Vital Healthcare Property Trust's manager has announced plans for a $150 million capital raising for expansion including three big projects in Australia.
NorthWest Healthcare Properties Management said the offer would be via a $125m underwritten placement of new units and a $25m unit purchase plan.
The money will allow Vital to expand and grow earnings, today's statement said, giving further details about three large property projects which are all in Australia.
Around $100m of brownfield developments are planned and either announced today or in the next few months.
Vital also plans to buy a "premium hospital in a metropolitan area for $95m, leased to a major private hospital operator".
Vital has announced a A$22.6m expansion and upgrade of Brisbane's Belmont Private Hospital, a A$18.6m expansion of Perth's Abbotsford Private Hospital and a A$21.7m development of a new health precinct in northern Adelaide - the Playford Health Hub.
A further $33m of developments are in the due diligence phase as Vital expands its property network, although it has an off-market asset sales process of round $100m also running. These are due to be completed next year.
Key risks to the business include unit price uncertainty, an economic downturn, development and construction delays, tenant and rental income uncertainty, property valuation fluctuations, funding issues and reliance on management services and key personnel.
Distributions made to unitholders are also dependent on rent from tenants so future distributions could be affected by overall economic conditions, the financial performance of tenants both now and in the future, the ability to negotiate lease extensions or replace outgoing tenants with new tenants, the occurrence of rental arrears or any vacancy periods, reliance on a tenant which leases a material portion of Vital's portfolio, an increase in unrecoverable outgoings and supply and demand in the property market, Vital's presentation said.
Another risk was that growth opportunities might not proceed due to a variety of circumstances.
Aaron Hockly, Vital's fund manager, said today: "Having outlined Vital's new five-year portfolio strategy in the FY20 results, we are pleased to announce a capital raising to allow us to deliver on this strategy.
"We have a strong development pipeline and are in advanced discussions to acquire a premium metropolitan hospital to be leased to a major private hospital operator for 30 years. The combination of the developments, potential acquisition and targeted asset sales would improve key portfolio metrics including an extended weighted average lease term and improved tenant profile," Hockly said.
The five-year strategy was announced in the latest full-year result.
The new hospital would be a significant addition to Vital's portfolio.
NorthWest is in advanced discussions to buy that hospital in a metropolitan area for $95m, on a 5.25 per cent year two stabilised cap rate.
"The hospital is in a strategic location with strong underlying demographics and leased to a high-quality hospital operator for 30 years. The vendor is particularly attracted by the development capability of both Vital (funding) and the manager (experience and personnel) due to potential future development of this facility. Completion of the acquisition remains subject to finalisation of terms, documentation and purchaser due diligence. The manager anticipates being in a position to execute and complete this acquisition during the fourth quarter of calendar year 2020," Vital said.
In August, Vital reported its net profit after tax.
Australasia's only listed hospital, healthcare and medical property specialist said that fell 37 per cent to $58m due to less spectacular revaluation gains in a year the business, which owns Melbourne real estate, said had been "challenging".
Vital, the fourth-largest NZX-listed real estate vehicle, said in the year to June 30, 2020, total revenue rose 2.5 per cent.
But last year's $103m revaluation gains were matched by gains of only $45m this year, pushing down the bottom-line figure. Revenue rose from $101m to $103m and operating profit was up from $34m to $41m.
"Although the suspension of elective surgery due to Covid-19 resulted in temporary cashflow issues for operators, private hospitals quickly returned to operating at full or near full capacity when restrictions were eased," Vital said in August.
It expects that to be repeated when the recently re-imposed restrictions in Victoria are removed. Australian hospital operators are being financially supported by agreements with state governments and none of Vital's aged-care tenants have been materially impacted by Covid "to date" and no requests for rent relief have been received from this subsector.
FY20 rent abatements were under $300,000 out of a total rent roll of over $100m. Debt to total assets ratio was 38.7 per cent at June 30.
Vital was yesterday trading around $2.98 on the NZX. The new units are to be issued at a fixed price of $2.80 per unit, representing a 6 per cent discount to the closing price yesterday, Vital said.
NorthWest will take at least $31.9m of new units.