Archive | Vital Healthcare Property Trust

Vital doubles loan to NorthWest for Healthscope acquisition

NZX-listed Vital Healthcare Property Trust has doubled its loan to its manager to support the acquisition of an increased stake in Australian listed company Healthscope Ltd.

Vital had paid $A41 million to support the investment in Healthscope, and this week upped it to $A81 million.

Vital’s manager, NorthWest Healthcare Properties Management Ltd, is part of a group of entities controlled by Paul Dalla Lana of Toronto, Canada, which invest in & manage properties & businesses in the healthcare sector. The Northwest group also owns 24% of Vital’s units.

Vital chief executive David Carr reiterated in a release yesterday that “an acquisition of Healthscope’s underlying hospital-related real estate is of interest to NorthWest & Vital, in line with their long-term strategy to invest in healthcare real estate assets in the Australasian market”.

He added: “Consistent with their conflicts policy, NorthWest & Vital currently intend to pursue any potential Healthscope real estate acquisition jointly, with scope to introduce other capital partners as appropriate.”

The immediate owner of Vital’s manager, NorthWest Healthcare Properties REIT, announced in May it had acquired a 10% interest in Healthscope at $A2.39/share by way of a derivative contract with Deutsche Bank AG’s Sydney branch. On 20 November, NorthWest said it had bought another 1% on market and on 30 November it amended the derivative contract to increase its interest in voting shares to up to 13.41%, acquired at an average $A2.360062/share.

As an extension of its loan arrangement with NorthWest, Vital agreed to lend the further $A40 million to NorthWest to reflect “Vital’s proportionate contribution to the funding required to support the acquisition of the 13.41% position. The loan is repayable in 12 months, unless the parties agree to a shorter timeframe. The loan continues to be on arm’s-length terms and interest is payable by NorthWest.”

Healthscope owns 43 private hospitals in Australia (down from 45 when Northwest bought in) and pathology operations in New Zealand, and has been a takeover target for months, after its sell-off of $A300 million of assets & 19% drop in net profit to $A89 million for the year to June.

In late November, Healthscope granted exclusive due diligence to Brookfield Capital Partners Ltd of Toronto, making its second bid to take over Healthscope at a total value of $A2.585/share, or about $A4.5 billion.

Through all the takeover activity, Healthscope has Brookfield’s agreement for it to continue working on establishing an unlisted property trust to hold most of its hospital assets and lease them back to Healthscope, provided it doesn’t enter a binding divestment agreement in the meantime. Healthscope added that “a new co-investor (unnamed) would be introduced to hold an interest of 49%” in the new trust.

Earlier stories:
25 November 2018: Vital Healthcare management fees up for review, new action at Healthscope
23 November 2018: Northwest increases Healthscope stake to 11.1%
9 May 2018: Vital Healthcare’s parent makes new Australian investment

Attribution: Company releases.

Continue Reading

Vital Healthcare management fees up for review, new action at Healthscope

Vital Healthcare Property Trust’s manager, NorthWest Healthcare Properties Management Ltd, said on Friday it planned to review its management fees in the first quarter of 2019.

Northwest & its ultimate shareholder, NWI Healthcare Properties LP, are controlled by Paul Dalla Lana of Toronto. Northwest also holds 24% of Vital’s units.

Another arm of the group, NorthWest Healthcare Properties REIT, increased the stake it bought in May in ASX-listed hospital owner Healthscope Ltd, as the takeover & breakup of Healthscope looked more certain.

On the management fees, Northwest committed not to exercise certain rights set out in Vital’s trust deed for the duration of the fee review, with a 31 March end date, including:

  • Their rights relating to the removal of independent directors, and
  • Their right to increase Northwest’s fees above current levels.

Vital chief executive David Carr, who’s also a management company director, said in yesterday’s release the full board would lead the fee review, with input to be sought from a range of unitholders.

“The decision to undertake a fee review follows positive & constructive discussions with a number of unitholders during the course of this year. The review will be conducted in the context of Vital’s existing structure as an externally managed listed trust, and its strategic & operational requirements.

“There can be no assurance of any changes to Vital’s fee structure or the nature of any such changes arising out of the review process.”

Vital will hold its annual meeting on Thursday 20 December.

The Healthscope scenario

In separate action this week, NorthWest Healthcare Properties REIT, of Canada, increased its stake in Australian listed hospital operator & takeover target Healthscope from 10% to 11.1%.

