Vital Healthcare bought this Lake Hayes property from Fraser Sanderson's business. Photo / Vital Healthcare
Vital Healthcare Property Trust, with $3.5 billion of Australasian properties, made an after-tax loss of $30.9m as revaluation gains turned to losses.
But revenue rose and so did the total value of assets owned by the business.
In the half-year to December 31, 2022, the trust recorded a $56m devaluations on its real estate compared to the previous $153m gains in the half-year to December 31, 2021.
That was the main reason last year’s interim $170m profit turned into the $30.9m loss.
Revenue rose from $60m to $74m and operating profit was also up from $27.8m to $35m. Assets rose from $3.4b to $3.5b.
But expenses rose too, from $8.7m to $11.6m.
Fund manager Aaron Hockly described the half-year as one of consolidation.
“Terms have been agreed to renew and extend debt facilities, interest rate hedging has been increased, developments - committed and potential - have been reviewed and assets for potential divestment have been identified and progressed.
“This period of consolidation has allowed us to adjust to changing market conditions, particularly a higher cost of capital. Our core strategy of delivering 2-3 per cent growth in adjusted funds from operations and distributions per unit per annum, over the medium term, remains unchanged,” he said today.
The trust has started a $200m asset sales programme, planning to use that money to fund its development pipeline.
Acquisitions in the six months totalled $156m and included Kawarau Park Health Hub for $95m, Campbelltown development land in New South Wales for A$22m and Tasman Medical Centre, Tasmania for A$13m.
A process to raise at least $200m from asset sales before September 30 is now underway.
Vital now has 47 properties, of which 26 are private hospitals representing nearly 80 per cent of the portfolio value.
The weighted average lease term of its contracts with tenants is 17.2 years, the longest of any NZX-listed real estate investment trust.
The trust said last year that all up, it was planning $1.8b of development work here and in Australia.
Today, it said it “had a committed development pipeline of $410m across 11 projects of which $302.5m was left to complete”.
But it also noted it still had $1.9b of development opportunities.
Vital owns healthcare properties here and in Australia: private hospitals, aged care facilities, medical specialists and outpatient buildings.
It is the only listed business of its specialising in the niche medical buildings market where tenants often stay much longer than in other types of properties.
That’s because the fitout of these buildings is usually far more complicated and expensive than other types of commercial property.
Vital is the only specialist-listed landlord of healthcare property in Australasia.
As of March last year, the trust owned 44 properties valued at $3.2b.
On the outlook, the trust said: “In uncertain times investors gravitate towards less risky assets. These assets include property. In particular, rental income for high-quality healthcare property like that within the Vital portfolio is less affected by business or economic cycles than income generated by other asset classes.”
Unitholders will get 9.75cpu for the full-year, according to the distribution guidance out today. That will be 1.2 per cent up on last year.
Units have been trading down 21 per cent annually at $2.40. In 2021, the units got as high as $3.36 so have sunk sharply in the last year. The trust has a market capitalisation of $1.5b.
Industrial projects dominate new supply, the study found, comprising 65% of new stock.