Vital Healthcare Property Trust · NZX:VHP
Vital Healthcare Property Trust — HY23 Earnings Presentation
46 slides from Vital Healthcare Property Trust's earnings presentation, Feb 23, 2023
Slide 1: HY23 interim results presentation
HY23 interim results presentation Defensive sector and strategy continues to deliver for Unit Holders 23 F E B R U A RY 2 0 23
Slide 2: Contents
Contents Presenters Aaron Hockly Fund Manager Delivery of core business strategies 3 Overview of Vital 4 Michael Groth Chief Financial Officer HY23 highlights 8 Financial results & capital management 11 Richard Roos Portfolio17 Exec. Director, Portfolio Developments21 Future focus 26 Chris Adams Exe
Slide 3: Delivery of core business strategies
Delivery of core business strategies DURING HY23, THE MANAGER CONTINUED TO DELIVER ON ITS STRATEGIES TO ADD VALUE FOR UNIT HOLDERS High-quality healthcare real estate portfolio anchored Increase exposure to green buildings. Growing AFFO and distributions by 2-3% per unit by private hospitals. per an
Slide 4: Overview of Vital
Overview of Vital VITAL IS THE ONLY SPECIALIST HEALTHCARE LANDLORD LISTED ON THE NZX V I TA L HEALT HCARE PROPERT Y T RU ST (V ITAL) IS: 17.2 year ~ NZ$3.5bn WA L E 47* PROPERTIES The owner of a ~NZ$3.5 billion healthcare ( AU S & N Z ) property portfolio in New Zealand (30% of assets) and Australia
Slide 5: Short, medium and longer term enhancements
Short, medium and longer term enhancements1 PO R TFO LI O E N H A N C E ME NTS SU PPO R T TA R G E T OF G RO WING AFFO AND D ISTRIBUTIO NS BY 2–3% P ER UN IT PER AN N UM TOTAL PRO PERT Y VA L U E WA L E AV E R AG E BUI L D I NG AG E 2 NET PROPERT Y INCOME (HALF YEAR) ~ NZ$0.62bn ~NZ$1.93bn ~NZ$3.5bn
Slide 6: Short, medium and longer term enhancements (cont'd)
Short, medium and longer term enhancements1 (cont'd) BAL ANC E S H E E T ST R E NG H TE NE D A ND R E F INA NC E P RO G RESS ING TO D ELIV ER NO D EBT EX P IRY UNTIL 2025 2 NTA PER UNIT B A L A N CE S H E E T G E A R I NG AV E R AG E D E BT M AT UR I T Y 44.8% 35.1% 33.7% 3.4 years 1.7 years 4.2 yea
Slide 7: Sustainability
Sustainability ACKNOWLEDGED AS A LEADER IN SUSTAINABILITY FOR LISTED HEALTHCARE REAL ESTATE First “6-star Green Star” Registered building in the Gold Coast Health & Knowledge Precinct In October 2022, Vital achieved Vital has also participated in the Construction is expected to a 5-star rating from
Slide 8: HY23 highlights
HY23 highlights
Slide 9: HY23 highlights
HY23 highlights DEBT S EC UR E D AN D EX T E ND E D; AC Q U ISITIO NS SLO WED; CO R E POR T FOLI O D E L IV E R ING INC O ME G R O W TH Refinance progressing to deliver no debt A$100m 67% expiry until 2025 1 additional debt of debt hedged with limit secured 1 a weighted term of 2.9 years1 33.7% 81%
Slide 10: HY23 highlights (cont'd)
HY23 highlights (cont'd) VALUE AD D AC T I V I T Y F R O M PR IO R PE R IO D S C O NTINUES TO D ELIV ER FO R UNIT H O LD ERS 20.3% 3.4% 17.2 years increase in underlying average rent reviews WALE; market leading income over CY22 completed (ex. FX) 13 developments NZ$86m >NZ$200m underway with of dev
Slide 11: Financial results & capital management
Financial results & capital management
Slide 12: Financial performance
Financial performance P RO P ERT Y E A R N I N GS G R O W TH HAS FAC IL ITATE D AFFO G RO WTH OV ER TH E M ED IUM TERM AC T UA L AC T UA L ($) (%) HY2023 HY2022 C HA N GE C HA N GE Contribution from structured rent reviews, acquisitions Net property income 72,068 57,924 14,144 24.4% and development
Slide 13: Net property income
Net property income 20.3% NP I GR O WT H (E XC L. F X) D U E TO AC Q U ISITIO NS, D EV ELO PM ENTS AND RENT REV IEWS Acquisitions – income from late FY22 N E T P R O P ER T Y IN C O M E B R ID GE and HY23 acquisitions ($M) +24.4% growth (incl FX) / +20.3% (excl. FX) Development income – rentalisatio
Slide 14: Balance sheet
Balance sheet STRENGT H E N E D BY NE W E Q U IT Y A ND D E BT E X T ENS IO N AC T UA L AC T UA L ($) (%) HY23 FY22 C HA N GE C HA N GE Increase due to: Investment properties 3,454,675 3,339,169 115,506 3.5% Development and capital works expenditure of ~$90m2 Other assets 42,530 60,665 (18,135) (29.
