campaign to acquire 14 hospitals in Britain from debt-heavy Northwest Healthcare Properties Real Estate Investment Trust NWH-UN-T, the latest in a series of hedge fund crusades against underperforming REITs.

On Monday, hedge fund TMR Capital PTC Ltd. published a letter urging the board of Northwest to sell its British unit as part of a plan to pay down $3.9 billion in debt, a third of which is at floating interest rates. Northwest, based in Toronto, owns $10 billion in assets, with 231 medical buildings and hospitals in eight countries.

TMR made its overture after Northwest cut its distributions to investors by more than 50 percent late Friday, and announced it was in talks to sell properties in Brazil and the United States.

On Monday, the value of Northwest units fell by 8.7 percent to a historic low. Year-on-year, the REIT's units are down by more than 40 percent.

TMR, based in British Virgin Islands and led by Canadians, has been publicly rebuffed since being privately rebuffed by Northwest in recent months. The hedge fund owns a share of the REIT and declined to disclose its size.

On Monday, Northwest vice-president of investor relations Andrew Grieg said theREIT has received several unsolicited offers from potential buyers of parts of its business since starting a strategic review in August. All offers are being considered by the REIT's advisers and a special board committee and Northwest has no plans to comment until the review is complete, he said.

In June, the REIT said it was canceling plans to sell a 70-percent share of its British hospital portfolio to an unnamed institutional investor, a transaction that would have brought in $276 million. Northwest aims to cut debt from $3.9 billion to $2.5 billion, and lock in more than 70 percent of debt at fixed rates.

This year's steep rise in interest rates has prompted many REITs to struggle to maintain distributions while paying down debt. REITs typically put mortgages on their properties equivalent to 50 percent of their value.

Northwest is the latest of several REITs to cut its payout, after rate hikes left the company borrowing money to pay distributions. The majority of Northwest's unitholders are income-seeking individual investors.

H&R Real Estate Investment Trust and shopping mall owner First Capital Real Estate Investment Trust have all faced challenges in asset sales and new boards, with varying degrees of success.

TMR partner Derek Vago said in a letter to Northwest that the fund manager made a non-binding offer for the British hospitals in August and has been unable to engage in follow-on negotiations.

TMR has offered to buy the company's British pubs.

In September, Restaurant Group's chair resigned and the company sold a revenue-losing division with 75 locations to a rival chain, Big Table Group Ltd. This year, Restaurant Group's share price has surged by 62 per cent.