VHP Vital Healthcare

[Toasty]

I couldn't find a thread for this company so I thought I would start one. I have owned a small amount of these for the last 5 or so years. Bought at 89 cents. They have just been ticking happily along with an ok but not exciting yield and a slow rise in value. Brief periods of excitement and controversy with the Australian acquisitions and then the management rights saga.

Just wondering if anyone has any thoughts on this company and whether or not it is viewed as worth owning. I was thinking about buying a few more as it seems safe and delivers a reasonable return.

[percy]

I brought a few last year.Went to a company presentation and am happy with their porfolio of medical related buildings.
Good way to get into Australian property.

[Germaine]

I can't understand why their share price is higher than their NTA. THis cannot be sustainable, so either the value of the buildings if forecast to go up signifciantly ot the share price must come down. Furthermore the manager promised fee reductions previously which has turned out to be rubbish. Someone should complain to the FMA about that as many investors sunk money into the rights issue for that very reason.

[Lizard]

May have been on the Sharetrader forums as ING Medical or IMP in a former life.

It was CHP - Calan Healthcare Properties before that.... but I think generally covered on the property trusts thread.

I quite like owning it for the geographical diversification (Australian property) while still benefiting from NZ tax structure. I don't think they're particularly cheap at the moment though - I can't quite fathom the upwards move in property trusts of late. Presumably either resulting from cheaper debt funding or investors hunting for anything better than bank deposit rates as older investments mature.

[Lizard]

Lizard, what do we make of NZX listed firms that go through multiple name changes in a period of only a few years? :-)

Calan, ING Medical, Vital Healthcare....

Canuckiwi Medical Properties can't be far behind...

:D

Yes, seems there is more money to be made trading the management contracts than the shares - if you have deep enough pockets.

[Toasty]

Haven't had a chance to read properly yet but the interim results look pretty good. I really like this company even though its not a startling performer and despite the management rights debacle a while back. Just keeps paying me a dividend and the share price just tracks up slowly. Probably my property ownership bias creeping in....

Beats a term deposit anyway...I think...

[percy]

Haven't had a chance to read properly yet but the interim results look pretty good. I really like this company even though its not a startling performer and despite the management rights debacle a while back. Just keeps paying me a dividend and the share price just tracks up slowly. Probably my property ownership bias creeping in....

Beats a term deposit anyway...I think...

Yes a good steady performer.

[RRR]

Yes a good steady performer.

I would say a star performer amongst LPT's.

[RRR]

Northwest partners planning to acquire another 5% (they already have19.99%) on the market over next 12 months. One has to question whether VHP will remain as a PIE entity in the future (IRD has given an exception as long as they are under 25% mark) but what if they increase their stake again after 12 months!

Northwest won't benefit from VHP being a PIE entity. I think gradually they will increase the stake and will be eventually taken over. Are we losing another excellent investment opportunity from NZX?

There was an opportunity to internalise management few years ago, even if it meant overpaying for it by a few millions:mad ;:

I will hold for now.

[Toasty]

One small bright moment for me on the market today was VHP finally getting to the $1.40 barrier. It has been waffling between $1.38 and $1.39 for so long. Not an exciting company and I don't really keep track of news or anything to do with it other than bank the dividend payment when it arrives (mental note: set up DC). I still like owning a bunch of hospitals. Beats the waterworks, Electric Company and Railway Stations.

[G on]

I was disappointed at the prospect of eventually losing its PIE status, not so much from tax issues, but making it a less appealing company. I liked the area it was in but I can see it will change to what I invested so I sold and will wait for it all to sort itself out. The graph showing the difference when it became a PIE company to me means it could do the reverse when it loses it, which IMO will be inevitable in the next 12 months +. I might be proved wrong in which case it will be a learning curve for me.

[Toasty]

VHP's sp has dropped dramatically in the last few days. I am assuming that this is a result of the impending rights issue? Is anyone looking to take this up? Difficult question I guess given there is zero info available at the moment.

[Toasty]

Anyone participating in the rights issue? Any thoughts? I hear crickets.....

[Sideshow Bob]

Heard nothing so far........

[Toasty]

Heard nothing so far........

Got all my paperwork today.

[stones]

Yes I'll give it a go. At $1.275 should be a good investment

[RRR]

I am participating in the rights issue as well and will also apply for some extra shares. Good time to raise the money given the large premium to NTA and favourable exchange rate too!

