Vital Healthcare Property Trust (NZX: VHP) Half Year Results and Increased Distribution Guidance

Thursday 25th February 2021

NorthWest Healthcare Properties Management Limited (the Manager), the manager of Vital Healthcare Property Trust (Vital), released Vital’s results for the six months ended 31 December 2020 (the Half Year) today.

Vital’s defensive portfolio helped it record a 19.8% total return for the 12 months ended 31 December 2020, outperforming the S&P/NZX REIT Index by 15.4% and the broader S&P/NZX 50 index by 5.9%.

This outperformance, despite the COVID-19 pandemic, highlights Vital’s defensive characteristics including its market-leading 19.0 year weighted average lease expiry term (WALE) and earnings growth. The underlying strength of our tenants’ income helped us achieve over 99% rent collection for the Half Year in turn enabling us to increase our distribution guidance for the second half of FY21 to 9.00 cpu (annualised) from prior guidance of 8.75 cpu.

Highlights for the Half Year

Appointment of Independent Chair, Graham Stuart, to lead a majority Independent Board.

Sale of three regional Australian hospitals for $100.4m; a 14.7% premium to their book value with the proceeds used to acquire Grace Hospital in Tauranga, New Zealand.

Balance sheet gearing reduced to 32.4%.

20.2% increase in adjusted funds from operations (AFFO) per unit from 4.88 cents per unit (cpu) in the first half of FY20 to 5.87 cpu.

Over 99% of rent collected despite COVID-19.

7.1% increase in net tangible assets (NTA) per unit from $2.38 to $2.55.

$66m of new developments commenced in addition to the $290m previously underway.

Vital’s Fund Manager, Aaron Hockly, said:

“During the Half Year the Manager continued to execute on our announced strategy:

1. improving the portfolio across all key metrics including over $200m of capital transactions (three sales and two acquisitions);

2. continuing to expand our development pipeline to ensure 10-15% of the portfolio remains under development over the medium-term; and

3. raising over $170m in new equity to reduce balance sheet gearing and provide capacity for future value enhancing acquisitions and developments.”

Earnings, expenses and distributions

Net property income increased by 7.5% (excluding foreign exchange impacts) over the Half Year from $49.9m to $54.2m compared to the prior corresponding period. This increase was primarily due to acquisitions ($2.2m of additional revenue), development income ($2.1m) and rental growth ($0.5m). Same property net property income compared to the prior corresponding period increased by 1.5% (excluding foreign exchange impacts) due to fixed and indexed rent reviews.

Outlook

Healthcare property remains a defensive asset class underpinned by growing demand, high levels of government support in Australia and New Zealand and growing institutional interest. Notwithstanding the challenging health and economic environment due to COVID-19, Vital remains well-positioned to continue to grow earnings, achieve our revised distribution guidance and continue to improve Vital’s high-quality portfolio.

Second Quarter Distribution

Vital's unitholders will receive a FY21 second quarter distribution of 2.1875 cents per unit (cpu) with 0.812974 cpu imputation credits attached. The record date is 11 March 2021 and payment will be made on 25 March 2021. Vital's Distribution Reinvestment Plan (DRP) will remain available to investors for this distribution, with a 1% discount being applied when determining the strike price.

Please see the links below for details:

HY2021 Interim Results Market Release

HY2021 Interim Report

HY2021 Interim Results Announcement

HY2021 Interim Results Presentation

Vital's FY21 Second Quarter Distribution

Source: Vital Healthcare Property Trust

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