High health investment yielding units could fetch huge returns

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 ronjoy@sasktel.net

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Moose Jaw Board of Police Commissioners Notes

Board of Police Commissioners meeting is Thursday, June 8, at 7 p.m. in the Moose Jaw Public Library south meeting room. The public is welcome to attend.

Police board receives financial update for first time since January

The Moose Jaw Police Service provided a financial update to the police board for the first time in months, a sign that city hall’s new financial software program is properly operating.

The organization (MJPS) had not provided the Board of Police Commissioners (BOPC) with a monthly financial update since January because city hall had been experiencing troubles implementing its Enterprise Resource Planning (ERP) software.

While the police service has a finance officer, the municipality’s finance department provides third-party accounting services to the organization.

The MJPS budgeted $1,784,000 in revenues and $13,284,895 in expenses this year, leaving an overall net expense of $11,509,548. City council agreed to fund this amount during its 2023 budget discussions.

From Jan. 1 to March 31, the MJPS saw revenues of $383,188 and expenses of $3,826,896, leaving an overall net expense of $3,468,297, according to a BOPC report. This is roughly 30 per cent of the overall budget.

Of note, the subscriptions and publications expense category was $5,296 over budget, the insurance category was $2,372 over budget and supplies were over budget by $2,645.

“It’s difficult for us to forecast right now because so many revenues (like provincial funding and contractual revenues) come in big chunks, so we’re never quite sure

Jason G. Antonio - Moose Jaw Express

what time of the year they’re going to show up,” said Police Chief Rick Bourassa during the recent BOPC meeting.

“A lot of the salary and benefits pieces are front-loaded because of CPP and employment insurance and those sorts of things that are paid upfront.”

There are no major budget variances so far, while the organization should finish the year in good shape, he added.

Commissioner Doug Blanc inquired about whether the budget included provincial funding from the automated speed enforcement cameras and the current accumulated surplus.

Bourassa replied that the MJPS would receive $330,000 in camera revenue, which would come later this year.

Meanwhile, the total accumulated surplus at the end of 2022 was $395,135.69. This included last year’s surplus of $229,202.20, the 2021 carry-forward surplus of $170,275.01 and $4,341.52 in losses from investments.

“We have to bear in mind (that) that surplus exists because we and the board made a decision to put contingency away for salary increases (and) for bargaining increases,” Bourassa said. “And then that goes into the surplus. Once the agreement is complete, then it comes out as backpay …”

“Ideally, we should be at zero all the time, but that surplus allows us to smooth things out during collective bargaining (agreement, CBA) periods.”

During the recent CBA negotiations, the BOPC agreed to retroactive pay increases of 1.8 per cent for 2021, 1.95 per cent for last year and 2.9 per cent for this year.

An investigation by the MJ Independent revealed the MJPS had an accumulated surplus of $1,137,301.03 in 2013, while it drew down $742,165.34 during those 10 years. Moreover, the organization experienced four deficits and six surpluses during that time.

The highest surplus was $229,202.20 last year, the investigation found, while the largest deficit was $697,738.51 in 2019.

When asked why supplies were over budget, finance officer Lisa Renwick replied that they weren’t. Instead, the organization has had difficulty knowing where to put some expenses because of the new software system. Moreover, city hall has suggested that the MJPS put some expenses in other areas.

“So it’s kind of a learning curve this year,” she said, noting the organization can adjust the budget later as it learns how to produce reports. “There has been a lot of equipment purchased (for the tactical unit) because we’ve spent the ($70,000 in) civil forfeiture money we’ve received.”