Vital Healthcare Property Trust · NZX:VHP
Vital Healthcare Property Trust — FY2021 Earnings Presentation
46 slides from Vital Healthcare Property Trust's earnings presentation, Aug 12, 2021
Slide 1: FY21 Annual Results Presentation
Managed by NorthWest Healthcare Properties Management Limited FY21 ANNUAL RESULTS PRESENTATION 12 August 2021
Slide 2: Contents
CONTENTS Page • Overview 3 • FY21 highlights 4 PRESENTED BY: • Portfolio 12 • Developments 17 • Financial results & capital management 22 Aaron Hockly Michael Groth • Outlook & guidance 28 Fund Manager Chief Financial Officer • Appendices 31 Richard Roos Chris Adams All amounts are in NZD unless oth
Slide 3: Overview of Vital
OVERVIEW OF VITAL VITAL IS THE FOURTH LARGEST LISTED PROPERTY VEHICLE AND THE ONLY SPECIALIST HEALTHCARE LANDLORD ON THE NZX AUSTRALIA Vital Healthcare Property Trust (Vital) is: $2.63bn ✓ the owner of a $2.63 billion healthcare property portfolio in New Zealand (27% of assets) and Australia (73%);
Slide 4: FY21 Highlights
FY21 HIGHLIGHTS 4 VITAL HEALTHCARE PROPERTY TRUST
Slide 5: Delivery of Strategy
DELIVERY OF STRATEGY DELIVERING FOR VITAL UNITHOLDERS IN ACCORDANCE WITH STRATEGY Continued deployment of Vital’s 5-year portfolio strategy resulting in: ✓ Earnings growth ✓ Continued portfolio improvement: o FY21 AFFO: 11.54cpu; 10.4% above FY20 o extension of market leading WALE to 18.7 years o FY
Slide 6: Highlights
HIGHLIGHTS DELIVERING FOR UNITHOLDERS WITH A STRENGTHENED BALANCE SHEET 10.4% 27.7% AFFO per unit change over FY21 total return 7.4% above benchmark 21.4% 35.0% balance sheet gearing; increase in NTA per unit significantly reduced from since 30 June 2020 38.7% at 30 June 2020 6 VITAL HEALTHCARE PROP
Slide 7: Highlights - Portfolio
HIGHLIGHTS - PORTFOLIO ENHANCED PORTFOLIO METRICS IN ALIGNMENT WITH VITAL STRATEGY 8.0% 60,000sqm 18.1 18.7yrs increase in underlying new, renewed or increased WALE income (ex. FX) extended leasing1 $9.7m 4.88% $387m Increase in NPI WACR property transactions primarily due to acquisitions and 66bps
Slide 8: Development Progress
DEVELOPMENT PROGRESS DEVELOPMENT CONTINUES TO DELIVER STRATEGIC AND FINANCIAL BENEFITS FOR UNITHOLDERS 1 $80m $74m ~6% developments developments gross yield on costs completed commenced Epworth Eastern Expansion (July 2021) $312m ~$740m developments committed increased potential ($136m spend remaini
Slide 9: Stabilised Asset Acquisitions
STABILISED ASSET ACQUISITIONS TWO PREMIUM ASSET ACQUISITIONS OF SCALE COMPLETED Grace Hospital, Tauranga (NZ) Epworth Camberwell, Camberwell (VIC) NZ$95m A$82.7m* acquisition price acquisition price 5.25%1 4.78%2 Initial yield Initial yield 30yr 20yr WALE WALE Quality Tenant Quality Tenant JV betwee
Slide 10: ~$740M Added to Development Pipeline
~$740M ADDED TO DEVELOPMENT PIPELINE CONTINUED RESTOCKING OF DEVELOPMENT PIPELINE THROUGH FIVE STRATEGIC ACQUISITIONS Playford Health Hub, Elizabeth Vale (SA) 17-23 Nelson Road, Box Hill (VIC) A$7.4m A$29m acquisition price acquisition price (balance 50% interest) 16,748 5,330 site area (sqm) site a
Slide 11: Comparative Returns
COMPARATIVE RETURNS VITAL OUTPERFORMED ITS BENCHMARK FOR ALL PERIODS ON A TOTAL RETURN(1) BASIS 5yr 10yr Since 2004 VHP vs S&P NZX Real Estate Index Total return(1) to 30 June 2021 1yr (p.a.) (p.a.) (p.a.) (2) Vital 27.7% 10.7% 15.5% 14.1% S&P/NZX All Real Estate Index 20.4% 9.6% 11.1% 9.5% S&P/NZX
