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Vital Healthcare first-half earnings slip 2.7% on bigger management fee

Tuesday 27th February 2018

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Vital Healthcare Property Trust reported a 2.7 percent decline in first-half earnings as the listed hospital owner and developer's expanding assets generated a bigger management fee. 

Adjusted funds from operations, the new preferred measure of listed property investors, fell to $23.4 million in the six months ended Dec. 31 from $24 million a year earlier, Vital's manager said in a statement. That was weighed down by a 66 percent jump in the manager's incentive fee to $5.8 million and a 49 percent increase in the base management fee to $5.6 million, reflecting a series of acquisitions adding Acurity New Zealand's hospitals, the Eden Rehabilitation Hospital and The Hills Clinic in Australia for a total of $187 million. 

The value of Vital's property portfolio rose to $1.67 billion as at Dec. 31 from $1.38 billion a year earlier, including a $42.8 million unrealised fair value gain, prompting a 16 percent increase in net profit to $52.9 million. 

"With a solid foundation and a defensive and resilient portfolio position, we look forward to the continued execution of our disciplined scale and diversification strategy," said David Carr, chief executive of manager NorthWest Healthcare Properties Management. "Irrespective of periodic political or regulatory interference in otherwise entrenched healthcare systems in New Zealand and Australia, we continue to see strong demographic, ageing and technological trends driving demand for healthcare services – delivered from quality healthcare infrastructure." 

The hospital investor has been expanding and diversifying its portfolio since it raised $160 million in a rights issue in 2016, and has six projects in its development pipeline over the next four years, which it anticipates will cost about $144 million. Bank debt has expanded to $613.6 million from $401.9 million a year earlier, and Vital has the capacity for $200 million of further acquisitions. 

Its 42 properties across New Zealand and Australia are at a 99.3 percent occupancy rate with a weighted average lease term of 18.6 years. 

The board declared a second-quarter distribution of 2.125 cents per unit, payable on March 29 with a March 15 record date, and reaffirmed annual guidance for an annual dividend totalling 8.5 cents. 

Vital units were unchanged at $2.09, and have declined 5.4 percent so far this year. 


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