VHP
24/08/2012 09:58
FLLYR
REL: 0958 HRS Vital Healthcare Property Trust
FLLYR: VHP: VHP strategy delivering, 2013 guidance range higher
Vital's strategy delivering, 2013 guidance range higher
Vital Healthcare Property Trust (Vital) (NZSX: VHP), Australasia's largest
listed investor in medical and healthcare property infrastructure, today
announced a 2012 full-year result in line with Prospectus1 guidance and says
its specialist focus and market presence have continued to deliver on
attractive opportunities on both sides of the Tasman.
Result highlights
Graeme Horsley, the Independent Chairman of Vital Healthcare Management
Limited (Vital's Manager), said the result for the year to 30 June 2012
reinforced the benefits of Vital's growth and diversification strategy. The
full year contribution of acquisitions made in the prior year and completed
development projects during the current period were the key contributors to a
$12.8 million or 33.6 percent increase to $50.7 million in Vital's gross
rental income for the year.
Mr Horsley noted that at the core of the financial result was the successful
delivery of the net distributable income of 7.7 cents per unit. This was
forecast in the 2010 Prospectus for the rights issue which part-funded
Vital's acquisition of an Australian healthcare property portfolio comprising
12 properties. On the basis of a stable business outlook for the coming 2013
financial year, the Board is guiding to a net distributable income range of
7.7 to 7.9 cents per unit.
David Carr, Chief Executive of Vitals' Manager, added "The healthcare sector
has demonstrated stability through the economic cycle, and Vital remains
uniquely positioned to benefit from Australasia's ageing demographic,
resilient private healthcare insurance levels and Vital's execution
capability and credibility in the sector."
Mr Carr also said "The market was clearly supportive of the strategy with
Vital's compound annual total return of 10.5 percent per annum over a
seven-year period to 30 June 2012 outperforming the listed property sector
benchmarks in both New Zealand and Australia. Vital's portfolio occupancy and
weighted average lease term (WALT) as at 30 June 2012 is the highest in the
New Zealand listed property sector."
Financial results
Net distributable income for the 2012 financial year was up 27.9 percent to
$23.3 million (2011: $18.2 million).
Administration and other expenses were $1.8 million (34.0 percent) higher at
$7.1 million. The increase is partly attributable to the one-off costs
associated with the proposed internalisation of Vital's management, which did
not go ahead. Management fees for the year also reflected the larger
portfolio. No incentive fee was payable to the Manager in 2012.
Vital's financing costs for the 2012 financial year were $2.5 million (18.1
percent) higher than the previous financial year, reflecting the debt funding
of the new acquisitions and developments during 2012, and after adjusting for
capitalised interest of $0.8 million. Vital benefited from the favourable 7.5
percent Managed Investment Trust tax rate throughout 2012 and continues to
have the ability to claim depreciation for tax purposes on its Australian
assets.
As announced earlier this month, Vital's annual independent portfolio
revaluation as at 30 June 2012 resulted in a decline in value of NZ$6.2
million or 1.05 percent. The portfolio decline was principally due to two
properties with medium term lease expiries, being Allamanda Private Hospital
in Southport on the Gold Coast and Ascot Hospital in Auckland. Whilst these
leases are not due to expire until 2018 and 2019 (5 and 7 years
respectively), proactive discussions are underway with the tenants at both of
these properties.
Vital's net profit after tax for the year, after taking into account
unrealised changes in the value of investment properties and other unrealised
items (such as foreign exchange gains/losses and marked-to-market adjustments
on interest rate hedges), was $9.0 million (2011: $7.4 million). These
adjustments are made in accordance with International Financial Reporting
Standards and the accounting treatment of these unrealised items has no
impact on Vital's net distributions to unit holders.
Vital's net tangible asset value (NTA) per unit as at 30 June 2012 was $0.98,
down from $1.04 a year earlier. This was due principally to the combination
of the portfolio revaluation and marked-to-market adjustments on interest
rate derivatives.
Portfolio
During the year, Vital secured two off-market acquisitions, Mayo Private
Hospital in Taree, New South Wales, for A$13 million and Hurstville Private
Hospital in Sydney for A$12.3 million. Both were acquired on initial yields
of approximately 10 percent after acquisition costs. Both properties have
potential for expansion. The acquisitions came about as a result of Vital's
relationship with Australia's third-largest private hospital operator and
major tenant of these properties, Healthe Care Australia Pty Ltd.
Meanwhile, Eastmed St Heliers in Auckland has been unconditionally sold for
$8.35 million with settlement due in October 2012. Four units at Brockway
House in Queensland were also sold for $1.4 million during the year. Over the
same period Vital invested approximately A$32 million in upgrades,
refurbishments and hospital expansions. This included on-going project work
and the practical completion of Maitland and Belmont Private Hospitals in New
South Wales and Queensland respectively. These assets are now generating
average returns of circa 10 percent per annum and will benefit future
earnings. The remaining four development projects, with a total cost of
approximately A$28 million, are forecast to yield average returns of
approximately 10 percent per annum on completion in FY13.
