Vital Healthcare Property Trust Analysis

Overview

Vital Healthcare Property Trust (Vital) is the only specialist, NZX-listed landlord of healthcare real estate in New Zealand and Australia. Vital's portfolio is valued at ~$2.2 billion.

The manager of the Trust is NorthWest Healthcare Properties Management Limited, a subsidiary of Toronto listed global healthcare fund manager and owner, NorthWest Healthcare Properties REIT.

Performance

The following information was extracted from Vital Healthcare Property Trust's Full Year Results, released on 8 August 2024:

Northwest Healthcare Properties Management Limited (the Manager), as manager of Vital Healthcare Property Trust (Vital), has today released its results for the 12 months ended 30 June 2024 (FY24).

Despite a challenging environment, Vital recorded Adjusted Funds from Operations (AFFO) of 10.9 cpu enabling payment of 9.75 cpu in distributions, consistent with guidance, on a prudent 89.4% payout ratio. The Manager also continued to progress several strategic initiatives including the sale of non-core assets, key ESG initiatives, capital partnering, increasing hedging and maintenance of balance sheet gearing below 40%.

Fund Manager, Aaron Hockly, said: “During FY24 NZ$251.3m of non-core assets were sold and five developments, totaling NZ$197m, were completed. Recycling capital from sales into developments, in addition to leasing, has enabled us to maintain Vital’s market leading WALE at 18.3 years and improved Vital’s property portfolio across a range of metrics including lowering the average building age, increasing exposure to healthcare precincts, green buildings and key markets including New Zealand.”

“Vital’s remaining committed development spend of ~NZ$138m is fully funded from existing debt headroom of ~NZ$158m. In addition, ~NZ$180m of asset sales are in due diligence to complete Vital’s asset sales programme” Hockly continued.

FY24 highlights include:

• Vital was acknowledged as Sector Leader (the highest possible achievement) by GRESB for ESG in healthcare for listed entities globally across performance, management and developments.
• A 3.7% increase in underlying net property income (NPI) primarily reflecting the impact of development income and rent reviews (on a same-property, constant currency basis).
• Divestment of NZ$251.3m of non-core assets at a 7.5% discount to previous book values.
• Practical completion was reached at five developments with a total development cost of NZ$197m:
• 10.90 cpu in AFFO, a 2.5% decline from FY23.
• Maintenance of distributions at 9.75 cpu (consistent with guidance) on a prudent 89% AFFO pay-out ratio.