Vital 2018 Annual Meeting

Annual Meeting
Of Unitholders
VITALHEALTHCAREPROPERTYTRUST
2 0 D E C E M B E R2018
INVESTINGINAUSTRALASIAS
HEALTHCAREINFRASTRUCTURE

Meeting
Agenda
•I N T R O D U C T I O N S
•CHAIR’S ADDRESS
•CHIEF EXECUTIVE OFFICER’S ADDRESS
•R E S O L U T I O N
•N O N-B I N D I N G P R O P O S A L S
•Q U E S T I O N S
•C L O S E O F M E E T I N G
•R E F R E S H M E N T S
2

Introductions

Board of Directors
4

In Attendance
5
Management Team
David Carr –Chief Executive Officer
Stuart Harrison –Chief Financial Officer
Trustee, audit and legal representative
Alex Wainwright –Trustees Executors
Justine Wealleans –Trustees Executors
Silvio Bruinsma–Deloitte
Toby Sharpe –Bell Gully

Chair’s
Address

Wakefield Hospital -Wellington
7

Video clip -Wakefield ‘rebuilt’
8

Strategy

Strategy
LONG TERM INVESTMENT IN AUSTRALASIA’S HEALTHCARE INFRASTRUCTURE
10
A strong track record of performance
Focused on long term value creation
through scale and diversification
A clear, consistent, and prudent strategy
focused on healthcare real estate
Unique, market leading portfolio
attributes
An experienced and aligned manager

Strategic Drivers
CORE COMPONENTS DRIVING EXECUTION TO STRATEGY
11

Total Returns
Source: Bloomberg, Craigs Investment Partners. Total returns (capital gain plus income) as at 30 November 2018
VITAL HAS OUTPERFORMED LOCAL INDICIES ON A COMPOUND BASIS OVER THE LAST DECADE
12

Distribution Sustainability
MAINTAINING PRUDENT & CONSERVATIVE PAYOUT RATIO
Notes:
NZ listed property sector 5 year compounded annual growth rate of distribution is a weighted average of NZX listed property companies by market capitalization
Vital’s calculation of adjusted funds from operations may differ from comparative entities
5 Year Compounded Annual Growth Rate of Distribution
Scale & diversification strategy driving
distribution outperformance relative to NZ
Listed Property sector
Quarterly distribution increased to 2.1875
cents per unit for the fourth quarter of
FY2018.
Equates to an annual distribution of 8.5625
cents per unit in FY2018 and guidance of
8.75 cents per unit for FY2019
Implied distribution growth of 2.2% next
year.
13
Sources: Macquarie Securities and FNZC

Investment Activity
SCALE & DIVERSIFICATION STRATEGY SUPPORTING DISTRIBUTION SUSTAINABILITY, AND CONSERVATIVE GROWTH
Vital has strategically
acquired properties
with expansion
potential adjacent to
existing properties
providing opportunities
to deploy incremental
capital into brownfield
developments at
attractive yields
Committed
development spend of
NZ$104m over the next
four years.
Additionally, underlying
indexation of rents on
core portfolio (and
acquisitions and
development) supports
earnings growth
14

Healthscope (HSO) real estate opportunity
SITUATION UPDATE
GENERATIONAL
OPPORTUNITY
SITUATION REQUIRES
UNCONVENTIONAL
TACTICS
RISKS HAVE BEEN
CONSIDERED
Healthscope’sAustralian
hospital property portfolio
aligns with Vital’shealthcare
property strategy
Operating within SIPO,
regulatory framework and
the Trust Deed
Position is balanced relative
to the business and
opportunity with downside
and upside limits
15
CURRENT
PRIVATISATION OFFER
PROVIDES A SEAT AT
THE NEGOTIATING
TABLE
CONTINUE TO WORK
THROUGH THIS
OPPORTUNITY
Brookfield’s offer under a
scheme of arrangement of
$2.585 is significantly above
our adjusted cost base of
$2.36
Stake provides us with the
best chance of unlocking
Healthscope’sAustralian
hospital property portfolio
The Board will decide
whether to proceed with
the opportunity if and when
the opportunity crystallises

Governance update
GRAHAM STUART APPOINTED THIRD INDEPENDENT DIRECTOR, NORTHWEST SUSPENDS RIGHTS & ANNOUNCES FEE REVIEW
GRAEME HORSLEY
RETIREMENT AS
INDEPENDENT CHAIR
REVISED POLICY
DOCUMENTS
GRAHAM STUART
APPOINTED AS THIRD
INDEPENDENT
DIRECTOR
Claire Higgins appointed
independent Chair and
David Carr (Vital CEO)
appointed Executive
Director on an interim basis
Review and update of
Conflicts Policy, SIPO and
Board Charter completed
Following an extensive 3
rd
party search process,
Graham was appointed
independent director in
November 2018
16
NORTHWEST
SUSPENDS ABILITY TO
REMOVE DIRECTORS
In response to unitholder
input, NorthWest has
suspended its rights to
remove independent
directors
NORTHWEST
SUSPENDS RIGHT TO
INCREASE FEES
In response to unitholder
input, NorthWest has
suspended its rights to
increase management fees
NORTHWEST
ANNOUNCES FEE
REVIEW
Commitment to review
Vital’s fees together with
Independent Directors

