Half year results and increased distribution guidance
MARKET RELEASE
Managed by NorthWest Healthcare
Properties Management Limited
25 February 2021
1H FY21 results release
1
NorthWest Healthcare Properties Management Limited (the Manager), the manager of Vital Healthcare
Property Trust (Vital), released Vital’s results for the six months ended 31 December 2020 (the Half Year)
today.
Vital’s defensive portfolio helped it record a 19.8% total return for the 12 months ended 31 December
2020, outperforming the S&P/NZX REIT Index by 15.4% and the broader S&P/NZX 50 index by 5.9%.
This outperformance, despite the COVID-19 pandemic, highlights Vital’s defensive characteristics
including its market-leading 19.0 year weighted average lease expiry term (WALE) and earnings growth.
The underlying strength of our tenants’ income helped us achieve over 99% rent collection for the Half
Year in turn enabling us to increase our distribution guidance for the second half of FY21 to 9.00 cpu
(annualised) from prior guidance of 8.75 cpu.
Highlights for the Half Year
• Appointment of Independent Chair, Graham Stuart, to lead a majority Independent Board.
• Sale of three regional Australian hospitals for $100.4m; a 14.7% premium to their book value with
the proceeds used to acquire Grace Hospital in Tauranga, New Zealand.
• Balance sheet gearing reduced to 32.4%.
• 20.2% increase in adjusted funds from operations (AFFO) per unit from 4.88 cents per unit (cpu) in
the first half of FY20 to 5.87 cpu.
• Over 99% of rent collected despite COVID-19.
• 7.1% increase in net tangible assets (NTA) per unit from $2.38 to $2.55.
• $66m of new developments commenced in addition to the $290m previously underway.
Vital’s Fund Manager, Aaron Hockly, said:
“During the Half Year the Manager continued to execute on our announced strategy:
(1) improving the portfolio across all key metrics including over $200m of capital transactions (three
sales and two acquisitions);
(2) continuing to expand our development pipeline to ensure 10-15% of the portfolio remains under
development over the medium-term; and
(3) raising over $170m in new equity to reduce balance sheet gearing and provide capacity for future
value enhancing acquisitions and developments.”
1
All values shown in NZ$
VITAL HEALTHCARE PROPERTY TRUST
Managed by NorthWest Healthcare Properties Management Limited
vhpt.co.nz
Page 2 of 6
Earnings, expenses and distributions
Net property income increased by 7.5%
2
over the Half Year from $49.9m to $54.2m compared to the
prior corresponding period. This increase was primarily due to acquisitions ($2.2m of additional
revenue), development income ($2.1m) and rental growth ($0.5m). Same property net property income
compared to the prior corresponding period increased by 1.5%
2
due to fixed and indexed rent reviews.
Expenses declined by 1.4% from $26.3m to $25.9m from the prior corresponding period.
Increased net property income and reduced expenses resulted in AFFO increasing by 27.9% from the
prior corresponding period to $28.1m for the Half Year. This equates to a 20.2% increase per unit;
4.88 cpu to 5.87 cpu.
Distributions for the Half Year were consistent with the prior corresponding period at 4.375 cpu (2.1875
cpu per quarter) on a conservative pay-ratio of 75%. The Board is pleased to provide updated
guidance. Distributions for the next two quarters are expected to increase to 2.25 cpu per quarter or 9.0
cpu annualised. This equates to a 1.4% increase in distributions per unit over FY21 from FY20. The
payout ratio for the second half of this financial year is expected to remain conservative at around 80%.
Capital Management
A placement and follow-on UPP was undertaken in October and November 2020 raising $157.5m
primarily from existing unitholders. Equity was issued at $2.80 per unit, a 17.5% premium to NTA per
unit at 30 June 2020.
At 31 December 2020, balance sheet gearing was 32.4%
3
, Vital had debt headroom in its existing
facilities of A$284.2m and the all-in weighted cost of debt was 3.6%
4
.
In early 2020, a process of reviewing and updating Vital’s lending documents was commenced to
support the extension and diversification of Vital’s debt. Post-balance date, terms were agreed with three
new lenders to join Vital’s banking syndicate and extend Vital’s average debt duration from 1.3 years to
2.9 years
5
. Later this calendar year, the Manager will look to diversify Vital’s sources of debt.
Portfolio overview
Vital owns a high-quality portfolio of 42 healthcare investment properties, diversified across all
mainland Australian States and New Zealand. The portfolio comprises 25 private hospitals (representing
83% of the portfolio value), nine out-patient facilities (11%) and eight aged care facilities (6%). At 19.0
years, Vital’s WALE remains the longest of any NZX or ASX listed REIT providing a high level of income
security for unitholders. Our tenants are some of the largest healthcare providers in New Zealand and
Australia.
Leasing
Over 25,000 square metres of new or extended leasing was undertaken across Vital ‘s portfolio during
the Half Year. Leasing helped to maintain a high occupancy of 99.1% (30 June 2020: 99.4%), extend
the WALE to 19.0 years (30 June 2020: 18.1 years) and contribute to the earnings growth noted above.
Over 99% of rent was collected for the Half Year.
2
Excluding foreign exchange impacts
3
This is the debt / assets ratio calculated in accordance with Vital’s Trust Deed.
4
Drawn debt only. Excludes line fees on undrawn debt.
5
Both at 31 December 2020 (pro -forma).
VITAL HEALTHCARE PROPERTY TRUST
Managed by NorthWest Healthcare Properties Management Limited
vhpt.co.nz
Page 3 of 6
Divestments
During the Half Year, three regional Australian hospitals were sold for $100.4m being:
1. Mayo Private Hospital, Taree, New South Wales;
2. Dubbo Private Hospital, Dubbo, New South Wales; and
3. North West Private Hospital, Burnie, Tasmania.
Sales proceeds were used to acquire Grace Hospital (refer below) and helped achieve the following
over the Half Year consistent with Vital’s 5-year portfolio strategy:
1. Reduction of single-tenant exposure from 48% to 41%.
2. Increase in metropolitan assets from 71.3% of the portfolio to 76.4%.
3. Increase in average property value from $47.4m to $53.5m.
4. Reduction of average building age from 12.1 years to 11.9 years.
5. Increased WALE from 18.1 years to 19.0 years.
Acquisitions
Vital has acquired three income producing investment properties:
1. Grace Hospital in Tauranga, New Zealand for $95.0m (plus transaction costs). This is a 51-
bed, 11-theatre facility purpose-built in 2007 and expanded in 2020. It is Tauranga's only
private in-patient hospital and is located on a ~4-hectare site providing significant future
expansion opportunities. The property is fully leased to a joint venture between New Zealand’s
largest hospital operator, Southern Cross Hospitals, and New Zealand’s third largest private
hospital operator, Evolution Healthcare for 30 years providing a rental yield of 5.25%
6
. Vital
will look to support Grace Hospital's $50m Master Plan to be built over the next 5 years
7
.
2. 50% of Elizabeth Vale Shopping Centre in Adelaide, South Australia for A$7.6m (plus
transaction costs). Vital already owned the other 50% and is developing this site into a staged,
purpose-built health hub to be known as “Playford Health Hub”. Refer to the developments
section below for more details.
3. A 5,330 square metre strategic development site at 17-23 Nelson Rd, Box Hill, Melbourne,
Victoria, approximately 14kms east of Melbourne's CBD for A$29m (plus transaction costs).
Settlement occurred post-balance date and the property is leased to Epworth Foundation
providing an income yield of 2.9%. The property is expected to be developed on a staged basis
over the medium term with a potential gross floor area in excess of 42,000 square metres.
Refer to the development section below for more details.
The acquisitions are expected to be accretive to Vital’s earnings.
Developments
Developments are a key component of Vital’s strategy to continue to deliver earnings growth and
improve the quality of the portfolio.
At 31 December 2020, Vital’s committed development pipeline had grown to $356.5m across nine
projects (six private hospitals and two out-patient / mixed facilities) of which $224.7m was left to
complete. This includes the following developments announced during the Half Year:
6
Based on year 2 stabilised / market rent.
7
Any future funding from Vital is subject to business case support among other conditions.
VITAL HEALTHCARE PROPERTY TRUST
Managed by NorthWest Healthcare Properties Management Limited
vhpt.co.nz
Page 4 of 6
1. A$22.6m expansion and upgrade of Belmont Private Hospital, a 150-bed specialist mental
health facility approximately 12kms from Brisbane's CBD, leased to Healthe Care (Australia's
third largest private hospital operator) for 25 years. The development will provide additional in-
patient capacity (net increase of 35 beds), 13 additional consulting suites and 70 new car
parks as well as updating and modernising some of the older wards. On development
completion, Belmont Private Hospital is anticipated to be valued at A$135m.
2. A$18.6m expansion of Abbotsford Private Hospital, a 30-bed specialist mental health and
addiction treatment facility approximately 3kms from Perth's CBD, leased to Healthe Care for
21 years. The development will provide 47 additional in-patient beds as well as additional
therapy rooms, administration facilities and car parking. On development completion,
Abbotsford Private Hospital is anticipated to be valued at A$51m.
3. A$20.7m stage one development of a new health precinct in northern Adelaide to be known as
"Playford Health Hub". Playford Health Hub is strategically located opposite one of South
Australia's largest public hospitals, Lyell McEwin. This first stage is expected to comprise a
mixture of consulting suites, parking for the public health department and ancillary retail. Future
stages are expected to comprise a major out-patient facility and private hospital.
These new developments of Vital's existing properties are primarily driven by tenant demand and are
expected to return a weighted average yield on cost of ~6.3%
8
.
In addition, Vital’s potential development opportunities increased to $560m. These are opportunities
which are being actively considered but are not yet committed or approved, with approximately $350m
arising from Vital’s acquisition of 17-23 Nelson Rd, Box Hill, Melbourne, Victoria. This property is
adjacent to Epworth Eastern Hospital (Vital's largest asset) and can support a gross floor area of over
42,000 square metres. It has been strategically acquired to support the ongoing expansion of Epworth
Eastern as well as potential ancillary uses including aged care and life sciences.
Property values
Consistent with Vital’s Trust Deed, approximately 40% of Vital’s portfolio (by number of properties) was
independently valued at 31 December 2020 with the balance valued on a desktop only basis. Valuation
gains totaling $60.9m were recorded over the Half Year with Vital’s portfolio being valued at $2.25
billion at 31 December 2020 (30 June 2020: $2.09 billion). This equated to a pre-tax $0.17 gain in
NTA per unit.
Vital’s weighted average capitalisation rate (WACR) firmed by 20 basis points to 5.33% (5.35% NZ
portfolio; 5.32% Australia portfolio).
COVID-19
The COVID-19 pandemic has had, and continues to have, a significant impact on people, communities
and economies around the world. Although initial restrictions on the movement of people, access to
premises and elective surgeries had a significant impact on many of Vital’s tenants in the early part of
2020, this had largely abated by 31 December. In particular, elective surgeries in Australia
recommenced in June and by early July hospitals were operating at close to full capacity.
At 30 June 2020, valuers were generally cautious given the then highly uncertain nature of the
pandemic including the economic consequences. By 31 December 2020, this caution was generally
replaced by expectations of falling capitalisation rates for healthcare assets. This has helped Vital record
the significant valuation gains noted above.
8
Before management fees
VITAL HEALTHCARE PROPERTY TRUST
Managed by NorthWest Healthcare Properties Management Limited
vhpt.co.nz
Page 5 of 6
Despite COVID-19, over 99% of rent due for the Half Year was collected further demonstrating the
resilience of healthcare operators and healthcare assets.
Outlook
Healthcare property remains a defensive asset class underpinned by growing demand, high levels of
government support in Australia and New Zealand and growing institutional interest. Notwithstanding
the challenging health and economic environment due to COVID-19, Vital remains well-positioned to
continue to grow earnings, achieve our revised distribution guidance and continue to improve Vital’s
high-quality portfolio.
Conference call and webcast
A conference call is scheduled for 11:30am (NZDT) today. Participants are encouraged to pre-register
for the event to avoid delays. Presentation slides and audio can be viewed by copying the following URL
into your internet browser: https://edge.media-server.com/mmc/go/vital-21-hy/
Participants will be required to input their name, email address and company name to register for the
webcast.
A copy of the webcast will be available on Vital’s website later in the day at: www.vhpt.co.nz
– ENDS –
ENQUIRIES
Aaron Hockly
Fund Manager, Vital Healthcare Property Trust
Tel 09 973 7301, Email aaron.hockly@nwhreit.com
Michael Groth
Chief Financial Officer, NorthWest Healthcare Properties Management Limited
Tel +61 409 936 104, Email michael.groth@nwhreit.com
About Vital (NZX code VHP):
Vital Healthcare Property Trust is an NZX-listed fund that invests in high-quality healthcare properties in
New Zealand and Australia including private hospitals (~83% of portfolio value), out-patient facilities
(~11%) and aged care (~6%).
Vital is the only specialist listed landlord of healthcare property in Australasia and currently has a
portfolio valued at over $2.2 billion.
Vital is managed by NorthWest Healthcare Properties Management Limited, a subsidiary of Toronto
Stock Exchange listed NorthWest Healthcare Properties REIT, a global owner and manager of
healthcare property.
For more information, visit our website: www.vhpt.co.nz
Disclaimer:
This announcement 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
announcement provide general information only. It is not intended as investment, legal, tax or financial
advice or recommendation to any person 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.
VITAL HEALTHCARE PROPERTY TRUST
Managed by NorthWest Healthcare Properties Management Limited
vhpt.co.nz
Page 6 of 6
All references to $ are to New Zealand dollars unless otherwise indicated.
This announcement may contain forward-looking statements. Forward-looking statements can include
words such as “expect”, “intend”, “plan”, “believe”, “continue” or similar words in connection with
discussions of future operating or financial performance or conditions. The forward-looking statements
are based on management's and directors’ current expectations and assumptions regarding the Trust’s
business, assets and performance and other future conditions, circumstances and results. As with any
projection or forecast, forward-looking statements are inherently susceptible to uncertainty and to any
changes in circumstances. The Trust’s actual results may vary materially from those expressed or implied
in the forward-looking statements. The Manager, the Trust, and its or their directors, employees and/or
shareholders have no liability whatsoever to any person for any loss arising from this presentation or any
information supplied in connection with it. The Manager and the Trust are under no obligation to update
this announcement or the information contained in it after it has been released. Past performance is no
indication of future performance.
---
3
CONTENTS
4PORTFOLIO OVERVIEW
6MANAGER'S REPORT
10ABOUT VITAL AND NORTHWEST
12GOVERNANCE AND MANAGEMENT
14FINANCIAL STATEMENTS
36INDEPENDENT AUDITOR'S REPORT
38IMAGE PAGE
39DIRECTORY
INVESTING IN
HEALTHCARE
INFRASTRUCTURE IN NEW
ZEALAND AND AUSTRALIA
VALUE OF INVESTMENT PORTFOLIO
$2.25B
TOTAL RETURN
19.8%
(12 months ended 31 December 2020)
WEIGHTED AVERAGE LEASE TERM TO EXPIRY
(WALE)
19.0years
VITAL HEALTHCARE PROPERTY TRUST INTERIM REPORT 2021
4PORTFOLIO OVERVIEW
Portfolio Overview
as at 31 December 2020
Vital Portfolio by Geography
AUSTRALIANEW ZEALAND
Vital is the fourth largest listed property vehicle, and only specialist
healthcare landlord on the NZX.
NZ$10 2m
NET ANNUAL PROPERTY INCOME (CY20)
NZ$1. 61bn
30* PROPERTIES (AUS)
NZ$643m
12* PROPERTIES (NZ)
5.33%
WEIGHTED AVERAGE CAP RATE (IPP)
‡
(5.32% - AUSTRALIA, 5.35% - NZ)
*Excludes strategic assets.
‡
Income Producing Property (excludes strategic assets)
WESTERN
AUSTRALIA
SOUTH
AUSTRALIA
4
2
NEW SOUTH
WALES
12
VICTORIA
5
TASMANIA
QUEENSLAND
7
NORTHERN
TERRITORY
12
5
Sub-sector Diversity
(% of Value)
Tenant Diversification
(% of Rent)
NZ$2.25bn
†
42* PROPERTIES (AUS/NZ)
NZ$643m
12* PROPERTIES (NZ)
19YRS
WALE
11 . 9YRS
AVERAGE BUILDING AGE
♦
9 9.1%
PORTFOLIO OCCUPANCY
♦
Average building age = the later of the date of
construction or last significant capital works.
† Figures may not sum due to rounding.
Healthe Care
41%
Other
24%
Bolton Clarke
3%
Mercy Ascot
4%
Sportsmed
4%
Hall & Prior
4%
Acurity Group
10%
Epworth Foundation
10%
Acute
57%
Specialty
26%
Aged Care
6%
Medical Office
Buildings
11%
H
O
S
P
I
T
A
L
8
3
%
O
T
H
E
R
1
7
%
VITAL HEALTHCARE PROPERTY TRUST INTERIM REPORT 2021
6MANAGER'S REPORT
Manager’s Report
For the 12 months ended 31 December 2020, Vital provided a 19.8% total return to
unitholders outperforming the S&P/NZX All Real Estate Index by 15.4% and the broader
S&P/NZX50 index by 5.9%.
Dear Unitholders,
NorthWest Healthcare Properties Management Limited, the Manager of
Vital Healthcare Property Trust (Vital), is pleased to report Vital’s results for
the six months ended 31 December 2020 (the Half Year).
Vital has continued to deliver for unitholders through earnings growth,
meeting distribution guidance, continuing to improve the portfolio and
strengthening Vital’s balance sheet. We also continued to deliver for
tenants and communities across New Zealand and Australia by investing
in healthcare infrastructure and supporting the wider healthcare
ecosystem.
Key achievements over the Half Year include:
•Appointment of an Independent Chair to lead a majority Independent
Board.
•60.1% increase in profit attributable to unitholders from the prior
corresponding period; $57.2m to $91.6m.
•27.9% increase in adjusted funds from operations (AFFO) from $22.0m
to $28.1m from the prior corresponding period.
