Vital Healthcare Property Trust · NZX:VHP
Vital Healthcare Property Trust — H1 2018 Earnings Presentation
32 slides from Vital Healthcare Property Trust's earnings presentation, Feb 27, 2018
Slide 1: Interim Results 31 December 2017
INTERIM RESULTS 31 DECEMBER 2017 INVESTING IN AUSTRALASIA’S HEALTHCARE INFRASTRUCTURE 27 FEBRUARY 2018
Slide 2: Agenda
AGENDA ► Highlights ► Strategy ► Financials ► Portfolio ► Outlook VITAL HEALTHCARE PROPERTY TRUST 2
Slide 3: Highlights
IGHLIGHTS South Eastern Private Hospital Gate 2 Clinic Reception - Olinda Ward 4p - Emerald Ward - Clinic Consulting Rooms Main Hospital Entrance
Slide 4: Highlights
HIGHLIGHTS Financial and portfolio performance delivering on strategy Financials Strategy & drivers Gross rental income1 of $44.8m, +17.9% Positive demographic trend due to ageing Operating profit before tax1 $30.4m, +3.5% population NDI1 of $22.8m, -4.1% 65yr+ cohort utilises 4x healthcar
Slide 5: Vital's Performance
VITAL’S PERFORMANCE Strong execution driving material outperformance Index rebased to 100 400 VHP 350 10 Year Compound Annual Growth Rate 300 Vital 13.9% vs. S&P / NZX All Real Estate Index 8.0% 250 S&P/NZX 50 Index 200 S&P/NZX All Real Estate 150 S&P/ASX 200 REIT 100 Index 50 - Dec-07 Dec-08 Dec-09
Slide 6: Strategy
STRATEGY
Slide 7: Strategic Framework
STRATEGIC FRAMEWORK Building (blocks) to a healthy future Management Aligned / Stable / Experienced / Credible / Capable Stabilised Sustainable Brownfield long term portfolio, Capital & developments earnings & strong Acquisitions (capacity Treasury underlying value expansion) creation thematics
Slide 8: Recent Acquisitions
RECENT ACQUISITIONS Diversified tenant covenant and extended overall lease term VITAL HEALTHCARE PROPERTY TRUST 8
Slide 9: Acurity Healthcare Partnership
ACURITY HEALTHCARE PARTNERSHIP VITAL HEALTHCARE PROPERTY TRUST 9
Slide 10: Wakefield Hospital, Wellington
WAKEFIELD HOSPITAL, WELLINGTON Now Proposed VITAL HEALTHCARE PROPERTY TRUST 10
Slide 11: Bowen Hospital, Wellington
BOWEN HOSPITAL, WELLINGTON VITAL HEALTHCARE PROPERTY TRUST 11
Slide 12: Royston Hospital, Hastings
ROYSTON HOSPITAL, HASTINGS VITAL HEALTHCARE PROPERTY TRUST 12
Slide 13: Development Update
DEVELOPMENT UPDATE Development continues to enhance asset quality and portfolio value Budgeted Spend Forecast development cost to date completion Development (NZ$m) (NZ$m) date Toronto Private (NSW) 10.3 7.4 Apr-18 North West Private (TAS) 1.1 0.3 May-18 Lingard Private (NSW) 26.2 8.6 Jun-18 Royston
Slide 14: Sector Drivers and Trends
SECTOR DRIVERS AND TRENDS Periodic regulatory reform, long term trends undeniable Economic & market influences Public system Relatively Regulatory pressure insulated reform relatively constant, private system from macro financial, diversification critical component economic and market critical condi
Slide 15: Private Health Insurance Trends
PRIVATE HEALTH INSURANCE TRENDS Strong PHI trends in NZ. Australian PHI growth stable but sector resilient 1,400 12,000 1,390 11,800 Lives Covered (000's) 1,380 11,600 1,370 11,400 1,360 11,200 1,350 11,000 1,340 10,800 1,330 10,600 1,320 10,400 1,310 10,200 1,300 10,000 New Zealand (LHS) Australia
Slide 16: Financials
FINANCIALS
Slide 17: Financial Performance
FINANCIAL PERFORMANCE Core business activities drive positive operating results Actual Normalised Change Change (in millions of $NZ, except per unit amounts) 1H18 1H17* $m % Gross rental income 44.8 38.0 6.8 17.9% Net rental income 43.2 37.0 6.2 16.6% Total expenses 12.8 7.7 5.1 67.2% Operating prof
Slide 18: Distributable Income
DISTRIBUTABLE INCOME Conservative payout ratio at both NDI and AFFO level Actual Normalised Change Change (in millions of $NZ, except per unit amounts) 1H18 1H17* $m % Profit before income tax 61.1 41.2 19.9 48.3% Revaluation (gains)/losses -42.8 -13.1 -29.7 226.5% Unrealised FX (gains)/losses 1.6 2
