- Release Date: 06/08/12 13:01
- Summary: GENERAL: VHP: Vital Update
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VHP 06/08/2012 11:01 GENERAL REL: 1101 HRS Vital Healthcare Property Trust GENERAL: VHP: Vital Update 6 August 2012 Vital Update Vital Healthcare Management Limited (the 'Manager'), the manager of Vital Healthcare Property Trust (the 'Trust') today updated the market in relation to various activities of the Trust and Manager. Strategic review Following a review of the Trust's existing strategy the collective new Board of the Manager has considered and now confirmed that there will be no change to the existing strategic philosophy and direction of the Trust. Graeme Horsley, the Independent Chairman of the Manager said "the prior principles and objectives of the Trust remain the foundation for its future". A key focus within the existing framework is that the Trust: - Maintains its low-risk, medium return investment characteristics - Retains its expert focus in healthcare real estate (social infrastructure) - Continues with its relationship focused approach, and - Pursues opportunities for growth, diversification and liquidity. VHP total return performance For the year ended 30 June 2012, VHP delivered a total return of 9.6%. This compares favourably to the NZX50 Gross Index which returned -1.4%, an outperformance of 11%. VHP's performance over the longer term has been even more compelling as shown in the Total Return Performance table below. Over five and seven year periods VHP has outperformed its New Zealand peers and the wider New Zealand equity market when measured against the NZX Property Gross Index and the NZX50 Gross Index respectively. Total Return Performance VHP NZX50 Gross NZX Property Gross Index 1 year 9.6% -1.4% 11.9% 3 years 32.2% 21.6% 51.1% 5 years 58.4% 6.4% 23.0% 7 years 101.2% 4.7% 49.9% Source: Craigs Investment Partners. Returns calculated as at 29 June 2012. 2012 preliminary revaluation result The Trust's preliminary independent valuations for the year ended 30 June 2012 have now been completed, resulting in a decline of approximately NZ$6.2 million. This represents a change of approximately -1.05%. The overall decrease comprised a NZ$5.3 million reduction in the New Zealand portfolio and a NZ$0.9 million decrease in the Australian portfolio. The portfolio decline has been led by two of the Trust's properties having medium term lease expiries, being Allamanda Private Hospital in Southport on the Gold Coast and Mercy Ascot Hospital in Auckland. Whilst these leases are not due to expire until FY2018 and FY2019 (5 and 7 years respectively) the Manager has proactively initiated discussions with the tenants at both of these properties. Excluding Allamanda and Mercy Ascot, the overall result would be a revaluation gain of NZ$3.1 million (+0.52%). The weighted average market capitalisation rate for the overall portfolio remained stable at circa 9.3%. The valuations are preliminary only and subject to finalisation of the Trust's audit of its 2012 financial statements. No incentive fee will be payable to the Manager for the year ended 30 June 2012 as a result of the above preliminary valuations. Fee review NorthWest Value Partners Inc. ('NorthWest'), having recently acquired the shares of the Manager, and having considered its position, has advised that it will not be proceeding with any change in the Manager's fee structure at this point in time. Appointment of executives Following the acquisition of the Manager by NorthWest earlier this year, NorthWest recognised the need to continue to implement and deliver on the Trust's strategy. It has now made two senior appointments to the existing Management team. David Carr, Chief Executive of the Manager said "that the two appointments will add to the experience and capability of the team, support the Manager's specialist healthcare capability and further enhance the position of the Trust". The two appointments are: ? Stephen Freundlich - Fund Analyst and Investor Relations Manager. Stephen has over 16 years commercial and equities market experience, including in the listed property sector and was previously an Equities Analyst and Associate Director at UBS New Zealand and Macquarie Equities. More recently he was an Associate Director in Institutional Banking and Private Wealth at ANZ. ? Jade Murphy - Financial Controller. After graduating in 2003 Jade worked in New Zealand until 2008 and then spent 3 years in the UK, having worked as a Finance Analyst and Property Finance Business Partner within the Corporate Real Estate Services Group at Barclays Bank in London. Jade is a Chartered Accountant. Capital management Management continues to take a pro-active approach to the investment portfolio and capital management activities. This includes an ongoing assessment of the strategic fit of properties in the Trust's portfolio and if appropriate, their possible sale, recycling the capital into improving the quality and yield attributes of existing assets. This approach has led to the prudent sale of lower value or non-core properties over the past two years. The most recent sale was of 188 Health Centre (Eastmed), in St Heliers, Auckland, in May 2012 for $8.35 million, with settlement to occur in October 2012. Funds received from the sale will initially be used to repay debt. Further lower value or non-core sales are envisaged. The Manager recently confirmed that it had also secured longer term debt at lower cost, with more favourable covenants. The renewed bank facility allowed the Trust to take advantage of a competitive environment, which reduces line & margin fees on its respective tranches. Diversifying the term of the facility across two expiry dates (March 2015 and March 2017) provides greater flexibility when undertaking future reviews of bank facility requirements and improves the overall tenor of the Trust's debt. Other favourable terms and conditions included increasing the Trust's loan-to-value ratio ('LVR') from 45% to 50%. This aligned it with the Trust Deed covenant of 50%. The interest cover covenant remains unchanged, with a requirement for earnings before interest and tax to be equal to or greater than 2.00 times the interest expense. The Trust's provisional gearing position (subject to audit) as at 30 June 2012 is 42.7% prior to any asset sales. Acquisitions and developments continue to enhance future earnings Mr Carr said "we continue to see the benefits of the development and acquisition programme. We have concluded development projects at Maitland and Belmont Private Hospital's having spent circa A$32 million, which are now generating returns of 9.5% per annum on average. We expect to conclude projects at three additional properties over coming months which are forecast to yield returns of approximately 10% per annum on average on a spend of approximately A$28m. The Trust secured two 'off-market' acquisitions during the 2012 financial year, Mayo Private Hospital in Taree and Hurstville Private Hospital in Sydney. Management is working closely with Healthe Care, the hospital operator at each of those properties in assessing opportunities to enhance future returns from those assets". Outlook Mr Carr said "we continue to see the benefits of being relatively insulated against ongoing local and global financial and economic headwinds. Demand for social infrastructure assets like healthcare continues to be underpinned by an ageing population and an increased demand on public healthcare services. These factors will continue to support our tenants and many of the underlying activities of the Trust". The Trust is however not totally immune from external events. For example, "Australia has recently introduced a means testing regime on private health insurance costs, however a number of market analysts expect that the impact will not be significant. Also, the recently announced adjustment to the Managed Investment Trust tax rate from 7.5% to 15% is another external event outside the Trust's control. On the plus side, after several quarters of decline, health insurance levels in New Zealand are now showing signs of stabilising according to the Health Funds Association of New Zealand". "Notwithstanding these external factors, we continue to see opportunities for the Trust in both New Zealand and Australia. For now however the forecast returns from the current development programme, in concert with other opportunities sees the Trust well positioned for the future" said Mr Carr. The Trust will release its year end results for 2012 on 24th August, at which time guidance for the 2013 financial year will be given. END 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$550m, Vital Healthcare Property Trust (NZSX: VHP) is New Zealand's largest listed entity investing in medical and healthcare properties in Australasia. With an expert understanding of the needs of healthcare tenants on both sides of the Tasman, we actively select, develop and manage quality properties to meet the growing demand for medical and healthcare services. Our 126 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:00225663 For:VHP Type:GENERAL Time:2012-08-06 11:01:59
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