Slide 15: Debt duration
Debt duration INCREAS E D WE I GH T ED AV E R AG E D E BT D U R AT IO N B A NK FAC ILITIES 31 D E C 2022 3 31 DEC 2021 Debt to gross assets (Trust Deed) 1 33.7% 33.2% Bank loan to value ratio – actual 2 35.5% 35.0% Bank loan to value ratio – covenant 55.0% 55.0% Refinance progressing to Weighted ave
Slide 16: Interest rate hedging profile
Interest rate hedging profile CO ST O F D E BT W E LL H E D G E D, MA NAG ING R ISK RATE S 31 D E C 2022 31 DEC 2021 H ED G ING M ATURIT Y P ROF IL E ($A) Weighted average cost of debt1 4.57% 3.14% 800 4.00% Weighted average fixed rate 2.91% 2.94% 700 3.50% (excl line and margin)2 600 3.00% Weighted
Slide 17: Portfolio
Portfolio
Slide 18: Portfolio overview
Portfolio overview ~$3.5BN I N V E ST E D I N 47 C O R E HE A LTH C A R E PR O P ERTIES WITH OV ER 2,800 BED S AND OV ER 150+ UNIQUE T EN AN TS CPI aligned leases support income growth G EO G RAP H IC D IV ERS IFIC AT ION (BY VALUE) 20.3% (excl. FX) growth in net property income; 3.7% growth for sam
Slide 19: Portfolio overview (cont'd)
Portfolio overview (cont'd) Turnover (0.8%) BREAKDO WN OF PORT F OL IO No Review CPI REVIEWS (2.9%) Lesser of CPI Stepped / Structured and 3% (3.2%) TYPE % (2.9%) ~81% of Vital's rent is linked to Fixed <3% (2.4%) CPI - Un-Capped 35.6% CPI of which 60% has a cap with a weighted average CPI x 1.5+ Fi
Slide 20: Disposals
Disposals DI VESTM E N T ST R AT E GY U ND E R WAY W ITH A TA R G E TED ~NZ$200M O F P RO C EED S BY 30 S EP TEM BER 2023 1 Australian Targeting ~NZ$200m asset currently net proceeds by held for sale 30 September 2023 for ~NZ$31m 11 Australian assets Funding to be used with a total value of for deve
Slide 21: Developments
Developments
Slide 22: Development strategy
Development strategy Existing development Highly selective Focus on precincts pipeline on track about additional and green buildings opportunities to be pursued Ability to drive programs and Early indications of softening deliver timely outcomes of procurement challenges in major markets VITAL HEALT
Slide 23: Committed development pipeline
Committed development pipeline NZ$510m NZ$369m NZ$180m committed developments 1 remaining to be spent expected to be spent over the next 12 months (funded through existing debt capacity & asset sales) 5.6% weighted average 70bps weighted average development yield development yield versus in use or e
Slide 24: Developments completed or nearing completion
Developments completed or nearing completion Abbotsford Private Hospital, WA Belmont Private Hospital, QLD Asset Type Mental Health Hospital Asset Type Mental Health Hospital Total Cost A$18.7m Total Cost A$22.6m Net Project Yield 6.1% Net Project Yield 5.8% Completion Date Staged PC and COO achieve
Slide 25: RDX, Gold Coast, Queensland
RDX, Gold Coast, Queensland VITAL' S FI R ST LI FE S C IE NC E S INV E STME NT U ND ER D EV ELO PM ENT A$140m total projected cost1 320 BEDS ~20K STUDENTS ~12,000 sqm 912 BEDS Early 2023 construction commencement 1 Includes land. VITAL HEALTHCARE PROPERTY TRUST | INTERIM RESULTS 2023 | 25
Slide 26: Future focus