•20.2% increase in AFFO per unit from the prior corresponding period;
4.88 net cents per unit (cpu) to 5.87 cpu.
•>99% rent collection for both FY20 and HY21 despite COVID-19.
•7.1% increase in net tangible assets (NTA) per unit from 2.38 to 2.55.
•Over $66m of new committed developments in addition to the $290m
previously underway
1
and a potential pipeline of $560m.
•Acquisition of a premium, metropolitan hospital in Tauranga, New
Zealand for $95m.
•Sale of three regional Australian hospitals for $100.4m; a 14.7%
premium to their aggregate 30 June 2020 book value.
•Over 25,000 square meters of leasing and lease restructuring to
maintain a high occupancy of 99.1% and long WALE of 19.0 years as
well as improve income security.
•$170.5m of new equity issued via placement, unit purchase plan and
distribution reinvestment plan helping to reduce balance sheet gearing
to 32.4%.
•Debt facilities reset to enable diversification of debt sources including
debt capital markets in the future.
•Extension of debt facility duration and introduction of three new lenders
(both post balance date).
1
Inclusive of a net increase of $10m revised from 30 June 2020.
31 Dec
2020
31 Dec
2019
%
Change
Unit price ($)3.272.8215.9
NTA per unit ($)2.552.387.1
Investment property value ($m)2,248.41,927.216.6
Investment properties (no.)42
1
42N/A
Avg. Property value ($m)53.545.916.6
Avg. Building age (yrs)11.910.9N/A
WALE (years)19.018.1N/A
Occupancy (%)99.199.4N/A
AFFO ($m) – 6 months28.122.027.9
AFFO per unit (cpu) – 6 months5.874.8820.2
1 Includes two property consolidations which occured at 30 June 2020, being Sportsmed
Consulting property into Sportsmed Hospital and Ascot Central Carparks (right of use) has
been consolidated into one property.
AFFO
AFFO (a proxy for cash profit for unitholders) increased by 27.9% from the
prior corresponding period to $28.1m. This equates to a 20.2% increase
per unit; 4.88 cpu to 5.87 cpu.
Expenses
In addition to growing revenue, we have retained our focus on reducing
costs for unitholders. Despite an 8.5% increase in net property income and
16.9% in total assets, expenses declined by 1.4% from $26.3m to $25.9m
from the prior corresponding period.
Distributions
Distributions for the Half Year were consistent with the prior corresponding
period at 4.375 cpu (2.1875 cpu per quarter) on a conservative pay-ratio
of 75%. Due to higher AFFO noted above, on the date of this report, the
Board increased distribution guidance for the next two quarters to 2.25
cpu or 9.0 cpu annualised. This equates to a 1.4% increase in distributions
per unit over FY21 from FY20. The payout ratio for the second half of this
financial year is expected to remain conservative at around 80%.
Net tangible assets
Net tangible assets (NTA) rose 7.1% per unit from $2.38 to $2.55
primarily attributable to property revaluation gains.
“
60.1% increase in profit attributable to
unitholders from prior corresponding
period; $57.2m to $91.6m.”
7
Capital management
A placement and follow-on UPP was undertaken in October and
November 2020 raising $157.5m primarily from existing unitholders. This
reduced balance sheet gearing to ~33%. Equity was raised at $2.80 per
unit, a 17.5% premium to NTA per unit at 30 June 2020 and a 6.0%
discount to the closing price on the day before launch of the placement. At
31 December 2020, Vital closed at $3.27; a 16.8% premium to the equity
raising price of $2.80.
At 31 December 2020, balance sheet gearing was 32.4%, all-in
weighted cost of debt was 3.6% (based on drawn debt only) and Vital
had debt headroom in its existing facilities of A$284.2m.
In early 2020, a process of reviewing and updating Vital’s lending
documents was commenced to support the extension and diversification of
Vital’s debt. Post-balance date, terms were agreed with three new lenders
to join Vital’s banking syndicate and extend Vital’s average debt duration
from 1.3 years at 31 December 2020 to 2.9 years (pro-forma).
Later in 2021, we will look to diversify Vital’s sources of debt so that it no
longer solely comprises bank debt.
Portfolio overview
Vital owns a high-quality portfolio of 42 healthcare investment properties,
diversified across all mainland Australian States and New Zealand. The
portfolio comprises 25 private hospitals (representing 83% of the portfolio
value), nine out-patient facilities (11%) and eight aged care facilities (6%).
At 19.0 years, Vital’s WALE remains the longest of any NZX or ASX listed
REIT providing a high level of income security for unitholders.
Leasing
Over 25,0000 square metres of new or extended leasing was undertaken
across Vital ‘s portfolio during the Half Year. Leasing helped to maintain a
high occupancy of 99.1% (30 June 2020: 99.4%), extend the WALE to
19.0 years (30 June 2020: 18.1 years) and contribute to the earnings
growth noted above.
Net property income
Net property income increased by 8.5% over the Half Year from $49.9m
to $54.2m compared to the prior corresponding period.
“
Developments, leasing, sales and
acquisitions are all consistent with
Vital’s 5-year portfolio strategy
including reducing single tenant risk,
focusing on premium metropolitan
assets, reducing average building age
and increasing asset quality.”
“Over the 10 years ended
31 December 2020, Vital has
provided a total return of 17.6% per
annum, 4.5% per annum above the
S&P/NZX All Real Estate Index and
2.9% per annum above the broader
S&P/NZX50 index.”
Divestments
Three regional Australian hospitals were sold for $100.4m during the Half
Year being:
•Mayo Private Hospital, Taree, New South Wales;
•Dubbo Private Hospital, Dubbo, New South Wales; and
•North West Private Hospital, Burnie, Tasmania.
Sales proceeds were used to acquire Grace Hospital (refer below) and
helped achieve the following, consistent with Vital’s 5-year portfolio
strategy:
•Reduction of single-tenant exposure from 48% to 41%.
•Increase in metropolitan assets from 71.3% of the portfolio to 76.4%.
•Increase in average property value from $47.4m to $53.5m.
•Reduction of average building age from 12.1 years to 11.9 years.
•Increase in WALE from 18.1 years to 19.0 years.
Acquisitions
Vital has acquired three income producing properties:
•Grace Hospital, a 51-bed, 11-theatre facility purpose-built in 2007
and expanded in 2020 located in Tauranga, New Zealand for
$95.0m (plus transaction costs). Grace is Tauranga's only private in-
patient hospital and is located on a ~4-hectare site providing significant
future expansion opportunities. The property is fully leased to a joint
venture between New Zealand’s largest hospital operator, Southern
Cross Hospitals, and New Zealand’s third largest private hospital
operator, Evolution Healthcare (formerly Acurity Health Group) for 30
years providing a rental yield of 5.25%
2
. Vital will look to support
Grace Hospital's $50m Master Plan over the next 5 years
3
.
GRACE HOSPITAL, TAURANGA, NZ
2
Based on year 2 stabilised / market rent.
3
Any future funding from Vital is subject to business case support among other conditions.
VITAL HEALTHCARE PROPERTY TRUST INTERIM REPORT 2021
8MANAGER'S REPORT
•50% of Elizabeth Vale Shopping Centre in Adelaide, South Australia
for A$7.6m (plus transaction costs). Vital already owned the other 50%
and is developing this site into a staged, purpose-built health hub to be
known as “Playford Health Hub”. Refer to the developments section
below for more details.
•A 5,330 square metre strategic development site at 17-23 Nelson Rd,
Box Hill, Melbourne, Victoria, approximately 14kms east of
Melbourne's CBD (Development Site) for A$29m (plus transaction
costs). The site adjoins Vital's existing Epworth Eastern Hospital and
Medical Centre assets. Settlement occurred post-balance date and the
property is leased to Epworth providing an income yield of 2.9%. The
property is expected to be developed on a staged basis over the
medium term, with a potential gross floor area in excess of 42,000
square metres. Refer to the development section below for more details.
The acquisitions are expected to be accretive to Vital’s earnings.
17-23 NELSON ROAD, BOX HILL, VIC
Developments
Developments are a key component of Vital’s strategy to continue to
deliver earnings growth and improve the quality of the portfolio.
As at 30 June 2020, Vital had a committed development pipeline of
$279.7m across six projects (five private hospitals and one out-patient
facility) of which $201.9m was left to complete. In addition, $130m of
potential opportunities had been identified to expand and improve the
existing portfolio.
At 31 December 2020, the committed development pipeline had grown
to $356.5m across nine projects (six private hospitals and two out-
patient / mixed facilities) of which $224.7m was left to complete. In
addition to the existing developments from 30 June 2020, the following
developments were announced during the Half Year:
•A$22.6m expansion and upgrade of Belmont Private Hospital, a 150-
bed specialist mental health facility approximately 12kms from
Brisbane's CBD, leased to Healthe Care (Australia's third largest
private hospital operator) for 25 years. The development will provide
additional inpatient capacity (net increase of 35 beds), 13 additional
consulting suites and 70 new car parks as well as updating and
modernising some of the older wards. On development completion,
Belmont Private Hospital is anticipated to be valued at A$135m.
•
A$18.6m expansion of Abbotsford Private Hospital, a 30-bed specialist
mental health and addiction treatment facility approximately 3kms from
Perth's CBD, leased to Healthe Care for 21 years. The development will
provide 47 additional inpatient beds as well as additional therapy
rooms, administration facilities and car parking. On development
completion, Abbotsford Private Hospital is anticipated to be valued at A
$51m.
•A$20.7m stage one development of a new health precinct in northern
Adelaide to be known as "Playford Health Hub". Playford Health Hub
is strategically located opposite one of South Australia's largest public
hospitals, Lyell McEwin. This first stage is expected to comprise a
mixture of consulting suites, parking for the public health department
and ancillary retail. Future stages are expected to comprise a major
out-patient facility and private hospital.
These new developments are of Vital's existing properties, are primarily
driven by tenant demand and are expected to return a weighted average
yield on cost of ~6.3%.
In addition, Vital’s potential development opportunities increased to
$560m. These are opportunities which are being actively considered but
are not yet committed or approved. Approximately $350m of this arose
from Vital’s acquisition of 17-23 Nelson Rd, Box Hill, Melbourne, Victoria.
This property is adjacent to Epworth Eastern Hospital (Vital's largest asset)
and can support a gross floor area of over 42,000 square metres. It has
been strategically acquired to support the ongoing expansion of Epworth
Eastern as well as potential ancillary uses including aged care and life
sciences.
COVID-19
The COVID-19 pandemic has had, and continues to have, a significant
impact on people, communities and economies around the world.
Although initial restrictions on the movement of people, access to premises
and elective surgery had a significant impact on many of Vital’s tenants in
the early part of 2020, this had largely abated by 31 December. In
particular, elective surgeries in Australia recommenced in June and by
early July most private hospitals were back operating at close to full
capacity. The private sector in both New Zealand and Australia is
expected to experience sustained high levels of activity addressing both
their own backlogs as well as overflow needs of public systems.
At 30 June 2020, valuers were generally cautious given the then highly
uncertain nature of the pandemic including the economic consequences.
By 31 December 2020, this caution was generally replaced by
expectations of falling capitalization rates for healthcare assets. This
helped Vital record the significant valuation gains noted above.
Despite COVID-19, over 99% of rent due for the Half Year was collected
further demonstrating the resilience of healthcare operators and
healthcare assets.
9
Outlook
Notwithstanding the challenging health and economic environment due to
COVID-19, Vital remains well-positioned to continue to grow earnings,
achieve our revised distribution guidance and continue to improve Vital’s
high-quality portfolio.
On behalf of your Board and Management, thank you for your on-going
support.
Graham Stuart
Chair
Aaron Hockly
Fund Manager
25 February 2021
NorthWest Healthcare Properties Management Limited, the Manager
of Vital Healthcare Property Trust
VITAL HEALTHCARE PROPERTY TRUST INTERIM REPORT 2021
10ABOUT VITAL AND NORTHWEST
About Vital and NorthWest
Vital benefits from being managed by a global healthcare property owner and manger
About Vital
Vital Healthcare Property Trust (Vital, the Trust) is an NZX-listed investment fund (NZX:VHP) that invests in high-quality healthcare properties in New
Zealand and Australia. The Trust is externally managed by NorthWest Healthcare Properties Management Limited.
Vital's portfolio of 42 properties is valued at more than NZ$2.25B with 71% (by value) located in Australia and the balance in New Zealand. The
portfolio has over 130 tenants and over 2,800 beds.
Vital’s tenants include hospital operators and healthcare providers who deliver a wide range of services across the full spectrum of health services.
Further information is available at vhpt.co.nz
“Vital is the only NZX listed specialist landlord of healthcare property and the
fourth largest NZX listed property vehicle”
About the Manager
NorthWest Healthcare Properties Management Limited (NWHPM, the Manager) is an external manager that provides management services to Vital
and its unitholders. The Manager’s primary responsibilities include the day-to-day administration of Vital, portfolio management, sourcing new
opportunities and conducting due diligence on potential acquisitions. The Manager is also responsible for providing specialist property management,
project management, development management and leasing services to the Trust.
The Manager’s board of five comprises three independent directors and two NorthWest appointees. Refer to page 12 for more details.
Vital's leadership team is led by Aaron Hockly (Fund Manager), and draws on the skills and experience of over 40 real estate professionals across New
Zealand and Australia with offices in Auckland, Melbourne and Sydney. Refer to page 13 for more details.
NorthWest REIT
NWHPM is a subsidiary of Toronto Stock Exchange-listed NorthWest Healthcare Properties REIT (NorthWest REIT). NorthWest REIT operates across
seven countries in four continents and was founded by its current CEO, Paul Dalla Lana, in 2004. Among other roles, Paul is a director of Vital's
Manager.
NorthWest REIT has NZ$8.3bn of AUM globally and over 250 real estate professionals including over 40 professionals across New Zealand and
Australia. In Australia and New Zealand, NorthWest is led by regional CEO, Craig Mitchell.
“
NorthWest REIT is a global healthcare real estate investor and manager with
over NZ$8.3B of assets under management.”
Our Structure - A Unit Trust
11
VITAL HEALTHCARE PROPERTY TRUST INTERIM REPORT 2021
12GOVERNANCE AND MANAGEMENT
Our Board
The board comprises five highly qualified directors; three of whom are independent. Both
the Chairman of the Board and the Chair of the Audit Committee are independent directors.
GRAHAM STUART
Independent Chairman and Member of the Audit Committee
Graham Stuart is an experienced corporate director with an established track record of performance in governance
and in prior executive roles. He is currently the Independent Chair of EROAD Limited and an Independent Director
and Chair of the Audit Committee at Tower and Metro Performance Glass Limited. He was previously the CEO of
Sealord Group from 2007 to 2014 and Director, Strategy and Growth and CFO of Fonterra Co-operative Group
from 2001 to 2007.
BERNARD CROTTY
Director and Member of the Audit Committee
Bernard Crotty is a Director of the Manager of Vital Healthcare Property Trust, a Trustee of NorthWest Healthcare
Properties REIT and previously served as President of NorthWest Healthcare Properties REIT. Bernard also previously
served as Chairman and/or Chief Executive of several publicly listed technology companies and practised law in
Canada, the United States and the United Kingdom. Mr. Crotty is a graduate of the Toronto-Institute of Corporate
Directors Education Program.
PAUL DALLA LANA
Director and Member of the Audit Committee
Paul Dalla Lana is the founder and CEO of NorthWest Healthcare Properties REIT – the 100% owner of NorthWest
Healthcare Properties Management Limited, the Manager of Vital Healthcare Property Trust. Over the past 25+
years, Paul has led NorthWest in the acquisition and development of over $10 billion worth of real estate
transactions, with a significant focus on healthcare properties. Prior to founding NorthWest, Paul was a professional
in the Real Estate Capital Markets Group of Citibank, N.A. and an economist with B.C. Central Credit Union. Paul
received his BA and his MBA from The University of British Columbia.
ANDREW EVANS
Independent Director and Member of the Audit Committee
Andrew Evans has over 30 years’ experience in commercial real estate and asset management, previously holding
executive positions with listed and unlisted real estate investment businesses. Andrew is Chairperson of Accessible
Properties NZ Ltd and Infinity Investment Group Holdings Ltd, is a director on Holmes Group Limited, Holmes GP
Fire Limited and Trust Investments Management Limited. In addition, Andrew is a past National President of the
Property Council of New Zealand, a fellow of the New Zealand Property Institute and a government appointee to
the Land Valuation Tribunal (Waikato No.1). He is a Chartered Fellow of the Institute of Directors and is on the
Auckland Branch Committee.
DR MICHAEL STANFORD AM
Independent Director and Chair of the Audit Committee
Dr Michael Stanford was a director of Healthscope, Australia’s second largest hospital group, until it was acquired
and delisted from the ASX in June 2019. He is currently a director of Virtus Health (ASX: VRT), the market leading
provider of assisted reproductive services in Australia, Ireland and Singapore, and Nucleus Networks, Australia’s
largest Phase I clinical research organisation. Dr Stanford is also Chair of Diabetes Australia, a large not-for-profit
servicing 1.6m Australians with diabetes, a role he has held since April 2020. He is also Senior Advisor to
Medibank Private Ltd, Australia’s largest private health insurer and an ASX top 50 company.
13
Our Executive Team
Vital's executive team comprises real estate professionals with extensive experience in New
Zealand, Australia and beyond.
AARON HOCKLY
Fund Manager – Vital Healthcare Property Trust
Aaron Hockly returned to New Zealand in 2018 after 17 years in senior management and advisory roles in
Australia. He has an extensive property, funds management and legal background with his last role in Australia
being the Chief Operating Officer for Growthpoint Properties Australia. Growthpoint is a A$4.1bn ASX listed real
estate investment trust with a portfolio of quality office and industrial properties. At Growthpoint Aaron had direct
management responsibility for strategy, transaction structuring and execution (property, debt and equity), reporting
and investor relations. Among other qualifications, Aaron has a Masters in Applied Finance and is a Fellow of both
Governance New Zealand and the Financial Services Institute of Australasia.
