Calan exits aged care, focuses on new hospital

By Chris Hutching

Friday 17th May 2002

Calan Healthcare Properties Trust says it is moving out of aged care in favour of the medical and surgical sector because there has been no growth in fees to aged-care providers.

Calan, a property landlord rather than an operator of healthcare facilities, is focusing on its latest $56 million hospital construction project in Melbourne after clinching an agreement with the Epworth Foundation, which will lease a planned 186-bed private hospital. Epworth operates the largest single-site private hospital in Australia at Richmond in Melbourne. The new hospital, to be called Epworth Eastern, will be financed partly from the sale of Calan's Parkhaven and Northhaven geriatric hospitals in Manukau and Whangaparaoa recently sold for $8.15 million.

In recent months Calan has also sold Endoscopy Auckland for $4.4 million, a property at 133 Remuera Rd for $960,000, and the White Cross Accident and Medical Clinic also in Remuera for $2.1 million.

Calan managing director Martin Lyttelton said the company was delivering on commitments to unitholders to fund new developments from asset sales.

Chief operating officer Miles Wentworth said that after the Melbourne project was completed the company would have about 30% of its assets in Australia. While Calan saw considerable growth opportunities in Australia this was tempered by the inability to pass back imputation credits to New Zealand investors, he said.

The Epworth Hospital will be about 20% bigger than Calan's main investment in Auckland, Ascot Hospital, valued at $61.8 million. The balance of Calan's assets is in smaller facilities mainly in the upper North Island.

The new hospital will be sited in Melbourne's affluent eastern suburbs on land already owned by Calan adjacent to Box Hill Gardens Medical Centre, also owned by Calan. The site is over the road from Melbourne's Box Hill Public Hospital. Mr Wentworth said the proximity to the public
hospital would allow staff synergies between both organisations and the new hospital has consent for an air bridge to Box Hill Public Hospital.

Epworth Eastern will be a tertiary-level hospital of 186 beds, eight operating theatres and an angiography suite of two cardiac catheter laboratories.

Calan says unitholders should see an immediate benefit resulting from the decision to go ahead with Epworth Eastern. Interest costs associated with the purchase of the Melbourne property in 1999 have affected distributions but Calan would now be able to capitalise interest costs and that would enhance the level of distributions. To date the trust has spent $7.01 million on acquisition and evaluation of the Epworth site.

The market surveillance panel of the Stock Exchange has granted a waiver from the listing rules requiring unitholder approval because the cost of Epworth Eastern exceeds the threshold requiring approval by a only small margin.

Calan's after-tax profit for the year ending June 2001 was $8.6 million on revenue of $15.9 million. Current assets are just over $200 million. The share price has languished in recent months from a high of $1.11 in August 2001 to 86c recently because of the constraints on dividends. In the latest quarter to March 2002 the gross distribution was increased from 1.73c per unit to 2c per unit.

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