Healthcare firm to expand in Australia

Vital Healthcare Property Trust Management general manager David Carr. Photo / Martin Sykes

Vital Healthcare Property Trust investors might hear today how much money they will get from a proposed $238.9 million deal for the NZX-listed trust to expand into Australia.

Vital is New Zealand's largest listed specialist medical landlord and has a deal, subject to investor approval, to buy 12 hospital, surgical and psychiatric facilities.

It will raise $88 million bank debt and $150.9 million via a fully-underwritten pro-rata one-for-one rights issue to existing unitholders.

But precisely how much more the deal will return to investors is yet to be disclosed. Vital's annual distribution is projected to be between 8c and 8.2c this financial year before the deal, down on last year's 8.5c.

David Carr, general manager, said revised distribution payout projections would not be available until a new prospectus was out. He said only that the deal was "accretive" to distributable profit.

Institutional investors have criticised listed real estate trusts for expanding assets under management pushing higher fees to the managers but without passing on that growth to unitholders.

Vital, with properties valued at $302.1 million, would own real estate worth $513.8 million if the deal goes ahead.

Institutional investors said yesterday they liked the deal because it had the potential to transform the business, grow profitability and push up distributions and they particularly liked the way the new capital was being raised so their holdings were not diluted.

Bill Thurston, chairman of the trust's manager, said the rights issue would be the single largest equity capital-raising on the NZX this year and was to fund growth, not to repay debt.

Vital wants to buy Essential Healthcare Trust and unitholders will meet on November 24 to vote at the trust's annual meeting.

Miles Wentworth, a former chief executive of Vital when it was called Calan, was this year negotiating to buy Essential. Wentworth is now in Australia where he works at ASX-listed ING Real Estate Healthcare Fund.

In June, Wentworth announced exclusivity to enter into due diligence with a view to a potential merger with Essential which he said would enhance IHF's position in the Australian healthcare property sector.

The offer is fully underwritten by Forsyth Barr Group. The unit issue price is $1.05 and the offer closes on December 13.

Carr said Vital's institutional investors included Accident Compensation Corporation, AMP, Tower, BT, Mint Asset Management and ING. Vital's properties include Greenlane's Ascot Hospital & Clinics, Melbourne's Epworth Eastern Hospital and Apollo Health & Wellness at Albany.

Vital units closed down 10c yesterday at $1.24.