CHRIS ADAMS
Executive Director - Developments
Chris Adams has extensive experience in the property industry in New Zealand, Australia and the United Kingdom,
including over 20 years’ experience in health sector property acquisitions, transaction structuring and large-scale
hospital development. Responsibilities with respect to NorthWest include overseeing development management
and joint responsibility for acquisitions undertaken by the business. He was one of the founding Executives at
Generation Healthcare REIT. Prior to joining Generation, Chris established Vital’s presence in Australia in 1999 and
served as General Manager – Australia following various roles with the group in New Zealand.
VANESSA FLAX
Regional General Counsel A/NZ and Company Secretary
Vanessa Flax joined the team on 1 May 2019, prior to which she was a special counsel at Ashurst Australia.
Vanessa has 25 years of deep and broad ranging property law experience in Australia and New Zealand,
including acting as primary legal adviser (for approximately 15 years) for Vital and NorthWest. Vanessa’s legal
experience covers all aspects of real estate property transactions, including acquisitions, divestments and sales,
leasing and Crown leasing, development transactions and due diligence.
MICHAEL GROTH
Chief Financial Officer
Michael Groth has over 13 years’ experience as a senior finance executive in the listed and unlisted property funds
and funds management industry. Prior to joining the team in October 2019, Michael’s most recent position was as
Group Chief Financial Officer of the Melbourne based and ASX-listed real estate fund manager, APN Property
Group Limited.Michael has extensive experience in financial management and reporting, taxation, treasury and
capital management, corporate structuring, acquisitions, disposals and equity raisings.
RICHARD ROOS
Executive Director – Portfolio
Richard Roos moved to Melbourne with his family to join Vital in June 2013 after spending the previous six years in a
senior executive role with NorthWest Healthcare Properties REIT. He has over 20 years’ career experience in
commercial real estate financing, acquisitions and property management.
In his role as Executive Director, Richard is responsible along with his Melbourne and Auckland based teams for the
asset management of Vital’s Australian and New Zealand portfolio, including leasing and tenant relationships, and
has joint responsibility for acquisitions undertaken by the business.
VITAL HEALTHCARE PROPERTY TRUST INTERIM REPORT 2021
0
Financial Statements
Consolidated Statement of Comprehensive IncomeFIN-1
Consolidated Statement of Financial PositionFIN-2
Consolidated Statement of Changes in EquityFIN-3
Consolidated Statement of Cash FlowsFIN-4
Notes to the Consolidated Financial StatementsFIN-5
ABOUT THIS REPORTFIN-5
1Reporting EntityFIN-5
2Basis of PreparationFIN-5
3Significant Accounting PoliciesFIN-6
PERFORMANCEFIN-7
4Segment InformationFIN-7
5TaxationFIN-8
6Investment PropertiesFIN-9
CAPITAL STRUCTURE , FINANCING AND RISK MANAGEMENTFIN-13
7Units on IssueFIN-13
8Earnings per UnitFIN-13
9Distributable IncomeFIN-14
10BorrowingsFIN-15
11DerivativesFIN-16
12Commitments and ContingenciesFIN-17
OTHER NOTESFIN-17
13Subsequent EventsFIN-17
14Related Party TransactionsFIN-18
Independent Auditor's Report36
VITAL HEALTHCARE PROPERTY TRUST INTERIM REPORT 2021
FIN-1
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the six months ended 31 December 2020
Note
6 months
Dec-20
$000s
6 months
Dec-19
$000s
Gross property income from rentals56,20551,084
Gross property income from expense recoveries6,7706,335
Property expenses(8,815)(7,521)
Net property income454,16049,898
Other income and expenses(12,386)(11,998)
Net strategic transaction expenses-7
Strategic transaction interest income-267
Finance income1841
Finance expense10(13,566)(14,619)
Operating profit28,22623,596
Other gains/(losses)
Revaluation gain on investment property660,85942,612
Net gain/(loss) on disposal of investment property611,557-
Fair value gain/(loss) on foreign exchange derivatives624137
Fair value gain/(loss) on interest rate derivatives2,9201,503
Realised gain/(loss) on foreign exchange(1,349)-
Unrealised gain/(loss) on foreign exchange388642
74,99944,894
Profit before income tax103,22568,490
Taxation expense5(11,635)(11,297)
Profit for the year attributable to unitholders of the Trust91,59057,193
Other comprehensive income
Items that may be reclassified subsequently to profit and loss:
Movement in foreign currency translation reserve(3,258)(4,203)
Fair value gain/(loss) on net investment hedges151484
Deferred taxation (expense)/credit(42)(135)
Total other comprehensive income/(loss) after tax(3,149)(3,854)
Total comprehensive income after tax88,44153,339
Earnings per unit
Basic and diluted earnings per unit (cents)819.1212.70
The notes on pages FIN 5 to FIN21 form part of and are to be read in conjunction with these financial statements.
VITAL HEALTHCARE PROPERTY TRUST INTERIM REPORT 2021
FIN-2
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 31 December 2020
Note
Dec-20
$000s
Jun-20
$000s
Non-current assets
Investment properties62,248,3982,086,309
Derivative financial instruments11170-
Other non-current assets-756
Deferred tax55,3486,792
Total non-current assets2,253,9162,093,857
Current assets
Cash and cash equivalents6,2835,265
Trade and other receivables3,5865,202
Other current assets1,737852
Derivative financial instruments1141842
Total current assets12,02411,361
Total assets2,265,9402,105,218
Unitholders' funds
Units on issue7765,285594,752
Reserves(10,371)(3,869)
Retained earnings558,460488,096
Total unitholders' funds1,313,3741,078,979
Non-current liabilities
Borrowings10477,699699,527
Lease liability - ground lease3,6053,675
Other payables9,71610,268
Derivative financial instruments1160,47363,238
Deferred tax5106,688104,150
Total non-current liabilities658,181880,858
Current liabilities
Trade and other payables25,43519,002
Income in advance1,285870
Derivative financial instruments11-232
Lease liability - ground lease139136
Taxation payable11,00611,153
Borrowings10256,520113,988
Total current liabilities294,385145,381
Total liabilities952,5661,026,239
Total unitholders' funds and liabilities2,265,9402,105,218
For and on behalf of the Manager, NorthWest Healthcare Properties Management Limited.
G Stuart, Chairman
25 February 2021
Dr M Stanford, Director
The notes on pages FIN 5 to FIN21 form part of and are to be read in conjunction with these financial statements.
VITAL HEALTHCARE PROPERTY TRUST INTERIM REPORT 2021
FIN-3
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the six months ended 31 December 2020
Units on issue
$000s
Retained
earnings
$000s
Translation
of foreign
operations
$000s
Foreign
exchange
hedges
$000s
Share based
payments
$000s
Total
unitholders'
funds
$000s
For the six months ended
31 December 2019
Balance at the start of the six months576,300469,914(93,324)64,77612,0771,029,743
Changes in unitholders' funds15,539---(12,077)3,462
Manager's incentive fee----3,2093,209
Profit for the period-57,193---57,193
Distributions to unitholders-(19,923)---(19,923)
Other comprehensive income for
the period
Movement in foreign currency
translation reserve--(4,203)--(4,203)
Fair value losses on net investment
hedges---349-349
Balance at the end of the six months591,839507,184(97,527)65,1253,2091,069,830
For the six months ended
31 December 2020
Balance at the start of the six months594,752488,096(73,003)62,6596,4751,078,979
Changes in unitholders' funds170,533---(6,475)164,058
Manager's incentive fee----3,1213,121
Profit for the period-91,590---91,590
Distributions to unitholders-(21,226)---(21,226)
Other comprehensive income for
the period
Movement in foreign currency
translation reserve--(3,257)--(3,257)
Fair value gains on net investment
hedges---109-109
Balance at the end of the six months765,285558,460(76,260)62,7683,1211,313,374
The notes on pages FIN 5 to FIN21 form part of and are to be read in conjunction with these financial statements.
VITAL HEALTHCARE PROPERTY TRUST INTERIM REPORT 2021
FIN-4
CONSOLIDATED STATEMENT OF CASH FLOWS
For the six months ended 31 December 2020
Note
6 months
Dec-20
$000s
6 months
Dec-19
$000s
Cash flows from operating activities
Property income60,97151,708
Recovery of property expenses6,2565,972
Interest received1841
Property expenses(10,759)(6,446)
Management and trustee fees(7,124)(6,559)
Interest paid(13,453)(14,642)
Tax paid(7,860)(7,513)
Other trust expenses(2,328)(2,780)
Net cash provided by/(used in) operating activities25,72119,781
Cash flows from investing activities
Receipts from foreign exchange derivatives1,28148
Capital additions on investment properties(80,421)(34,451)
Purchase of properties(106,056)(1,003)
Prepaid transaction costs(145)(1,308)
Proceeds from disposal of properties100,47564
Repayment of loan provided to related parties-84,495
Payments for foreign exchange derivatives(2,629)(161)
Strategic transaction expenses(925)-
Strategic transaction third party interest-267
Net cash provided by/(used in) investing activities(88,420)47,951
Cash flows from financing activities
Debt drawdown176,10031,205
Repayment of debt(255,207)(83,317)
Issue of units157,502-
Loan issue costs(32)-
Costs associated with new equity raised(2,487)(8)
Distributions paid to unitholders(12,159)(16,455)
Net cash from/(used in) financing activities63,717(68,575)
Net increase/(decrease) in cash and cash equivalents1,018(843)
Cash and cash equivalents at the beginning of the period5,2656,068
Cash and cash equivalents at the end of the year6,2835,225
The notes on pages FIN 5 to FIN21 form part of and are to be read in conjunction with these financial statements.
VITAL HEALTHCARE PROPERTY TRUST INTERIM REPORT 2021
FIN-5
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
ABOUT THIS REPORT
1 REPORTING ENTITY
Vital Healthcare Property Trust (“VHP” or the “Trust”) is a unit trust established under the Unit Trusts Act 1960 by a Trust Deed dated 11 February 1994 (as
subsequently amended and replaced), domiciled in New Zealand, with its registered office at Level 16, AIG Building, 41 Shortland Street, Auckland.
The Trust is managed by NorthWest Healthcare Properties Management Limited (the “Manager”).
The condensed consolidated interim financial statements of VHP for the six months ended 31 December 2020 comprise VHP and its subsidiaries
(together referred to as the “Group”). VHP is listed on the New Zealand Stock Exchange (NZX) and is a FMC reporting entity for the purpose of the
Financial Markets Conduct Act 2013. The Group's principal activity is investment in high quality Health Sector related properties.
These condensed consolidated interim financial statements were approved by the Board of Directors of the Manager on 25 February 2021.
The condensed consolidated interim financial statements for the six months ended 31 December 2020 (including comparative balances) have been
reviewed by the auditor. The 30 June 2020 comparatives were subject to independent audit.
2 BASIS OF PREPARATION
(a) Statement of compliance
These condensed consolidated interim financial statements have been prepared in accordance with Generally Accepted Accounting Practice in New
Zealand (NZ GAAP), NZ IAS 34 and IAS 34 Interim Financial Reporting, and do not include notes of the type normally included in an Annual Report.
Therefore this report should be read in conjunction with the Group's most recent Annual Report. The accounting policies have been consistently applied,
when compared to those used in the 2020 Annual report. The 2020 Annual Report complies with New Zealand equivalents to International Financial
Reporting Standards (NZIFRS) and other applicable Financial Reporting Standards issued and effective at the time of preparing those statements.
(b) Basis of consolidation
The Group’s financial statements incorporate the financial statements of the Trust and entities controlled by the Trust (its subsidiaries). Control is achieved
where the Trust has power over the investees; is exposed, or has rights, to variable returns from its involvement with the investees; and has the ability to
use its power to affect its returns. The results of subsidiaries are included in the consolidated financial statements from the date of acquisition to the date of
disposal. All significant intra-group transactions, balances, cashflows, income and expenses are eliminated on consolidation.
(c) Basis of measurement
The Group uses the historical cost basis except for derivative financial instruments and investment properties which are measured at fair value. Historical
cost is based on the fair value of the consideration given or received in exchange for assets or liabilities. Fair value is the price that would be received to
sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price
is directly observable or estimated using another valuation technique.
(d) Functional and presentation currency
These financial statements are presented in New Zealand Dollars ($), which is the Trust's functional and presentation currency. All information has been
rounded to the nearest thousand dollars ($000), unless stated otherwise.
(e) Impact of COVID-19
In March 2020 the World Health Organisation declared the outbreak of a novel coronavirus (‘COVID-19’) as a pandemic, which spread throughout
New Zealand, Australia and the world. Governments in New Zealand and Australia responded with lock-downs, business trading restrictions and
social distancing measures all of which impacted large parts of the economy, including the ability for the Group’s tenants to operate on a business as
usual basis. In recent times, community transmissions of COVID-19 in New Zealand and Australia have abated and COVID-19 vaccination programs
are due to commence.
In response to these challenging economic conditions the Group supported some tenants with rent abatement and/or rent deferral arrangements.
Accordingly trade receivables related to deferral arrangements outstanding at the reporting date are ongoing and loss allowances have been made.
While Government restrictions have eased and ‘COVID normal’ operating conditions have been established, including vaccination programs that are
due to commence in the near term, as at the reporting date, deferred rent with businesses impacted by previous lock-downs and trading restrictions
remains.
COVID-19 has also potentially impacted the previous market evidence used by independent valuers to inform assumptions and opinions that determine
the fair value of investment property in some markets the Group operates, although recent independent professionally qualified valuer reports
commissioned note that market conditions and transactional evidence uncertainty has abated (refer Note 6 for further details).
Currently there remains a risk of further community transmission outbreaks caused by COVID-19 mutations and/or further waves that would likely
adversely impact the viability of the Group’s tenants and therefore potentially the operating performance and the financial position of the Group if the
Governments in New Zealand and Australia were to respond with prolonged lock-downs and business trading restrictions.
VITAL HEALTHCARE PROPERTY TRUST INTERIM REPORT 2021
FIN-6
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(f) The notes to the consolidated financial statements
The following notes include information required to understand these financial statements that is relevant and material to the operations, financial position
and performance of the Group. The notes have been collated into sections to help users find and understand inter-related information. Information is
considered material and relevant if, for example:
•the amount in question is significant by virtue of its size or nature;
•it is important to understand the results of the Group;
•it helps explain the impact of significant changes in the Group's business; or
•it relates to an aspect of the Group's operations that is important to its future performance.
3 SIGNIFICANT ACCOUNTING POLICIES
Critical accounting estimates and judgements
In the application of NZ IFRS, the Board and management are required to make judgements, estimates and assumptions about carrying values of assets
and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on experience and other factors
that are believed to be reasonable under the circumstances, however actual results may differ from these estimates and assumptions.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the
estimate is revised and in any future periods affected.
The critical judgements, estimates and assumptions made in the current period are contained in the following notes:
NoteDescription
Note 5Current and deferred taxation
Note 6Valuation of investment properties
VITAL HEALTHCARE PROPERTY TRUST INTERIM REPORT 2021
FIN-7
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
PERFORMANCE
This section shows the results and performance of the Group and its reporting segments and includes detailed information in respect to its revenues,
expenses and profitability. It also provides information on the investment properties that underpin the Group's performance.
4 SEGMENT INFORMATION
The principal business activity of the Group is to invest in Health Sector related properties. Segment profit represents the profit earned by each segment
including allocation of identifiable administration costs, finance costs, revaluation gains/(losses) on investment properties, and gains/(losses) on
disposal of investment properties. This is the measure reported to the Board, who are the chief operating decision makers for the purposes of resource
allocation and assessment of segment performance. The Group operates in both Australia and New Zealand.
The following is an analysis of the Group’s results by reportable segment.
Australia
$000s
New Zealand
$000s
Total
$000s
Segment profit/(loss) for the six months ended 31 December 2020:
Gross property income from rentals42,64613,55956,205
Gross property income from expense recoveries3,1913,5796,770
Property expenses(4,797)(4,018)(8,815)
Net property income41,04013,12054,160
Other expenses(6,500)(5,886)(12,386)
Net finance expense(3,717)(9,831)(13,548)
30,823(2,597)28,226
Fair value gain/(loss) on interest rate derivatives-2,9202,920
Revaluation gains on investment properties28,59932,26060,859
Net gain/(loss) on disposal of investment property11,557-11,557
Other foreign exchange gains/(losses)(3)(334)(337)
Total segment profit before income tax70,97632,249103,225
Taxation expense(11,635)
Profit for the six months91,590
Segment profit/(loss) for the six months ended 31 December 2019:
Gross property income from rentals38,49312,59151,084
Gross property income from expense recoveries2,5243,8116,335
Property expenses(3,444)(4,077)(7,521)
Net property income37,57312,32549,898
Other expenses(5,630)(6,368)(11,998)
Net strategic transaction income/(expenses)7-7
Strategic transaction interest income267-267
Net finance expense(5,562)(9,016)(14,578)
26,655(3,059)23,596
Fair value gain/(loss) on interest rate derivatives-1,5031,503
Revaluation gains on investment properties29,77012,84242,612
Other foreign exchange gains/(losses)-779779
Total segment profit before income tax56,42512,06568,490
Taxation expense(11,297)
Profit for the six months57,193
Net property income comprises rental income and expense recoveries from tenants less property expenses. The Group has three tenants (one New
Zealand and two Australian) that contributed $34.7m of gross property income (31 December 2019: two Australian tenants that contributed $28.3m).
There were no inter-segment sales during the six months (31 December 2019: nil).
VITAL HEALTHCARE PROPERTY TRUST INTERIM REPORT 2021
FIN-8
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
4 SEGMENT INFORMATION (continued)
Australia
$000s
New Zealand
$000s
Total
$000s
Segment assets at 31 December 2020:
Investment properties1,605,492642,9062,248,398
Other non-current assets-5,5185,518
Current assets8,6513,37312,024
Consolidated assets1,614,143651,7972,265,940
Segment assets at 30 June 2020:
Investment properties1,594,519491,7902,086,309
Other non-current assets6146,9347,548
Current assets8,6822,67911,361
Consolidated assets1,603,815501,4032,105,218
Segment liabilities at 31 December 2020:
Borrowings447,387286,832734,219
Other liabilities143,38574,962218,347
Consolidated liabilities590,772361,794952,566
Segment liabilities at 30 June 2020:
Borrowings516,680296,835813,515
Other liabilities132,44380,281212,724
Consolidated liabilities649,123377,1161,026,239
All assets and liabilities have been allocated to reportable segments.
