Daily ShareChat: Vital Healthcare Property Trust

By Jenny Ruth

Friday 6th May 2011 1 Comment

The $14 million price to internalise the management of Vital Healthcare Property Trust, formerly ING Medical Properties Trust and, before that, Calan Healthcare Properties Trust, appears to be too high, says Chris Byrne, an analyst at Craigs Investment Partners.

That's because unitholders can vote with a 75% majority to remove the manager, the ANZ Bank-owned OnePath, at a cost of about $2.3 million, although this wouldn't be a riskless process, and because similar transactions suggest a lower price, Byrne says.

While the trustee, Trustees Executors, could in theory sack the manager if that was in unitholders' interests, "we think the chances of this happening are remote, given a lack of trustee activism in the past," he says.

However, the right of unitholders to remove the manager "does mean the manager's income stream is not secured and provides a bargaining 'chip' that should be accounted for in determining the value of the management rights."

The suggested price of the management rights is 2.7% of Vital's $517.5 million in assets but the trust doubled its assets in December with the purchase of 12 properties in Australia. The asking price is 4.6% of Vital's assets excluding those properties.

"While it may not have been the intention of management to do this simply to boost the value of the management contract, it could be construed this way," Byrne says.

Recommendation: Hold.

Comments from our readers

On 7 May 2011 at 5:43 pm Foregone said:

You have to be pretty sure that the Trustee is not going to place Vital in a litigious situation AND at the dreamers' buy out price of $2.3m, ANZ would be better off retaining the rights. Let's try for a bit of realism please.