Healthscope, which owns 43 private hospitals in Australia (down from 45 when Northwest bought in) and pathology operations in New Zealand, has been a takeover target for months, after its sell-off of $A300 million of assets & 19% drop in net profit to $A89 million for the year to June.

This week Healthscope turned down a quest for due diligence from private equity firm BGH Capital Pty Ltd, heading a consortium comprising industry fund AustralianSuper, Carob Investment Pte Ltd of Singapore & 2 Canadian super funds, the Canada Pension Plan Investment Board & Ontario Teachers’ Pension Plan Board. Instead, Healthscope granted exclusive due diligence to Brookfield Capital Partners Ltd of Toronto, making its second bid.

The BGH proposal is worth $A4.1 billion at an indicative $A2.36 cash/share. Brookfield made a bid in August at $A2.50/share and raised it this week to total value of $A2.585/share. Norges Bank built a 5.1% stake in Healthscope over the last 3 months in a range of $A1.79-2.38/share.

Mr Dalla Lana said Northwest & the Vital trust were interested in jointly acquiring Healthscope’s underlying hospital-related real estate, in line with their long-term strategy to invest in healthcare real estate assets in Australia & New Zealand, and with scope to introduce other capital partners.

Through all the takeover activity, Healthscope has Brookfield’s agreement for it to continue working on establishing an unlisted property trust to hold most of its hospital assets and lease them back to Healthscope, provided it doesn’t enter a binding divestment agreement in the meantime. Healthscope added that “a new co-investor (unnamed) would be introduced to hold an interest of 49%” in the new trust.

Earlier story:
23  November 2018: Northwest increases Healthscope stake to 11.1%
9 May 2018: Vital Healthcare’s parent makes new Australian investment

Attribution: Northwest, Vital & Healthscope releases.

Continue Reading

Northwest increases Healthscope stake to 11.1%

The Canadian real estate investment trust which controls the Vital Healthcare Property Trust & its manager has increased its stake in Australian listed hospital operator Healthscope Ltd to 11.1%.

NorthWest Healthcare Properties REIT said on Tuesday it had added 1% of Healthscope’s voting shares, through onmarket buying, to the 10.1% it acquired in May under a forward derivative contract with Deutsche Bank AG’s Sydney branch.

Healthscope has a portfolio of 43 hospitals concentrated in large metropolitan centres throughout Australia.

Northwest chair Paul Dalla Lana & chief executive John Frey said Northwest & the Vital trust were interested in jointly acquiring Healthscope’s underlying hospital-related real estate, in line with their long-term strategy to invest in healthcare real estate assets in Australia & New Zealand, and with scope to introduce other capital partners.

NorthWest is an unincorporated, open-ended Canadian real estate investment trust which owns New Zealand company NorthWest Healthcare Properties Management Ltd, manager of the Vital Healthcare Property Trust, and holds 24% of Vital’s units.

Attribution: Company release.

Continue Reading

Vital Healthcare’s parent makes new Australian investment

The owner of the Vital Healthcare Property Trust’s manager, NorthWest Healthcare Properties REIT, has acquired a 10% interest in Australian private hospital operator Healthscope Ltd.

NorthWest, based in Toronto, Canada, said yesterday it had bought the stake for $A2.39/share by way of a derivative with Deutsche Bank AG’s Sydney branch.

Healthscope has a portfolio of 45 hospitals concentrated in large metropolitan centres throughout Australia. NorthWest said in a release: “An acquisition of Healthscope’s underlying hospital-related real estate is of interest to NorthWest & Vital Healthcare in line with their long-term strategy to invest in healthcare real estate assets in the Australasian market. NorthWest & Vital currently intend to pursue any potential Healthscope real estate acquisition jointly, with scope to introduce other capital partners as appropriate.”

The NorthWest group has interests in a diversified portfolio of 149 properties in Canada, Brazil, Germany, Australia & New Zealand.

Attribution: Company release.

Continue Reading

Vital Healthcare gets revaluation lift

Vital Healthcare Property Trust increased net profit after tax by 16.2% to $52.9 million ($45.5 million) for the December half, although revenue from ordinary activities fell 15.1% to $43.2 million ($50.8 million).

Revaluations made the difference, up from $13.1 million a year ago to $42.8 million.

Basic & diluted earnings/unit were 12.22c (10.97c).

