Vital Healthcare Property Trust Management general manager David Carr. Photo / Martin Sykes
Vital Healthcare Property Trust Management general manager David Carr. Photo / Martin Sykes
Vital Healthcare Trust's proposed $238.9 million Australian expansion is not popular with all investors.
Brent Sheather, a financial adviser whose clients control a block of units, criticised the trust's new management deal proposed as part of the purchase of 12 Australian hospitals, surgical and psychiatric facilities.
"In my view theproposed performance fee is a joke. The performance fee is going to be based on unit holder returns and the manager will get a performance fee if the total unit holder returns are in excess of 10 per cent annually. Currently Vital is paying a dividend of 8 to 8.2 cents per unit per year and the current share price is $1.24 per share.
"The dividend is either an excluded dividend or fully imputed which means it is tax-free to unitholders therefore the current yield is 9.2 per cent, so the share price only has to go up by less than 1 per cent for them to get a performance fee," Sheather said.
But Jeremy Simpson, Forsyth Barr analyst, was optimistic about the expansion.
"Vital has strong defensive qualities given its long-weighted average lease term of 8.4 years, almost twice the sector average, low lease expiry risk and most of its leases structured for annual CPI-based rental increases. The proposed Australian expansion provides Vital with the opportunity to transform what is already a strong operation. Our [guidance] is hold with Vital trading in line with our valuation," Simpson said.
"Vital has a solid track record of managing its portfolio and balance sheet in recent years and has been a leading listed property performer through the global financial crisis, however it has struggled to find value-adding opportunities. This acquisition provides Vital with the opportunity to significantly expand, increase its weighted average lease term from 8.4 to 11.5 years ... improve the near-term lease expiry profile, and it is forecast to be accretive to earnings," Simpson said.
Unitholders in Vital will meet later this month to vote on the deal.
