Vital Managed Investment Scheme 2021 Annual Report

FMCA Compliance Annual
Report 2021
Managed by NorthWest Healthcare
Pr operties Management Ltd

www.vhpt.co.nz
DETAILS OF THE SCHEME

The Scheme is the Vital Healthcare Property Trust (Scheme or Vital) which is a managed
investment scheme for the purposes of the Financial Markets Conduct Act 2013 (FMCA).

The Scheme is managed by NorthWest Healthcare Properties Management Limited
(Manager) and supervised by Trustees Executors Limited, a supervisor licensed under the
Financial Markets Supervisors Act 2011 (Supervisor).

The offer of interests in the Scheme was originally made under the Unit Trust Act 1960.
The Scheme transitioned to compliance with the FMCA on 30 November 2016.
Accordingly, a Product Disclosure Statement has not been prepared for the Scheme as
no regulated offers of units have been made pursuant to the FMCA. The Scheme units are
listed on the New Zealand Stock Exchange (NZX code: VHP).

Vital’s latest financial statements and the auditor’s report for those statements were
lodged with the Disclose Register on 21 September 2021.

DESCRIPTION OF THE SCHEME

Vital’s main function is to identify, acquire and manage healthcare properties that are
leased or for lease to operators across the healthcare continuum. Vital also undertakes
the design, refurbishment or development of healthcare properties. Vital may invest
directly in real property, or in companies or trusts (listed on a recognised stock exchange
or unlisted)
through financial products, other types of financial instruments or the provision
of debt, which themselves own, directly or indirectly, real property with healthcare related
qualities.

The Scheme was a unit trust established under the Unit Trust Act 1960 by a Trust Deed
dated 11 February 1994, as amended by subsequent Deeds of Variation and
Restatement. Vital became a registered Managed Investment Scheme under the
Financial Markets Conduct Act 2013 on 29 November 2016.

INFORMATION ON COMPOSITION OF THE SCHEME

This Annual Report covers the accounting period from 1 July 2020 to 30 June 2021.

The number of managed investment products, being units in the Scheme (Units) on issue
at the start of the accounting period was 453,782,695. The number of Units on issue at the
end of the accounting period was 519,752,625.

VITAL HEALTHCARE PROPERTY TRUST
Managed by NorthWest Healthcare Properties Management L
vhpt.co.nz
Page 2 of 8
CHANGES RELATING TO THE SCHEME

Material changes to the nature of the Scheme, the Scheme property, the investment
objectives and strategy, or the management of the Scheme over the accounting period
are as follows:

STATEMENT OF INVESTMENT POLICIES AND OBJECTIVES (SIPO)

There have been no amendments to the SIPO made during the current accounting
period.

A copy of the current SIPO is available on Vital’s website www.vhpt.co.nz
under the
section About/Governance.

TRUST DEED

There have been no amendments to the Trust Deed made during the current accounting
period.

A copy of the amended and restated Trust Deed is available on Vital’s website
www.vhpt.co.nz
under the section About/Governance. It is also available on the Disclose
Register accessible on the Companies Office website at (https://disclose-
register.companiesoffice.govt.nz/disclose).

RELATED PARTY TRANSACTIONS

During the period 1 July 2020 to 30 June 2021 there were no changes to the nature and
scale of related party transactions.

There were no related party transactions that were not on arm’s-length terms.

Further details of the related party fees paid by Vital to the Manager and its related
parties can be found in note 22 of Vital’s financial statements which have been lodged
with the Registrar.

TERMS OF THE OFFER OF UNITS

Vital continues to be a closed ended fund and does not continuously offer units for
subscription. Vital offers units for subscription from time to time to raise equity capital and,
during the period 1 July 2020 to 30 June 2021, Vital completed a placement and unit
purchase plan pursuant to which it raised $159. 65 million to pursue strategic
objectives. Vital also offers new units to Unit holders through participation in its dividend
reinvestment plan, the terms of which remained unchanged during the current
accounting period.