Highlights:

  • Portfolio lease term increased to 18.6 years (from 17.7 years at 30 June 2017), while retaining occupancy at 99.3%
  • Same property net operating income increased 3.5%
  • Net distributable income of $22.8 million (5.26c/unit)
  • Adjusted funds from operations/unit (AFFO/unit) 5.40c, generating a payout ratio of 79%
  • Cap rate firmed to 5.85% (from 6.03% at 30 June 2017), generating an interim gain of $42.8 million
  • NTA/unit of $2.19, up 7% from 30 June 2017
  • Finance costs declined 57basis points to 4.09%, gearing at 36.8%
  • Acquisition of Acurity NZ hospital portfolio, Eden Rehabilitation Hospital & The Hills Clinic in Australia for $NZ187 million
  • Development pipeline (6 projects) of $144 million over the next 4 years
  • Management integration in Australia & New Zealand further strengthening the platform.

Link:
Vital financial reports

Attribution: Company release.

Continue Reading

Vital Healthcare confirms 3 hospital acquisitions & development programme

Vital Healthcare Property Trust has received Overseas Investment Office approval enabling it to commit unconditionally to the purchase of 3 hospitals from Acurity Health Group Ltd and up to $106.5 million to brownfield development over the next 4 years to expand the hospitals.

Vital agreed in May to buy the land & buildings at Wakefield & Bowen Hospitals in Wellington and the Royston Hospital in Hastings for $54 million.

Wakefield Hospital, Newtown

In addition to the acquisition, Vital has also committed to the full redevelopment of Wakefield Private Hospital alongside Acurity, subject to regulatory consents.

The completed development will include 8 operating theatres, 42 beds, a 3000m² medical consulting building, over 260 parking spaces, supporting infrastructure and patient & administration services. Expansion capacity will be built into the design to allow for growth as required.

Vital management company chief executive David Carr said on Friday: “The redeveloped Wakefield will be completed in stages to minimise disruption to existing operations. Completion of the works will provide a sector-leading, modern & functional facility for Acurity to deliver exceptional quality healthcare to patients for generations to come.”

The total forecast capital commitment is up to $82 million. The works are planned to start in 2018 and be completed in mid-2021.

Bowen Hospital, Crofton Downs

Vital also confirmed that, subject to regulatory consents, it has committed to the development of necessary infrastructure for radiation oncology services to be commissioned at Bowen Hospital.

The works will include the construction of 2 radiation oncology bunkers, initially with one linear accelerator but capacity to increase to 2 as demand increases.

Mr Carr said this was the first private radiation oncology service for patients in Wellington. The service is operated by Icon Cancer Care, Australia’s largest private provider of cancer care, in partnership with Acurity. He said radiation oncology services were a logical expansion following the recent commencement of private medical oncology services at Bowen by the Icon/Acurity partnership.

The total forecast capital commitment is up to $11.5 million. The works are planned to start in the first half of 2018 and are forecast to take about 9 months.

Royston Hospital, Hastings

Vital has committed to an immediate development project at Royston, alongside Acurity as hospital operator.

Subject to resource consent, the development will see an expansion into adjacent properties held for development and will incorporate an additional 2 operating theatres, reconfiguration of patient admission & recovery areas, and expansion of medical imaging.

Mr Carr said: “Our agreement with Acurity to enter into a 30-year lease and commitment to an immediate development project at Royston affirms our combined vision to enhance Royston’s long-held reputation as a quality private hospital serving the Hawke’s Bay region.”

The total forecast capital commitment is up to $13 million. The project is expected to start in late 2018, subject to regulatory consents, and is forecast to take about 12 months.

Vital is scheduled to settle the acquisitions this month.  All development capital expenditure is forecast to be rentalised at a yield of about 7%.

Earlier story:
12 May 2017: Vital enters asset & redevelopment partnership with Acurity

Attribution: Company release.

Continue Reading

Vital settles Hills purchase

Vital Healthcare Property Trust settled its $A30.3 million purchase of a private mental health hospital in Sydney, The Hills Clinic, on 31 July.

The Hills will be run on a 30-year lease by Healthe Care Australia Pty Ltd, Australia’s third largest corporate private hospital operator and pan-Asian healthcare services group, now owned by the Singapore-based Luye Medical Group Pte Ltd.

Vital chief executive David Carr said when he announced the acquisition in June: “The Hills Clinic is Vital’s fifth mental health hospital in Australia and its first in New South Wales and directly supports our scale & diversification strategy. The Hills site has expansion capability, with potential for an additional 24 beds, which fits nicely with Vital’s philosophy of supporting its operating partners as population growth & wider demand for mental health services increases over time”.

Earlier story:
13 June 2017: Vital buys another Sydney hospital

Attribution: Company release.

