Northwest Healthcare Properties REIT’s property valuations fell by $571.8 million in 2023.

The REIT said the decline included a $157.6-million drop in the fourth quarter of 2023. An independent third-party appraiser determined 82% of the REIT’s investment property fair values.

“The fair value losses were attributable mainly to cap rate expansions in consideration of the interest rate environments in which the REIT operates,” said Northwest in its latest financial report.

“The weighted average capitalization rate increased to 5.9% for the consolidated portfolio, as compared to 5.4% December 31, 2022.”

The REIT was referring to the fact that it has been in sell-off mode as it strives tor reduce debt. Toronto-based Northwest announced in late 2023 that it had completed investment and non-core asset sales for $235.1 million in gross proceeds to date, while additional non-core asset sales are under contract. Toronto-based Northwest is also working to divest its remaining stake in the Australian Unity Healthcare Fund.

Craig Mitchell, Northwest’s CEO, said 2023 was about strengthening the REIT’s business and balance sheet.

:It is important to highlight that the constraints we have faced as a company over the past year stemmed from balance sheet leverage and the resulting interest expense,” said Mitchell. “:However, our underlying real estate and business fundamentals remain strong.”

The REIT has been conducting a strategic review in recent months, examining ways to clean up its balance sheet and increase unit value. Northwest did not provide an update on the review.