[Toasty]

Sent mine away yesterday with the rights ticked plus adding a few extras if they are available.

[Toasty]

https://www.nzx.com/companies/VHP/announcements/240051

Annual result out a few days ago but I posted in the wrong thread. I guess we already knew most of this but its always nice to see it on paper. I really like this company. Doesn't really provide any particular thrill other than that of a slowly improving share price and half way decent yield....so quite thrilling really.

I opted to collect a few more shares in the rights issue so keen to see how that went on the 23rd. I like the fact that their WALT is very long. Feels very secure. Along with an occupancy rate that is just shy of 100%.

[RRR]

The over subscription was significantly scaled back - I got only 30% "extra shares" (but only 10% of the applied!).

[Toasty]

The over subscription was significantly scaled back - I got only 30% "extra shares" (but only 10% of the applied!).

Where do you go to find out how this went? Computershare?

[RRR]

https://nzx.com/companies/VHP/announcements/240171

[Toasty]

Got my letter last night. Same scaling not surprisingly. Bit disappointing really as I thought this was a good chance to acquire a reasonable holding at a good price. Never mind. Still a win.

[Toasty]

30 year lease term with MercyAscot. Not a bad length of time. I wish my tenants would sign up for this long...with appropriate ratchet clauses of course.

https://www.nzx.com/companies/VHP/announcements/245280

Come on people lets hear some support for VHP. Its an exciting stock...no really, it is?

[Sideshow Bob]

Will be exciting when I get my divvy in a couple of days. Then I will go back into a slumber.........ZZZZZZzzzzzzzz

[Onion]

VHP vs $AUD

I was interested in how the shifting NZD-AUD exchange rate affected VHP share price. VHP's assets are nearly 75% Australian (70.9% June 2012, 73.79% June 2013) so will be worth less in NZD when the kiwi is strong.

The SP in NZD is very flat over the past year but has steadily appreciated when converted to AUD.

5204

[Onion]

Craigs analyst Chris Byrne in Dominion/Stuff (5/2/2014, Investors lose out to fund managers (http://www.stuff.co.nz/business/money/9685597/Investors-lose-out-to-fund-managers)) says, with respect to management of property trusts


"Vital [Healthcare Properties] has some of the worst corporate governance in the sector but it has done very well."

I have previously wondered about the conflict when the majority shareholder is also the manager of the portfolio - as is the case with VHP.

[Toasty]

http://www.stuff.co.nz/business/industries/10043511/Vital-Healthcare-mum-on-Aussie-assets

Something in the wind? Nice little rise of late in the share price. I probably shouldn't wish for excitement in this holding as XRO and PEB provide enough heart attacks on a regular basis.

[fungus pudding]

Is this thing a PIE?

[couta1]

Is this thing a PIE?
Certainly is.

[fungus pudding]

Certainly is.

Might buy some then. Thanks for that.

[Toasty]

$1.46 Highest price ever? Have I said that I really like this company? A few hiccups not withstanding it seems to have a nice steady history supported by fantastic lease terms and a good dividend. Long may it continue not to shock.

[Beagle]

8 cps forecast for 2015 with all tax paid i.e. PIE fund = 5.48% after tax = 8.18% gross for people on a 33% tax rate which isn't too shabby considering the very low risk involved.

[Toasty]

Closing at $1.48. Is there something going on or just a lead up to the last dividend?

[Beagle]

GMT also going ballistic. Scramble for safe yield incl final divvy IMO.

[Sideshow Bob]

Why the 5c rise today? Albeit on only 204k shares

[Toasty]

They recently settled on the Hibiscus Coast Health Centre. But that would only have brought in $4 or $5 million. Used to reduce debt for the moment as I understand it. I can't really see this making much difference though. I don't really like sudden spikes in this stock. I would rather it just slowly appreciated over time and kept paying a reasonable dividend.

[Beagle]

Interest rates staying low for as far as the eye can see. The scramble for nice safe yield continues...

[Toasty]

$1.70 up and not a seller on the horizon. At least until $1.80 anyway. Up 67% over the 9 years I have held the stock plus more than my initial investment paid out in cash dividends until I took up the DRP.

This is the kind of performance that makes me appreciate the quiet achievers in the market. Plenty of other noise and hype out there but this just keeps quietly ticking over.

[Toasty]

Weird trade for 1800 shares at $2 today. Someone's mouse finger slipped? Price was up 25 cents briefly. Quite exciting really.