Acquisitions and completed developments, offset by foreign exchange
movements, divestments and the portfolio revaluation saw the total value of
Vital's investment portfolio increase by $53.3 million (10.4 percent) to
$567.2 million.
Portfolio occupancy as at 30 June 2012 stood at 99.3 percent (2011: 99.2
percent) and remains at the forefront of the Australasian listed property
sector. The portfolio WALT increased to 11.9 years (2011: 11.3 years)
providing a high degree of income certainty and remains over twice the New
Zealand sector average of 5.0 years.
Mr Carr added that over the coming year only 2.5 percent of Vital's portfolio
income is subject to scheduled lease expiries and over the next five years,
less than 13.1 percent of portfolio income is falling due. "Vital's approach
is to pro-actively engage with our tenants well in advance of lease
expiries."
During the 2012 financial year, Vital completed a total of 125 rent reviews,
equating to approximately 75 percent of portfolio income and resulting in an
average increase of 3.3 percent across the rental incomes reviewed. CPI or
structured mechanisms applied to approximately 90 percent of the reviews,
which were predominantly for Australian-based tenants.
Treasury and capital management
Following the acquisitions, disposals and development capital expenditure
during the year, Vital's debt-to-total-assets ratio as at 30 June 2012 was
42.3 percent (2011: 36.9 percent), well below its bank and Trust Deed
covenants, which are aligned at 50 percent. The weighted average interest
rate, including margin and line fee, as at 30 June 2012 was 6.87% percent. As
noted in an announcement in April, Vital's bank facility was renewed,
securing longer term debt at lower cost, with more favourable covenants. As
at 30 June 2012, Vital's bank facility has a weighted average term to expiry
of 3.8 years (2011: 2.2 years).
Distribution policy
For the 2013 financial year the Board has determined that it will continue to
use a net distributable income (NDI) based methodology in calculating unit
holder distributions. This remains consistent with the requirements under the
Trust Deed. Various interpretations regarding an AFFO2 based calculation have
been identified across the listed property sector. As a result the Board will
continue to investigate AFFO further including any listed property sector
adopted methodologies.
Outlook
Mr Carr said Vital held a well-respected position in a sector with proven
resilience. "In the 2012 financial year, we have seen the initial results of
Vital's growth and diversification strategy. The focus for 2013 is on
continued improvement of our core portfolio and consideration of further
appropriate value-add opportunities. Prudent capital management will continue
to play its part, including the continued divestment of selected non-core
assets."
"Vital's portfolio metrics are among the best in the listed property sector
on both sides of the Tasman and we remain focused on continued execution of
Vital's strategy. With a relatively stable earnings outlook, we remain
positive about the underlying sector fundamentals over the next 12 months.
The guidance for 2013 is a net distributable income range of 7.7 to 7.9 cents
per unit."
Distribution
For the fourth-quarter of the 2012 financial year, Vital unit holders will
receive a distribution of 1.925 cents per unit with imputation credits of
0.0998 cents per unit attached. The record date for the distribution is 7
September 2012 and payment will be made on 28 September 2012. The
Distribution Reinvestment Plan (DRP) will remain available to unit holders
for this distribution with a 1 percent discount being applied when
determining the strike price. This will bring the full year cash distribution
for 2012 to 7.7 cents per unit.
- ENDS -
1 Simplified Disclosure Prospectus dated 3 November 2010 (the "2010
Prospectus")
2 AFFO is defined as net operating cash flow, adjusted for lease incentives
and maintenance capital expenditure
ENQUIRIES
David Carr, Chief Executive Officer
Vital Healthcare Management Ltd, Telephone 09 973 7301, Email
[email protected]
Stuart Harrison, Chief Financial Officer
Vital Healthcare Management Ltd, Telephone 09 973 7302, Email
[email protected]
About Vital Healthcare Property Trust
With a portfolio value of over NZ$567m, Vital Healthcare Property Trust
(NZSX: VHP) is New Zealand's largest listed investor in medical and
healthcare infrastructure property in Australasia. With an expert
understanding of the needs of healthcare tenants, we actively select, develop
and manage quality properties to meet the growing demand for medical and
healthcare services. Our 124 tenants, in 25 properties, provide essential
healthcare services to thousands of patients while also undertaking research
and providing support services that will make a difference to many more lives
in the future.
The Manager of Vital Healthcare Property Trust, Vital Healthcare Management
Limited is owned by NorthWest Value Partners Inc., a private real estate
investment firm based in Canada with a healthcare real estate interests in
Canada, Australia, New Zealand, Brazil and Germany.
End CA:00226418 For:VHP Type:FLLYR Time:2012-08-24 09:58:44