5 TAXATION
Income tax recognised in the consolidated statement of comprehensive income
6 months
Dec-20
$000s
6 months
Dec-19
$000s
Profit/(loss) before tax for the period103,22568,490
Taxation (charge)/credit - 28% on profit before income tax(28,903)(19,177)
Effect of different tax rates in foreign jurisdictions9,2307,335
Tax exempt income10,1193,902
Tax impact of leasing deals4,563-
Foreign tax credits4,2061,896
Tax charges on overseas investments(6,609)(5,834)
Over/(under) provided in prior periods(470)-
Other adjustments(3,771)581
Taxation (expense)/credit(11,635)(11,297)
The taxation (charge)/credit is made up as follows:
Current taxation(7,578)(4,977)
Deferred taxation(4,057)(6,320)
Total taxation (expense)(11,635)(11,297)
VITAL HEALTHCARE PROPERTY TRUST INTERIM REPORT 2021
FIN-9
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
6 INVESTMENT PROPERTIES
Investment properties comprise real estate predominately leased, or targeted to be leased, to health sector tenants that is held for either deriving rental
income, for capital appreciation or both.
6A RECONCILIATION OF CARRYING AMOUNTS
Dec-20
$000s
Jun-20
$000s
Carrying value of investment property at the beginning of the six months2,086,3091,836,430
Acquisition of properties104,82175,419
Capitalised costs53,43184,169
Capitalised interest costs2,1423,624
Net capitalised incentives
1
31,158753
Disposal of properties(87,746)-
Foreign exchange translation difference(2,576)36,256
Change in fair value60,85945,703
Right of use asset recognised-3,955
Carrying value of investment property at the end of the six months2,248,3982,086,309
1 Includes payments associated with the Belmont Private Hospital rent being rebased to market and lease extension.
The Group holds the freehold to all properties except the car parks at the rear of Ascot Hospital and Ascot Central, which are the subject of a ground
lease ("right of use" asset) that has a weighted average term remaining of 18.3 years (30 June 2020: 18.8 years). As at reporting date the fair value of
this right-of-use asset totals $7.2m (30 June 2020: $7.4m).
6B JOINT ARRANGEMENTS
During 2019 the Group purchased a 50% tenants-in-common interest in an investment property in Elizabeth Vale, South Australia (now re-named
Playford Health Hub). Subject to a Co-ownership Deed, this arrangement constituted a joint operation whereby the Group recognised its share of assets
and liabilities in the consolidated statement of financial position and share of revenue earned and expenses incurred in the consolidated statement of
comprehensive income. On 21 August 2020 the Group purchased the remaining 50% interest in the investment property and ceased the joint
arrangement.
No new joint arrangements have been entered into in the current period.
6C ACQUISITION OF PROPERTY
During the period the Group:
•acquired the remaining 50% share in Playford Health Hub in South Australia for A$7.4m excluding transaction costs on 21 August 2020.
•acquired Grace Hospital located in Tauranga, New Zealand for $95m excluding transaction costs on 16 December 2020.
6D DISPOSAL OF PROPERTY
During the period the Group:
•sold 3 regional assets, being Dubbo Private Hospital (NSW), Mayo Private Hospital (NSW) and North West Private Hospital (TAS) for a total of
A$94.3m excluding transaction costs on 21 December 2020. These assets had a carrying value of A$82.4m.
•sold a land development site at 142 Brighton Ave, Toronto, NSW for A$0.3m excluding transactions costs on 9 December 2020. This site had a
carrying value of A$0.3m.
6E CONTRACTUAL ARRANGEMENTS
The Group was party to purchase or construct property (including in respect to Epworth Eastern, Vitctoria and Wakefield Private Hospital, Wellington)
not recognised in the financial statements for the following amounts:
Dec-20
$000s
Jun-20
$000s
Capital expenditure commitments224,740208,198
6F INDIVIDUAL VALUATIONS AND CARRYING AMOUNTS
The details of the New Zealand and Australian investment property portfolio, including its location, sub sector, fair value, market capitalisation rate,
occupancy and weighted average lease expiry term are as follows:
VITAL HEALTHCARE PROPERTY TRUST INTERIM REPORT 2021
FIN-10
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Latest independent valuationFair valueMarket capitalisation rateOccupancyWALE
PropertiesLocationSub sectorMajor TenantDate$M
$M
Dec-20
$M
Jun-20
%
Dec-20
%
Jun-20
%
Dec-20
%
Jun-20
Years
Dec-20
Years
Jun-20
Australia
Lingard Private HospitalMerewether, New South WalesHospital (Acute)Healthe CareDec 20174.5174.5162.75.05.3100.0100.025.225.7
Maitland Private HospitalEast Maitland, New South WalesHospital (Acute/Specialty)Healthe CareJun 20109.4109.2109.45.55.5100.0100.017.017.5
Hurstville Private HospitalHurstville, New South WalesHospital (Acute)Healthe CareDec 2081.281.279.45.86.3100.0100.021.321.8
The Hills ClinicKellyville, New South WalesHosptial (Specialty)Healthe CareDec 2049.749.748.04.85.0100.0100.026.527.0
Toronto Private HospitalToronto, New South WalesHospital (Acute/Specialty)Healthe CareJun 2044.043.944.05.85.8100.0100.022.022.5
Mayo Private HospitalTaree, New South WalesHospital (Acute)Healthe CareJun 2042.8-42.8-6.0-100.0-11.5
Mons Road Medical CentreWestmead, New South WalesMOBCastlereaghJun 2036.736.736.75.85.894.594.54.14.5
Lingard Day CentreMerewether, New South WalesMOBHealthe CareDec 2036.636.634.95.05.3100.0100.025.225.7
Hirondelle Private HospitalChatswood, New South WalesHospital (Specialty)Healthe CareJun 2027.828.227.85.55.5100.0100.021.421.9
Dubbo Private HospitalDubbo, New South WalesHospital (Acute)Healthe CareJun 2019.5-19.5-6.0-100.0-11.6
Fairfield Aged CareFairfield, New South WalesAged CareHall & PriorDec 2019.119.118.56.57.0100.0100.015.215.7
Darlington Aged CareBanora Point, New South WalesAged CareBolton ClarkeJun 2018.118.218.16.56.5100.0100.015.816.3
Clover Lea Aged CareBurwood Heights, New South WalesAged CareHall & PriorDec 2013.913.913.86.57.0100.0100.015.215.7
Grafton Aged CareSouth Grafton, New South WalesAged CareHall & PriorDec 2011.811.811.47.07.2100.0100.016.316.8
Epworth Eastern HospitalBox Hill, VictoriaHospital (Acute)Epworth FoundationJun 20209.3235.4209.35.05.0100.0100.019.920.7
South Eastern Private HospitalNoble Park, VictoriaHospital (Specialty)Healthe CareDec 2076.076.071.15.05.1100.0100.020.220.7
Epworth Eastern Medical CentreBox Hill, VictoriaMOBEpworth FoundationJun 2041.841.841.85.35.3100.074.89.49.9
Ekera Medical CentreBox Hill, VictoriaMOBImaging AssociatesJun 2032.532.532.55.55.596.297.13.94.1
Epworth RehabilitationBrighton, VictoriaHospital (Specialty)Epworth FoundationJun 2027.827.827.85.55.5100.0100.03.13.6
Belmont Private HospitalCarina Heights, QueenslandHospital (Specialty)Healthe CareDec 20117.8117.883.24.85.0100.0100.024.715.7
Palm Beach Currumbin ClinicCurrumbin, QueenslandHospital (Specialty)Healthe CareDec 2064.964.961.55.05.3100.0100.014.711.6
The Southport Private HospitalSouthport, QueenslandHospital (Acute/Specialty)RamsayDec 2051.351.349.15.05.3100.0100.024.224.7
Eden RehabilitationCooroy, QueenslandHospital (Acute/Specialty)Healthe CareJun 2029.229.629.25.55.5100.0100.016.917.4
Baycrest Aged CareHervey Bay, QueenslandAged CareBolton ClarkeJun 2019.819.719.86.56.5100.0100.015.516.0
Gold Coast Surgery CentreSouthport, QueenslandMOBSouth Coast RadiologyJun 2013.612.613.67.57.588.988.92.73.2
Tantula Rise Aged CareAlexandra Headland, QueenslandAged CareBolton ClarkeJun 2024.624.624.66.56.5100.0100.015.516.0
Hamersley Aged CareSubiaco, Western AustraliaAged CareHall & PriorDec 2013.313.313.17.07.1100.0100.015.215.7
Marian CentreWembley, Western AustraliaHospital (Specialty)Healthe CareJun 2052.852.852.95.15.1100.0100.013.614.1
Abbotsford Private HospitalWest Leederville, Western AustraliaHospital (Specialty)Healthe CareJun 2031.031.030.75.15.1100.0100.021.221.7
Rockingham Aged CareRockingham, Western AustraliaAged CareHall & PriorDec 207.27.27.17.07.1100.0100.015.215.7
Sportsmed Hospital, Clinic & Cons.Stepney, South AustraliaHospital (Acute)Sportsmed SAJun 2073.373.573.35.55.5100.0100.015.115.3
Sportsmed OfficeStepney, South AustraliaMOBSportsmed SAJun 204.95.04.96.06.0100.0100.015.115.6
North West Private HospitalBurnie, TasmaniaHospital (Acute/Specialty)Healthe CareJun 2025.1-25.1-6.0-100.0-16.4
Total Australia1,539.81,537.6
New Zealand
Ascot Hospital & ClinicsGreenlane, AucklandHospital (Acute)Ascot Hospital and Clinics LimitedJun 20117.0123.0117.04.95.199.599.317.418.0
Royston HospitalHastings, Hawkes BayHospital (Acute)Acurity Health GroupDec 2072.972.964.15.55.8100.0100.029.029.5
Wakefield HospitalNewtown, WellingtonHospital (Acute)Acurity Health GroupDec 2083.483.458.85.35.5100.0100.027.027.5
Bowen HospitalCrofton Downs, WellingtonHospital (Acute)Acurity Health GroupDec 2057.657.653.85.35.5100.0100.029.029.5
Boulcott Private HospitalLower Hutt, WellingtonHospital (Acute)Healthe CareJun 2041.344.041.35.45.6100.0100.017.518.0
Ormiston HospitalFlatbush, AucklandHospital (Acute)Ormiston Surgical and Endoscopy LtdJun 2040.543.440.55.65.6100.0100.02.73.0
Ascot CentralGreenlane, AucklandMOBFertility Associates LimitedJun 2038.040.438.05.35.480.9100.07.06.1
Apollo Health & Wellness CentreAlbany, AucklandMOBApollo Medical LimitedDec 2027.227.225.85.86.583.481.98.38.5
Grace HospitalTauranga, Bay of PlentyHospital (Acute)Norfolk Southern Cross LimitedOct 2096.596.5-5.3-100.0-30.0-
Kensington HospitalWhangarei, NorthlandHospital (Acute)Kensington Hospital LimitedJun 2020.321.720.35.55.9100.0100.025.526.0
Napier Health CentreNapier, Hawkes BayMOBHawke's Bay District Health BoardJun 2011.011.611.07.58.0100.0100.03.03.5
Ascot Carpark (right of use asset)Greenlane, AucklandHospital (Acute)Ascot Hospital and Clinics LimitedJun 207.47.27.410.710.791.199.815.115.3
Total New Zealand628.9478.0
Properties held for development79.770.7
TOTAL FAIR VALUE OF INVESTMENT PROPERTIES2,248.42,086.35.35.599.199.419.018.1
VITAL HEALTHCARE PROPERTY TRUST INTERIM REPORT 2021
FIN-11
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Latest independent valuationFair valueMarket capitalisation rateOccupancyWALE
PropertiesLocationSub sectorMajor TenantDate$M
$M
Dec-20
$M
Jun-20
%
Dec-20
%
Jun-20
%
Dec-20
%
Jun-20
Years
Dec-20
Years
Jun-20
Australia
Lingard Private HospitalMerewether, New South WalesHospital (Acute)Healthe CareDec 20174.5174.5162.75.05.3100.0100.025.225.7
Maitland Private HospitalEast Maitland, New South WalesHospital (Acute/Specialty)Healthe CareJun 20109.4109.2109.45.55.5100.0100.017.017.5
Hurstville Private HospitalHurstville, New South WalesHospital (Acute)Healthe CareDec 2081.281.279.45.86.3100.0100.021.321.8
The Hills ClinicKellyville, New South WalesHosptial (Specialty)Healthe CareDec 2049.749.748.04.85.0100.0100.026.527.0
Toronto Private HospitalToronto, New South WalesHospital (Acute/Specialty)Healthe CareJun 2044.043.944.05.85.8100.0100.022.022.5
Mayo Private HospitalTaree, New South WalesHospital (Acute)Healthe CareJun 2042.8-42.8-6.0-100.0-11.5
Mons Road Medical CentreWestmead, New South WalesMOBCastlereaghJun 2036.736.736.75.85.894.594.54.14.5
Lingard Day CentreMerewether, New South WalesMOBHealthe CareDec 2036.636.634.95.05.3100.0100.025.225.7
Hirondelle Private HospitalChatswood, New South WalesHospital (Specialty)Healthe CareJun 2027.828.227.85.55.5100.0100.021.421.9
Dubbo Private HospitalDubbo, New South WalesHospital (Acute)Healthe CareJun 2019.5-19.5-6.0-100.0-11.6
Fairfield Aged CareFairfield, New South WalesAged CareHall & PriorDec 2019.119.118.56.57.0100.0100.015.215.7
Darlington Aged CareBanora Point, New South WalesAged CareBolton ClarkeJun 2018.118.218.16.56.5100.0100.015.816.3
Clover Lea Aged CareBurwood Heights, New South WalesAged CareHall & PriorDec 2013.913.913.86.57.0100.0100.015.215.7
Grafton Aged CareSouth Grafton, New South WalesAged CareHall & PriorDec 2011.811.811.47.07.2100.0100.016.316.8
Epworth Eastern HospitalBox Hill, VictoriaHospital (Acute)Epworth FoundationJun 20209.3235.4209.35.05.0100.0100.019.920.7
South Eastern Private HospitalNoble Park, VictoriaHospital (Specialty)Healthe CareDec 2076.076.071.15.05.1100.0100.020.220.7
Epworth Eastern Medical CentreBox Hill, VictoriaMOBEpworth FoundationJun 2041.841.841.85.35.3100.074.89.49.9
Ekera Medical CentreBox Hill, VictoriaMOBImaging AssociatesJun 2032.532.532.55.55.596.297.13.94.1
Epworth RehabilitationBrighton, VictoriaHospital (Specialty)Epworth FoundationJun 2027.827.827.85.55.5100.0100.03.13.6
Belmont Private HospitalCarina Heights, QueenslandHospital (Specialty)Healthe CareDec 20117.8117.883.24.85.0100.0100.024.715.7
Palm Beach Currumbin ClinicCurrumbin, QueenslandHospital (Specialty)Healthe CareDec 2064.964.961.55.05.3100.0100.014.711.6
The Southport Private HospitalSouthport, QueenslandHospital (Acute/Specialty)RamsayDec 2051.351.349.15.05.3100.0100.024.224.7
Eden RehabilitationCooroy, QueenslandHospital (Acute/Specialty)Healthe CareJun 2029.229.629.25.55.5100.0100.016.917.4
Baycrest Aged CareHervey Bay, QueenslandAged CareBolton ClarkeJun 2019.819.719.86.56.5100.0100.015.516.0
Gold Coast Surgery CentreSouthport, QueenslandMOBSouth Coast RadiologyJun 2013.612.613.67.57.588.988.92.73.2
Tantula Rise Aged CareAlexandra Headland, QueenslandAged CareBolton ClarkeJun 2024.624.624.66.56.5100.0100.015.516.0
Hamersley Aged CareSubiaco, Western AustraliaAged CareHall & PriorDec 2013.313.313.17.07.1100.0100.015.215.7
Marian CentreWembley, Western AustraliaHospital (Specialty)Healthe CareJun 2052.852.852.95.15.1100.0100.013.614.1
Abbotsford Private HospitalWest Leederville, Western AustraliaHospital (Specialty)Healthe CareJun 2031.031.030.75.15.1100.0100.021.221.7
Rockingham Aged CareRockingham, Western AustraliaAged CareHall & PriorDec 207.27.27.17.07.1100.0100.015.215.7
Sportsmed Hospital, Clinic & Cons.Stepney, South AustraliaHospital (Acute)Sportsmed SAJun 2073.373.573.35.55.5100.0100.015.115.3
Sportsmed OfficeStepney, South AustraliaMOBSportsmed SAJun 204.95.04.96.06.0100.0100.015.115.6
North West Private HospitalBurnie, TasmaniaHospital (Acute/Specialty)Healthe CareJun 2025.1-25.1-6.0-100.0-16.4
Total Australia1,539.81,537.6
New Zealand
Ascot Hospital & ClinicsGreenlane, AucklandHospital (Acute)Ascot Hospital and Clinics LimitedJun 20117.0123.0117.04.95.199.599.317.418.0
Royston HospitalHastings, Hawkes BayHospital (Acute)Acurity Health GroupDec 2072.972.964.15.55.8100.0100.029.029.5
Wakefield HospitalNewtown, WellingtonHospital (Acute)Acurity Health GroupDec 2083.483.458.85.35.5100.0100.027.027.5
Bowen HospitalCrofton Downs, WellingtonHospital (Acute)Acurity Health GroupDec 2057.657.653.85.35.5100.0100.029.029.5
Boulcott Private HospitalLower Hutt, WellingtonHospital (Acute)Healthe CareJun 2041.344.041.35.45.6100.0100.017.518.0
Ormiston HospitalFlatbush, AucklandHospital (Acute)Ormiston Surgical and Endoscopy LtdJun 2040.543.440.55.65.6100.0100.02.73.0
Ascot CentralGreenlane, AucklandMOBFertility Associates LimitedJun 2038.040.438.05.35.480.9100.07.06.1
Apollo Health & Wellness CentreAlbany, AucklandMOBApollo Medical LimitedDec 2027.227.225.85.86.583.481.98.38.5
Grace HospitalTauranga, Bay of PlentyHospital (Acute)Norfolk Southern Cross LimitedOct 2096.596.5-5.3-100.0-30.0-
Kensington HospitalWhangarei, NorthlandHospital (Acute)Kensington Hospital LimitedJun 2020.321.720.35.55.9100.0100.025.526.0
Napier Health CentreNapier, Hawkes BayMOBHawke's Bay District Health BoardJun 2011.011.611.07.58.0100.0100.03.03.5
Ascot Carpark (right of use asset)Greenlane, AucklandHospital (Acute)Ascot Hospital and Clinics LimitedJun 207.47.27.410.710.791.199.815.115.3
Total New Zealand628.9478.0
Properties held for development79.770.7
TOTAL FAIR VALUE OF INVESTMENT PROPERTIES2,248.42,086.35.35.599.199.419.018.1
VITAL HEALTHCARE PROPERTY TRUST INTERIM REPORT 2021
FIN-12
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Recognition and measurement
Valuation process
The purpose of the valuation process is to ensure that investment properties are held at fair value. In accordance with the Group's valuation policy and
Trust Deed, external valuations are performed by independent professionally qualified valuers who hold a recognised and relevant professional
qualification and have specialised expertise in the type of investment property being valued. The valuation policy requires that a valuer may not value the
same property for more than two consecutive valuations. All valuations are reviewed by the Manager and approved by the Board. The fair value of
investment property as at 31 December 2020 was determined through independent professional valuers for approximately 40% of the portfolio and the
remainder was determined by the Manager. The Manager's valuations were informed by market data and valuation advice provided by independent
valuers, comparable transactional evidence and current period leasing activities. The valuers of properties which have been independently valued at
31 December 2020 included: Ernst & Young, Colliers International, Jones Lang LaSalle Australia, Valued Care, Absolute Value and CBRE. The
properties which have been independently valued at 31 December 2020 are disclosed above in note 6e.
