ING aims for Calan takeover

The $71 million Ascot Hospital and Clinic medical centre, near the Southern Motorway at Greenlane.

The ailing real estate holdings of medical landlord Calan Healthcare Properties Trust could be resuscitated if suitor ING goes ahead with the full takeover it signalled yesterday.

ING Property Trust, the New Zealand property arm of the Dutch financial giant, yesterday made a stand in the market for 13.4 million Calan units, amounting to 9.7 per cent of securities on issue, worth $16.7 million.

If it succeeds in that bid and then goes ahead with a full takeover - which it talked up yesterday - the $800 million ING trust would control $1 billion in real estate assets here and in Australia.

ING offered $1.25 for each Calan unit, well above the $1.15 it was trading at before the bid opened, and ahead of broker valuations.

Bruce Davidson, chairman of Calan's management company, Calan Healthcare Properties , said the board would meet today and then issue a statement to unitholders on its view of ING's moves.

"I'm not surprised about the offer because there's been a lot of interest in property stocks in the last 12 months," Davidson said.

Calan has a market capitalisation of $160 million, unitholder funds of $164.4 million and properties here and in Australia last valued at $204.3 million, up $12.2 million on their valuations a year before.

Based on last year's property valuations, Calan's net tangible asset backing was $1.19 but brokers estimated its true value would be slightly higher because of the rising market.

Its portfolio is weighted towards two large buildings: the $71 million Ascot Hospital and Clinic specialist medical centre at Greenlane, and the $63 million Perorate Eastern Campus in Melbourne.

Various ING entities already control 10.3 per cent of Calan and, if the offer succeeds, ING would have an aggregated holding of 20 per cent.

ING Property Trust managing director Andy Evans said yesterday that a full offer would be made if the 9.7 per cent bid succeeded.

He said if the full takeover was made, ING would offer Calan unitholders a mixture of cash and units in its listed trust, trading yesterday around $1.19.

Mark Lister, of ABN Amro Craigs, said a full takeover would create an amalgamated trust with assets worth $1 billion. "Calan was looking vulnerable because it was smaller and ripe for the picking, trading at a discount to [net tangible asset value] and with many smaller investors on its register," Lister said. "I guess you could say it's the last one standing."

An ING adviser said Calan had 5100 unitholders, of which 4700 held parcels of 50,000 or less. Other major shareholders are AXA, holding about 5 per cent, Tower, Sovereign and Accident Compensation Corp.

Lister said Calan's attractions were its 11.6-year, portfolio-weighted average lease term, ahead of the sector's six-year average. The icing on the cake was Calan's 99 per cent portfolio occupancy level.

Stephen Freundlich, associate analyst at UBS Investment Research, made his Calan diagnosis on December 1 and told investors to reduce their holding. He said Calan's viability depended on its beginning planned property development projects.

"The biggest issue facing Calan is the absence of any notable growth opportunities," he wrote. "Major health sector asset acquisitions are unlikely. We believe smaller purpose-built facilities of $5 million to $15 million are the most likely growth opportunities in the medium term."

At end of trading yesterday, ING had secured an additional 2.5 per cent.

www.calan.co.nz

www.ingproperty.co.nz