Chief
Executive
Officer’s
Address

FY18 Results
Summary

FY18 Results Summary
STRONG OPERATING AND PORTFOLIO PERFORMANCE
19
$93.7m
Gross rental income, +20.1%*
10.6cpu
NDI per unit, 81% payout ratio
$49.5m
Adjusted funds from operations
8.5625cpu
Cash distribution +0.7% from FY2017
*Comparative period results adjusted for $13.8m one-off lease termination receipt in October 2016
Figures as at 30 June 2018

Treasury and capital management
PRUDENT BALANCE SHEET PROVIDES MANAGEMENT ABILITY TO DEPLOY CAPITAL FOR RIGHT OPPORTUNITIES
20
37.5%
Loan-to-value
4.60%
Weighted average cost of debt,
80% hedged with a 7.0 year term
A$275m
Additional credit facility
$2.26
NTA per unit +10.2% from FY2017
Figures as at 30 June 2018

Portfolio

Strong core portfolio
5 YEAR TRENDS SHOW PORTFOLIO IN GREAT SHAPE -UNDERPINS LONG-TERM PERFORMANCE
22
99.3%
Occupancy averaging +99% for the
last 8 years
1.7%
Rents expiring over the next 10 years
Figures as at 30 September 2018
Occupancy

Strong core portfolio
5 YEAR TRENDS SHOW PORTFOLIO IN GREAT SHAPE -UNDERPINS LONG-TERM PERFORMANCE
23
WALE
18.1yrs
WALE, longest listed vehicle in
Australia and New Zealand
84.1%
Income subject to structured rent
reviews in FY2019

Portfolio overview
$1.76B PORTFOLIO OF HEALTHCARE REAL ESTATE COMPRISING 42 INVESTMENT PROPERTIES AND ~2,600 BEDS
24

Acquisitions update
ACQUISITIONS MAINLY ‘OFF-MARKET’ WITH PARTNERS SEEKING TO MAINTAIN A RELATIONSHIP WITH VITAL
25
Total
Future
Asset
Purchase
Development
Type
Price
Potential
Settlement
The Hills Clinic (Sydney, NSW)
Psych
A$30.3

31-Jul-2017
Eden Rehabilitation Hospital (Cooroy, QLD)
Rehab
A$23.8

11-Dec-2017
Land held for development (FY2018)
Strategic
A$7.5

Various
Total Australian Acquisitions
A$61.5
Wakefield Hospital (Wellington, NZ)
Acute
NZ$23.7

14-Dec-2017
Royston Hospital (Hastings, NZ)
Acute
NZ$54.2

14-Dec-2017
Bowen Hospital (Wellington, NZ)
Acute
NZ$44.5

14-Dec-2017
Land held for development (FY2018)
Strategic
NZ$2.1

3-Aug-2017
Total New Zealand Acquisitions
NZ$124.5
Total Acquisitions in NZD
NZ$194.7

Committed development update
BROWNFIELDS DRIVING VALUE-ADD OUTCOMES, UNDERPINS EARNINGS SUSTAINABILITY, IMPROVES ASSET QUALITY & PERFORMANCE
Estimate NZ$25m to NZ$50m of development per annum on average as a result of
continue demand for healthcare infrastructure.
26
Note: Spend to date reflects 30 September 2018 reported amounts updated for recent project announcements

Portfolio composition
PORTFOLIO DIVERSIFIED ACROSS GEOGRAPHY AND HEALTH CARE SUB-SECTORS
Geographic Diversification
Sector Diversification
27
* Top Ten Tenants based on revenue earned in the last 3 months

1.7% p.a.
average lease
expiry over the
next 10 years
Lease expiry profile
Lease expiry
LOW RISK EXPIRY PROFILE SUPPORTS SUSTAINABLE, PREDICTABLE AND DEFENSIVE CASH FLOWS
Lease expiries in FY2019 and FY2020 primarily reflect multi-tenant properties, with small
(consulting type) occupants at the following properties:
Ascot Hospital, Ascot Central, Ormiston Hospital, Epworth Eastern Medical Centre, Gold Coast
Surgery, and EkeraMedical Centre.
Two-thirds of FY2019 lease expiries are due in the second half of the year
In terms of the largest single lease expiries over the next 5 years, the current estimated probability
of renewal is over 75%.
28

