NorthWest Healthcare Properties Management Limited (the Manager), as manager of Vital Healthcare Property Trust (Vital), today announced its intention to raise approximately $200 million in new equity, through an offering of 1 for 8.54 pro-rated accelerated entitlement (the offering) to fund ~$225 million in new acquisitions and developments (as noted below).
Vital fund manager Aaron Hockly said:
“The acquisitions announced today will strengthen Vital’s geographic diversification and mark our strategic entry into the South Island of New Zealand. They are an opportunity for us to build new relationships with quality tenants and should support growth of AFFO for Vital unitholders There will be immediate upside development available for both acquisitions.
Additionally, we are delighted to announce two additional developments that stem from our long-standing relationships with New Zealand’s three largest private hospital operators. These developments will enable us to provide additional healthcare infrastructure in Auckland while providing AFFO and value growth to Vital unitholders.
The acquisitions and developments announced today include a range of sustainability features consistent with Vital’s and the manager’s commitments to sustainability.”
South Island Acquisitions
Vital has reached agreements to acquire its first South Island properties.
• Kawarau Park, Queenstown: (Purchase price $95 million). A newly developed health district with a weighted average lease expiration (WALE) of 8.7 years which includes Queenstown’s only private hospital, benefiting from Queenstown’s favorable demographics. The neighborhood has six high quality individual buildings and immediate further development potential. The anchor tenant is a hospital operated as a joint venture between Southern Cross Hospitals and Central Lakes Trust, with other tenants including national healthcare providers Pacific Radiology (an NZX-listed subsidiary of Infratil) and listed Green Cross Health at NZX. The fully leased blended yield is expected to be around 4.5%, with 40% of leases (by revenue) subject to rent increases at the higher of CPI and market.
• 68 St Asaph Street, Christchurch: (Purchase price $50.7 million). A large modern outpatient (maternity) and life science site, part of one of New Zealand’s leading health centers and located 300 meters from Christchurch Hospital. The WALE is 8.5 years and the property provides an expected net operating return of approximately 5.1%. Current tenants include Canterbury District Health Board and life sciences company Syft Technologies. The balance, comprising ~30% of the net leasable area, is available for rental and subject to a 24-month rental subscription by the seller.
Vital is proposing to acquire and expand a hospital in Auckland and to expand another hospital in Auckland which it already owns.
• Endoscopy Auckland, Epsom: (Purchase price $22.2 million; estimated development costs ~ $21.6 million). Vital has agreed terms to acquire land and buildings at 148 Gillies Avenue and 22-24 Kipling Avenue, Epsom. Currently the properties comprise an existing endoscopy facility and residential units on a plot of approximately 4,000m². The hospital business is jointly owned by Healthcare Holdings and Evolution Healthcare. Terms were agreed to use the vacant land at 22 Kipling Avenue and develop a new day surgery and endoscopy facility, with the existing facility increasing surgery capacity. The initial yield on the purchase price is estimated at approximately 4.75%, and is expected to increase to a yield of approximately 5.1% due to development expenditures. The existing buildings will be leased for an initial term of 20 years from the date of settlement and the new hospital will be pre-leased for 20 years from completion.
• Ormiston Hospital, Auckland: (estimated development costs ~$40 million). Ormiston Hospital is an existing Vital owned asset of approximately 5,000m² leased to Ormiston Surgical Endoscopy Limited (~50% owned by Southern Cross Hospitals). Conditions have been agreed with the tenant to develop a new building of ~4,500 m² on 3 levels connected to the existing building of ~5,000 m² on 3 levels by an air bridge. Once completed, the new facility will be leased for 20 years, with the lease for the existing facility also being extended to 20 years (an extension of approximately 18.5 years). The estimated net return on development costs is 5.5%.
Capital Raising Overview
The offering is an accelerated pro rata rights offering of new ordinary units to existing eligible unitholders, to raise approximately $200 million. NorthWest has committed to participate in the Offer by subscribing for $55 million of new units, representing its pro rata ownership of approximately 27.5% in Vital.
Under the offering, eligible unitholders are entitled to subscribe for 1 new unit for every 8.54 existing Vital units held as of 5:00 p.m. (New Zealand time) on the record date of Friday 29 April 2022 , at the offering price of $2.95 per Unit.