The methods used for assessing the fair value of investment property are the Direct Comparison, Discounted Cash Flow (using a risk adjusted discount
rate), Capitalisation of Contract and Market Income approaches and are unchanged from the prior period. The principal assumptions in establishing the
valuation include the capitalisation/discount rates, occupancy, market rent assessments and the weighted average lease term to expiry (WALE).
COVID-19 impact
In determining the fair value of investment properties at 30 June 2020, independent professionally qualified valuers cautioned that previous market
evidence used to inform assumptions and opinions may not reflect the market conditions for comparison purposes in some markets in which the Group
operates, as conditions had changed and may change rapidly. While market evidence and transactional activity has increased in the period to
31 December 2020, valuers still advise that less certainty and a high degree of caution should be attached to independent property valuations. Directors
valuations at 31 December 2020 have been informed by this recent evidence.
Fair Value Hierarchy
As the valuation methods use assumptions and judgements that are not based on observable market data, investment properties are classified as Level 3
under the fair value hierarchy.
Generally, as:
•market rent assessments, occupancy and weighted average lease term to expiry increase, yields firm, resulting in increased fair values for investment
properties and vice versa;
•capitalisation rates and discount rates used in the valuation approaches decrease (firm), the fair value of the investment property will increase, and
vice versa.
VITAL HEALTHCARE PROPERTY TRUST INTERIM REPORT 2021
FIN-13
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CAPITAL STRUCTURE , FINANCING AND RISK MANAGEMENT
This section outlines how the Group manages its capital structure and related financing activities and presents the resultant returns delivered to unitholders
via distributions and earnings per unit.
7 UNITS ON ISSUE
Dec-20
$000s
Jun-20
$000s
Balance at the beginning of the period594,752576,300
Issue of units under Distribution Reinvestment Plan9,0686,434
Issue of units under placement and unit purchase plan157,502-
Issue of units to satisfy Manager's incentive fee6,45012,077
Issue costs of units(2,487)(59)
170,53318,452
Balance at the end of the period765,285594,752
Dec-20
$000s
Jun-20
$000s
Reconciliation of number of units
Balance at the beginning of the period453,783446,346
Issue of units under the Distribution Reinvestment Plan3,0512,517
Issue of units under placement and unit purchase plan56,250-
Units issued to satisfy Manager's incentive fee2,5654,920
Balance at the end of the period515,649453,783
Distributions related to the six month period to 31 December 2020 were 4.375 cents per unit (31 December 2019: 4.375 cents per unit), including the
second quarter distribution of 2.1875 cents per unit declared subsequent to the reporting date (31 December 2019: 2.1875 cents per unit). Refer Note
13 for details.
On 28 August 2020, 2,565,076 units were issued against the 30 June 2020 Manager’s incentive fee of $6.5m (31 December 2019: 4,919,883 were
issued against the 2019 Manager’s incentive fee of $12.1m).
On 13 October 2020, 44,642,858 units were issued for a price of $2.80 per unit under an underwritten placement and on 4 November 2020,
11,607,176 units were issued for a price of $2.80 per unit under a unit purchase plan.
8 EARNINGS PER UNIT
6 months
Dec-20
$000s
6 months
Dec-19
$000s
Profit attributable to unitholders of the Trust ($000s)91,59057,193
Weighted average number of units on issue (000's of units)479,151450,234
Basic and diluted earnings per unit (cents)19.1212.70
Recognition and measurement
Basic and diluted earnings per unit is calculated by dividing the profit attributable to unitholders of the Trust by the weighted average number of ordinary
units on issue during the reporting period.
VITAL HEALTHCARE PROPERTY TRUST INTERIM REPORT 2021
FIN-14
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
9 DISTRIBUTABLE INCOME
Statutory profit attributable to unitholders is determined in accordance with NZ GAAP and includes a number of non-cash items including fair value
movements, straight line lease accounting adjustments and amortisation of borrowing and leasing costs and incentives.
The Manager adopted, in FY2020, Adjusted Funds from Operations (AFFO) and AFFO per unit as the Group's key performance metric, representative
of the Group's underlying performance, and as a guide to informing the Group's distribution policy. AFFO adjusts statutory profit attributable to
unitholders for certain items that are non-cash, unrealised, capital in nature or are one-off or non-recurring (i.e. outside the Group's ordinary operations
or not reflective of its underlying performance). As AFFO is a non GAAP measure it may not be directly comparable with other entities.
A reconciliation of statutory profit attributable to unitholders to AFFO and AFFO per unit is outlined as follows:
6 months
Dec-20
$000s
6 months
Dec-19
$000s
Adjusted funds from operations
Operating profit before tax and other income28,22623,596
Add/(deduct):
Current tax expense(7,578)(4,977)
Current tax expense on net of gain on property disposals and lease incentive transaction3,374-
Incentive fee3,0963,209
Net strategic transaction expenses-(274)
Realised foreign exchange on borrowings (net of tax)478227
Amortisation of borrowing costs336283
Amortisation of leasing costs & tenant inducements1,100512
IFRS 16 Operating lease accounting(67)(78)
Funds from operations (FFO)28,96522,498
Add/(deduct):
Non-recurring corporate costs-323
Actual capex & leasing from continuing operations
1
(862)(847)
Adjusted funds from operations (AFFO)28,10321,974
AFFO (cpu)5.874.88
Distribution per unit (cpu)4.384.38
AFFO payout ratio75%90%
Units on issue (weighted average, 000s)479,151450,234
1 The payment to secure re-based market rent, increased leased term and other improvements in respect to Belmont Private Hospital has been excluded from AFFO as it is non-recurring and capital
in nature. Funds from operations has also excluded the corresponding taxation benefit and incentive amortisation associated with this transaction
VITAL HEALTHCARE PROPERTY TRUST INTERIM REPORT 2021
FIN-15
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
10 BORROWINGS
Dec-20
$000s
Jun-20
$000s
AUD denominated loans684,938790,037
NZD denominated loans50,00024,500
Borrowing costs(719)(1,022)
Total borrowings734,219813,515
Current liability256,520113,988
Non current liability477,699699,527
Total borrowings734,219813,515
Dec-20
$000s
Jun-20
$000s
Total borrowings at the beginning of the period813,515734,211
Drawdowns during the period176,100142,978
Repayments during the period(255,207)(83,382)
Additional facility refinancing fee(32)(409)
Facility refinancing fee amortised during the period336611
Foreign exchange movement(493)19,506
Total borrowings at the end of the period734,219813,515
10A SUMMARY OF BORROWING ARRANGEMENTS
The Group has a syndicated revolving multi-currency facility with ANZ Bank New Zealand Limited, Australia and New Zealand Banking Group Limited,
Bank of New Zealand Limited and National Australia Bank Limited. The facilities expiry profile and undrawn facility limits are as follows:
Dec-20Jun-20
TrancheA$m LimitA$m UndrawnExpiryA$m LimitA$m UndrawnExpiry
A125.0-31 Mar-21125.018.531 Mar-21
B200.0-31 Jul-22200.0-31 Jul-22
C125.021.030 Oct-23125.025.030 Oct-23
D115.0-30 Oct-21115.015.030 Oct-21
E175.0175.020 Nov-21175.091.620 Nov-21
F150.053.215 Jan-22150.01.715 Jan-22
G
35.035.0
24 Sep-21
35.035.0
24 Sep-21
A$ Facility
925.0284.2925.0186.8
NZ$ Facility50.0-30 Oct-2350.025.530 Oct-23
The syndicated revolving multi-currency facility is secured and cross collateralised over the Group's investment properties (by first ranking real property
mortgages) and other assets (via a first ranking general 'all assets' security agreement).
The syndicated revolving multi-currency facility contains both financial and non-financial covenants and undertakings that are customary for secured
facilities of this nature. The key financial covenants (with capitalised terms being defined terms in the facility agreement) are as follows:
Covenant
Dec-20
Actual
Jun-20
Actual
Banking Covenants
Loan to Value Ratio< 50%35.0%40.2%
Interest Cover> 2.00x2.582.44
Weighted Average Lease Term> 3.5 years19.018.1
Total Assets of Obligors v Total Assets of GroupNot < 90%100%100%
Total Value of unmortgaged properties v Total Assets of GroupNot > 5%3.2%1.7%
Subsequent to the reporting date Vital has agreed revised and new financing terms with existing and a new group of banks respectively. Facility limits of
A$320m and $75m have been secured from new banks, over terms of 4 and 5 years, to refinance near term facility expiries, resulting in a A$40m net
increase in facility limits. The documentation for the refinance has been agreed but is subject to final satisfaction of conditions precedent, which is
VITAL HEALTHCARE PROPERTY TRUST INTERIM REPORT 2021
FIN-16
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
expected to occur in the next few days. As a result of this refinance event, the next facility maturity date will be 20 November 2021 for a value of A
$100m.
10B FINANCE EXPENSE
The effective interest rate on the borrowings, incorporating interest rate hedges, as at the reporting date was 3.62% per annum (30 June 2020: 3.59%).
11 DERIVATIVES
11A INTEREST RATE SWAPS
Dec-20
$000s
Jun-20
$000s
Current liabilities
Interest rate derivative liabilities-(155)
Non-current liabilities
Interest rate derivative liabilities(60,473)(63,238)
Total(60,473)(63,393)
During the period the Group recognised an unrealised fair value gain of $2.9m (31 December 2019: $1.5m loss) on interest rate contracts. The Group's
interest rate swaps outstanding at the reporting date are as follows:
Dec-20
$000s
Jun-20
$000s
Nominal value of interest rate swaps - AUD440,000460,000
Average fixed interest rate3.01%3.01%
Floating rates based on AUD BBSW0.08%0.15%
Interest rate derivatives mature over the next ten years and have fixed interest rates ranging from 1.54% to 4.99% (30 June 2020: from 1.54% to 4.99%).
Recognition and measurement
Derivatives are categorised as financial instruments at fair value through profit or loss and are initially recognised and subsequently measured at fair
value derived from counterparty bank valuations. Counterparty bank valuations are tested for reasonableness by discounting the estimated future
cashflows and using market interest rates for a substitute instrument at the measurement date. The resulting gain or loss is recognised immediately in the
consolidated statement of comprehensive income as hedge accounting has not been applied.
11B FORWARD EXCHANGE CONTRACTS
Dec-20
$000s
Jun-20
$000s
Current assets
Foreign exchange derivative assets41842
Non-current assets
Foreign exchange derivative assets170-
Current liabilities
Foreign exchange derivative liabilities-(77)
Total588(35)
During the period the Group recognised an unrealised fair value gain of $0.62m (31 December 2019: $0.14m loss) on forward exchange contracts.
The Group's forward exchange contracts outstanding at the reporting date are as follows:
Dec-20
$000s
Jun-20
$000s
Nominal value of foreign exchange contracts - AUD29,84818,100
Average foreign exchange rate0.92130.9362
VITAL HEALTHCARE PROPERTY TRUST INTERIM REPORT 2021
FIN-17
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Recognition and measurement
Derivatives are categorised as financial instruments at fair value through profit or loss and are initially recognised and subsequently measured at fair
value derived from counterparty bank valuations. Counterparty bank valuations are tested for reasonableness by using a valuation model based on the
applicable forward price curves derived from observable forward prices. As hedge accounting has not been applied any resulting gain or loss is
recognised immediately in the consolidated statement of comprehensive income.
11C FAIR VALUE HIERARCHY
The following table provides an analysis of derivatives that are measured at fair value at reporting date, grouped into Levels 1 to 3 based on the degree
to which the fair value inputs are observable:
Level 1 fair value measurements are those derived from quoted prices in active markets for identical assets or liabilities.
Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or
liability, either directly (that is, as prices) or indirectly (that is, derived from prices).
Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable
market data (unobservable inputs).
The Group has determined that interest rate swaps and foreign exchange contract derivatives are Level 2 fair value measurement instruments, that are
measured using observable prices of similar instruments. There have been no reclassifications between levels in the current period (2019: nil).
12 COMMITMENTS AND CONTINGENCIES
Other than the contractual obligations disclosed in Note 13 and Note 12A, there are no other commitments and contingencies in effect at the reporting
date (31 December 2019: nil).
12A NZSX BANK BOND
As a condition of listing on the New Zealand Stock Exchange (NZSX), NZSX requires all issuers to provide a bank bond to NZSX under NZSX/DX
Listing Rule 1.23.2. The bank bond required by the Trust for listing on the NZSX is $50,000.
OTHER NOTES
13 SUBSEQUENT EVENTS
On 25 February 2021 a final cash distribution of 2.1875 cents per unit was announced by the Trust. The Record Date for the final distribution is 11 March
2021, and payment is scheduled to unitholders on 25 March 2021. Imputation credits of 0.8130 cents per unit will be attached to the distribution.
On 2 February 2021 the Group settled a contract to purchase a strategic development site at 17-23 Nelson Rd, Box Hill, Melbourne for A$29m
excluding transaction costs.
Subsequent to the reporting date Vital has agreed revised and new financing terms with existing and a new group of banks respectively. Facility limits of
A$320m and $75m have been secured from new banks, over terms of 4 and 5 years, to refinance near term facility expiries, resulting in a A$40m net
increase in facility limits and the pro-forma weighted average facility term to maturity increasing from 1.3 to 2.9 years. The documentation for the
refinance has been agreed but is subject to final satisfaction of conditions precedent, which is expected to occur in the next few days. As a result of this
refinance event, the next facility maturity date will be 20 November 2021 for a value of A$100m.
VITAL HEALTHCARE PROPERTY TRUST INTERIM REPORT 2021
FIN-18
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
14 RELATED PARTY TRANSACTIONS
The Manager
Vital is managed by NorthWest Healthcare Properties Management Limited (the "Manager"), a wholly owned subsidiary of NWI Healthcare Properties
LP (NWIHLP).
The ultimate parent of NWIHLP is Toronto listed NorthWest Healthcare Properties Real Estate Investment Trust (NW REIT) that, as at reporting date,
holds a 25.8% (31 December 2019:24.8%) interest in Vital. NW REIT and its controlled entities (including the Manager) are considered related parties
to Vital and its controlled entities by virtue of common ownership and/or directorships.
Other related parties by virtue of common ownership and/or ownership and/or directorship to the Manager of Vital include Australian Properties
Limited and NorthWest Healthcare Australian Property Limited.
Remuneration of the Manager
Vital pays fees to the Manager in accordance with the Trust Deed. The aggregate of Base Fees, Incentive Fees and Activity Fees is capped at 1.75% per
annum of Vital's gross asset value (GAV) as at the end of a financial year.
Fee arrangements
In accordance with the Trust Deed, the fee arrangements are as follows:
Base Fee
The Base Fee structure is as follows:
•65 bps per annum up to $1bn of GAV:
•55 bps per annum from $1bn to $2bn of GAV;
•45 bps per annum from $2bn to $3bn of GAV; and
•40 bps per annum over $3bn of GAV.
Incentive Fee
The Incentive Fee is determined as 10% of the average annual increase in Vital’s Net Tangible Assets (NTA) (as defined by the Trust Deed) over the
respective financial year and the two preceding financial years, with payment being made by way of subscribing for new units. The incentive fee
calculations are also subject to a ‘three year high watermark”, such that the Manager will not be paid an Incentive Fee in a year where NTA grows if it is
still below where it was on the last business day of any of the past three financial years.
Activity Fees
The Activity Fee structure is as follows:
a. Leases or licences
Vital pays the Manager leasing or licence fees where the Manager has negotiated leases or licences. The fees are charged at 11% of the aggregate
annual rental for terms less than 3 years, 12% of the aggregate annual rental for terms of 3 years, and 12% plus an additional 1% for each year or part
thereof for terms greater than three years (to a maximum of 20%), subject to a minimum fee of $2,500.
Lease or licence renewals are charged at 50% of a new lease or licence fee.