Sector
drivers &
trends

Sector drivers and trends
PERIODIC REGULATORY REFORM, LONG TERM TRENDS UNDENIABLE
E C O N O M I C & M A R K E T I N F L U E N C E S
REGULATORY
PUBLIC SYSTEM
PRESSURE
RELATIVELY
INSULATED
reform relatively constant,
diversification critical
private system
critical component
from macro financial,
economic and market
conditions
S T R O N G F O R E C A S T D E M A N D, U N D E N I A B L E T R E N D S
2x
~4x
80%
>65 year demographic
forecast over the next
40 years
>65 year demographic
have at least
one chronic disease
utilisationof
healthcare services
by >65 year demographic
30

Summary

Resolution

Election of Independent Director
To consider and vote to approve:
Either:
That Graham Stuart, who was appointed by the Board and stands for re-
election, be re-elected as an Independent Director of the Manager
Or:
That Paul Mead, who has been nominated by three unitholders, be elected as
an Independent Director of the Manager
33

Non-
binding
Proposals

Non-binding Proposal #1
For the purpose of s 139(2)(a)(i) of the Financial Markets Conduct Act 2013
(FMCA), the Unitholders approve the Manager and Supervisor removing
clause 30.11 of the Trust Deed which provides that the Shareholder of the
Manager can unilaterally remove Independent Directors and can unilaterally
remove the right for Unitholders to nominate and vote on Independent
Directors.
35

Non-binding Proposal #2
For the purpose of s 139(2)(a)(i) of the Financial Markets Conduct Act 2013
(FMCA), the Unitholders approve the Manager and Supervisor removing
clause 22.5 of the Trust Deed which provides that the Manager can
unilaterally alter the amount of the Manager’s fee.
36

Non-binding Proposal #3
That Unitholders request that [the] Manager negotiate in good faith with
Unitholders to bring fees currently charged by the Manager in line with
current market levels and improve the alignment of interests between the
Manager and Unitholders..
37

Non-binding Proposal #4
That Unitholders request that Manager increase the size of the Board to 6,
with a minimum of 4 Independent Directors and a minimum of 2 Independent
Directors being elected by Unitholders.
38

Non-binding Proposal #5
The Unitholders request that the Manager amend all policies and
procedures, including the Conflicts of Interest Policy and the Board Charter,
to reflect resolutions 1, 2 and 4, and to ensure that the primary duty of the
Board of the Manager is to Unitholders.
39

Questions

Thank you.

Disclaimer
This presentation has been prepared by NorthWest Healthcare Properties
Management Limited (the "Manager") as manager of the Vital Healthcare Property
Trust (the "Trust"). The details in this presentation provide general information only. It
is not intended as investment or financial advice and must not be relied on as such.
You should obtain independent professional advice prior to making any decision
relating to your investment or financial needs.
The provision of this presentation does not constitute an offer, invitation or
recommendation to subscribe for or purchase units in the Trust.
Past performance is no indication of future performance.
20
TH
December 2018
42

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1
Chair’s Address, Vital Healthcare Property
Trust Annual Meeting, 20 December 2018
The following is the address of the Chair of NorthWest
Healthcare Properties Management Limited for the Vital
Healthcare Property Trust Annual Meeting held at Ellerslie
Event Centre, 80 Ascot Ave, Auckland on Thursday 20
December 2018 commencing at 2.00pm.
___________________________________
[Slide 1 – Cover slide]
[Welcome]
Welcome ladies and gentlemen to the 2018 Annual Meeting
of Vital Healthcare Property Trust.
My name is Claire Higgins, I am the Chair and an
Independent Director of your Trust’s Manager.
Under the terms of the Trust Deed and with the agreement
of the Trust’s Supervisor I have been appointed the Chair of
this meeting.
[Notice of Meeting]
The Notice of Annual Meeting has been circulated to all
Unitholders. It sets the scope of what we are scheduled to
discuss today and includes the details of the various
resolutions we are due to consider.
[Quorum & Proxies]
I am pleased to confirm that there is a quorum present and
I declare the 2018 Annual Meeting of Unitholders of Vital
Healthcare Property Trust open.
___________________________________
[Slide 2 – Meeting Agenda]
[Meeting process/agenda]
The order for the meeting is as follows:
 I will start with some introductions;

