Vital Healthcare Property Trust · NZX:VHP
Vital Healthcare Property Trust — HY2021 Earnings Presentation
47 slides from Vital Healthcare Property Trust's earnings presentation, Feb 25, 2021
Slide 1: FY21 Half Year Results Presentation
Managed by NorthWest Healthcare Properties Management Limited FY21 HALF YEAR RESULTS PRESENTATION 25 February 2021
Slide 2: Contents
CONTENTS All amounts are in NZD unless otherwise shown Page • Overview 3 • HY21 highlights 7 PRESENTED BY: • Portfolio 13 • Developments 18 • Financial results & capital management 25 Aaron Hockly Michael Groth • Outlook & guidance 31 Fund Manager Chief Financial Officer • Appendices 34 Richard Roos
Slide 3: Overview
OVERVIEW 3 VITAL HEALTHCARE PROPERTY TRUST
Slide 4: 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: $2.25bn ✓ the owner of a $2.25 billion healthcare property portfolio in New Zealand (28% of assets) and Australia (72%);
Slide 5: 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 6: 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 7: HY21 Highlights
HY21 HIGHLIGHTS 7 VITAL HEALTHCARE PROPERTY TRUST
Slide 8: HY21 Highlights - Transactions
HY21 HIGHLIGHTS - TRANSACTIONS TRANSACTIONS UNDERTAKEN TO GROW FUTURE EARNINGS & SUPPORT FUTURE GROWTH $236m $171m A$390m property transactions equity raised debt extended in expanded ($135m acquisitions & $101m (2 x DRP, $125m placement & banking syndicate disposals) $32.5m UPP) (post-balance date)
Slide 9: HY21 Highlights - Transactions (cont'd)
HY21 HIGHLIGHTS – TRANSACTIONS (cont’d) RECYCLED ~NZ$100M FROM REGIONAL ASSET SALES TO FUND ACQUISITION OF GRACE HOSPITAL IN TAURANGA, NZ Disposal Summary ~$100m 14.7% portfolio sale price premium achieved on 30 June book value Acquisition Summary $95m $5m acquisition price stabilised net rent (year
Slide 10: HY21 Highlights - Portfolio
HY21 HIGHLIGHTS - PORTFOLIO ENHANCED PORTFOLIO METRICS AND EXPANDED DEVELOPMENT PIPELINE (COMMITTED AND POTENTIAL) 7.5% 25,000sqm 18.1 19.0yrs increase in underlying new or extended increased WALE income (ex. FX) leasing 2.1% >$60m $560m+ growth from new developments development rent reviews committ
Slide 11: HY21 Highlights - Capital
HY21 HIGHLIGHTS - CAPITAL DELIVERING FOR UNITHOLDERS WITH A STRENGTHENED BALANCE SHEET 7.1% 19.8% 32.4% increase in NTA total return (12m ended 31 Dec 2020). balance sheet gearing; per unit since 30 June 2020 15.4% outperformance versus significantly reduced from benchmark 38.7% at 30 June 2020 11 V
Slide 12: Real Estate Returns
REAL ESTATE RETURNS HEALTHCARE REAL ESTATE CONTINUES TO PERFORM STRONGLY Returns by real estate asset class in Australia versus Vital’s real estate level returns (non-compounding) year ended 31 December 2020 100% 81.8% 80% 62.5% 63.9% Income Growth 60% % Return 39.1% 40% 33.1% 31.2% 19.9% Capital 20
Slide 13: Portfolio
PORTFOLIO 13 VITAL HEALTHCARE PROPERTY TRUST
Slide 14: Portfolio Overview
