Vital makes $93.4m, blames interest rates, tax costs for 6.6pc profit drop

Ascot Hospital in Auckland. Photo / Richard Robinson

Vital Healthcare Property Trust's annual net profit after tax dropped 6.6 per cent from last year's $100.1m to $93.4 due to interest rate and tax issues.

The listed medical real estate specialist business has just declared its full-year result for the year to June 30, 2019, citing "non-cash losses from interest rate derivatives ($36.3m) and higher income tax due to a change in legislation partially offset by property revaluation gains."

Vital said gross rental income rose 7.9 per cent to $101.1m and net property income was up 7.7 per cent to $97.7m.

The portfolio now stands at $1.8b, occupancy is 99.4 per cent and has a weighted average lease term of 18.1 years.

Revaluations saw gains of $103.6m, up 5 per cent.

Vital owns health and medical-related properties here and in Australia. Its tenants are hospital and healthcare operators providing medical and health services and carrying out research.

Investors to vote on controversial fee structure

The trust could be at a crossroads, with investors due to vote on the manager's fee structure. changes soon. Manager Canada-based NorthWest Healthcare Property Real Estate Investment Trust has promised to call a meeting to vote on the changes before the end of October.

Today, the trust said on fees and governance: "On 1 April 2019 it was announced that a conditional agreement on a new governance and fees structure had been reached between the independent directors and the Vital manager's parent, NorthWest Healthcare Properties. The proposed enhanced fee and governance amendments will be put to a unitholder vote at the AGM."

In December, institutional investors the Government-backed ACC, ANZ Investments and Mint Asset Management ramped up their fight to change the way Vital was being managed, criticising increasing management fees that they say are inherently unfair to unitholders.

In April, the Herald reported how the manager tried to lobby a senior Cabinet minister to curb what it described as "aggressive tactics" by ACC to lower management fees. That lobbying was condemned by the New Zealand Shareholders' Association, which said NorthWest Healthcare's December 1 , 2018 etter to ACC Minister Iain Lees-Galloway was "unwelcome" and unnecessary.

A Treasury report said the letter was subsequently forwarded to Finance Minster Grant Robertson to deal with.