Slide 12: Portfolio
PORTFOLIO 12 VITAL HEALTHCARE PROPERTY TRUST
Slide 13: Portfolio Overview
PORTFOLIO OVERVIEW ALL FOUR KEY ASSET GROUPINGS CONTINUE TO PERFORM WELL Private hospitals - Australia Out-patient facilities / medical Subsector diversity (by value) office buildings – Australia and NZ 17 hospitals (acute and specialty – mental health, rehabilitation) 7 assets (Australia: 4, NZ
Slide 14: Net Property Income
NET PROPERTY INCOME 9.4% NPI GROWTH AIDED BY ACQUISITIONS, DEVELOPMENTS AND RENT REVIEWS Leasing activity (exc. assets sold) Net Property Income Bridge 9.4% growth (incl. FX) / 8.0% (excl. FX) (NZ$000’s) Belmont Private Hospital: 10yr lease extension (25yr WALE) – Healthe Care Currumbin Clinic:
Slide 15: Movement in Investment Property
MOVEMENT IN INVESTMENT PROPERTY WELL-LEASED HEALTHCARE ASSETS CONTINUE TO EXPERIENCE CAP RATE COMPRESSION Investment Property Bridge (FY21) (NZ millions) Key FY21 Results: ~66% of Vital’s portfolio independently valued (by number of properties) at 30 June 2021, following 40% being undertaken at 31
Slide 16: Tenant Concentration Reduced
TENANT CONCENTRATION REDUCED VITAL’S TOP 5 TENANTS CONTINUE TO PURSUE VALUE-ADD OPPORTUNITIES TENANT Specialty Acute PORTFOLIO INCOME (%) 28% 14% 13% 10% 4% # OF ASSETS 10 4 3 3 1 (SPECIALTY HOSPITALS) (ACUTE HOSPITALS) (ACUTE AND SPECIALTY (ACUTE AND SPECIALTY (ACUTE HOSPITAL) (TYPE) HOSPITALS) HOS
Slide 17: Developments
DEVELOPMENTS 17 VITAL HEALTHCARE PROPERTY TRUST
Slide 18: Development Strategy & Value-Add
DEVELOPMENT STRATEGY & VALUE-ADD TARGETING 10-15% OF THE PORTFOLIO VALUE UNDER DEVELOPMENT Developments are key for: Core part of strategy ✓ Earnings & capital In addition to immediate financial benefits, developments enable Vital to continue to improve the portfolio through: growth Lowering avera
Slide 19: Completed Developments
COMPLETED DEVELOPMENTS TWO DEVELOPMENTS COMPLETED IN FY21 South Eastern Private Hospital Royston Private Hospital Asset South Eastern Private Hospital Asset Royston Asset Type Specialty Hospital Asset Type Acute Hospital Total Cost A$9.2m Total Cost NZ$9.9m (plus $8.1m for DSU project, PC in late-21
Slide 20: Committed Development Updates
COMMITTED DEVELOPMENT UPDATES $300M+ COMMITTED DEVELOPMENT PIPELINE EPWORTH EASTERN, VIC BELMONT PRIVATE, QLD EDEN REHABILITATION, QLD A$12.4m cost A$2.9m spent PC (Mid-22)1 PLAYFORD HEALTH HUB, SA A$96.5m cost A$83.9m spent PC (Early-22) A$22.6m cost A$2.6m spent PC (Late-22) A$20.7m cost2 A$11.6m
Slide 21: Potential Development Pipeline
POTENTIAL DEVELOPMENT PIPELINE ~$740M POTENTIAL DEVELOPMENT PIPELINE ACROSS AUSTRALIA & NEW ZEALAND $376m $83m $155m $16m $50m $60m 21 VITAL HEALTHCARE PROPERTY TRUST | ANNUAL RESULTS 2021
Slide 22: Financial Results & Capital Management
FINANCIAL RESULTS & CAPITAL MANAGEMENT 22 VITAL HEALTHCARE PROPERTY TRUST
Slide 23: Financial Performance
FINANCIAL PERFORMANCE PROPERTY EARNINGS & REVALUATIONS GROWTH HAS FACILITATED SIGNIFICANT AFFO GROWTH Actual Actual ($) (%) FY2021 FY2020 change change Contribution from structured rent Net property income 109,663 100,147 9,516 9.5% reviews, acquisitions and development rents Corporate expenses (4,7
Slide 24: Balance Sheet
BALANCE SHEET STRENGTHENED BY SIGNIFICANT REVALUATION GAINS, NEW EQUITY AND DEBT EXTENSION Actual Actual ($) (%) FY2021 FY2020 change change Increase due to: Investment properties 2,634,588 2,086,309 548,279 26.3% development and capital works expenditure of $127m 2 Other assets 27,972 18,909 9,06
