Canadian healthcare REIT expands, rebalances German portfolio

Interest from North American REITs in German healthcare properties seems to have reached new levels over the past few months, with several focused investors known to be rooting around in Germany for suitable acquisitions. The latest to announce expansion plans is Canada’s NorthWest International Healthcare Properties REIT, which already owns a number of assets in the eastern region of Germany.

The Toronto-based NorthWest has now signed agreements to buy a further 16 German medical office buildings, to add to the six it already owns. The latest deal involves two separate transactions for assets in the cities of Berlin (4 assets), Ingolstadt (1) and Leipzig (11), and more than doubles the size of the REIT’s German holdings.

The sixteen assets with 46,500 sqm are 96% occupied with a weighted average lease expiry of 7.0 years, while the purchase price of €65m represents an 8% stabilised cap rate.

According to NorthWest, the REIT's investment will be funded from existing resources and new mortgage facilities of about €43m. The financing has a weighted average interest rate of about 3.0%, a weighted average term of 10 years and a weighted average amortisation period of nearly 30 years. The deal is expected to close this quarter.

The company’s existing assets are located in Berlin, with one in Marktredwitz in Bavaria near the Czech border and one in Fulda, on the Hesse-Thuringia border. NorthWest is selling its leasehold interest in the Marktredwitz property for about €5m to the local municipality, representing a 6.25% cap rate, as it was deemed non-core to the German portfolio.

Apart from Germany and its home turf of Canada, where NorthWest owns 78 healthcare properties, the group is also active in Australasia and Brazil.