PORTFOLIO OVERVIEW ALL FOUR KEY ASSET GROUPINGS PERFORMING WELL Subsector diversity (by value) Private hospitals - Australia Out-patient facilities / medical office buildings – Australia and NZ 16 hospitals (acute and specialty – mental health, rehabilitation) 9 assets (Australia: 6, NZ: 3) Fo
Slide 15: Net Property Income
NET PROPERTY INCOME 8.5% NPI GROWTH AIDED BY ACQUISITIONS, DEVELOPMENTS AND RENT REVIEWS Leasing activity - Net Property Income Bridge 8.5% growth (incl. FX) / (NZ$000’s) 7.5% (excl. FX) Belmont Private Hospital: 10yr lease extension (25yr WALE) Currumbin Clinic: 4.4yr extension (15yr WALE) Dubb
Slide 16: Movement in Investment Property
MOVEMENT IN INVESTMENT PROPERTY WELL-LEASED HEALTHCARE ASSETS CONTINUE TO EXPERIENCE CAP RATE COMPRESSION Investment Property Bridge (NZ millions) Key HY21 considerations: ~40% of Vital’s portfolio independently valued (by number of properties) at 31 December 2020 20 basis points cap rate compre
Slide 17: Acquisition of Grace Hospital, NZ
ACQUISITION OF GRACE HOSPITAL, NZ VITAL ACQUIRED A PREMIUM NEW ZEALAND HOSPITAL FOR $95M Acquisition Summary $95m 5.25%1 $5m acquisition price Initial yield stabilised year 2 net rent 39,571 Dec 2020 30yr site area (sqm) final settlement WALE 51 11 Quality Tenant inpatient beds operating theatres JV
Slide 18: Developments
DEVELOPMENTS 18 VITAL HEALTHCARE PROPERTY TRUST
Slide 19: Development Strategy & Value-Add
DEVELOPMENT STRATEGY & VALUE-ADD TARGETING 10-15% OF THE PORTFOLIO VALUE UNDER DEVELOPMENT Developments are key for: Pipeline ✓ Earnings & capital $356m of committed developments; $225m of spend remaining growth ~$560m of potential long-term development ✓ Improving the opportunities identified (
Slide 20: Acquisition of 17-23 Nelson Rd, Box Hill (VIC)
ACQUISITION OF 17-23 NELSON RD, BOX HILL (VIC) VITAL HAS SETTLED A STRATEGIC LAND HOLDING ADJOINING EXISTING PREMIUM ASSETS FOR FUTURE PRECINCT EXPANSION1 Ekera Medical Acquisition Summary Centre & 120 Thames St A$29m Feb 2021 settlement Box Hill Public Hospital acquisition Price 5,330 ~7yrs Site ar
Slide 21: Playford Health Hub
PLAYFORD HEALTH HUB STAGED HEALTH PRECINCT UNDER DEVELOPMENT Overview of Stages 1-3 A$48m >7,000 450 total projected cost total projected GFA car parking S1 of stages 1 & 2 (sqm) of stages 1 & 2 bays provided S3 Precinct Overview S2 Medical Centre (Stage 2) LYELL MCEWIN Stage 1 (S1): Retail precinct
Slide 22: Abbotsford Private Hospital, WA
ABBOTSFORD PRIVATE HOSPITAL, WA SPECIALIST MENTAL HEALTH AND ADDICTION TREATMENT FACILITY LOCATED 3KM FROM PERTH'S CBD Development Summary A$19m 6.25% project cost forecast project yield on cost 47 21yr additional WALE inpatient beds Jan-21 early-22 construction forecast practical commenced completi
Slide 23: Belmont Private Hospital, QLD
BELMONT PRIVATE HOSPITAL, QLD EXPANSION AND UPGRADE OF HOSPITAL ADJACENT TO BRISBANE’S CBD Development Summary A$23m 6.00% project cost forecast project yield on cost 35 25yr Additional WALE inpatient beds 13 70 additional additional car consulting suites parking bays early-21 mid-22 construction fo
Slide 24: Committed Developments