2
 I will then give my address looking at strategy,
performance and focus for the year ahead. In
addition I will also speak to two current items of
interest to unitholders, being governance matters
that relate to the Proposals in the Notice of Meeting
and the Healthscope Real Estate opportunity;
 David Carr, the Chief Executive Officer of the
Manager will then speak, briefly recapping our 2018
results, and also provide you with an update of
activities for the year to date;
 After David’s address we then move to the formal
business, including the appointment of either Graham
Stuart or Paul Mead as an independent director and
consider the five individual Proposals by ACC, ANZ
and Mint Asset Management;
 I will then invite you to ask any residual questions
you may have regarding the Trust;
 We will then conclude the meeting, following which
there will be refreshments, and I invite all Unitholders
to remain and enjoy these with us.
The Annual Report and Financial Statements for the year
ended 30 June 2018 have been circulated to all Unitholders
and are now formally tabled at the meeting.
Copies of the minutes of last year’s Annual Meeting are
available for inspection at the entrance to the room.
___________________________________
[Slide 3 – Introductions]
[Slide 4 - Board of Directors]
Before going any further I would like to take the
opportunity to introduce my fellow Directors.
To my right is Graham Stuart, to his right is Andrew
Evans and next to Andrew is Bernard Crotty. Due to
business commitments, attending via conference call is
Paul Dalla Lana. Good afternoon Paul. Next to Bernard is
David Carr, who is an Executive Director and Chief

3
Executive Officer. David will be stepping down as Executive
Director following the Annual Meeting.
For those of you that attended last year’s Annual Meeting,
you’ll notice the Board composition has changed from last
year following the retirement of Graeme Horsley in May, so
our sincere thanks on behalf of the Board and all
unitholders for his contribution to Vital over all these years.
___________________________________
[Slide 5 – In attendance today]
I would also like to introduce our Chief Financial Officer and
Company Secretary, Stuart Harrison who is seated next
to David.
Also present today are:
1. Alex Wainwright and Justine Wealleans from
Trustees Executors Limited, the Supervisor of Vital
Healthcare Property Trust
2. Silvio Bruinsma, Audit Partner from Deloitte, the
auditors for the Trust and
3. Toby Sharpe from Bell Gully, the legal advisers to the
Manager
[Slide 6 – Chair’s address]
Ladies and gentleman, over the past few years we’ve taken
the opportunity to share with you a video clip of one of our
properties or a key partner relationship. Today, I’d like to
do the same.
[Slide 7 – Wakefield]
We have a clip to share with you from one of our largest
ever development projects, the rebuild of Wakefield
Hospital in Wellington, which will commence early in 2019.
Vital acquired Wakefield, Bowen and Royston Hospitals
from the Acurity Health Group on a sale and leaseback
basis in December 2017.

4
Acurity is one of New Zealand’s largest for profit private
hospital operators and an excellent new long term partner
to Vital.
All three hospitals acquired have value add brownfield
development opportunities and David will update you on
the progress in his presentation later.
The Wakefield Hospital development will have a total
development cost in excess of $100m, of which $88m will
be funded by Vital and the balance by Acurity.
Let’s now take a look at the video clip please.
[Slide 8 - PLAY VIDEO]
We are very pleased to be embarking on this development.
We believe it will help contribute to the health and
wellbeing of the Wellington community long into the future.
We look forward to sharing this with you as this vision
becomes a reality.
[Slide 9 – Strategy]
[Slide 10 – Strategy]
With respect to strategy, the key overarching messages we
wish to share with you today is that Vital:
1. has a strong track record of performance and has
provided a long term sustainable distribution;
2. is focused on long term value creation through scale
and diversification;
3. maintains a clear, consistent, and prudent strategy
focused on healthcare real estate;
4. has established unique, market leading portfolio
attributes; and
5. is supported by an experienced and aligned manager
Recognising these five key points, I’ll now speak to the core
drivers of how we have wrapped all these elements into a
succinct and highly relevant framework.

5
[Slide 11 – Strategic Drivers]
Each of the building blocks are quite important in their own
right.
My intention over the next few slides is to show how, over
both the medium and long term, delivery to the core
strategic drivers has produced strong results for
unitholders.
From the left, we have:
 Maintained a high quality pure-play Australasian
healthcare real estate portfolio with exceptional and
unique leasing arrangements that are not available
anywhere else in the market, with embedded growth,
backed by market leading operators and tenants.

This continues to be underpinned by undeniable long
term trends in demand for healthcare services - driven
by a growing and ageing population;
 Next, we continue with the brownfield development
programme which we expect to continue into the
foreseeable future – ultimately generating, as it has
historically, very attractive returns.