Slide 25: Net Tangible Assets
NET TANGIBLE ASSETS REVALUATION GAINS HAVE LED TO STRONG NTA GROWTH PER UNIT NTA Per Unit Bridge Revaluation gain of $235m; an 11.3% increase in total portfolio value from June 2020 69% of gain from Australian portfolio and 31% from New Zealand Revaluation gains include ~$17m from rental incre
Slide 26: Debt
DEBT GEARING REDUCED DURING FY21 TO SUPPORT FUTURE GROWTH FY21 Overview Strategic priorities delivered: weighted average maturity extended to 2.5 years expiring facilities refinanced 35.0% enhanced lending terms and conditions secured, with DEBT / ASSETS Calculated in accordance with Vital’s
Slide 27: Debt Maturity
DEBT MATURITY INCREASED WEIGHTED AVERAGE DEBT DURATION AND AVAILABLE HEADROOM FOR UTILISATION Bank Facilities 30 Jun 2021 30 Jun 2020 1 Debt to gross assets (Trust Deed) 35.0% 38.7% Headroom available under existing 2 facility to support future growth Bank loan to value ratio - actual 38.0% 40.2% Ba
Slide 28: Outlook and Guidance
OUTLOOK AND GUIDANCE 28 VITAL HEALTHCARE PROPERTY TRUST
Slide 29: Outlook & Guidance
OUTLOOK & GUIDANCE CONTINUED DELIVERY AND FOCUS ON EARNINGS GROWTH FY22 AFFO guidance of at least Significant development pipeline Future asset recycling strategies 11.80 cpu; up at least 2% on FY21 continue to be considered to o $312m – committed partially fund new developments and FY22 dis
Slide 30: Appendices
APPENDICES 30 VITAL HEALTHCARE PROPERTY TRUST
Slide 31: Why Invest in Vital
WHY INVEST IN VITAL VITAL IS THE ONLY SPECIALIST NZX-LISTED OWNER OF HEALTHCARE PROPERTY; NO ASX-LISTED EQUIVALENT HIGH QUALITY EARNINGS DEVELOPMENT DEFENSIVE SECTOR HIGH DEMAND PORTFOLIO GROWTH UPSIDE Private healthcare is Ageing demographics Landlord to some of New Targeting 2-3% AFFO $136m of rem
Slide 32: Vital's Strategy
VITAL’S STRATEGY VITAL INVESTS IN HEALTHCARE ECOSYSTEMS IN NEW ZEALAND & AUSTRALIA Earnings growth Acuity Portfolio Allocation* Portfolio designed to support AFFO Hospitals Aged Care Higher acuity target growth of 2-3%/unit per annum Investments in core health ecosystem Quality Regulated and
Slide 33: Vital Structure
VITAL STRUCTURE VITAL IS A UNIT TRUST LISTED ON THE NZX, EXTERNALLY MANAGED BY A LEADING GLOBAL HEALTHCARE REAL ESTATE INVESTOR AND MANAGER New Zealand’s largest specialist owner of healthcare real estate Only listed specialist owner of healthcare real estate in Australasia Over 40 healthcare real e
Slide 34: Real Estate Returns
REAL ESTATE RETURNS HEALTHCARE REAL ESTATE CONTINUES TO PERFORM STRONGLY AGAINST CORE PROPERTY INVESTMENT SECTORS Returns by real estate asset class in Australia versus Vital’s real estate level returns (non-compounding) year ended 30 June 2021 Income Growth Capital Growth Total Return Office (Aus)
Slide 35: Portfolio Overview
PORTFOLIO OVERVIEW $2.63B PORTFOLIO OF HEALTHCARE REAL ESTATE COMPRISING 41 INVESTMENT PROPERTIES AND 3,000+ BEDS Epworth Camberwell, VIC Grace Hospital, NZ 35 VITAL HEALTHCARE PROPERTY TRUST | ANNUAL RESULTS 2021
Slide 36: Portfolio Overview (cont'd)
PORTFOLIO OVERVIEW (cont’d) $2.63B INVESTED IN 41 CORE HEALTHCARE PROPERTIES WITH OVER 3,000 BEDS AND 103 UNIQUE TENANTS Income Tenant Diversification (% of rent) FY21 property income growth of 1.5% (like-for-like, same currency basis) Strong positive rent growth achieved during FY21 through a c