The offering price reflects a 5.4% discount to the closing price of $3.12 on Wednesday, April 27, 2022 and a 4.9% discount to the ex-duty theoretical price of $3.10.
Object of the offer
The net proceeds of the Offering will be used to repay debt incurred for recently announced acquisitions and developments, including those announced today.
Vital’s pro forma debt to gross assets ratio will be 33.8% upon closing of the Offering, the initial acquisitions and development expenditures announced today and other transactions announced during the calendar year 2022.
The manager currently estimates that Vital’s NTA as of March 31, 2022 was $3.20 to $3.25 cpu, primarily reflecting increases in property valuations due to rental growth and market gains on property swaps. interest rate.
The Board of Directors reconfirms Vital’s previously published AFFO guidance of at least 11.9 cents per unit and the FY22 second half distribution guidance of 2.4375 cents per unit per quarter (9.75 cents per unit). per unit on an annualized basis).
Fundraising Details
The Offer will be made in the form of a pro rata fast-track offer and will consist of the following four distinct elements:
• Institutional Right Offering: First, an offering of units to existing eligible institutional unitholders of Vital (with a registered address in New Zealand and other selected jurisdictions at 5:00 p.m. on the record date of Friday, April 29, 2022 ) where they will be entitled to participate in the Offer on a pro rata basis. The institutional law offering will be accelerated and will open at 10:00 a.m. on Thursday, April 28, 2022 (immediately after the announcement of the Offer) and will close at 5:00 p.m. on that day;
• Institutional Bookbuild: Second, a bookbuild of units representing the shortfall from the institutional rights offering (i.e. where institutional unitholders did not participate or were not eligible to participate). Institutional investors and brokers will be invited to participate in the bookbuild. Any excess subscription amount above the offering price will be returned on a pro rata basis to Nonparticipating Institutional Unitholders. There is no guarantee that any excess will be realized through the institutional bookbuild. The Institutional Bookbuild will open at 10:00 a.m. on Friday, April 29, 2022 and close at 3:00 p.m. that day;
• Retail Right Offering: Third, an offering of Units to existing eligible Retail Unitholders of Vital (with a registered address in New Zealand at 5:00 p.m. on the record date of Friday 29 April 2022) where they will have the right to participate in the pro rata offer. The Retail Right Offering will open at 10:00 a.m. on Tuesday, May 3, 2022 and close at 5:00 p.m. on Thursday, May 12, 2022; and
• Retail bookbuild: finally, a bookbuild of units representing the shortfall in relation to the retail rights offering (i.e. retail unitholders did not participate or were not eligible to participate). Institutional investors and brokers will be invited to participate in the bookbuild. In addition, eligible retail Unitholders who fully exercise their right may apply for additional new Units (i.e. Units in excess of their pro rata entitlement) which will be offered for sale under the Retail Bookbuild. . Any excess subscription amount above the offering price will be returned on a pro rata basis to non-participating retail Unitholders. There is no guarantee that any excess will be realized through retail bookbuilding. The retail bookbuild will open at 10:00 a.m. on Monday, May 16, 2022 and close at 3:00 p.m. that day.
Eligible Unitholders may choose to exercise their right in whole, in part or not at all. Unitholders who do not exercise all of their rights or who are not entitled to do so will see their participation diluted. Rights cannot be traded on the NZX main board or transferred privately.
The new units issued under the offer will rank pari passu with the existing Vital units upon issuance and will be eligible for future distributions.
NorthWest Commitment and Subscription
NorthWest has committed to participate in the offer by subscribing for $55 million of new units, representing its pro rata interest in Vital on the $200 million offer. It will do so by taking over its rights in the institutional rights offering.
The balance of the offering is guaranteed by Craigs Investment Partners Limited and Forsyth Barr Group Limited.
See the full announcement, presentation and/or Offer Document for the key dates of the Offer.
Further information
Additional information regarding the Offer is contained in the Offer Document and investor presentation accompanying this announcement and available at www.vitalunitoffer.co.nz. The investor presentation contains important information, including key risks and foreign selling restrictions relating to the offering.
If you have any questions about the offer, please visit the offer website at www.vitalunitoffer.co.nz or call the Vital Investor information line on 0800 650 034 (toll free in New Zealand ) from 8:30 a.m. to 5:00 p.m. Monday to Friday (excluding public holidays), or contact your financial or other professional adviser.
– ENDS –
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