DELIVERING VALUE INTERIM RESULTS 2020 | 19 FEBRUARY 2020
CONTENTS PAGE • Overview of Vital 3 • HY20 highlights 9 • Financial results & capital management 13 • Portfolio overview & update 19 PRESENTED BY: • Overview of projects 25 • Outlook 30 Aaron Hockly Michael Groth • Appendices 36 Fund Manager Chief Financial Officer Richard Roos Chris Adams Exec. Director, Portfolio Exec. Director, Projects 2 VITAL HEALTHCARE PROPERTY TRUST | INTERIM RESULTS 2020
OVERVIEW OF VITAL
OVERVIEW OF VITAL VITAL IS A PURE PLAY, LISTED LANDLORD OF HEALTHCARE REAL ESTATE 42 $1.93b Vital Healthcare Property Trust (Vital) is: the owner of a ~$2 billion healthcare portfolio in New PORTFOLIO PROPERTIES Zealand and Australia; the only specialist healthcare landlord listed in New Zealand or Australia (NZX ticker: VHP); and 99.5% 17.9 externally managed by a subsidiary of Toronto-listed, global healthcare real estate owner and manager, NorthWest OCCUPANCY Healthcare Properties REIT (TSX ticker: NWH). WALE ~2.5% 35.1% DEBT/ASSETS (1) LIKE FOR LIKE RENTAL GROWTH Calculated in accordance with the Vital’s Trust Deed (1) 4 VITAL HEALTHCARE PROPERTY TRUST | INTERIM RESULTS 2020
OVERVIEW OF VITAL (continued) $1.93B PORTFOLIO OF HEALTHCARE REAL ESTATE COMPRISING 42 INVESTMENT PROPERTIES, 178 TENANTS AND ~2,600 BEDS Geographic diversification Sector diversification Tenant diversification (1) Ramsay 2% Ormiston Surgical 2% Aged care 3% Strategic 4% Mercy Ascot 4% Medical office Rehabilitation 10% Other 17% Sportsmed 4% buildings 11% Hall & Prior 4% Acurity Group 9% Mental WA 5% QLD 12% Health 14% Epworth Foundation 10% NSW 33% SA 4% NZ 25% VIC 20% Healthe Care 48% Acute Surgical 58% TAS 1% VITAL HAS A SCALE PORTFOLIO OF HIGH-QUALITY HEALTHCARE PROPERTY ACROSS NEW ZEALAND AND AUSTRALIA (1) As a percentage of rental income 5 VITAL HEALTHCARE PROPERTY TRUST | INTERIM RESULTS 2020
OVERVIEW OF NORTHWEST – VITAL’S MANAGER NORTHWEST: A FOCUSED HEALTHCARE REAL ESTATE INVESTMENT PARTNER 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 of the largest global healthcare markets Execution excellence 15+ years of healthcare real estate investment, management and development Entrepreneurial culture, institutional capabilities 10+ year public company track record A proven track record NZ$7.4 B + Track record of delivering strong risk-adjusted returns for investors Scalable platform with embedded growth Assets under management Its operator relationships and existing portfolio provide a robust acquisition and development pipeline 6 VITAL HEALTHCARE PROPERTY TRUST | INTERIM RESULTS 2020
GLOBAL SECTOR OVERVIEW CHANGING DEMOGRAPHICS ACROSS THE GLOBE HAVE PAVED THE WAY FOR INCREASED HEALTHCARE EXPENDITURE Population Global population growth of 83 million people p.a. growth Global life expectancy has increased from 46 years in 1950 to 71 years in 2015 and Aging population / living longer increasing. People are living longer but with higher instance of chronic disease Societal Increase in behavior, obesity, Strong links between diet, lifestyle and chronic disease, increasing need for healthcare Trends addictions services (both preventative and reactive) Increase in urban migration Focus around metropolitan centres Rise in health awareness and Rising consumerism - greater focus on health and wellness with a willingness to spend spending Growth in high / Growth in high-end specialised treatment in private hospitals, and in lower care low-end categories categories including home care and role of general practitioner Market Trends Consolidation Larger operators are seeking consolidation to create scale required for efficiency and quality 7 VITAL HEALTHCARE PROPERTY TRUST | INTERIM RESULTS 2020
ANZ SECTOR OVERVIEW STRONG FUNDAMENTALS AND INCREASED INVESTOR DEMAND HAVE MADE HEALTHCARE ONE OF THE BEST PERFORMING ASSET CLASSES IN THE ANZ REGION Population growth Australian population (25.3m) increased by 1.5% over the 12 months to Jun-2019 (381,000 people). New Zealand’s population (4.9m) increased by 1.7% over the 12 months to Jun -2019 (82,000 people). Aging population / living longer Life expectancy in the ANZ region is extremely high on a world scale, with Australia at 82.5 Demographic years and New Zealand at 81.6 years. People are living longer but with higher instances of Trends chronic disease. Pressure on Public While Australian private health coverage rates have modestly fallen to 44%, the proportion of Hospitals people aged 60 and above continues to rise. The increased incidence of both chronic and acute conditions among this cohort has driven an increase in visitations across both public and private systems. Service Changing service demands The number of beds provided by the private sector has increased by 3.6% p.a. since 2012- Trends 13. Operators are consolidating and providing a higher level of acuity to care for the greater number of people living with comorbidity. Sources: ABS, StatsNZ, World Bank, AIHW, APRA 8 VITAL HEALTHCARE PROPERTY TRUST | INTERIM RESULTS 2020