Over the past 2.5 years we have invested over $70
million in brownfield developments, that continue to
enhance rental income. These often also provide an
opportunity to renegotiate and extend lease terms
building further long term sustainability into the
portfolio;
 Acquisitions remain a core feature of our scale and
diversification strategy. Vital has the largest pure
hospital real estate portfolio in the region. I want to
assure you that this is not a ‘buy anything and
everything strategy’.
 We remain considered and prudent around all
investment decisions. By way of example, we have not
participated in excess of $400m of healthcare real

6
estate transactions this year as certain opportunities
have not met our investment criteria, whether that be
price, tenant or asset quality, or location.
 With gearing at 38.2% as at 30 September we continue
to manage our balance sheet requirements within what
the Board considers an acceptable framework.
 And from a management team perspective, the core
team remains in place, and was in fact further
strengthened at the start of the year with the
integration of the NorthWest team in Australia. This
has provided an even greater depth of skills and
experience.
Managing healthcare real estate requires a unique set
of skills, and I personally consider the team as market
leaders in this regard.

The last, and the most important part of this equation
is the blue circle on the right hand side of this slide
which is our core focus, and that is the sustainability of
the distribution and long term value creation.
These core drivers have delivered the following
performance outcomes across a number of metrics.
[Slide 12 – Vital’s unit price performance]
Vital’s ongoing total return outperformance compares
favorably against both the wider market and our real estate
peers over the past 10 years.
As you can see as at 30 November 2018, the last 10 years
has produced a compounded total annual return of 14.5%.
With a commitment to continue our scale and diversification
strategy, we remain focused on a continuation of
exceptional asset management driving long term
performance.

7
[Slide 13 – Distribution Sustainability]
Long term distribution sustainability has been part of Vital’s
stated framework now for many years.
As can be seen Vital has a 5 year track record of delivering
a higher rate of distribution growth relative to the New
Zealand listed property sector.
In my view this reflects a long term balanced, and
responsible approach to managing desired equity returns
with the capital requirements and demands of the business
in delivering on its stated strategy.
[Slide 14 – Investment Activity]
This chart paints a clear picture of Vital’s track record of
delivering on our stated scale and diversification strategy
and how that has correlated to not only increased cash
distributions but, importantly, also to an improvement in
the quality of earnings.
This has enabled the Board to provide unitholders with
increased cash returns (and strong total returns) over time,
whilst still underpinning the sustainability of such.
[Slide 15 – Healthscope opportunity]
With respect to the Healthscope real estate opportunity.

Generally, the situation can be broken down as follows:

 This is a real time generational opportunity in its purest
form, noting that this is a portfolio entirely comprised of
private hospitals concentrated in major metropolitan cities,
with considerable brownfield development opportunity.
 Given the size of the portfolio, Vital and the NorthWest
REIT agreed to pursue this opportunity equally.
 As we sit here today, we have a 50% interest in a 13.41%
stake in Healthscope. Whilst there are some risks that
come with that, I can assure you we have not blindly made
that decision. The risks have been, and are, duly
considered; and where appropriate we have limited the

8
downside risk and capped the upside to provide a balanced
position relative to the business and the opportunity.
 Also remember that, as it stands today, we have an ingoing
average price of the shares we control of just over $2.36,
and there have been a number of offers for the Company
this year at that figure as a minimum, with the current
offer by Brookfield Capital Partners under a Scheme of
Arrangement at $2.585.
 I can assure you that we are operating within the
requirements of the Statement of Investment Policy and
Objectives and the Trust Deed.
 The benefit of the 13.4% interest is that we have had a
seat at the table of most interested parties, and we
continue to believe that the stake will give us the strongest
chance of unlocking the opportunity.
 However, without getting ahead of ourselves, clearly the
investment decision if the opportunity crystallises is yet to
be made by the Board. And whilst we have a number of
scenarios that may play out, we are as yet unable to speak
to any potential outcome and what result that will have on
Vital.
 It may well be that the investment decision isn’t
satisfactory and we don’t end up acquiring any assets.
 So in summary, yes the strategic initiative was deliberately
taken by the Board with full awareness of the opportunity
and the risks, but absolutely balanced by the potential
benefits to secure an interest in Healthscope’s underlying
portfolio of high quality hospital real estate.
We continue to work through this opportunity and will update
investors as it progresses further.
[Slide 16 – Governance Update]
Much has been said over recent weeks and following the
release of the Notice of Meeting in relation to Vital’s
governance, the fee review and the unitholder proposals.
Each of these Proposals will be dealt with in due course
today.