VALUATION AND PRICING METHODOLOGIES

There was no change to the valuation and pricing methodologies, as outlined in the Trust
Deed, for the Scheme during the current accounting period.

VITAL HEALTHCARE PROPERTY TRUST
Managed by NorthWest Healthcare Properties Management L
vhpt.co.nz
Page 3 of 8
FINANCIAL CONDITION AND PERFORMANCE OF THE SCHEME

2021 has been a challenging year globally due to COVID-19. Notwithstanding these
challenges, Vital’s defensive portfolio helped Vital record a 27.7% total return in FY21,
outperforming the S&P/NZX REIT Index by 7.4%.

Vital’s defensive characteristics include its market-leading 18.7 year weighted average
lease expiry term (WALE), high levels of government support for healthcare operators and
healthcare spending being primarily non-discretionary or high-priority.

Vital has continued to deliver on its strategies to develop and grow its unique healthcare
portfolio in Australia and New Zealand, while providing significant growth in returns for its
unitholders.

FY21 Highlights

• 21.8% increase in adjusted funds from operations (AFFO) from $47.2m to $57.5m;
•
10.4% increase in AFFO per unit from 10.45 cents per unit (cpu) to 11.54 cpu;
•
27.7% total unitholder return, exceeding the S&P/NZX REIT Index by 7.4%;
•
21.4% increase in net tangible assets (NTA) per unit from $2.38 to $2.89;
• Distributions of 8.875 cpu paid or payable; representing a prudent 76.9% AFFO pay-
out ratio;
• Extension of market-leading weighted average lease expiry term (WALE) from 18.1
to 18.7 years;

•
$286m acquisitions ($269m completed and $17m committed);
•
Significant development progress including practical completion of the expansion
and upgrade at Royston Hospital (Hastings), a new oncology centre at South
Eastern Private Hospital (Melbourne), and Stage 1 of Wakefield Hospital
(Wellington);

• $182.4m of new equity (net of costs) raised through a placement, UPP, 4 x DRPs and
issue of incentive units;
• Appointment of an Independent Chair to lead a majority independent Board; and
• Retirement of long-standing Director Bernard Crotty, replaced with Craig Mitchell.
As at 30 June 2021 Vital had net assets of $1,503.5 million (2020: $1,079.0 million),
comprising total current assets of $21.5 million (2020: $11.4 million), total non-current assets
of $2,641.1 million (2020: $2,093.9 million) and total liabilities of $1,159.1 million (2020:
$1,026.2 million).

Total comprehensive income for the 12 month period to 30 June 2021 was $280.5 million
(2020: $76.3 million), and total distributions relating to the period to Unit holders were $44.4
million (2020: $39.9 million), representing 8.875 cents per Unit (2020: 8.75 cents per Unit).

You can find a copy of Vital’s financial statements, including information on distributions
made by the Scheme on the Disclose Register at:
https://disclose-
register.companiesoffice.govt.nz/ Scheme number SCH11214. Further information on the
financial results is provided in Vital’s Annual Report at: www.vhpt.co.nz.

VITAL HEALTHCARE PROPERTY TRUST
Managed by NorthWest Healthcare Properties Management L
vhpt.co.nz
Page 4 of 8
FEES

The following fees and expenses were charged in respect of the Scheme in dollars and as
a percentage of the Scheme’s property for the 12 month period to 30 June 2021.


2021
$000s
Percentage
of Scheme’s
Property
1

Total fees and expenses incurred

Management fees 13,014 0.49%
Manager's incentive fee 12,402 0.47%
Leasing / Licencing fees 147 0.01%
Property management fees 1,500 0.06%
Disposal fees 1,011 0.04%
AFSL fee 995 0.04%

29,069 1.09%



Service fees capitalised

Acquisition fees 4,050 0.15%
Leasing / Licencing fees 1,345 0.05%
Project management fees 158 0.01%
Development management fees 3,447 0.13%
Total fees charged by the Manager and associated persons 38,069 1.43%


Auditor's remuneration 197 0.01%
Supervisor’s fees 654 0.02%
Other operating income/expenses 2,923 0.11%
Total fees & expenses 41,843 1.57%
1: Totals may not add due to rounding

MANAGER’S FEES

Remuneration of the Manager

Vital pays fees to the Manager in accordance with the arrangements set out in the
amended Trust Deed approved by unitholders on 31 October 2019.