Ko ngā tahu ā ō tapuwae inanhi, hei tauira mō āpōpō. The footsteps we lay down in our past create the paving stones on which we stand today. Future focus
Slide 27: Outlook & guidance
Outlook & guidance C ONTINU E D DE LI V E RY A ND F O C U S O N A D D ING VALUE AND EARNING S G RO WTH F Y23 distribution guidance of djusting to market conditions A Maintenance of strategy through 9.75 cpu 1.2% above FY22 including pausing acquisitions and the cycle Conservative ~85% payout ratio m
Slide 28: Appendices
Appendices
Slide 29: Committed developments – Australia & New Zealand
Committed developments – Australia & New Zealand DEVELOPM E N TS E N H A NC E E A R NING S G R O W T H AND IM P ROV E ASS E T Q UALIT Y ALL VALUES SHOWN IN $M DESCRIPTION OF WORKS DEVELOPMENT SPEND COST TO FORECAST FORECAST STATUS COST TO DATE COMPLETE NET RETURN COMPLETION DATE Australia GCHPK - RD
Slide 30: Committed developments – Australia & New Zealand (cont'd)
Committed developments – Australia & New Zealand (cont'd) DEVELOPM E N TS E N H A NC E E A R NING S G R O W T H AND IM P ROV E ASS E T Q UALIT Y ALL VALUES SHOWN IN $M DESCRIPTION OF WORKS DEVELOPMENT SPEND COST TO FORECAST FORECAST STATUS COST TO DATE COMPLETE NET RETURN COMPLETION DATE Australia C
Slide 31: Adjusted funds from operations (AFFO)
Adjusted funds from operations (AFFO) CO NS ERVAT I VE PAYO U T R ATIO HY2023 HY2022 ($) CHA NG E (%) CHA NG E Operating profit before tax and other income 35,888 27,815 8,073 29.0% Add/(deduct): Current tax expense (7,916) (4,352) (3,564) (81.9%) Incentive fee 7,510 6,823 687 10.1% Realised and unr
Slide 32: Net Tangible Assets
Net Tangible Assets REVALUAT I ON LOSS H AS L E D TO SMA L L NTA D E CLINE P ER UNIT NTA P ER UNIT BRIDG E (HY23) NZ$56m or 1.7% reduction from June 2022 $3.40 $3.34 ($0.09) $3.30 ($0.05) $0.01 ($0.03) $3.20 $3.17 $0.00 $3.10 $3.00 $2.90 $2.80 $2.70 $2.60 $2.50 $2.40 30-Jun-22 Property revaluations
Slide 33: Movement in investment property
Movement in investment property STRO NG C P I LI N KE D H E A LTH C A R E PO R T F O L IO O FFS E TS C AP RATE S O FTENING TOTA L P ORTF OLIO VALUE B RI DG E (1H FY23) K EY HY22 RESULTS (N Z$ M I L LI O N S) ~55% of Vital’s portfolio (56) independently valued (by value) at 90 (1) (74) $3,500 3,339 1
Slide 34: Real estate returns
Real estate returns HEALTHCARE REAL ESTATE CONTINUES TO PERFORM STRONGLY AGAINST CORE PROPERT Y INVESTMENT SECTORS Returns by real estate asset class in Australia versus Vital’s real estate level returns (non-compounding) year ended 30 September 2022 100% 92.7% Vital continues to 80% 67.1% outperfor
Slide 35: Comparative returns
Comparative returns VITAL MA I N TAI N S LO NG-TE R M O U TPE R F O R MA N C E VS BENC H M ARK O N A TOTAL RE TURN 1 BAS IS TOTAL RETURN 1 TO 31 DECEMBER 2022 1YR 5YR (P.A.) 10YR (P.A.) SINCE 2004 (P.A.) 2 V H P VS S&P NZ X REAL ESTAT E IN DEX Vital -26.0% 3.5% 10.4% 10.9% S&P/NZX All Real Estate In
Slide 36: Australian portfolio overview
~NZ$2.5bn Australian portfolio overview G EO GR A P H I C A LLY D ISPE R SE D AU ST R A L IA N PO R TFO LIO C O NTINUES TO P ERFO RM WELL PRIVAT E HOSPITALS 17 hospitals (acute and specialty – mental health, rehabilitation) Four hospital operators AG E D C A R E 78% of AUS portfolio value; A M B U L