Slide 19: Net Operating Income
NET OPERATING INCOME Acquisitions and developments were key drivers of core rent growth Same property NOI growth was 3.5% for the 6 month period, over the prior year. VITAL HEALTHCARE PROPERTY TRUST 19
Slide 20: Balance Sheet
BALANCE SHEET Strong balance sheet supports execution of strategy Actual Actual change change (in millions of $NZ, except per unit amounts) 1H18 FY17 $ % Investment properties 1,670.8 1,376.2 294.6 21.4% Weighted average cap rate 5.85% 6.03% -17 bps Total assets 1,687.4 1,392.2 295.2 21.2% Bank debt
Slide 21: Investment Property
INVESTMENT PROPERTY Acquisitions and FX key drivers of property uplift over the first six months NZ $millions 1,800 54.0 1,671.0 42.8 187.4 10.5 1,600 1,376.4 1,400 Australian Australian portfolio 1,200 portfolio translated into in A$ NZ$ 1,000 800 A $1,057.7m A $1,159.8m 600 400 NZ 200 portfolio NZ
Slide 22: NTA Movement
NTA MOVEMENT NTA uplift reflective of foreign exchange and revaluation gains VITAL HEALTHCARE PROPERTY TRUST 22
Slide 23: Portfolio
PORTFOLIO
Slide 24: Strong Geographic Diversification
STRONG GEOGRAPHIC DIVERSIFICATION 42 investment properties comprising ~2,550 beds and ~95 operating theatres. Geographic split (%) 76/24 Australia/New Zealand by value Indicates number of assets in each state VITAL HEALTHCARE PROPERTY TRUST 24
Slide 25: Portfolio Composition
PORTFOLIO COMPOSITION New partnership with Acurity increases weighting to Acute Surgical in New Zealand GEOGRAPHIC DIVERSIFICATION SECTOR DIVERSIFICATION Strategic NSW WA 33% Aged care 2% 6% 4% TAS 1% SA Rehabilitation 4% 10% Acute Surgical 58% QLD 13% Mental health 14% NZ 24% VIC Medical office 19%
Slide 26: Core Portfolio Metrics
CORE PORTFOLIO METRICS Resilient metrics underpin defensive qualities, driving financial performance Total income subject to Occupancy WALE structured rent reviews 18.6 92.2% 20 100% 100% 99.6% 17.1 18.4 17.7 85.4% 85.8% 82.9% Percentage of income 99.3% 99.4% 99.1% 99.3% 15.1 Percentage of income 16
Slide 27: Lease Expiry Profile
LEASE EXPIRY PROFILE Low risk expiry profile = sustainable, predictable and defensive cash flows 12% 10% Percentage of portfolio (by income) 80% of income expiries after 2028 8% 6% 4% 1.8% p.a. 2% average lease expiry over the next 10 years 0% 18 19 20 21 22 23 24 25 26 27 Total expiry Largest singl
Slide 28: Interim Revaluation
INTERIM REVALUATION Strong interim revaluations validate strategy Revaluation summary Revaluation gain of $42.8m, +2.9% above book value Values supported by external independent desktop reviews Majority of gain from Australian portfolio Australian WACR firmed ~16 bps to 5.85%, New Zealand ~1
Slide 29: Outlook
OUTLOOK
Slide 30: Outlook
OUTLOOK Investing in Australasia’s Healthcare Infrastructure Deliver strong operational, financial and portfolio results - driven by scale and diversification Execution of acquisition and development pipelines, continuation of incremental value-add opportunities Acquire strategic sites to support op
Slide 31: Disclaimer
DISCLAIMER This presentation has been prepared by NorthWest Healthcare Properties Management Limited (the "Manager“, formerly Vital Healthcare Management Limited) as manager of the Vital Healthcare Property Trust (the "Trust"). The details in this presentation provide general information only. It is
Slide 32: Glossary
GLOSSARY Adjusted Funds From Operations is an alternate measure used for assessing distributable income. Essentially AFFO adjusts NPAT for all non-cash items (i.e. NDI) then makes adjustments for items such as maintenance capex and lease incentives paid Capitalisation rate. Generally calculated as n
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