COMMITTED DEVELOPMENTS DEVELOPMENTS ENHANCE EARNINGS GROWTH AND IMPROVE ASSET QUALITY Development Spend to Cost to Forecast Forecast 1 All values shown in $m Description of Works Cost Date Complete Income Return Completion Date Structure complete to Level 8 and New 14 storey tower incorporating 5 op
Slide 25: Financial Results & Capital Management
FINANCIAL RESULTS & CAPITAL MANAGEMENT 25 VITAL HEALTHCARE PROPERTY TRUST
Slide 26: Financial Performance
FINANCIAL PERFORMANCE PROPERTY EARNINGS GROWTH HAS SUPPORTED AFFO GROWTH Actual Actual ($) (%) HY2021 HY2020 change change Contribution from structured rent Net property income 54,160 49,898 4,262 8.5% reviews, acquisitions and Corporate expenses (2,232) (2,407) 175 7.3% development rents Management
Slide 27: Balance Sheet
BALANCE SHEET STRENGTHENED BY EQUITY RAISING, DEBT EXTENSION AND REVALUATION GAINS Actual Actual ($) (%) HY2021 FY2020 change change Increase due to: Investment properties 2,248,398 2,086,309 162,089 7.8% development and capital Other assets 17,542 18,909 (1,367) (7.2%) works expenditure of $57m 2
Slide 28: Net Tangible Assets
NET TANGIBLE ASSETS REVALUATION GAINS HAVE LED TO NTA GROWTH PER UNIT NTA Per Unit Bridge* Revaluation gain of $61m; a 2.9% increase in total portfolio value from June 2020 47% of gain from Australian portfolio and 53% from New Zealand ~$55m of the gain from cap rate compression with the balan
Slide 29: Debt
DEBT GEARING SIGNIFICANTLY REDUCED DURING HY21 TO SUPPORT FUTURE GROWTH HY21 Overview In mid-2020 a process of reviewing and updating lending documents commenced to support the extension and diversification of Vital’s debt. Terms now agreed1 for: 32.4% DEBT / ASSETS enhanced lending terms and
Slide 30: Debt Maturity
DEBT MATURITY UTILISING AVAILABLE HEADROOM AND ADDING CAPACITY Debt Maturity Profile – 31 Dec 2020 (pro-forma) (A$) 31 Dec 2020 31 Dec 30 Jun Bank Facilities (pro-forma)3 2020 2020 Debt to gross assets (Trust Deed)1 32.4% 32.4% 38.7% Bank loan to value ratio – actual2 35.0% 35.0% 40.2% Bank loan to
Slide 31: Outlook and Guidance
OUTLOOK AND GUIDANCE 31 VITAL HEALTHCARE PROPERTY TRUST
Slide 32: Adding Value for Unitholders
ADDING VALUE FOR UNITHOLDERS SIGNIFICANT GROWTH ACHIEVED DURING HY21 HY2021 (%) change (%) change (NZ$,000's) (HY20-HY21) cents per unit (HY20-HY21) Net Property Income 54,160 8.5% 11.3 2.0% Less: Expenses (25,934) (1.4%) (5.4) (7.3%) Operating Profit 28,226 19.6% 5.9 12.4% Add: Other Gains (& Losse
Slide 33: Outlook & Guidance
OUTLOOK & GUIDANCE FOCUSSED ON EARNINGS GROWTH HY21 AFFO of 5.87 cpu; 20.2% Significant development pipeline Future asset recycling to be above HY20 considered to partially fund new o $356m – committed developments and acquisitions Distributions of 4.375 cpu paid in o $225m – remaining cost
Slide 34: Appendices
APPENDICES 34 VITAL HEALTHCARE PROPERTY TRUST
Slide 35: 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 $225m of rem
Slide 36: Comparative Returns
COMPARATIVE RETURNS VITAL HAS OUTPERFORMED THE INDEX ON A TOTAL RETURN(1) BASIS Total return to 5yr 10yr Since 2004 VHP vs S&P NZX Real Estate Index 1yr 31 December 2020 (p.a.) (p.a.) (p.a.) (2) Vital 19.8% 16.3% 17.6% 14.7% S&P/NZX 50 Index 13.9% 15.7% 14.7% 9.5% Vital’s outperformance vs 5.9% 0.6%
