Both Vital Healthcare Property Trust's trustee and its manager have refused to answer questions about what authority the manager had to charge Vital for various fees.
The fees the manager, owned by Canada-based NorthWest Healthcare Property Real Estate Investment Trust, charged Vital in the six months ended December jumped to $22.1 million, up almost 75 per cent from $12.7 million in the same six months a year earlier.
That was at the same time as Vital's net distributable income fell 18.7 per cent.
The fees included base fees of $6.9 million, incentive fees of $5.1 million and another $10.1 million in other fees and expenses.
In addition, a further $9.5 million in fees owed to NorthWest were capitalised.
The other fees and expenses included an A$8.2 million "acquisition fee" for acquiring property from ASX-listed Healthscope.
However, the Healthscope acquisition hasn't happened yet and NorthWest has said repeatedly that Vital isn't yet a party to that transaction.
NorthWest said so as recently as April 1 when it announced proposed changes to its fee structure after an outcry from unitholders, including three institutions: ANZ Funds Management, Mint Asset Management and the Accident Compensation Corp, as well as the New Zealand Shareholders' Association.
"NorthWest is now in a position to focus on the Healthscope real estate opportunity and potentially agree terms with NorthWest REIT that could see Vital participate in a Healthscope transaction," it said.
NorthWest itself doesn't own any Healthscope properties yet. All it has is an agreement with property giant and fellow Canadian company Brookfields to buy A$1.26 billion worth of Healthscope's property, should Brookfields' takeover of Healthscope succeed.
Brookfields hasn't even sent its takeover offer, which will be via a scheme of arrangement, to Healthscope's shareholders. It has until April 24 to do so, although it does have the support of Healthscope's board, suggesting its takeover is likely to succeed.
BusinessDesk asked the trustee, Trustees Executors, where NorthWest got its authority to charge fees for a transaction that hasn't happened yet.
Other questions included why NorthWest undertook to refund Vital only A$5.2 million if Vital isn't party to the Healthscope transaction? What happens to the other A$3 million? How is NorthWest justified in keeping it?
Another question was why fees were being capitalised and what they were for.
Trustees Executors, which is supposed to be supervising NorthWest's management of Vital, responded by email: "In relation to the specifics of your queries, we suggest you liaise with the manager."
Pushed further Trustees Executors responded: "Given that the financial statements have been prepared and signed by the manager … , we believe your questions would be better placed being answered by them."
The manager said: "NorthWest is comfortable that it's met its disclosure requirements and doesn't plan to add to it at this stage."
In a move that angered some investors, NorthWest borrowed A$81 million from Vital last year to secure a stake in Healthscope, then beset by a number of predators planning a takeover. NorthWest wanted a seat at the table when Healthscope's properties were carved up.
Although the first announcement of its stake in Healthscope was on May 8 last year, NorthWest did not say then whether Vital was involved.
It wasn't until August last year, when NorthWest had to publish audited accounts for Vital, that investors learnt they had already lent NorthWest A$40 million to buy the Healthscope stake, which later increased. The total A$81 million loan was disclosed in December.
The annual accounts included a note saying: "Vital has the benefit of participating in the opportunity and has agreed to jointly pay the costs and jointly share the benefits and risks" of the Healthscope investment.
Except that Vital, being a trust and having no officers or directors of its own, is incapable of agreeing to anything. Essentially, NorthWest continues to agree with and negotiate with itself over matters relating to Vital but say that Vital is agreeing and negotiating.
And it appears that Vital has paid for everything so far and that NorthWest has been using Vital's funds to position itself to reap benefits without sharing those benefits with Vital.
Neither NorthWest nor Trustees Executors would answer how much, if anything, NorthWest itself had contributed to buying the Healthscope stake.
Another question both NorthWest and Trustees Executors declined to answer was whether, if Brookfield's A$2.50 per share offer for Healthscope succeeds, Vital will be entitled to any of the profit on NorthWest's stated entry cost of A$2.36 per share, or 14 cents per share.
The subsequent first-half accounts showed NorthWest is paying "circa" 4 per cent on the loan. That's less than Vital is paying on its own borrowings; NorthWest renewed and expanded Vital's banking facilities in June last year.
When it reported Vital's first-half results in February, NorthWest said its weighted average cost of debt was 4.5 per cent.
Both Trustees Executors and NorthWest declined to say why Vital was apparently borrowing at 4.5 per cent to lend NorthWest money at 4 per cent.