Current Fee Arrangements

In accordance with and from the effective date of the amended Trust Deed, the fee
arrangements are as follows:

Base Fee

The Base Fee structure is as follows:
• 0.65% per annum of the gross value of the assets of the Scheme up to $1 billion;
• 0.55% per annum of the gross value of the assets of the Scheme between $1 billion
and $2 billion;

VITAL HEALTHCARE PROPERTY TRUST
Managed by NorthWest Healthcare Properties Management L
vhpt.co.nz
Page 5 of 8
• 0.45% per annum of the gross value of the assets of the Scheme between $2 billion
and $3 billion; and
• 0.40% per annum of the gross value of the assets of the Scheme over $3 billion.

Incentive Fee

The incentive fee is an amount equal to 10% per annum of the average annual increase
in the Net Tangible Assets (as defined in the Trust Deed) of the Scheme over the relevant
financial year and two preceding financial years subject to a three year high-water mark,
with payment being made by way of subscribing for new units.

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 instead of, or alongside, a real estate agent. These 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.

b) Property management
Vital pays the Manager property management fees where the Manager acts as
the property manager instead of, or alongside, a real estate agent. 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.
c) Facilities management
Vital pays the Manager a facilities management fee on a cost recovery basis.
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. 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.

VITAL HEALTHCARE PROPERTY TRUST
Managed by NorthWest Healthcare Properties Management L
vhpt.co.nz
Page 6 of 8
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 real estate agent. These fees are charged at 1.5% of the purchase
price and related capitalised acquisition costs.

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 real
estate agent. These fees are charged at 1% of the contracted sale price of the
relevant investment or property actually received, provided that, if a real estate
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.

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, the fee
payable to the Manager will be reduced by the non-rentalisable third party costs
paid.

EXPENSES CHARGED BY THE MANAGER & ASSOCIATED PERSONS

The Manager and the Supervisor are entitled to be reimbursed by Vital for all expenses,
costs or liabilities incurred in acting as Manager or Supervisor as the case may be. Certain
services are provided by the Manager in lieu of using external providers.

Any changes to fees and expenses charged by any person in respect of the Scheme
during the accounting period require the approval of the Supervisor (or in certain
circumstances, unitholders) and would be advised to unitholders via the NZX.

For more information in respect to the Fees, please refer to Vital’s financial statements, on
the Disclose register at https://disclose-register.companiesoffice.govt.nz/disclose
, scheme
number SCH11214.

VITAL HEALTHCARE PROPERTY TRUST
Managed by NorthWest Healthcare Properties Management L
vhpt.co.nz
Page 7 of 8
SCHEME PROPERTY

The table below contains the assets of the Scheme extracted from the Consolidated
Statement of Financial Position:


2021
$000s
2020
$000s


Non-current assets
Investment Properties 2,634,588 2,086,309
Derivative financial instruments - -
Other non-current assets 6,477 7,548
Total non-current assets 2,641,065 2,093,857


Current assets
Cash and cash equivalents 6,880 5,265
Trade and other receivables 1,634 5,202
Other current assets 12,736 852
Derivative financial instruments 245 42
Total current assets 21,495 11,361
Total assets 2,662,560 2,105,218

CHANGES TO PERSONS INVOLVED IN THE SCHEME

The Manager appointed Craig Douglas Mitchell (29 June 2021) as a Director of Vital
following Bernard Crotty’s resignation as a Director (29 June 2021).

There have been no changes to the Supervisor involved in the Scheme during the
accounting period.

