Vital Healthcare to raise $150M to buy Aust assets; shares tumble

Vital Healthcare Property Trust Management general manager David Carr. Photo / Martin Sykes

Vital Healthcare Property Trust plans to raise $150.9 million in a discounted rights issue to after agreeing to buy 12 hospitals and medical properties in its biggest ever foray into Australia. The shares tumbled 7.5 per cent to $1.24.

The health-care property investor formerly known as ING Medical Property Trust has entered into a conditional agreement to the assets in Australia for A$164.5 million from Essential Healthcare Trust. The deal will boost the value of Vital's portfolio by 70 per cent to $513.8 million.

Shareholders are being offered shares in a one-for-one pro-rata renounceable rights issue at $1.05 a share, a 22 per cent discount to its trading price yesterday. Brokerage Forsyth Barr Group is underwriter, lead manager and organising participant for the sale.

Vital is also seeking a A$100 million extension to existing debt facilities.

"This is a transformative acquisition for the trust in terms of its scale, diversification and the benefits that come from an increased NZX 50 Index weighting," said David Carr, general manager of the trust's manager. "It is difficult to source opportunities of this nature that not only improve portfolio and financial metrics, but align with the strategic direction of the trust."

As part of the transaction, trust manager Vital Healthcare Management Ltd. will review its fee structure as listed property entities try and better align their management incentives with shareholders.

The manager proposes to cut its base fee to 0.6 per cent of the gross value of the trust from 0.75 per cent. That's still higher than the offer put forward to AMP NZ Office Trust investors that was panned by its independent adviser, and would see the manager net an extra $800,000 a year from the increased portfolio.

Investors will vote on whether to support the deal at the annual meeting on November 24.

Last week, ANZ National Bank, the ultimate parent of the trust's manager, said it had received offers for Vital Healthcare and sister company Argosy Property Management Ltd. Argosy and Vital Healthcare were formerly the ING property trusts and were renamed after ANZ acquired the 51 per cent of the funds manager that it didn't already own.