Leasing or licence fees are capitalised to the respective investment or property in the consolidated statement of financial position and amortised over the
term of the lease.
b. Property management
Vital pays the Manager property management fees where the Manager acts as the property manager. These fees are charged at 1% - 2% of gross
income depending on the number of tenants at the property and may be recovered from tenants if permitted under lease agreements.
Property management fees, net of recoveries from tenants, are expensed through the consolidated statement of comprehensive income in the year in
which they arise.
c. Facilities management
Vital pays the Manager a facilities management fee where the Manager acts as a property facilities manager based on the market rate (referenced to a
reputable and high-quality third party service provider) for similar services at similar properties. This fee may be recovered from tenants if permitted under
lease agreements.
Facilities management fees are expensed, net of recoveries from tenants, through the consolidated statement of comprehensive income in the year in
which they arise.
d. Project management
Vital pays project management fees to the Manager for managing capital expenditure projects where the purpose of the project is to upgrade, repair or
otherwise extend the life of the property, including via the replacement or repair of major plant and equipment, structural items and building envelope.
VITAL HEALTHCARE PROPERTY TRUST INTERIM REPORT 2021
FIN-19
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Project management fees for projects with a budget of between $0.2m and $2.5m are 2% of the committed spend where the Manager is the project
lead and 1% of committed spend where the Manager has an oversight role, increasing to 4% and 2% respectively for projects with a budget greater
than $2.5m.
Project management fees are capitalised to the respective investment or property in the consolidated statement of financial position.
Additional Costs
The Additional Costs structure is as follows:
a. Acquisitions
Vital pays fees to the Manager for managing the due diligence, financing, legal aspects and settlement of the purchase of an investment or property
instead of, or alongside, a third party agent. These fees are charged at 1.5% of the capitalised cost of the relevant investment or property, being the
contracted price payable, excluding any deductions netted off the settlement price (such as rates), together with other related capitalised acquisition
costs.
Acquisition fees are capitalised to the respective investment or property in the consolidated statement of financial position.
b. Disposals
Vital pays fees to the Manager for managing the due diligence, legal aspects and settlement of the sale of an investment or property instead of, or
alongside, a third party agent. These fees are charged at 1% of the contracted sale price of the relevant investment or property actually received,
provided that, if a third party agent has been engaged to provide services for the disposal, then the fee payable to the Manager will be net of the third
party agent’s costs and commissions.
Disposal fees are expensed through the consolidated statement of comprehensive income in the year in which they arise.
c. Development Management
Vital pays fees where the Manager acts as a development manager on Vital developments. These fees are charged at 4% of the committed spend
(excluding land) approved by the Board of the Manager provided that, if a third party agent has been engaged to provide development management
services, then the fee payable to the Manager will be reduced by the non-rentalisable third party costs paid.
Development management fees are capitalised to the respective property in the consolidated statement of financial position.
Other amounts
In accordance with the Trust Deed, the Manager is permitted to engage related parties to provide services to the Trust. The provision of these services is
subject to compliance with the restrictions on related party transactions in the Financial Markets Conduct Act 2013.
VITAL HEALTHCARE PROPERTY TRUST INTERIM REPORT 2021
FIN-20
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Transactions with related parties
Amounts charged by the Manager and related parties and owing are as follows:
31 December 2020
$000s
31 December 2019
$000s
30 June
2020
Statement of
Comprehensive
Income
Statement of
Financial
PositionTotal
Amounts
Owing/
(Receivable)
Statement of
Comprehensive
Income
Statement of
Financial
PositionTotal
Amounts
Owing/
(Receivable)
Base fee6,324-6,324-6,271-6,271-
Incentive Fee
1
3,096-3,0963,1213,209-3,2096,475
Activity Fees:
Leasing/licensing
2
321,0851,11727194766346
Property management
3
751-751216297-297194
Facilities management
3
--------
Project management--------
AFSL fee
492-492-437-437-
10,6951,08511,7803,36410,2334710,2807,015
Additional Costs:
Acquisitions-1,5351,535--33-
Disposals
4
1,003-1,0031,003----
Development management
5
-1,7331,7332,022-3,4603,460525
1,0033,2684,2713,025-3,4633,463525
Other Amounts:
Reimbursement of third party
expenses:
Other expenses462-462-17-17-
Amounts paid to Independent
Directors:
6
Andrew Evans45-45-15-15-
Graham Stuart
58-58-17-17-
565-565-49-49-
12,2634,35316,6166,38910,2823,51013,7927,540
1 Manager's incentive fee outstanding at 31 December 2020 of $3.1m (Jun20: $6.5m) is payable to NorthWest Healthcare Properties Management Limited
2 Amounts outstanding at 31 December 2020 are: NorthWest Healthcare Properties Management Limited $0.02m (Jun20: $0.1m); NorthWest Healthcare Australian Property Limited $0.01m
(Jun20: $0.2m)
3 Property Management and Facilities Management fees, exclusive of recoveries from tenants, incurred by the Trust totalled $0.8m and nil respectively for the six months ended 31 December 2020
(Dec19: $0.3m and nil respectively). Amounts outstanding at 31 December 2020 are: NorthWest Healthcare Properties Management Limited $0.1m (Jun20: $0.1m); NorthWest Healthcare
Australian Property Limited $0.1m (Jun20: $0.1m)
4 Amounts outstanding at 31 December 2020 are: NorthWest Healthcare Australian Property Limited $1.0m (Jun20: nil)
5 Amounts outstanding at 31 December 2020 are: NorthWest Healthcare Properties Management Limited $0.2m (Jun20: $0.1m); NorthWest Healthcare Australian Property Limited $1.8m (Jun20:
$0.4m)
6 Remuneration of Independent Directors in accordance with the Trust Deed
VITAL HEALTHCARE PROPERTY TRUST INTERIM REPORT 2021
FIN-21
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Other Related Parties
The following table summarises the transactions that occurred during the reporting period or remain outstanding at the reporting date:
6 months
Dec-20
$000s
6 months
Dec-19
$000s
During the period there have been transactions between the Trust and NWHAAT
Related party advance/(repayment)-(84,495)
Interest income-267
On 21 August 2020 the Group acquired the remaining 50% share in Playford Health Hub in South Australia from the NorthWest Australia Real Estate
Investment Trust for A$7.4m excluding transaction costs.
The related party advance provided by the Group to NWH Australia AssetCo Pty Limited as trustee of NWH Australia Asset Trust (NWHAAT), a wholly
owned subsidiary of NWH Healthcare Properties LP, was fully repaid on 2 August 2019.
36
INDEPENDENT AUDITOR’S REVIEW REPORT
TO THE UNITHOLDERS OF VITAL HEALTHCARE PROPERTY TRUST
Conclusion
We have reviewed the condensed consolidated interim financial statements (‘interim financial statements’) of Vital
Healthcare Property Trust and its subsidiaries (‘the Group’ or ‘the Trust’) which comprise the consolidated statement of
financial position as at 31 December 2020, and the consolidated statement of comprehensive income, consolidated
statement of changes in equity and consolidated statement of cash flows for the six month period ended on that date,
and a summary of significant accounting policies and other explanatory information on pages FIN 1 to FIN 21.
Based on our review, nothing has come to our attention that causes us to believe that the interim financial statements
of the Trust do not present fairly, in all material respects, the financial position of the Trust as at 31 December 2020 and
its financial performance and cash flows for the period ended on that date in accordance with NZ IAS 34 Interim
Financial Reporting and IAS 34 Interim Financial Reporting.
Basis for Conclusion
We conducted our review in accordance with NZ SRE 2410 (Revised) Review of Financial Statements Performed by the
Independent Auditor of the Entity (‘NZ SRE 2410 (Revised)’). Our responsibilities are further described in the Auditor’s
Responsibilities for the Review of the Interim Financial Statements section of our report.
We are independent of the Group in accordance with the relevant ethical requirements in New Zealand relating to the
audit of the annual financial statements, and we have fulfilled our other ethical responsibilities in accordance with these
requirements.
Other than in our capacity as auditor, we have no relationship with or interests in the Group.
Emphasis of Matter – valuation uncertainty related to investment properties
We draw your attention to note 2(e) and note 6E in the condensed consolidated interim financial statements, where the
Trust discloses information about the ongoing impact of COVID-19 on the valuation of investment properties.
Independent registered valuers determined the fair value of approximately 40 percent of the investment properties at
31 December 2020, and the Directors determined the fair value of the remaining properties. The independent registered
valuers cautioned in their reports that “less certainty” and “a higher degree of caution” should be attached to the
valuations than would normally be the case. Our opinion is not modified in respect of this matter.
Directors’ responsibilities for the interim financial statements
The Board of Directors of the Manager is responsible on behalf of the Trust for the preparation and fair presentation of
the interim financial statements in accordance with NZ IAS 34 Interim Financial Reporting and IAS 34 Interim Financial
Reporting and for such internal control as the Board of Directors of the Manager determines is necessary to enable the
preparation and fair presentation of the interim financial statements that are free from material misstatement, whether
due to fraud or error.
Auditor’s responsibilities for the review of the interim financial statements
Our responsibility is to express a conclusion on the interim financial statements based on our review. NZ SRE 2410
(Revised) requires us to conclude whether anything has come to our attention that causes us to believe that the interim
financial statements, taken as a whole, are not prepared, in all material respects, in accordance with NZ IAS 34 Interim
Financial Reporting and IAS 34 Interim Financial Reporting.
37
A review of the interim financial statements in accordance with NZ SRE 2410 (Revised) is a limited assurance
engagement. We perform procedures, primarily consisting of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other review procedures. The procedures performed in a
review are substantially less than those performed in an audit conducted in accordance with International Standards on
Auditing (New Zealand) and consequently do not enable us to obtain assurance that we might identify in an audit.
Accordingly we do not express an audit opinion on the interim financial statements.
Restriction on use
This report is made solely to the Trust’s unitholders, as a body. Our review has been undertaken so that we might state
to the Trust’s unitholders those matters we are required to state to them in a review report and for no other purpose.
To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Trust’s
unitholders as a body, for our engagement, for this report, or for the conclusions we have formed.
Silvio Bruinsma
Partner
for Deloitte Limited
Wellington, New Zealand
25 February 2021
VITAL HEALTHCARE PROPERTY TRUST INTERIM REPORT 2021
38
39
DIRECTORY
MANAGER
NorthWest Healthcare Properties Management Limited
PO Box 6945, Wellesley Street
Auckland 1141
Telephone: 0800 225 264 (NZ freephone); +64 9 973 7300
Email: enquiry@vhpt.co.nz
NorthWest Healthcare Properties Management - Australia
Level 45, Rialto South Tower, 525 Collins Street
Melbourne 3000
BOARD OF THE MANAGER
Graham Stuart - Independent Chairman and Member of the Audit
Committee
Bernard Crotty - Director and Member of the Audit Committee
Paul Dalla Lana - Director and Member of the Audit Committee
Andrew Evans - Independent Diretor and Member of the Audit Committee
Dr Michael Stanford - Independent Director and Chair of the Audit
Committee
Aaron Hockly - Fund Manager
Vanessa Flax - Regional General Counsel A/NZ and Company
Secretary
Michael Groth - Chief Financial Officer
AUDITOR
Deloitte Limited
Deloitte Centre
80 Queen Street
Auckland 1010
Private Bag 115-033
Auckland 1140
Telephone: +64 9 303 0700
Facsimile: +64 9 303 0701
LEGAL ADVISERS TO THE TRUST AND THE MANAGER
Bell Gully
Vero Centre
48 Shortland Street
PO Box 4199
Auckland 1140
Telephone: +64 9 916 8800
Facsimile: +64 9 916 8801
Ashurst Australia
Level 26
181 William Street
GPO Box 4958
Melbourne, Victoria 3001
Australia
Telephone: +61 3 9679 3000
Facsimile: +61 3 9679 3111
SUPERVISOR
Trustees Executors Limited
Level 7, 51 Shortland Street
Auckland 1010
PO Box 4197
Auckland 1140
Telephone: +64 9 308 7100
Facsimile: +64 9 308 7101
BANKERS TO THE TRUST
ANZ Bank New Zealand Limited
ANZ Centre
23-29 Albert Street
Auckland 1010
Australia and New Zealand Banking Group Limited
2/100 Queen Street
Melbourne, Victoria 3000
Australia
Bank of New Zealand
Deloitte Centre
80 Queen Street
Auckland 1010
UNIT REGISTRAR
Computershare Investor Services Limited
159 Hustmere Road
Takapuna, Auckland 0622
Private Bag 92119
Auckland 1142
New Zealand
vital@computershare.co.nz
Telephone: +64 9 488 8777
Facsimile: +64 9 488 8787
This document is printed on an environmentally responsible paper,
produced using Elemental Chlorine Free (ECF), FSC(R) certified, Mixed
Source pulp from Responsible Sources, and manufactured under the strict
ISO14001 Environmental Management System.
---
VITAL HEALTHCARE PROPERTY TRUST
Managed by NorthWest Healthcare
Properties Management Limited
vhpt.co.nz
MARKET RELEASE
Managed by NorthWest Healthcare
Properties Management Ltd
Results for announcement to the market
Name of issuerVital Healthcare Property Trust
Reporting Period6 months to 31 December 2020
Previous Reporting Period 6 months to 31 December 2019
CurrencyNZD
Amount (000s)Percentage change
Revenue from continuing
operations$54,1608.54%
Total revenue$54,1608.54%
Net profit/(loss) from continuing
operations$91,59060.14%
Total net profit/(loss)$91,59060.14%
Interim/Final Dividend
Amount per Quoted Equity
Security$0.02187500
Imputed amount per Quoted
Equity Security$0.00812974
Record Date11 March 2021
Distribution Payment Date25 March 2021
Current periodPrior comparable period
Net tangible assets per Quoted
Equity Security$2.55$2.36
A brief explanation of any of the
figures above necessary to enable
the figures to be understoodRefer announcement
Authority for this announcement
Name of person authorised to
make this announcementMichael Groth
Contact person for this
announcementMichael Groth
Contact phone number+61 409 936 104
Contact email addressMichael.Groth@nwhreit.com
Date of release through MAP25 February 2021
Interim financial statements accompany this announcement
RESULTS ANNOUNCEMENT
---
FY21 HALF YEAR RESULTS
PRESENTATION
25 February 2021
Managed by NorthWest Healthcare Properties Management Limited
PRESENTED BY:
CONTENTS
Page
•Overview 3
•HY21 highlights7
•Portfolio 13
•Developments18
•Financial results & capital management25
•Outlook & guidance31
•Appendices34
2
VITAL HEALTHCARE PROPERTY TRUST | HALF YEAR RESULTS 2021
Aaron Hockly
Fund Manager
Richard Roos
Exec. Director, Portfolio
Michael Groth
Chief Financial Officer
Chris Adams
Exec. Director, Projects
All amounts are in NZD unless otherwise shown
OVERVIEW
3
VITAL HEALTHCARE PROPERTY TRUST
OVERVIEW OF VITAL
VITAL HEALTHCARE PROPERTY TRUST | HALF YEAR RESULTS 2021
4
VITAL IS THE FOURTH LARGEST LISTED PROPERTY VEHICLE AND THE ONLYSPECIALIST HEALTHCARE LANDLORD ON THE NZX
Vital Healthcare Property Trust (Vital) is:
✓the owner of a $2.25 billion healthcare
property portfolio in New Zealand (28% of
assets) and Australia (72%);
✓the only NZX-listed specialist healthcare
landlord (NZX ticker: VHP) with no ASX-
listed equivalent;
✓externally managed by a subsidiary of
Toronto-listed, global healthcare real estate
owner and manager, NorthWest Healthcare
Properties REIT (TSX ticker: NWH);
✓the fourth-largest NZX-listed property
vehicle; and
✓targeting 2-3% AFFO and DPU growth per
annum over the medium term, whilst
retaining a conservative pay-out ratio
*Excludes strategic assets
Figures may not sum due to rounding
42* properties (A/NZ)
4
2
5
12
7
11
$1.61bn
$643m
$2.25bn
12* Properties (NZ)
30* properties (AUS)
AUSTRALIA
NEW ZEALAND
12
TASMANIA
VITAL STRUCTURE
5
VITAL IS A UNIT TRUST LISTED ON THE NZX, EXTERNALLY MANAGED BY A LEADING GLOBAL HEALTHCARE REAL ESTATE INVESTOR
AND MANAGER
VITAL HEALTHCARE PROPERTY TRUST | HALF YEAR RESULTS 2021
Only listed specialist owner of healthcare
real estate in Australasia
Over 40 healthcare real estate
professionals in Australia and New
Zealand and 200+ globally
New Zealand’s largest specialist owner of
healthcare real estate
VITAL’S STRATEGY
VITAL HEALTHCARE PROPERTY TRUST | HALF YEAR RESULTS 2021
6
VITAL INVESTS IN HEALTHCARE ECOSYSTEMS IN NEW ZEALAND & AUSTRALIA
Portfolio Allocation*
Actual: 83%
Target: 50%-70%
VITAL
Earnings growth
Portfolio designed to support AFFO
target growth of 2-3%/unit per annum
Quality
Continuously improve portfolio quality
Aiming to maintain or improve (lower)
average building age
Location
Australia or New Zealand
Focus on metropolitan assets with
growing populations
Acuity
Higher acuity
Investments in core health ecosystem
Regulated and precinct offerings preferred
Investment characteristics
Screened by a range of metrics including
IRRs, impact on overall portfolio, earnings
growth and management capability
Focus on high quality, well capitalised
operators
Sub-Sector
Reduction in hospital allocation indicates an
expectation that future growth opportunities
are more likely to come from the other sub-
sectors, rather than a desire to reduce
exposure.
Hospitals
Aged Care
Outpatient Facilities
Life Sciences /
Research
Actual: 6%
Target: 10%-20%
Actual: 11%
Target: 10%-20%
Actual: 0%
Target 5%-10%
*
Based on total portfolio value.