Slide 37: New Zealand portfolio overview
~NZ$1.0bn New Zealand portfolio overview K EY NE W Z E A L AN D M A R K E T PE R F O R MING STR ONG LY PRIVATE HOSPITALS 9 hospitals (all acute) 6 hospital operators A M B U L ATO RY CARE 78% of NZ portfolio value; 79% of NZ rent 22% % WALE: 20.7 years E R 22 TH O AMBULATORY CARE 7 assets, multiple
Slide 38: Investment properties
Investment properties AS AT 31 D EC EM BER 2022 ~NZ$3.5B N P OR T FOL IO O F HE A LTH C A R E R E A L E STATE C O M P RIS ING 47 INV ESTM ENT P RO P ERTIES AND 2,800+ BEDS Western Australia (4) Queensland (6) New South Wales (12) Auckland (6) Abbotsford Private Hospital Baycrest Aged Care Clover Lea
Slide 39: Lease expiry profile
Lease expiry profile LO W RIS K E XP I RY P R O F IL E SU PPO R TS SU STA INA BLE, P RED IC TABLE AND D EFENS IV E C AS H FLO WS CY23 EXPIRIES 1 — 2.0% of this has signed extensions or heads of agreement Total potential expiries 2 of NZ$4.5m or 3.0% of Ormiston Hospital, terms pre- annual rent throu
Slide 40: Rent reviews
Rent reviews HIG H P E R C E N TAGE O F TOTA L R E NT IS R E V IE W E D ANNUALLY WITH STRUC TURED 1 REV IEW M EC H ANISM S Rent reviews – HY23 (“LIK E-F OR-LI KE” E XC LU D E S D E V E LO PME NTS, AC Q UIS ITIO NS AND D IS P O SALS) Rent reviews have been Jun-22 Rent p.a. Dec-22 Rent p.a. Increase A
Slide 41: Core portfolio metrics
Core portfolio metrics 5 Y EAR T R E N D S H I GH L IG H T PO R TF O L IO STR E NG TH AND UND ERP IN LO NG-TERM P ERFO RM ANC E O C C UPANC Y WAL E 19.0 100% 99.4% 99.5% 99.1% 19 99.0% 98.4% 18.0 17.9 17.8 98% 17.2 17 96% 15 94% Long-term track record of maintaining 13 92% >98% Occupancy 90% 2018 20
Slide 42: Vital's structure
Vital’s structure VITAL IS A UNIT TRUST LISTED ON THE NZX, EXTERNALLY MANAGED BY A LEADING GLOBAL HEALTHCARE REAL ESTATE INVESTOR AND MANAGER Vital’s Manager and largest Unit Holder ~28% Management of Vital in accordance with the Trust Deed >250 ~NZ$11bn 7 healthcare assets under number of New Zeala
Slide 43: Why invest in vital
Why invest in vital VITAL IS T H E ON LY S PE C IA L IST NZ X-L IST E D O W N ER O F H EALTH C ARE P RO P ERT Y; NO ASX-LISTED EQ UIVAL EN T DEF ENSIVE SEC TOR H IGH D E M A N D H I G H Q UA L I T Y P O R T FO L I O E A R NI NG S G R OW T H DEV ELOPMEN T U PSIDE Private healthcare is typically Agein
Slide 44: Glossary
Glossary AFFO Adjusted Funds From Operations is an alternate measure used for assessing distributable income. Essentially adjusts net profit after tax for all non-cash items (i.e. NDI) then makes adjustments for items such as maintenance capex and lease incentives paid. Cap Rate Capitalisation Rate.
Slide 45: Disclaimer
Disclaimer This document has been prepared by NorthWest Healthcare Properties Management Limited (the Manager) as manager of the Vital Healthcare Property Trust (the Trust). This document provides general information only and is not intended as investment, legal, tax, financial product or financial
Slide 46: Thank you
Thank you RDX, Gold Coast, Australia www.vhpt.co.nz Artist's Impression
Vital Healthcare Property Trust — HY23 Earnings Presentation on 6ix