9
Firstly, I want to speak to any unit holders who have been
upset or concerned by telephone calls they have received in
regards to the Proposals and voting today.
As this is a very important meeting for Vital, for all
unitholders, we felt it was important to reach out and
remind you of the importance of your vote. Historically we
have had a low voting turnout of approximately 34%,
compared to this year at 56%.
At no time did we instruct anyone to try to convince people
to change their vote, but we did seek feedback about
voting intentions or reasons why, should anyone wish to
provide that feedback.
You will have, no doubt, read the Proposals from ACC, ANZ
and Mint Asset Management which they will speak to
shortly.
I want to explain to you why the Board did not support
these Proposals.
Since coming into the role as Chair on 1 May, we have been
working with the proposers on a number of questions that
they have had with the governance and structure of Vital.
In addition, we have been engaged with a number of other
investors.
The Manager has, I believe in good faith, held a number of
discussions with the proposers, including options for a fee
review. A number of the questions raised have already
been addressed, these being:
 Updating the board charter;
 The Statement of Investment Policy and Objectives
was also updated;
 The Conflicts Policy has been amended; and
 A third independent director appointment has been
made.
Unfortunately, we were unable to agree on elements of the
fee review and other matters and hence why the Manager
announced on 23
rd
November the fee review to be

10
completed by 31 March 2019, together with the suspension
of their rights under the contract to remove the
independent directors or to unilaterally change the fees.
So whilst the Proposals are quite specific in this regard, we
believe we have largely agreed to do what has been asked.
The announcement on 23 November also described the
review as being a board led review and that it would
include engagement with unitholders.
What this means is that the review will be led by a majority
of independent directors.
This is absolutely where the role of the independent
director is so crucial. We will endeavor to negotiate an
outcome in the best interests of all unitholders. No
outcome will be achieved without the agreement of the
Manager as they own the contractual rights.
I also want to be clear, we have never said that we would
not seek independent advice. Also, we are not in breach of
our board charter with respect to convening a committee of
independent directors – we may well do this. And, we have
not said that we will not seek submissions or input.
We want to keep all the tools in the toolkit that we can, and
as we have not yet framed up the precise terms of
reference it is too early to either rule in or out any
particular approach.
What we will do is work through this task methodically,
carefully and deliberately.
Each of the independent directors – Andy, Graham and I
are committed to our roles. Graham summed it up very
well in the media recently when he said ‘The basis of my
independence is in my experience, in my reputation
and in my integrity.’ Andy and I would completely agree
with this statement.
And with respect to the appointment of Graham Stuart as
an independent director of the Manager, I would like to
outline the process we went through to ensure the best
outcome could be achieved for all unitholders.

11
Graham came through an independent search process that
I auspiced with the help of Heidrick & Struggles – an
international search firm.
Deliberately, we defined the search criteria to find an
individual who was a New Zealander and who could chair
the audit committee. This was a key criteria as I am
currently fulfilling the role of both board and audit
committee chair and we agree that this is not an ideal
governance construct.
All up we considered in excess of 50 possible candidates.
In building the candidate list we actively engaged with
unitholders, the NZSA, institutional investors (including the
Proposers), our auditors, legal advisors and other sources
to ensure that the candidate list identified was fulsome.
Personally, I believe we have been successful in appointing
an exceptional candidate who has substantial listed
company experience and is an experienced audit committee
chair.
In summary, we have been making progress in responding
to questions raised. There remains quite some work ahead
of us and we look forward to continuing the dialogue.

In the meantime, operationally, we will continue to build a
platform of assets which will underpin the long term returns
to unitholders.

In addition to all the above, as a team we remain
absolutely focused on distribution sustainability and
delivering on the Board’s increased FY19 cash distribution
guidance of 8.75 cents per unit.

I will now pass you over to David who will run through his
presentation.
[Claire to pass the meeting to David].
___________________________________
[David’s presentation]

12


Chief Executive Officer’s address
___________________________________
Slide 17 Chief Executive Officer’s address
Thank you Claire, welcome and good afternoon everyone.
It’s a pleasure to be here to update you on the activities of
the Trust.
I have three overarching messages today:
 First, Vital’s underlying operating and portfolio
performance remains strong, with many of our metrics
market leading;
 Second, the undeniable longer term healthcare trends
of a growing and ageing population remain intact
notwithstanding some headwinds in parts of the
Australian healthcare sector, whilst New Zealand
remains an attractive and growing market;
 Third, as the Board announced in August, the 2019
cash distribution increased by 2.2% to 8.75 cents per
unit, and through my presentation I’ll detail many of
the portfolio characteristics that underpinned that
decision.
I’ll now review some of the highlights from the 2018 results.
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Slide 18 FY18 Results Summary
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Slide 19 – FY18 Result Summary
As we announced in August, the Trust had a sound 2018
financial year, supported by consistent performance across
all facets of the business.
Starting with financials, at the gross rent level we reported
$93.7m, reflecting full and part year contributions from
acquisitions, development completions and organic rent
growth.