There have been no changes to the Registrar or the auditors involved in the Scheme during
the accounting period.

HOW TO FIND FURTHER INFORMATION

Copies of documents relating to the Scheme, such as the Trust Deed, SIPO and the annual
financial statements are available on the Disclose Register at
https://disclose-
register.companiesoffice.govt.nz/disclose, scheme number SCH11214, on Vital’s website
www.vhpt.co.nz or on request from the Manager.

You have the right, free of charge and during normal office hours, to inspect that part of
the Unit register that relates to your Units on giving 5 working days’ notice to the Manager.

You also have the right, free of charge, on giving 5 working days’ notice and during
normal office hours, to inspect a copy of the Trust Deed, SIPO and annual financial
statements at the Manager’s registered office, which is located at: c/- Bell Gully, Vero
Centre, Level 21, 48 Shortland Street, Auckland. Alternatively, you can obtain a copy free
of charge by writing to us at: PO Box 6945, Victoria Street West, Auckland 1142.

VITAL HEALTHCARE PROPERTY TRUST
Managed by NorthWest Healthcare Properties Management L
vhpt.co.nz
Page 8 of 8
CONTACT DETAILS AND COMPLAINTS

Manager
NorthWest Healthcare Properties Management Limited
PO Box 6945, Victoria Street West, Auckland 1142
Attn: Company Secretary
Telephone: 0800 225 264
Email: enquiries@vhpt.co.nz
Website: www.vhpt.co.nz

Trustee and Supervisor
Trustees Executors Limited
Level 11, 51 Shortland Street, Auckland 1010
PO Box 4197, Auckland 1140
Attn: Client Services Manager – Corporate Trustee Services
Telephone: 0800 002 431
Email: cts@trustuees.co.nz

Registrar
Computershare Investor Services Limited
Level 2, 159 Hurstmere Road, Takapuna
Private Bag 92119, Auckland 1142
Telephone: +64 9 488 8777
Facsimile: +64 9 488 8787
Email: vital@computershare.co.nz

Complaints
Complaints may be made to the Manager or the Supervisor at the contact details above.
In addition, as a financial service provider registered under the Financial Service Providers
(Registration and Dispute Resolution) Act 2008, the Manager is a member of an approved
dispute resolution scheme (registration number FSP33302) to which complaints may be
made.
Insurance & Financial Services Ombudsman Scheme Inc.
Level 8, 81 Molesworth Street, Wellington 6011
Telephone: +64 4 499 7612
Email: info@ifso.nz

There will be no fee charged to any complainant in connection with investigation or
resolution of a complaint.

---

VITAL HEALTHCARE PROPERTY TRUST vhpt.co.nz
Managed by NorthWest Healthcare
Properties Management Limited


Managed by NorthWest Healthcare
Properties Management Ltd
MARKET RELEASE

22 September 2021

Managed Investment Scheme 2021 Annual Report
On 12 August 2021 Vital Healthcare Property Trust (Vital) released to the NZX the 2021
Annual Report. That report contained information required under the NZX Listing Rules and
included the Manager’s Report, details on the Property Portfolio in New Zealand and
Australia, Corporate Governance, Financial Statements and Auditor’s Report.
Vital is a managed investment scheme for the purposes of the Financial Markets Conduct
Act 2013 (FMCA). As a managed investment scheme Vital is required to produce a
second annual report in a format consistent with the FMCA and in accordance with Listing
Rule 3.12.1.
An electronic copy of the FMCA compliant annual report has been registered on the New
Zealand Companies Office - Disclose Register and is provided to the NZX as an
attachment to this announcement.

– 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

VITAL HEALTHCARE PROPERTY TRUST vhpt.co.nz
Managed by NorthWest Healthcare
Properties Management Limited


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 (~85% of portfolio
value), ambulatory care facilities (~10% of portfolio value) and aged care (~5% of
portfolio value).
Vital is the leading specialist listed landlord of healthcare property in Australasia and
currently has a portfolio valued at over $2.6 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