Prime Minister Chris Hipkins and Energy Minister Megan Woods answer questions with representatives from BlackRock about the introduction of their fund for clean energy.
Video / Alyse Wright
The NZX today published a substantial shareholder notice showing one of the world’s largest investment companies BlackRock had bought into a New Zealand-listed property business with Australasian holdings, purchasing a stake worth more than $100 million at today’s unit price.
But a BlackRock spokesperson said just now from Australia thatthe notice on it buying into Vital Healthcare Properties Trust was an “administrative error”.
It should not have gone up, she said. It was not true that BlackRock had bought a 6.5 per cent stake in Vital, as the notice said, the spokeswoman explained.
Asked to say what happened, Vital fund manager Aaron Hockly seemed at a loss to be able to explain it: “Not sure. They lodged the notice, not us.”
BlackRock this week committed $2b to a fund focused on making New Zealand the first country in the world with 100 per cent renewable electricity.
Also today, Northwest Healthcare Properties Management today released Vital’s annual result for the year to June 30, 2023. That business is a subsidiary of Toronto Stock Exchange-listed Northwest Healthcare Properties.
The result shows the metrics are sound: a massive 17-year weighted average lease term, giving huge certainty of cash flow and incomes, as well as 99 per cent occupancy.
Based on valuations, around 80 per cent of its properties are hospitals, 16 per cent are ambulatory care facilities and 4 per cent are aged care.
Hospitals and medical landlords don’t move easily or quickly and Vital has hit on that magic formula of keeping its tenants for the long haul.
However, paper losses marred this year’s result somewhat when studied from a valuation perspective.
Vital pushed up revenue 18 per cent, from $123m in 2022 to $145m this year. But property revaluations hit negative territory, from last year’s $305m gain to a $205m loss this year.
Aaron Hockly of Vital Healthcare. Photo / supplied
Net loss after tax was $152m, a turnaround from last year’s $303m profit but Hockly encouraged less focus on that.
“The difference in the two year’s bottom line comes from the property revaulations. That change in revaluations is due solely to interest rates. They have a direct correlation with market capitalisation rates,” Hockly said.
“The reality for us is that all of these revaluations are unrealised. The thing that matters to us is the cash that’s derived from the properties which the unitholders benefit from, due to retained earnings and distributions paid have gone up significantly.”
Last year, the trust paid its unitholders 9.63cpu and this year paid 9.75cpu, up 1.3 per cent and Hockly said that was significant and a sign that the cash flow far overrode revaluations from a payout perspective.
Northwest last year earned $50.1m and this year that dropped to $44.8m.
“A benefit of an externally managed vehicle is that as revaluations go down, the manager earns less,” Hockly said.
That resulted in a turnaround in pre-tax net profit from last year’s $362m profit to a $135m loss on paper this year.
Australian holdings valued at $2.4b far outweigh New Zealand’s $1b although Vital’s attempts a few years ago to list on the ASX weren’t backed by unitholders so that bid failed.
In Australia, the business has 20 properties but here only 15.
Asked about the weightings between the two countries, Hockly said most of those in Australia had been owned for some time.
Three years ago, Vital had under $500m in NZ and now it’s up to $1b here, so the weighting in this country has risen substantially, he emphasised.
“We have a lot under way in Australia. But we’ve invested so much in New Zealand. On the development front, $217m in pure development is committed to NZ compared to A$190m in Australia, so slightly more investment is going on in New Zealand. It’s partly because we see opportunities here. We also see big opportunities in southeast Queensland.”
That is due in both geographic locations to under-investment by the public health authorities as well as population growth.
On the outlook for the June 2024 year, Vital said: “Despite recent heightened market volatility, healthcare property remains a defensive asset class, underpinned by a high level of government support and non-discretionary spending. This has been demonstrated by recent sales in the sector notably in Australia. Vital has A$180m of debt headroom which, in conjunction with asset sales, will fund its development pipeline and has no debt expiring until March 2025. FY24 distribution guidance of at least 9.75cpu has been provided.”
The company’s annual report is headlined ‘revitalising our healthy portfolio’, in reference to redevelopment.
Hockly said sales of non-core assets would continue to invest into brand new buildings.
Vital has a $1.5b market capitalisation on the NZX and its units are trading around $2.65, down 16 per cent annually.
Anne Gibson has been the Herald’s property editor for 23 years, has won many awards, written books and covered property extensively here and overseas.