7
VITAL HEALTHCARE PROPERTY TRUST
HY21 HIGHLIGHTS
HY21 HIGHLIGHTS -TRANSACTIONS
VITAL HEALTHCARE PROPERTY TRUST | HALF YEAR RESULTS 2021
8
TRANSACTIONS UNDERTAKEN TO GROW FUTURE EARNINGS & SUPPORT FUTUREGROWTH
property transactions
($135m acquisitions & $101m
disposals)
$236m
equity raised
(2 x DRP, $125m placement &
$32.5m UPP)
debt extended in expanded
banking syndicate
(post-balance date)
A$390m
$171m
HY21 HIGHLIGHTS –TRANSACTIONS (cont’d)
9
RECYCLED ~NZ$100M FROM REGIONAL ASSET SALES TO FUND ACQUISITION OF GRACE HOSPITAL IN TAURANGA, NZ
VITAL HEALTHCARE PROPERTY TRUST | HALF YEAR RESULTS 2021
Up to $50m
potential expansion /
development cost
~2,500+
additional GFA (sqm)
~$100m
portfolio sale price
14.7%
premium achieved on
30 June book value
Disposal Summary
Future Development Potential
$95m
acquisition price
5.25%
1
initial yield
30yr
WALE
Acquisition Summary
Grace Hospital, Tauranga (NZ)
1
Based on Year 2 stabilisedrent
$5m
stabilisednet rent
(year 2)
HY21 HIGHLIGHTS -PORTFOLIO
VITAL HEALTHCARE PROPERTY TRUST | HALF YEAR RESULTS 2021
10
ENHANCED PORTFOLIO METRICS AND EXPANDED DEVELOPMENT PIPELINE (COMMITTED AND POTENTIAL)
increase in underlying
income (ex. FX)
7.5%
new developments
committed
>$60m
new or extended
leasing
25,000sqm
development
potential
increased WALE
18.119.0yrs
growth from
rent reviews
2.1%
$560m+
HY21 HIGHLIGHTS -CAPITAL
VITAL HEALTHCARE PROPERTY TRUST | HALF YEAR RESULTS 2021
11
DELIVERING FOR UNITHOLDERS WITH A STRENGTHENED BALANCE SHEET
increase in NTA
per unit since 30 June 2020
7.1%
total return (12m ended 31 Dec 2020).
15.4% outperformance versus
benchmark
19.8%
balance sheet gearing;
significantly reduced from
38.7% at30 June 2020
32.4%
REAL ESTATE RETURNS
12
HEALTHCARE REAL ESTATE CONTINUES TO PERFORM STRONGLY
Vital has outperformed all three core real estate asset classes in Australia over preceding 5 year period.
Returns by real estate asset class in Australia versus Vital’s real estate level returns (non-compounding) year ended 31 December 2020
Source: MSCI & Vital, 2020
Returns shown are on a nominal, unlevered “all asset” basis (inclusive of development and transaction activity). Vital returns include Australian and New Zealand Portfolio
VITAL HEALTHCARE PROPERTY TRUST | HALF YEAR RESULTS 2021
Capital
Growth
Income
Growth
Vital Portfolio Returns
Office (Aus)Retail (Aus)
Industrial (Aus)
Total Return
4.9%
31.2%
62.5%
-9.9%
-1.1%
19.9%
12.0%
39.1%
63.9%
9.0%
33.1%
81.8%
-20%
0%
20%
40%
60%
80%
100%
1yr3yr5yr1yr3yr5yr1yr3yr5yr1yr3yr5yr
% Return
13
PORTFOLIO
VITAL HEALTHCARE PROPERTY TRUST
PORTFOLIO OVERVIEW
14
ALL FOUR KEY ASSET GROUPINGS PERFORMING WELL
Private hospitals -Australia
16 hospitals (acute and specialty
–mental health, rehabilitation)
Four hospital operators
58% of portfolio value; 54% of rent
W ALE: 20.4 years
Private hospitals -New Zealand
9 hospitals (all acute)
Six hospital operators
25% of portfolio value; 25% of rent
W ALE: 22.3 years
Out-patient facilities / medical
office buildings –Australia and NZ
9 assets (Australia: 6, NZ: 3)
Multiple tenants
11% of portfolio value; 12% of rent
W ALE: 8.9 years
Aged care -Australia
8 facilities (all in Australia)
Two operators
6% of portfolio value; 8% of rent
W ALE: 15.6 years
Subsector diversity (by value)
VITAL HEALTHCARE PROPERTY TRUST | HALF YEAR RESULTS 2021
Largest single
tenant exposure
reduced from
48% to 41%
Tenant diversity (by rent)
NETPROPERTY INCOME
Leasing activity -
Belmont Private Hospital:
10yr lease extension (25yr W ALE)
Currumbin Clinic:
4.4yr extension (15yr W ALE)
Dubbo Private Hospital*:
4.5yr lease extension (15yr W ALE)
Mayo Private Hospital*:
4.6yr lease extension (15yr W ALE)
Rent reviews –completed at 2.1%
Acquisitions –income from CY20 acquisitions
Development income –rentalisation of capital expenditure
and holding income from strategic site acquisitions
COVID-19 Abatements –includes lease extensions and
other portfolio enhancing initiatives (includes provision for
doubtful debts)
VITAL HEALTHCARE PROPERTY TRUST | HALF YEAR RESULTS 2021
15
8.5% NPI GROWTH AIDED BY ACQUISITIONS, DEVELOPMENTS AND RENT REVIEWS
(NZ$000’s)
8.5% growth (incl. FX) /
7.5% (excl. FX)
Net Property Income Bridge
*Leases were extended prior to subsequent disposal of the assets in December 2020.
MOVEMENT IN INVESTMENT PROPERTY
16
WELL-LEASED HEALTHCARE ASSETS CONTINUE TO EXPERIENCE CAP RATE COMPRESSION
Investment Property Bridge
Key HY21 considerations:
~40% of Vital’s portfolio independently
valued (by number of properties) at31
December 2020
20 basis points cap rate compression
since 30 June 2020; a ~$55m gain
5
$12.9m gross profit realisedon
disposals
4
(NZ millions)
NZ AssetsAU Assets
VITAL HEALTHCARE PROPERTY TRUST | HALF YEAR RESULTS 2021
1
$135m of acquisitions, including $95m for Grace Private Hospital, remaining 50% acquisition of Playford Health Hub and associated acquisitions costs
2
~$55m gain from cap rate compression and the balance from income growth and development margin
3
Period end NZD/AUD exchange rate increased to 0.9356 from 0.9345 at30 June 2020
4
Compared to 30 June 2020 book value. Excludes ~$1.4m of disposal costs
5
Remaining ~$6m gain from income growth and development margins, and is partly offset by non-recoverable expenses
*Includes development expenditure and capitalised interest costs
1
3
2
17
VITAL HEALTHCARE PROPERTY TRUST | HALF YEAR RESULTS 2021
VITAL ACQUIRED A PREMIUM NEW ZEALAND HOSPITAL FOR $95M
ACQUISITION OF GRACE HOSPITAL, NZ
Up to $50m
potential expansion /
development cost
~2,500+
additional GFA
(sqm)
Future Development Summary
$95m
acquisition price
Dec 2020
final settlement
39,571
site area (sqm)
Acquisition Summary
30yr
WALE
5.25%
1
Initial yield
$5m
stabilisedyear 2
net rent
51
inpatient beds
11
operating theatres
Quality Tenant
JV between 1
st
& 3
rd
largest
private hospital operators in NZ
(Southern Cross & Evolution)
1
Based on Year 2 stabilisedrent
18
VITAL HEALTHCARE PROPERTY TRUST
DEVELOPMENTS
19
DEVELOPMENT STRATEGY & VALUE-ADD
VITAL HEALTHCARE PROPERTY TRUST | HALF YEAR RESULTS 2021
Developments are key for:
✓Earnings & capital
growth
✓Improving the
portfolio
NorthWest has specialist
healthcare development
skills in New Zealand and
Australia. Key people have
20+ years experience
individually; unmatched in
the sector
Pipeline
$356m of committed developments; $225m of spend
remaining
~$560m of potential long-term development
opportunities identified (subject to business cases,
due diligence and approvals)
Expected Financial Impacts
Committed development pipeline delivering 6.1%
yield on cost
1
Pipeline (committed and potential) to be delivered on
a staged basis over the medium term
Both earnings/NTA accretive and portfolio enhancing
TARGETING 10-15% OF THE PORTFOLIO VALUE UNDER DEVELOPMENT
1
Gross yield
20
VITAL HEALTHCARE PROPERTY TRUST | HALF YEAR RESULTS 2021
c.A$350m
Potential expansion /
development cost
40,000+
Potential GFA (sqm)
A$29m
acquisition Price
Feb 2021
settlement
5,330
Site area (sqm)
~7yrs
Holding income
Acquisition Summary
Future Development Summary
Future development may include, integrated hospital / medical
uses, aged care, retirement, life sciences / research and office
Acquisition adjoins existing Vital owned, Epworth Eastern
Private Hospital and Medical Centre
Epworth Eastern
Private Hospital &
Medical Centre
Box Hill Public Hospital
Ekera Medical
Centre & 120
Thames St
Box Hill Institute
Box Hill Institute
VITAL HAS SETTLED A STRATEGIC LAND HOLDING ADJOINING EXISTING PREMIUM ASSETS FOR FUTURE PRECINCT EXPANSION
1
ACQUISITION OF 17-23 NELSON RD, BOX HILL (VIC)
1
Settled in February 2021. Therefore, not fully included within Vital HY21 results.
PLAYFORD HEALTH HUB
21
STAGED HEALTH PRECINCT UNDER DEVELOPMENT
VITAL HEALTHCARE PROPERTY TRUST | HALF YEAR RESULTS 2021
LYELL MCEWIN
PUBLIC HOSPITAL
PLAYFORD
HEALTH HUB
Precinct Overview
Overview of Stages 1-3
A$48m
S3
S2
S1
Medical Centre (Stage 2)
total projected cost
of stages 1 & 2
>7,000
total projected GFA
(sqm) of stages 1 & 2
Stage 1 (S1): Retail precinct
& multi-deck car park.
Construction commenced.
Stage 2 (S2): Specialist
Medical Centre. Planning
approval received.
Stage 3 (S3): Private
Hospital. Concept planning in
progress.
450
car parking
bays provided
22
VITAL HEALTHCARE PROPERTY TRUST | HALF YEAR RESULTS 2021
A$19m
project cost
Jan-21
construction
commenced
21yr
WALE
Development Summary
SPECIALIST MENTAL HEALTH AND ADDICTION TREATMENT FACILITY LOCATED 3KM FROM PERTH'S CBD
ABBOTSFORD PRIVATE HOSPITAL, WA
47
additional
inpatient beds
6.25%
forecast project
yield on cost
early-22
forecast practical
completion
23
VITAL HEALTHCARE PROPERTY TRUST | HALF YEAR RESULTS 2021
A$23m
project cost
early-21
construction
commencement
25yr
WALE
Development Summary
EXPANSION AND UPGRADE OF HOSPITAL ADJACENT TO BRISBANE’S CBD
BELMONT PRIVATE HOSPITAL, QLD
35
Additional
inpatient beds
6.00%
forecast project
yield on cost
mid-22
forecast practical
completion
13
additional
consulting suites
70
additional car
parking bays
Description of Works
Development
Cost
Spend to
Date
Cost to
Complete
Forecast
Income Return
Forecast
Completion Date
Epworth Eastern (VIC)
New 14 storey tower incorporating 5 operating theatres,
60 beds, 7 levels of consulting and refurbishment of the
existing Medical Centre
A$126.2
A$55.0
A$71.2
5.95%
End-21
South Eastern Private (VIC)
New Day Oncology Centre, new 10 bed ward and
conversion of shared rooms to singles
A$9.9
A$8.2
A$1.7
6.00%
Early 21
Eden Rehabilitation (QLD)
New 26 bed mental health ward, Rehab Unit and
refurbishment of existing wards
A$12.4
A$1.3
A$11.1
6.00%
Mid-22
Abbotsford Private (WA)
47 Beds, parking, therapy rooms and admin - Planning
Approved
A$18.6
A$0.1
A$18.6
6.25%
Early 22
Belmont Private (QLD)
48 New Inpatient Beds, 13 private practice consulting
suites and 70 new car parks
A$22.6
A$0.1
A$22.5
6.00%
Mid-22
Playford Health Hub Stage 1
(SA)
Multi-deck Car Park (circa 450 spaces) & Ground Floor
retail
A$20.7
A$1.3
A$19.4
6.77%
Late-21
Total Australian Projects
NZ$210.5
NZ$66.0
NZ$144.5
6.1%
Wakefield Hospital (Wellington)
Staged demolition and redevelopment of entire hospital
NZ$112.8
NZ$48.9
NZ$63.8
6.03%
Staged 21-23
Royston Hospital (Hastings)
New CSSD, Reception upgrade, Two theatre shells, One
theatre fitout and general refurbishment
NZ$10.7
NZ$9.5
NZ$1.2
6.29%
Early 21
Royston DSU Project (Hastings)
New standalone two theatre Day Surgery Unit
NZ$8.1
NZ$2.8
NZ$5.3
6.25%
Late-21
Total New Zealand Projects
NZ$131.5
NZ$61.2
NZ$70.3
6.1%
Total Projects in NZD
NZ$356.5
NZ$131.8
NZ$224.7
6.1%
All values shown in $m
COMMITTED DEVELOPMENTS
VITAL HEALTHCARE PROPERTY TRUST | HALF YEAR RESULTS 2021
24
DEVELOPMENTS ENHANCE EARNINGS GROWTH AND IMPROVE ASSET QUALITY
Structure complete to Level 8 and
remains on target for end-2021
completion.
Project resumed following hold for
Covid-19. Revised completion mid-
2022.
Practical completion reached for main
works in January 2021; on
programmeand budget.
Stage 1 forecast for completion mid-
2021. Scope increased to include
additional beds, catheter lab shell and
specialist tenancy fitouts.
Project yields represent a
~500bps premium over the
New Zealand and Australian
10-year Government bond
yields.
Main hospital works completed in
February 2021.
1
Gross project yield
Period end NZD/AUD exchange rate of 0.9356 adopted
1
FINANCIAL RESULTS & CAPITAL MANAGEMENT
25
VITAL HEALTHCARE PROPERTY TRUST
FINANCIAL PERFORMANCE
26
PROPERTY EARNINGS GROWTH HAS SUPPORTED AFFO GROWTH
Contribution from structured rent
reviews, acquisitions and
development rents
VITAL HEALTHCARE PROPERTY TRUST | HALF YEAR RESULTS 2021
$61m of revaluation gains during
HY21, in addition to $12.9m
gross profit realisedon disposals
(pre-costs)
ActualActual($)(%)
HY2021HY2020changechange
Net property income54,16049,8984,2628.5%
Corporate expenses(2,232)(2,407)1757.3%
Management fees(9,421)(9,480)590.6%
Strategic transaction income and expenses07(7)(100.0%)
Strategic transaction interest income0267(267)(100.0%)
Realised transaction gains / (losses)(733)(112)(621)(557.1%)
Net finance expenses(13,548)(14,578)1,0307.1%
Operating profit before tax and other income28,22623,5964,63019.6%
Property revaluations and other income74,99944,89430,10567.1%
Profit before income tax103,22568,49034,73550.7%
Adjusted funds from operations (AFFO)28,10321,9746,13027.9%
Adjusted funds from operations (cpu)5.874.880.9820.2%
All values shown as NZ$,000's
Average NZD/AUD exchange rate in the period0.93860.9488
BALANCE SHEET
27
STRENGTHENED BY EQUITY RAISING, DEBT EXTENSION AND REVALUATION GAINS
1
Calculated in accordance with Trust Deed
2
Total capitalised costs, including development expenditure, capitalised interest on developments and capitalised incentives
VITAL HEALTHCARE PROPERTY TRUST | HALF YEAR RESULTS 2021
Increase due to:
development and capital
works expenditure of $57m
2
acquisitions totaling $135m
revaluation gains of $61m
disposals of ($88m)
F/X impact of ($3m)
New equity of $157.5m raised via
placement and UPP at a 17.5%
premium to NTA per unit
Actual
Actual
($)
(%)
HY2021
FY2020
change
change
Investment properties
2,248,398
2,086,309
162,089
7.8%
Other assets
17,542
18,909
(1,367)
(7.2%)
Bank debt
734,938
814,537
(79,599)
(9.8%)
Other liabilities
217,629
211,702
5,927
2.8%
Debt to gross assets
1, 2
32.4%
38.7%
(16.2%)
Unitholder funds
1,313,374
1,078,979
234,395
21.7%
Units on issue (000s)
515,649
453,783
61,866
13.6%
Net tangible assets ($/unit)
2.55
2.38
0.17
7.1%
All values shown as NZ$,000's
Period end NZD/AUD exchange rate
0.9356
0.9345
NET TANGIBLE ASSETS
28
REVALUATION GAINS HAVE LED TO NTA GROWTH PER UNIT
NTA Per Unit Bridge*
VITAL HEALTHCARE PROPERTY TRUST | HALF YEAR RESULTS 2021
*Figures may not sum due to rounding
Revaluation gain of $61m; a
2.9% increase in total portfolio
value from June 2020
47% of gain from Australian
portfolio and 53% from New
Zealand
~$55m of the gain from cap rate
compression with the balance
rent increases and development
margin
$12.9m gross profit realisedon
disposals
DEBT
29
GEARING SIGNIFICANTLY REDUCED DURING HY21 TO SUPPORT FUTURE GROWTH
HY21 Overview
In mid-2020 a process of reviewing and updating lending
documents commenced to support the extension and
diversification of Vital’s debt.
Terms now agreed
1
for:
enhanced lending terms and conditions, supported by
existing financiers;
three new lenders to join Vital’s banking group; and
extension of Vital’s average debt duration from 1.3
years at 31 December 2020 to 2.9 years (pro-forma).
Vital’s all-in weighted average cost of debt was 3.6% as at 31
December 2020 (based on drawn debt only).