Slide 37: Adjusted Funds From Operations (AFFO)
ADJUSTED FUNDS FROM OPERATIONS (AFFO) CONSERVATIVE PAYOUT RATIO Actual Actual ($) (%) HY2021 HY2020 change change Operating profit before tax and other income 28,226 23,596 4,630 19.6% Add/(deduct): Current tax expense (7,578) (4,977) (2,601) (52.3%) Current tax impacted by Current tax expense on ne
Slide 38: Interest Rate Hedging Profile
INTEREST RATE HEDGING PROFILE COST OF DEBT WELL HEDGED, MANAGING RISK Rates 31 Dec 2020 30 Jun 2020 Hedging Maturity Profile ($A) Weighted average cost of debt1 3.62% 3.59% Weighted average fixed rate 3.01% 3.01% (excluding line fee and margin) Weighted average fixed rate duration 5.9 years 6.1 year
Slide 39: Asset Allocation
ASSET ALLOCATION VITAL INVESTS IN HEALTH ECOSYSTEMS IN NEW ZEALAND & AUSTRALIA HOSPITALS Target Portfolio Allocations* AGED CARE Comprises: public, private, rehabilitation and Comprises: residential aged care villages mental health hospitals and similar facilities (excluding retirement facilitie
Slide 40: Portfolio Overview
PORTFOLIO OVERVIEW $2.25B PORTFOLIO OF HEALTHCARE REAL ESTATE COMPRISING 42 INVESTMENT PROPERTIES AND 2,800+ BEDS Belmont Private Hospital, QLD Maitland Private Hospital, NSW 40 VITAL HEALTHCARE PROPERTY TRUST | HALF YEAR RESULTS 2021
Slide 41: Portfolio Overview (cont'd)
PORTFOLIO OVERVIEW (cont’d) $2.25 BILLION INVESTED IN 42 CORE HEALTHCARE PROPERTIES WITH OVER 130 TENANTS AND ~2,800 BEDS Income Tenant Diversification (% of rent) HY21 property income growth of 1.5% (like-for-like, same currency basis) Positive rent growth forecast for FY21 Geographic Diversifi
Slide 42: Lease Expiry Profile
LEASE EXPIRY PROFILE LOW RISK EXPIRY PROFILE SUPPORTS SUSTAINABLE, PREDICTABLE AND DEFENSIVE CASH FLOWS Lease expiries in the remainder of FY21 primarily reflect smaller tenancies at multi-tenant properties. FY21 Expiries: Total expiry of $970k through to June 2021 across 1,317 sqm over 6 multi-te
Slide 43: Rent Reviews
RENT REVIEWS HIGH PERCENTAGE OF TOTAL RENT IS REVIEWED ANNUALLY WITH STRUCTURED1 REVIEW MECHANISMS Rent Reviews – HY21 (“like-for-like” excludes developments, acquisitions and disposals) Annualised Jun-20 Rent p.a. Dec-20 Rent p.a. Increase Growth # (NZD) (NZD) (NZD) (Stable currency) Rent reviews w
Slide 44: Core Portfolio Metrics
CORE PORTFOLIO METRICS 5 YEAR TRENDS HIGHLIGHT PORTFOLIO STRENGTH AND UNDERPIN LONG-TERM PERFORMANCE OCCUPANCY WALE 12th consecutive year of portfolio occupancy >99% AVERAGE 10 YR LEASE EXPIRY(1) TOTAL INCOME SUBJECT TO STRUCTURED RENT REVIEWS High degree of confidence that future expiries will be r
Slide 45: 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 200+ healthcare property professionals based in 3
Slide 46: 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 47: 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 fi
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