NZX-listed Vital Healthcare Property Trust’s manager, NorthWest Healthcare Properties Management Ltd, has pulled out of an Australia portfolio purchase with its parent, NorthWest Healthscope Properties REIT of Toronto.
On a second contentious issue hotly debated at Vital’s annual meeting in December – management fees – the Toronto reit has agreed resolutions should go to a unitholder meeting before the end of October, and that NorthWest & associates won’t vote on it.
The Toronto reit & Vital agreed in early 2018 to jointly pursue the acquisition of the Healthscope opportunity, and entered into a derivative position on Healthscope shares to retain influence over the real estate outcome in a complicated takeover process.
In accordance with Vital & NorthWest’s joint investment policy, Vital has the right to acquire a 50% interest in any property acquisitions NorthWest pursues in Australia & New Zealand. The NorthWest reit formally signed up to acquire 50% of the Healthscope portfolio in late January and offered 50% of this portfolio to Vital, on exactly the same terms.
Independent directors of the New Zealand trust’s manager, Andy Evans & Graham Stuart, said on Friday: “Consideration of this rare opportunity has been a very thorough & detailed process for the board & Vital. Unfortunately, despite the board’s collective view earlier in calendar 2018 that the Healthscope real estate opportunity was in line with Vital’s strategy, we were unable to see that the opportunity met all the overall investment objectives for the trust.
“Further, management & directors have also listened carefully to a range of investor feedback over the last few weeks and it has factored heavily into our conclusion. Turning away from a quality & scale portfolio opportunity can be a difficult decision but, for Vital in this instance, we are satisfied it is the right decision at this time in light of the broadest range of applicable considerations.”
Vital won’t bear the costs of fees & third party due diligence, but will still participate in 50% of the NorthWest reit’s derivative position in Healthscope shares, including the payment of associated fees.
As at 31 December 2018, Vital had $9 million of recorded costs capitalised on its balance sheet and a net expense through the income statement of $3.6 million. It’s forecast that Vital’s financial statements to 30 June 2019 will show the net expense will improve by about $1 million from December to June and there will be no costs remaining on the balance sheet.
The fees issue
As previously announced, on 1 April 2019 the New Zealand NorthWest management company’s independent directors reached an agreement with the Toronto reit on a new governance & fees structure for Vital.
After discussion with the supervisor, the proposed changes will be put to a meeting of all unitholders to ensure investors have a say in these enhancements, both financially in relation to lower fees as well as changes to the trust deed on governance matters.
The meeting will be held before the end of October 2019. If approved, the fee reductions will apply from 1 April 2019, excluding the incentive fee which will take affect from 1 July 2019.
The NorthWest reit & its associates confirmed they wouldn’t vote on the resolutions to be put to unitholders.
30 April 2019: Vital Healthcare manager defers Healthscope investment update
1 April 2019: Chair resigns as Vital Healthcare announces agreement after management company review
4 March 2019: Vital Healthcare Property profit drops, trust grows development book & looks at recycling assets
21 December 2018: Vital Healthcare Property dissidents show muscle, and their arguments may yet hold sway
6 December 2018: Vital doubles loan to NorthWest for Healthscope acquisition
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 release.