Continue Reading

Vital Healthcare makes $165 million in revaluations

Vital Healthcare Property Trust said on Friday a preliminary unaudited revaluation had increased the value of its portfolio by $165.4 million for the 12 months ending this Friday, 30 June.

For the previous 12 months, Vital made a $101.9 million portfolio gain.

The portfolio value is expected to be $1.37 billion when year-end figures are confirmed.
Management company chief executive David Carr said: “Vital is now realising the benefits of the strong execution of our scale & diversification strategy for many years. Over the last 24 months we have observed healthcare real estate capitalisation rates firm faster than the wider market.

“We consider this firming a mainly structural shift as the market’s appreciation of the unique characteristics & underlying drivers of healthcare real estate is now evident. These attractive market characteristics are amplified by Vital’s leading portfolio metrics, including a weighted average lese term to expiry of about 17.5 years and occupancy levels sustained at over 99% for 8 years.

“This structural shift has been underpinned by multiple new entrants looking to secure opportunities in the sector. Whilst they have been successful at the fringes, we continue to prudently execute on a number of recent off-market acquisitions, reflecting the strength of relationships Vital has with both existing & new partners. We expect to participate in further market consolidation over time, which will continue to drive our strategy forward.”

Revaluation highlights:

  • Like-for-like (excluding acquisitions) portfolio revaluation increase of 17%
  • Australian portfolio revaluation gain of $144.4 million
  • New Zealand portfolio revaluation gain of $21 million
  • Australian weighted average cap rate firmed 120 basis points to 6.03%
  • New Zealand’s weighted average cap rate firmed 84 basis points to 6.09%
  • Whole portfolio weighted average cap rate firmed 113 basis points to 6.04%

Mr Carr said about 90% of the increase had been cap rate firming, rental growth the balance. Overall, Vital’s investment portfolio value at 30 June 2017 is forecast to be about $1.37 billion.

By itself, the revaluation gain is expected to add about 28c/unit to Vital’s net tangible asset value at 30 June (at 31 March it was $1.79).

The valuations remain subject to Vital’s year-end audit & exchange rate. These will be confirmed in the financial results, to be announced in August.

Attribution: Company release.

Continue Reading

Vital buys another Sydney hospital

The Vital Healthcare Property Trust has bought a Sydney private mental health hospital, The Hills Clinic, for $A30.3 million. Settlement is expected to occur in July. It comes a fortnight after the NZX-listed Vital bought a rehabilitation hospital in north Sydney suburb Chatswood, the Hirondelle Private Hospital, for $A23.5 million.

The Hills will be run on a 30-year lease by Healthe Care Australia Pty Ltd, Australia’s third largest corporate private hospital operator and pan-Asian healthcare services group, now owned by the Singapore-based Luye Medical Group Pte Ltd. Healthe Care runs Hirondelle on a 25-year lease.

Vital management company chief executive David Carr said today The Hills, in Kellyville, 40km north-west of the Sydney cbd, was modern & innovative. It’s a 2-level purpose-built mental health hospital offering specialist inpatient programmes.

Built in 2011, The Hills is a 59-bed private inpatient facility, including a medical clinic with 8 consulting rooms & about 30 referring clinicians. Mr Carr said it was differentiated by its dedicated youth mental health programme providing accommodation for adolescents with drug, alcohol, depression & anxiety disorders.

“The Hills Clinic is Vital’s fifth mental health hospital in Australia and its first in New South Wales and directly supports our scale & diversification strategy. The Hills site has expansion capability, with potential for an additional 24 beds, which fits nicely with Vital’s philosophy of supporting its operating partners as population growth & wider demand for mental health services increases over time”.

Earlier story:
2 June 2017: Vital buys Sydney hospital

Attribution: Company release.

Continue Reading

Vital buys Sydney hospital

The NZX-listed Vital Healthcare Property Trust has bought a rehabilitation hospital in north Sydney suburb Chatswood, the Hirondelle Private Hospital, for $A23.5 million. The operator & tenant is Healthe Care Australia Pty Ltd, Australia’s third largest corporate private hospital operator and pan-Asian healthcare services group, now owned by the Singapore-based Luye Medical Group Pte Ltd.

Hirondelle is a 53-bed private rehabilitation hospital on Sydney’s lower North Shore, 10km north-west of the Sydney cbd. The hospital will be leased to Healthe Care for 25 years, and Vital said dit had bought it on an initial yield of 6.00%.

Vital also acquired 2 adjacent residential sites and an option to acquire a third property for possible expansion to meet forecast rising demand for rehabilitation services in the area.

Attribution: Trust release.

Continue Reading