HY20 HIGHLIGHTS
HY20 HIGHLIGHTS VITAL CONTINUED TO DELIVER FOR UNITHOLDERS AND POSITION ITSELF FOR FUTURE OPPORTUNITIES Portfolio Acquisitions and Projects Financial Normalised NDI of $22.1m (+14.6%) Property revaluation gains of $42.6m NZ$11.2m of acquisitions of strategic (+2.3%) sites for future development AFFO of $22.0m (+11.8%) Portfolio WACR firmed 9 bps to 5.52% Invested NZ$36.2m in developments and NTA of $2.36 (+2.2% from 30 Jun 2019) expansion projects with a weighted Like-for-like same currency rental growth Debt to gross asset ratio of 35.1%, down average return on cost of 6.1% of 2.5% from 35.3% at 30 June 2019 At Wakefield Hospital, foundation works 87% of leases subject to structured rent Annual distribution of not less than 8.75 cpu have commenced and Stage One reviews in FY20 (60% CPI linked, 27% remains on target for completion in Q1 fixed percentage). 2021. 1.6% average annual lease expiries over At the East Tower of Epworth Eastern, next 10 years early works are complete and bulk excavation is in progress. Remains on target for late 2021 completion. Reviewing several potential operator expansions within the existing portfolio 10 VITAL HEALTHCARE PROPERTY TRUST | INTERIM RESULTS 2020
NET PROPERTY INCOME DEVELOPMENTS AND RENT REVIEWS WERE KEY DRIVERS OF GROWTH NET PROPERTY INCOME BRIDGE (NZ 000’s) Development Income increase through rentalisation of capital expenditure for selected brownfield projects and holding income from strategic site acquisitions. Rent reviews completed at an annualised rate of 2.6% Leasing activity including major lease at Gold Coast Surgery Centre (1) (1) Represents positive variance versus the prior comparable period 11 VITAL HEALTHCARE PROPERTY TRUST | INTERIM RESULTS 2020
COMPARATIVE RETURNS VITAL HAS OUTPERFORMED ON A TOTAL RETURN (1) BASIS Index Total return to 31/12/19 1yr 5yr 10yr Inception (p.a.) (2) (p.a.) (p.a.) Vital 39.9% 17.2% 15.7% 14.3% S&P/NZX All Real Estate 31.3% 13.9% 13.0% 10.2% Index Out performance 8.6% 3.4% 2.7% 4.1% Source: Bloomberg, Forsyth Barr (1) Total returns (change in unit price plus post-tax distributions) to 31 December 2019 (2) S&P/NZX All Real Estate Index data commences 31 December 2004 12 VITAL HEALTHCARE PROPERTY TRUST | INTERIM RESULTS 2020
FINANCIAL RESULTS & CAPITAL MANAGEMENT
FINANCIAL PERFORMANCE STRONG PROPERTY LEVEL PERFORMANCE SUPPORTS SOLID NORMALISED DISTRIBUTABLE INCOME Contribution from structured rent reviews and development rents Recently introduced Australian land taxes and costs related to the unitholder vote on fee and governance changes A reduction in floating rates over the prior period and repayment of the related party loan Net distributable income normalised for non-recurring activities in the year 14 VITAL HEALTHCARE PROPERTY TRUST | INTERIM RESULTS 2020
BALANCE SHEET SOLID POSITION Increase due to: • revaluation gains of $42.6m • acquisitions of $11.2m • capital expenditure of $39.1m, and • F/X impact of ($6.5m) Manager’s incentive fee paid in units Distribution Reinvestment Plan provided to unitholders at a 1% discount to market (1) Calculated in accordance with Trust Deed (2) Excludes A$80.3m related party loan which was repaid on 2 August 2019 and used to repay bank debt 15 VITAL HEALTHCARE PROPERTY TRUST | INTERIM RESULTS 2020
NET TANGIBLE ASSETS REVALUATION GAINS HAVE LED TO NTA GROWTH PER UNIT NTA PER UNIT BRIDGE NTA per unit increase due to higher revaluation gains 16 VITAL HEALTHCARE PROPERTY TRUST | INTERIM RESULTS 2020
DEBT LEVELS CURRENT GEARING LEVELS UNDERPINNED BY VITAL’S UNIQUE LONG-TERM STRUCTURED CASH FLOWS IN A DEFENSIVE SECTOR Vital’s debt is 35.1% 1 on a debt to total assets basis Vital operates in a defensive sector with unique demand drivers supporting the (1) 35.1% ongoing need for quality healthcare property assets. In addition, Vital has A WALE of 17.9 years DEBT / ASSETS Occupancy at 99.5% High quality tenants that are performing well Vital has no true peers on either the ASX or NZX Current debt levels deemed prudent in light of the above factors Board comfortable with both debt levels and headroom Calculated in accordance with Vital’s Trust Deed (1) 17 VITAL HEALTHCARE PROPERTY TRUST | INTERIM RESULTS 2020
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