Slide 37: Committed Developments
COMMITTED DEVELOPMENTS DEVELOPMENTS ENHANCE EARNINGS GROWTH AND IMPROVE ASSET QUALITY 1 Structure and façade complete. Fitout of clinical areas well progressed. 2 Refurbishment works continuing. ~$9.5m of extensions works paused, pending review. Enabling works complete. Authority approvals received
Slide 38: Disposals
DISPOSALS RECYCLED ~$100M FROM REGIONAL ASSET SALES TO FUND ACQUISITION OF GRACE HOSPITAL IN TAURANGA, NZ Mayo Private Hospital, NSW Regional Asset Disposals Asset Portfolio Summary ~175km Distance to Newcastle CBD 202 (Mayo Private) Inpatient beds ~400km Distance to Sydney CBD Dubbo Private Hospita
Slide 39: Adjusted Funds From Operations (AFFO)
ADJUSTED FUNDS FROM OPERATIONS (AFFO) CONSERVATIVE PAYOUT RATIO Actual Actual ($) (%) FY2021 FY2020 change change Operating profit before tax and other income 51,064 41,132 9,932 24.1% Add/(deduct): Current tax expense (7,858) (7,238) (620) (8.6%) Incentive fee 12,402 6,475 5,927 91.5% Realised and
Slide 40: Interest Rate Hedging Profile
INTEREST RATE HEDGING PROFILE COST OF DEBT WELL HEDGED, MANAGING RISK Rates 30 Jun 2021 30 Jun 2020 Hedging Maturity Profile ($A) 1 Weighted average cost of debt 3.32% 3.59% Weighted average fixed rate 2.94% 3.01% (excl line and margin) Weighted average fixed rate duration 5.5 yrs 6.1 years % of dra
Slide 41: Lease Expiry Profile
LEASE EXPIRY PROFILE LOW RISK EXPIRY PROFILE SUPPORTS SUSTAINABLE, PREDICTABLE AND DEFENSIVE CASH FLOWS Lease expiries in FY22 primarily reflect smaller tenancies at multi-tenant properties. FY22 Expiries: Total expiry of $2.0m or 1.7% of annual rent through to June 2022. Largest single lease expi
Slide 42: Rent Reviews
RENT REVIEWS HIGH PERCENTAGE OF TOTAL RENT IS REVIEWED ANNUALLY WITH STRUCTURED1 REVIEW MECHANISMS Rent Reviews – FY21 (“like-for-like” excludes developments, acquisitions and disposals) Annualised Jun-20 Rent p.a. Jun-21 Rent p.a. Increase Growth # (NZD) (NZD) (NZD) (Stable currency) Australia AUS
Slide 43: Core Portfolio Metrics
CORE PORTFOLIO METRICS 5 YEAR TRENDS HIGHLIGHT PORTFOLIO STRENGTH AND UNDERPIN LONG-TERM PERFORMANCE OCCUPANCY WALE 100% 19 18.7 99.4% 99.4% 99.2% 99.1% 99.3% 18.2 18.1 18.1 99% 18 17.7 13th consecutive year of 98% Years portfolio occupancy 17 97% >99% 96% 16 95% 15 2017 2018 2019 2020 2021 2017 201
Slide 44: Overview of NorthWest - Vital's Manager
OVERVIEW OF NORTHWEST – VITAL’S MANAGER NORTHWEST: A FOCUSED HEALTHCARE REAL ESTATE INVESTMENT OWNER AND MANAGER Global scale, local relationships Partner of choice for leading operators in each market it invests Deep healthcare real estate expertise 230+ healthcare property professionals based in 3
Slide 45: Glossary
GLOSSARY AFFO Adjusted Funds From Operations is an alternate measure used for assessing distributable income. Essentially adjusts NPAT 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. Generally calcu
Slide 46: Disclaimer
DISCLAIMER This presentation has been prepared by NorthWest Healthcare Properties Management Limited (the "Manager") as manager of the Vital Healthcare Property Trust (the "Trust"). The details in this presentation provide general information only. It is not intended as investment, legal, tax or fin
Vital Healthcare Property Trust — FY2021 Earnings Presentation on 6ix