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Net Distributable Income was 10.6 cents per unit and
equated to a pay-out ratio of 81%.
In terms of “AFFO” (or available funds from operations) the
result was $49.5m, up 4.5% on 2017.
As we increased the 4
th
quarter distribution, the full year
2018 cash distribution was 8.5625 cents per unit, ahead of
the forecast guidance of 8.5 cents per unit at the start of the
year.
And as I noted, the Board confirmed the full year 2019
distribution would increase to 8.75 cents per unit.
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Slide 20 – Treasury and Capital management
Vital’s LVR or Loan to Value Ratio was at 37.5% at 30 June
and has increased slightly to 38.2% as at 30 September.
However, at under 40%, our LVR remains well below our
bank and Trust Deed covenants of 50%.
We have a 4.6% weighted average cost of debt, currently
80% hedged and a 7 year term.
During 2018 we put in place additional credit facilities of
A$275m. I can confirm that the Board has today been
provided with credit approved terms to extend its facility
with its partner banks by a further A$150m to manage our
future capital requirements.
We had strong Net Tangible Asset growth to $2.26 at year
end, which has reversed slightly in the first quarter of this
year on the back of a weaker exchange rate.
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Slide 21 – Portfolio update
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Slide 22 – Strong core portfolio
This slide shows our core portfolio metrics remain in great
shape.
Our current occupancy of 99.3% maintains our track record
of over 99% for the last 8 years.

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This is a strong indicator of performance and one the team is
proud of. It goes to the heart of both the quality of Vital’s
properties and the lasting nature of the partnerships we
have with our tenants.
We have an average of 1.7% per annum of rents expiring
over the next 10 years.
This is down from an average of approximately 3% per
annum 4 years ago and shows that we have greatly reduced
any material lease expiry risks over the next decade,
providing a high degree of contracted rental income
certainty over the long term, underpinning core earnings.
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Slide 23 – Strong core portfolio
Our WALE (or Weighted Average Lease Term to Expiry) of
18.1 years is market leading.
Remember, the obvious natural decline in WALE by 12
months every year is not easy to arrest.
However as a result of some astute acquisition and lease
transactions over the year, the team continues to focus on
this important and uniquely differentiating metric, with
Vital’s WALE currently sitting at almost three times higher
than the New Zealand listed property sector average of 6.6
years.
A long dated WALE recognises Vital’s portfolio quality and
long term suitability of our properties for our tenants and
operators - as we have proven over recent years with a
number of tenants signing new 30 year leases.
Lease terms of this length are effectively un-heard of in the
wider commercial property market.
Ultimately a long dated WALE provides contracted long term
rental income stability for investors, and directly supports
the Board’s distribution sustainability message.
Supporting these core metrics, this year we have
approximately 85% of our rent reviews that fall due having
fixed or CPI based increases and this provides for excellent

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underlying core income growth and historically has been a
key factor in supporting increased distributions to investors.
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Slide 24 – Portfolio Overview
Slide 24 provides a portfolio snapshot, really the only way
we can now graphically show the whole investment portfolio
on one slide.
With a strong geographic spread, we now have 42 core
healthcare real estate properties, including a mix of different
facilities, including acute, rehabilitation and mental health
hospitals.
We also now have over 2,600 beds, culminating in the
largest listed and most diverse healthcare real estate
portfolio in Australasia.
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Slide 25– Acquisitions update
This slide simply recaps the acquisitions we completed over
the 2018 financial year.
We have previously reported on these so I won’t go through
them again, but there are three key points I would like to
make:
 First, as you can see, we haven’t acquired any hospital
investment assets in calendar 2018.
As Claire mentioned earlier, there has been over $400m
of potential transactions that we have deliberately and
consciously decided not to proceed with.
This validates the prudent and methodical nature of the
way we look at each investment opportunity and
ultimately whether it makes good business sense and
aligns with our strategy.
 The second point I’d like to make relates to the column
of ‘ticks’ as you can see on this slide.
In essence each of these acquisitions present future
development opportunities that directly support the

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growth aspirations of our operating partners at each of
those properties.
Remember this organic brownfield development
potential has been the foundation and essence of Vital’s
performance now for 10 years.
With the growing forecast demand for healthcare
services over coming decades we expect that this
attractive brownfield development programme will
continue to underpin Vital’s overall performance by
improving asset quality and operator performance at
each of these hospitals.
 The third point that you’ll see on this slide, is the
reference to “Land held for Development”.
This is where we have acquired adjacent properties
around key assets, and is a unique feature of our
strategy.
It reflects our intent to protect and enhance the long
term value of the hospital operating business and the
underlying real estate by ensuring that we can actually
accommodate future growth as required.
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Slide 26 – Development update
On this slide you can see a summary of the 5 committed
development projects that continue, where we’re spending
approximately $109m over coming years, building additional
capacity in hospital beds, operating theatres and related
facilities.
These capital investments continue to reposition and
modernise the portfolio and entrench our long term strategic
partnerships with high quality hospital operators.
For each of the New Zealand projects, you’ll recall we
formed a strategic partnership with Acurity Health Group in
2017, acquiring (on a 30 year sale and leaseback)
Wakefield, Bowen and Royston Hospitals. On each I note
that:

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• Tenders have been invited for the first stage of
redevelopment at Wakefield Hospital, with the
construction contract expected to be awarded early
2019.
The project will be delivered in stages to be
completed in 2022, creating a brand new, high
quality facility with eight operating theatres, 42
beds, a 3,000 square metre medical consulting
building and supporting infrastructure.
Wakefield will be base isolated to protect against
seismic events in Wellington.
• At Royston Hospital in Hastings we have a capital
commitment of $13m. Resource consent has been
received for the development which will expand into
adjacent properties owned by Vital.
The development will incorporate the reconfiguration
of patient admission and recovery areas, expansion
of consulting space and two new operating theatres,
with one to be commissioned immediately.
The construction contract has now been awarded,
with completion scheduled for mid-2020.
• In regard to Bowen Hospital in Wellington, works are
almost completed for the development of the
radiation oncology facility, including new linear
accelerator bunkers, with the service operational in
the New Year.
With Vital’s Weighted Average Capitalisation Rate now at
5.74%, and these projects forecast to yield approximately
7%, this absolutely supports the value add investment
proposition relating to current and future brownfield
developments.
In terms of our outlook for development projects, we
estimate that we’ll likely commit on average $25m to $50m
per annum as a result of continued demand for healthcare
infrastructure.
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Slide 27 – Portfolio Composition
This slide shows Vital’s geographic and sector diversification
by asset type.
We are comfortable with the diversification as shown here,
and I note that we don’t have any set policy or target
weightings.
Our preference is to assess any new opportunities as they
arise and within the over-arching context of whether it
ultimately aligns with our core strategy.
This diversification also reinforces the quality of earnings,
which gives the Board the confidence to sustain, and over
time, look to enhance distributions to investors.
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Slide 28 – Lease expiry profile
In essence this chart shows that over the next 10 years we
have only 17% of our total current income expiring, with the
balance 83% expiring between 2029 and 2047. This is an
important metric when you think about it from a certainty of
income perspective across the portfolio.
It also shows we have just under 3% of total income
expiring in 2019, and based on historic renewal trends, as at
today, I’d reasonably expect over 90% of these tenants will
agree to stay on.
Be assured however that we are not resting there and we
remain very focused on resolving these lease expiries early
to ensure we further enhance this profile for years to come.
The other important point to quickly note on this slide is the
light blue bars on the chart.
They basically show the largest single tenant lease to expire
in any one year.
Here, you can also see that the largest expiry is less than
2%, in fact is just 1.6% in 2024 and relates to a core
hospital asset that over the next few years I expect will
evolve into another excellent value add brownfield

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development opportunity, with a new long term lease put in
place.
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Slide 29 - Sector drivers and trends
We’ll now look at some of the sector drivers of demand and
trends for healthcare services.
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Slide 30 - Sector drivers and trends
Slide 30 is deliberately in 2 halves.
The top half reflects on some market and economic factors,
with the Australian healthcare market currently facing some
challenging conditions.
However, for example, whilst there has been a small decline
in the percentage of the population covered by Private
Health Insurance in Australia, the fact remains that due to
population growth, the absolute number of people covered
continues to increase.
Notwithstanding these headwinds, the benefits of a
diversified portfolio becomes apparent, with the New
Zealand Health Funds Association recently reporting the
following statistics:
• private health insurance has now had 14
consecutive quarters of growth
• 2017-2018 experiencing the strongest annual
increase in lives covered since 2001 and
• Total claims paid to the September 2018 year were
up 7.6%.
The second half of the slide speaks to some of the
underlying thematics, which continue to support longer term
growth and the defensive nature of the sector. And
remember, growth has only slowed, it is not negative.
On balance we retain a net positive long term outlook and
don’t expect changes to the fundamental structure and
characteristics of healthcare services to change that view.

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Slide 31 – Summary
Finally, Vital’s strategy continues to deliver as we build on
recent successes and future opportunities.
Healthcare real estate remains an attractive long term
investment proposition.
Proactive asset and portfolio management is an essential
and core part of our role as Manager and the team takes
pride in delivering outcomes both the market and investors
have come to expect.
We’ve successfully maintained our key point of difference
which has seen the prudent execution of a number of off-
market acquisitions, reflecting the strength of relationships
Vital has with both existing and new partners and we remain
excited about the future.
Thank you, I will now pass you back to Claire.