New Zealand Professional Investment Services Firm

Forsyth Barr

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Forsyth Barr is a foundation New Zealand Exchange firm (NZX) and accredited market participant. We have been confirmed by the Financial Markets Authority as a Qualifying Financial Entity (QFE).

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New Zealand Professional Investment Services Firm, Forsyth Barr

Equity Bottom-Up

Vital Healthcare Property Trust / Equity Bottom-Up

<h2>Vital Healthcare<br>NZ$200m Capital Raise</h2>
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<p><strong>RESTRICTED</strong></p>
<p>Vital Healthcare Property (VHP) has announced a capital raise of approximately NZ$200m, through a 1 for 8.54 underwritten accelerated entitlement offer at an offer price of NZ$2.95 per share. The offer price represents a -5.4% discount to the previous closing price of NZ$3.12. The capital raise is being completed to fund the acquisition of two completed assets located in Queenstown and&nbsp; Christchurch as well as two developments in Auckland. Due to Forsyth Barr's role in the transaction, our rating is now RESTRICTED.</p>
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<h3>Key Points</h3>
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<li><strong>The offer</strong>: Consists of a NZ$200m 1 for 8.54 underwritten accelerated entitlement offer. The offer price of NZ$2.95 per share is a 5.4% discount to the previous close of NZ$3.12 and a -4.9% discount to the theoretical ex-rights price of NZ$3.10. VHP's manager, NorthWest, will participate in the placement by subscribing for at least its 27.5% pro rata which equates to NZ$55m.</li>
<li><strong>Acquisitions</strong>: (1) The newly developed Kawearau Park Health Precinct, anchored by Queenstown's only private hospital which is operated by a Southern Cross Healthcare JV. The acquisition price is NZ$95m for a fully let blended yield of 4.5%. (2) A large, modern ambulatory care (maternity) and life sciences site at 68 St Asaph Street, located 300 metres from Christchurch Hospital. The acquisition price is NZ$51m for a yield of 5.1%, including a 2 year vendor rental underwrite over 30% of lettable area.</li>
<li><strong>Developments</strong>: (1) A 4,500sqm expansion of Ormiston Hospital, Auckland. The project is expected to cost NZ$40m and deliver a net yield on cost of 5.5%. The new facility will be leased for 20 years with the lease of the existing facility also extended to 20 years. (2) A new day surgery and the expansion of the existing facility at Endoscopy Auckland in Epsom. The purchase price is NZ$22m with an additional NZ$22m of development spend. The initial yield is 4.75% and is expected to increase to 5.1% as a result of the development. On completion all leases will be extended to 20 years.</li>
<li><strong>Gearing</strong>:&nbsp;VHP's&nbsp;debt to gross assets increases slightly from 33.2% to 33.8% (including the acquisitions since 31 December 2021).&nbsp;VHP does not have a stated target gearing range, however, its bank LVR covenant imposes a 50% limit.</li>
<li><strong>Portfolio metrics</strong>: Following the acquisition, 30% of&nbsp;VHP's&nbsp;portfolio will be located in NZ and the portfolio weighted average lease expiry (WALE) is broadly unchanged at&nbsp;17.6 years. The weighting to ambulatory care increases to 15%.</li>
<li><strong>NTA</strong>: The offer price is 5% below VHP's last reported net tangible assets of NZ$3.12 (December 2021). VHP estimates its NTA at 31 March 2022 had increased to NZ$3.20–3.25 reflecting property valuation increases and interest rate swap gains.</li>
<li><strong>Earnings and dividend guidance</strong>:&nbsp;VHP's&nbsp;board has reconfirmed&nbsp;FY22 adjusted funds from operations (AFFO) and dividend per share (DPS) guidance of 11.8cps and 9.5cps respectively (2.4375cps for 3Q22 and 4Q22).&nbsp;</li>
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Vital Healthcare NZ$200m Capital Raise

RESTRICTED
Vital Healthcare Property (VHP) has announced a capital raise of approximately NZ$200m, through a 1 for 8.54 underwritten accelerated entitlement offer at an offer price of NZ$2.95 per share. The offer price represents a -5.4% discount to the previous closing price of NZ$3.12. The capital raise is being completed to fund the acquisition of two completed assets located in Queenstown and&nbsp; Christchurch as well as two developments in Auckland. Due to Forsyth Barr's role in the transaction, our rating is now RESTRICTED.


Key Points



The offer: Consists of a NZ$200m 1 for 8.54 underwritten accelerated entitlement offer. The offer price of NZ$2.95 per share is a 5.4% discount to the previous close of NZ$3.12 and a -4.9% discount to the theoretical ex-rights price of NZ$3.10. VHP's manager, NorthWest, will participate in the placement by subscribing for at least its 27.5% pro rata which equates to NZ$55m.
Acquisitions: (1) The newly developed Kawearau Park Health Precinct, anchored by Queenstown's only private hospital which is operated by a Southern Cross Healthcare JV. The acquisition price is NZ$95m for a fully let blended yield of 4.5%. (2) A large, modern ambulatory care (maternity) and life sciences site at 68 St Asaph Street, located 300 metres from Christchurch Hospital. The acquisition price is NZ$51m for a yield of 5.1%, including a 2 year vendor rental underwrite over 30% of lettable area.
Developments: (1) A 4,500sqm expansion of Ormiston Hospital, Auckland. The project is expected to cost NZ$40m and deliver a net yield on cost of 5.5%. The new facility will be leased for 20 years with the lease of the existing facility also extended to 20 years. (2) A new day surgery and the expansion of the existing facility at Endoscopy Auckland in Epsom. The purchase price is NZ$22m with an additional NZ$22m of development spend. The initial yield is 4.75% and is expected to increase to 5.1% as a result of the development. On completion all leases will be extended to 20 years.
Gearing:&nbsp;VHP's&nbsp;debt to gross assets increases slightly from 33.2% to 33.8% (including the acquisitions since 31 December 2021).&nbsp;VHP does not have a stated target gearing range, however, its bank LVR covenant imposes a 50% limit.
Portfolio metrics: Following the acquisition, 30% of&nbsp;VHP's&nbsp;portfolio will be located in NZ and the portfolio weighted average lease expiry (WALE) is broadly unchanged at&nbsp;17.6 years. The weighting to ambulatory care increases to 15%.
NTA: The offer price is 5% below VHP's last reported net tangible assets of NZ$3.12 (December 2021). VHP estimates its NTA at 31 March 2022 had increased to NZ$3.20–3.25 reflecting property valuation increases and interest rate swap gains.
Earnings and dividend guidance:&nbsp;VHP's&nbsp;board has reconfirmed&nbsp;FY22 adjusted funds from operations (AFFO) and dividend per share (DPS) guidance of 11.8cps and 9.5cps respectively (2.4375cps for 3Q22 and 4Q22).&nbsp;



Vital Healthcare Property Trust

Vital Healthcare: NZ$200m Capital Raise