Sufficient liquidity and headroom available to support Vital’s
requirements, including developments
32.4%
DEBT / ASSETS
Calculated in accordance with Vital’s Trust Deed
✓Debt levels considered conservative given
cashflow security: high quality tenants,
long leases, high quality properties and
defensive asset class
✓Focus now on securing long duration debt
VITAL HEALTHCARE PROPERTY TRUST | HALF YEAR RESULTS 2021
1
The documentation has been agreed but is subject to final satisfaction of conditions precedent, which is expected to occur inthe next few days
DEBT MATURITY
VITAL HEALTHCARE PROPERTY TRUST | HALF YEAR RESULTS 2021
30
UTILISING AVAILABLE HEADROOM AND ADDING CAPACITY
Debt Maturity Profile –31 Dec 2020 (pro-forma) (A$)
Bank Facilities
31 Dec 2020
(pro-forma)
3
31 Dec
2020
30 Jun
2020
Debt to gross assets (TrustDeed)
1
32.4%32.4%38.7%
Bank loan to value ratio –actual
2
35.0%35.0%40.2%
Bank loan to value ratio –covenant55.0%50.0%50.0%
W eighted average duration to expiry2.9 years1.3 years1.8 years
Undrawn facility limit$347m$304m$225m
Three new financiers added to
diversify finance providers and
increase debt duration
1
Trust Deed debt ratio is based on total borrowings to gross asset value of the Trust
2
Bank LVR is based on total indebtedness to secured property value as determined by external valuers
3
Pro-forma for the debt refinance terms agreed subsequent to balance date
Next expiry Nov-21 (A$100m)
OUTLOOK AND GUIDANCE
31
VITAL HEALTHCARE PROPERTY TRUST
ADDING VALUE FOR UNITHOLDERS
VITAL HEALTHCARE PROPERTY TRUST | HALF YEAR RESULTS 2021
32
SIGNIFICANT GROWTH ACHIEVED DURING HY21
Asset recycling undertaken to improve the quality of the portfolio; ~10% of the total value
8.5% increase in underlying income
1
Like-for-like property income growth of 1.5%
Significant leasing to maintain and grow future earnings
Progression of existing developments and commencement of new value-add developments
1
including FX impact
HY2021(%) change(%) change
(NZ$,000's)(HY20-HY21)cents per unit(HY20-HY21)
Net Property Income54,1608.5%11.32.0%
Less: Expenses(25,934)(1.4%)(5.4)(7.3%)
Operating Profit28,226 19.6%5.9 12.4%
Add: Other Gains (& Losses)74,99967.1%15.757.0%
Less: Income Tax(11,635)3.0%(2.4)(3.2%)
Unitholder Profit91,590 60.1%19.150.5%
OUTLOOK & GUIDANCE
33
FOCUSSED ON EARNINGS GROWTH
HY21 AFFO of 5.87 cpu; 20.2%
above HY20
Distributions of 4.375 cpu paid in
HY21
Distributions of 4.5 cpu guidance
for 2H; 9.00 cpu annualised
Significant development pipeline
o$356m –committed
o$225m –remaining cost to complete
o$560m –potential long-term pipeline
Further value-add acquisition and
development opportunities being
considered
Future asset recycling to be
considered to partially fund new
developments and acquisitions
Further debt diversification and
extensionto be considered later in
CY21
NorthW est is in the process of
developing a comprehensive
sustainability framework which will
include Vital
VITAL HEALTHCARE PROPERTY TRUST | HALF YEAR RESULTS 2021
VITAL HEALTHCARE PROPERTY TRUST
34
APPENDICES
WHY INVEST IN VITAL
VITAL HEALTHCARE PROPERTY TRUST | HALF YEAR RESULTS 2021
35
VITAL IS THE ONLY SPECIALIST NZX-LISTED OWNER OF HEALTHCARE PROPERTY; NO ASX-LISTED EQUIVALENT
DEFENSIVE SECTOR
HIGH DEMAND
HIGH QUALITY
PORTFOLIO
DEVELOPMENT
UPSIDE
EARNINGS
GROWTH
Private healthcare is
typically a non-
discretionary or high
priority discretionary
spend
Less impacted by
economic or business
cycles than other
property sectors
Ageing demographics
and growing population
in both Australia and
New Zealand
Rising life expectancy
Improvements in
science, technology and
healthcare increase
service offerings
$225m of remaining
spend on existing
developments and $560m
long-term potential
pipeline to be partially
funded by asset recycling
and existing debt facilities
W eighted average
project yield of 6.1%;
provide value creation
and earnings growth
Targeting 2-3% AFFO
and DPU growth with a
conservative pay-out
ratio
94% of leases increase
by CPI or fixed %
Embedded earnings
growth enhanced by
acquisitions and
developments
Landlord to some of New
Zealand and Australia’s
leading private
healthcare operators
$2.25B portfolio
99.1% occupancy
W ALE: 19.0 years
Average building age*:
11.9yrs
*averagebuildingage=thelaterofthedateofconstructionorlastsignificantcapitalworks
Vital seeks to deliver stable and growing total unitholder returns, including an attractive risk-adjusted income distribution, sourced
from healthcare property
COMPARATIVE RETURNS
VITAL HEALTHCARE PROPERTY TRUST | HALF YEAR RESULTS 2021
36
VITAL HAS OUTPERFORMED THE INDEX ON A TOTAL RETURN
(1)
BASIS
Source: Forsyth Barr
(1) Total returns measured by change in unit price plus post-tax distributions to 31 December 2020
(2) S&P/NZX All Real Estate Index and S&P/NZX 50 Index data from 31 December 2004, being the inception date of the
NZX All Real Estate Index
Total return to
31 December 2020
1yr
5yr
(p.a.)
10yr
(p.a.)
Since 2004
(p.a.)
(2)
Vital19.8%16.3%17.6%14.7%
S&P/NZX 50 Index13.9%15.7%14.7%9.5%
Vital’s outperformance vs
NZX 50
5.9%0.6%2.9%5.2%
S&P/NZX All Real Estate Index4.4%11.8%13.1%9.8%
Vital’s outperformance vs
NZX REIT
15.4%4.5%4.5%4.9%
VHP vs S&P NZX Real Estate Index
✓Outperformance against both the S&P/NZX All Real Estate
Index and S&P/NZX 50 Index since December 2004
✓15.4% outperformance versus NZX REIT benchmark over
last 12 months and 5.9% outperformance versus NZX 50
✓Outperformance highlights the defensive nature of
healthcare real estate compared to other real estate classes
ActualActual($)(%)
HY2021HY2020changechange
Operating profit before tax and other income 28,226 23,596 4,630 19.6%
Add/(deduct):
Current tax expense (7,578) (4,977) (2,601) (52.3%)
Current tax expense on net of gain on property disposals
and lease incentive transaction
3,374 - 3,374 -
Incentive fee 3,096 3,209 (113) (3.5%)
Realised and unrealised fx on borrowings (net of tax) 478 227 251 110.6%
Amortisation of borrowing costs 336 283 53 18.7%
Amortisation of leasing costs & tenant inducements 1,100 512 589 115.0%
Net strategic transaction expenses - (274) 274 (100.0%)
IFRS 16 operating lease accounting (67) (78) 11 14.1%
Funds from operations (FFO) 28,965 22,498 6,468 28.7%
Add/(deduct):
Non-recurring corporate costs - 323 (323) (100.0%)
Actual capex & leasing from continuing operations (862) (847) (15) (1.8%)
Adjusted funds from operations (AFFO) 28,103 21,974 6,130 27.9%
AFFO (cpu)5.87c4.88c0.98c 20.2%
Distribution per unit (cpu)4.38c4.38c
AFFO payout ratio75%90%
All values shown in NZ$,000's
Units on issue (weighted average, 000s)479,151450,234
ADJUSTED FUNDS FROM OPERATIONS (AFFO)
37
CONSERVATIVE PAYOUT RATIO
Note: HY2020 AFFO has been restated to adjust for realised and unrealised FX on borrowing (net of tax) and IFRS 16 accounting.
1
Increase due in part to Belmont lease transaction
2
The payment to secure re-based market rent, increased leased term and other improvements in respect to Belmont Private Hospital has been excluded from AFFO as it is
non-recurring and capital in nature.Funds from operations has also excluded the corresponding taxation benefit and incentive amortisation associated with this transaction.
VITAL HEALTHCARE PROPERTY TRUST | HALF YEAR RESULTS 2021
1
1
Current tax impacted by
one-off leasing transaction
and property disposal
2
INTEREST RATE HEDGING PROFILE
38
COST OF DEBT WELL HEDGED, MANAGING RISK
Hedging Maturity Profile ($A)
NOTE: Fixed rates exclude line fees and margin
Rates31 Dec 202030 Jun 2020
W eightedaverage cost of debt
1
3.62%3.59%
W eightedaverage fixed rate
(excluding line fee and margin)
3.01%3.01%
W eightedaverage fixed rate duration
5.9 years6.1 years
% of drawn debt fixed
64%60%
1
Drawn debt (excludes line fees on undrawn facility)
VITAL HEALTHCARE PROPERTY TRUST | HALF YEAR RESULTS 2021
ASSET ALLOCATION
39
VITAL INVESTS IN HEALTH ECOSYSTEMS IN NEW ZEALAND & AUSTRALIA
OUT-PATIENT /
MEDICAL OFFICE BUILDINGS
HOSPITALS
LIFE SCIENCES / RESEARCH
AGED CARE
Comprises: public, private, rehabilitation and
mental health hospitals and similar facilities
Targeting: Government supported or high private
health insurance catchments with growing
populations
Target portfolio weighting: 50 -70%
(31 December 2020: 83%)
Comprises: administration, diagnostic services
and specialist out-patient facilities
Targeting: facilities located in a healthcare
precinct
(1)
and/or from where healthcare is
delivered
Target portfolio weighting: 10 -20%
(31 December 2020: 11%)
Target Portfolio Allocations*
10%-20%
5%-15%
50%-70%
10%-20%
Comprises: biotechnology, pharmaceutical,
biomedical, university and other research
facilities
Targeting: specialised facilities and/or facilities
located in a healthcare precinct
1
Target portfolio weighting: 5-15%
(31 December 2020: 0%)
2
Comprises: residential aged care villages
(excluding retirement facilities)
Targeting: high quality operators with substantial
balance sheets and <45% Rent/EBITDAR and high-
quality infrastructure
Target portfolio weighting: 10 -20%
(31 December 2020: 6%)
VITAL
Investments targeted to provide earnings growth from a diversified and defensive asset base
VITAL HEALTHCARE PROPERTY TRUST | HALF YEAR RESULTS 2021
1
Healthcare precinct = area or hub for healthcare delivery typically including at least two of a public hospital, major private hospital, health teaching
facility or health research facility
2
The initial focus for this subsector will be New Zealand. Hospitals and aged care are the priority for Vital’s growth in Australia at least in the near-term.
*
Based on total portfolio value. Reduction in hospital allocation indicates an expectation that future growth opportunities are more likely to come from the
other sub-sectors, rather than a desire to reduce exposure.
PORTFOLIO OVERVIEW
40
$2.25B PORTFOLIO OF HEALTHCARE REAL ESTATE COMPRISING 42 INVESTMENT PROPERTIES AND 2,800+ BEDS
Belmont Private Hospital, QLD
Maitland Private Hospital, NSW
VITAL HEALTHCARE PROPERTY TRUST | HALF YEAR RESULTS 2021
PORTFOLIO OVERVIEW (cont’d)
41
$2.25 BILLION INVESTED IN 42 CORE HEALTHCARE PROPERTIES WITH OVER 130 TENANTS AND ~2,800 BEDS
Income
HY21 property income growth of
1.5% (like-for-like, same currency
basis)
Positive rent growth forecast for FY21
through a combination of CPI and
fixed rent increases
Diversification
As shown on this page, Vital has a
diverse portfolio by location and
tenant
Seeking to continuously improve
diversity of income
Largest single tenant exposure
reduced from 48% to 41% since 30
June 2020
WA 5%
SA 4%
VIC 20%
NSW 30%
QLD 13%
NZ 28%
Tenant Diversification (% of rent)
Geographic Diversification (by value)
VITAL HEALTHCARE PROPERTY TRUST | HALF YEAR RESULTS 2021
LEASE EXPIRY PROFILE
Lease expiries in the remainder of FY21 primarily reflect smaller tenancies at multi-tenant properties.
FY21 Expiries:
Total expiry of $970k through to June 2021 across 1,317 sqm over 6 multi-tenanted properties (0.8% of annual rent).
42
LOW RISK EXPIRY PROFILE SUPPORTS SUSTAINABLE, PREDICTABLE AND DEFENSIVE CASH FLOWS
VITAL HEALTHCARE PROPERTY TRUST | HALF YEAR RESULTS 2021
10-year average annual lease
expiry of only 1.51% (as % of
total portfolio income)
(1)Includes fixed percentage and CPI reviews
RENT REVIEWS
43
HIGH PERCENTAGE OF TOTAL RENT IS REVIEWED ANNUALLY WITH STRUCTURED
1
REVIEW MECHANISMS
Rent Reviews –HY21 (“like-for-like” excludes developments, acquisitions and disposals)
Rent reviews were completed
for 61 leases in 1H FY21
Structured reviews represented
98%
(1)
of leases by income in
1H FY21
VITAL HEALTHCARE PROPERTY TRUST | HALF YEAR RESULTS 2021
Jun-20 Rent p.a.Dec-20 Rent p.a.Increase
Annualised
Growth
#
(NZD)(NZD)(NZD)
(Stable currency)
Australia114,053,4824,096,14542,6631.1%
New Zealand5018,412,55418,837,725425,1712.3%
Total6122,466,03622,933,869467,8342.1%
Jun-20 Rent p.a.Dec-20 Rent p.a.
Increase
Annualised
Growth
#
(NZD)(NZD)(NZD)
(Stable currency)
CPI4621,517,21121,956,120438,9092.0%
Fixed11853,841880,90727,0653.2%
Market394,98396,8431,8592.0%
Total6122,466,03622,933,869467,8342.1%
77 leases to be renewed in the
remainder of FY21
CORE PORTFOLIO METRICS
44
5 YEAR TRENDS HIGHLIGHT PORTFOLIO STRENGTH AND UNDERPIN LONG-TERM PERFORMANCE
12
th
consecutive year of
portfolio occupancy
>99%
High degree of
confidence that future
expiries will be renewed
or replaced in advance
(1)Reflects the average % of total portfolio income that expires over each of the next 10 years.
TOTAL INCOME SUBJECT TO STRUCTURED RENT REVIEWS
WALE
OCCUPANCY
AVERAGE 10 YR LEASE EXPIRY
(1)
VITAL HEALTHCARE PROPERTY TRUST | HALF YEAR RESULTS 2021
OVERVIEW OF NORTHWEST –VITAL’S MANAGER
45
NORTHWEST: A FOCUSED HEALTHCARE REAL ESTATE INVESTMENT OWNER ANDMANAGER
NZ$8.3Bn
Assets under management
Global scale, local relationships
Partner of choice for leading operators in each market it invests
Deep healthcare real estate expertise
200+ healthcare property professionals based in 3 of the largest
global healthcare markets
Execution excellence
15+ years of healthcare real estate investment, management and
development
Entrepreneurial culture, institutional capabilities
10+ year public company track record
A proven track record
Track record of delivering strong risk-adjusted returns for investors
Scalable platform with embedded growth
Its operator relationships and existing portfolio provide a robust
acquisition and development pipeline
VITAL HEALTHCARE PROPERTY TRUST | HALF YEAR RESULTS 2021
GLOSSARY
46
VITAL HEALTHCARE PROPERTY TRUST | HALF YEAR RESULTS 2021
AFFO
Adjusted Funds From Operations is an alternate measure used for assessing distributable income. Essentially adjusts NPAT for allnon-cash items
(i.e. NDI) then makes adjustments for items such as maintenance capex and lease incentives paid.
Cap Rate
Capitalisation Rate. Generally calculated as net operating income / current market value of investment property.
CPI
Consumer Price Index. An index that measures the change in the cost of a ‘basket’ of basic goods and services, showing how the cost-of-living
changes over time. The most widely accepted indicator of inflation.
FX
An abbreviation for ‘foreign exchange’ used where there is a transaction in a currency other than the local currency.
IPP
Income Producing Property.
LTM
Last Twelve Months.
LVR
Loan to Value Ratio. Is the ratio of a loan to the value of an asset purchased or total assets. The term is commonly applied by looking at the level of
Borrowings (or debt) versus the Total Assets, or Borrowings versus the Investment Properties
NTA
Net Tangible Assets. The total assets of the Trust less total liabilities. NTA is normally divided by the number of units on issue and expressed as an
annual amount per unit.
WACR
W eighted Average Capitalisation Rate. The market cap rate for each property weighted by property value.
WALE
W eighted Average Lease term to Expiry. The weighted average lease term remaining to expire across a portfolio, sometimes alsoreferred to was
W ALT.
DISCLAIMER
47
This presentation has been prepared by NorthW est 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 ,
legal, tax or financial advice or recommendation to any person 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.
This presentation may contain forward-looking statements. Forward-looking statements can include words such as “expect”, “intend”,
“plan”, “believe”, “continue” or similar words in connection with discussions of future operating or financial performance orconditions. The
forward-looking statements are based on management's and directors’ current expectations and assumptions regarding the Trust’s
business, assets and performance and other future conditions, circumstances and results. As with any projection or forecast, forward-
looking statements are inherently susceptible to uncertainty and to any changes in circumstances. The Trust’s actual results mayvary
materially from those expressed or implied in the forward-looking statements. The Manager, the Trust, and its or their directors, employees
and/or shareholders have no liability whatsoever to any person for any loss arising from this presentation or any informationsupplied in
connection with it. The Manager and the Trust are under no obligation to update this presentation or the information contained in it after it
has been released. Past performance is no indication of future performance.
25 February 2021
VITAL HEALTHCARE PROPERTY TRUST | HALF YEAR RESULTS 2021
Data sourced from publicly available filings. Our datasets may not be complete. Automated analysis can produce errors. If you believe any data on this page is incorrect, please contact us at hello@nzxplorer.co.nz. For informational purposes only. Not investment advice.