[Jaa]

Nice to see Vital finally announce an increase in distributions (from the 3rd quarter) after all the acquisitions, disposals and brownfield developments over the last couple of years!

Also the first significant increase in NTA post the Australian acquisitions.

[percy]

The manager booked an incentive fee of $2.3mil.
Pity the management was not internalised, as was mooted a few years ago.
I always wonder whether the business is being run for the manager's, or for shareholders' benefit?

[Onion]

The manager booked an incentive fee of $2.3mil.
Pity the management was not internalised, as was mooted a few years ago.
I always wonder whether the business is being run for the manager's, or for shareholders' benefit?

I have wondered that too!


I have previously wondered about the conflict when the majority shareholder is also the manager of the portfolio - as is the case with VHP.

[kizame]

No shares for sale!!!
Someone needs to make a rediculous offer and I'm there.

[Lewylewylewy]

Does anyone know what the DRP SP is set at? I can't find anything about it on the NZX.

[777]

Does anyone know what the DRP SP is set at? I can't find anything about it on the NZX.

All the info is on their dividend announcement.

[Sideshow Bob]

No shares for sale!!!
Someone needs to make a rediculous offer and I'm there.

$2.05 :ohmy:

[Deej5]

Lowest offer $2.11

[Sideshow Bob]

Lowest offer $2.11

Went ex-div today and the share price went up....

[Lewylewylewy]

I'm still struggling to understand why gxh traders at a PE of 20 and VHP is less than 5. Is there some massive risk that I just don't know about?

[kiora]

Because PE is not 5 but 18.6 ?
http://www.4-traders.com/VITAL-HEALTHCARE-PROPERTY-6491517/financials/

[noodles]

Property revaluations should not really be included in underlying profit

[fungus pudding]

Property revaluations should not really be included in underlying profit
So where would you put it?

[Toasty]

All time high. Yay?

[Toasty]

21/06/2016 09:39


RIGHT


PRICE SENSITIVE


REL: 0939 HRS Vital Healthcare Property Trust





RIGHT: VHP: Vital announces $160m pro rata renounceable rights offer





Vital Healthcare Management Limited (the 'Manager'), the manager of Vital


Healthcare Property Trust ('Vital'), today announced it intends to raise


approximately $160m of new equity capital through a pro rata renounceable


rights offer of new units to existing unitholders (the 'Offer'), with $120.6m


underwritten by Forsyth Barr Group Limited.





Equity-raising to support ongoing delivery of scale and diversification


strategy





David Carr, Chief Executive of the Manager said "Over the last five years


Vital has consistently delivered strong operational, financial and portfolio


results for investors. We have executed on the Board's scale and


diversification strategy to support operator growth and new acquisition


initiatives. Following the recently announced pipeline of new value-add


projects and acquisition opportunities and supported by a strong unit price,


the Board now considers it appropriate to seek further equity in this next


exciting phase of growth.





As with previous capital raisings, the Board was keen to ensure the offer


allows existing investors of Vital the opportunity to participate on an


equitable basis. A pro rata renounceable rights offer gives investors that


opportunity."





Vital intends to raise $160m of new equity through a 2-for-9 pro rata


renounceable rights offer at an issue price of $2.08 per unit. The issue


price reflects a 5.2% discount to the theoretical ex rights price ('TERP'1)


of $2.195 per unit.





NorthWest Healthcare Properties Real Estate Investment Trust and the


Directors of the Manager intend to take up all of their Rights (approximately


$39.3m). Forsyth Barr Group Limited has underwritten the balance of $120.6m.





The new units will rank equally with existing units on issue and are eligible


for the final quarter distribution for the financial year ending 30 June


2016, expected to be paid in September 2016.





Mr Carr said "We have experienced an extremely successful period of growth


and cemented a track record of being market leading long-term managers and


investors in healthcare real estate. Having established and strengthened key


operator partnerships across the sector and supported by strong fundamentals


we will continue with our scale and diversification strategy delivering


sustainable returns to investors."





The funds raised through the Offer will initially be used to reduce Vital's


bank debt. This will enable Vital to continue to pursue development,


acquisition and growth opportunities that are continually being evaluated,


and for general corporate purposes.





Further details relating to the Offer will be provided in an Offer Document


to unitholders. The Manager expects to have the Offer Document available to


investors on the NZX website under the ticker code "VHP" on 28 June 2016 and


it will be sent to unitholders shortly after that. The Offer closes on 19


July 2016.





A person should consider the Offer Document in deciding whether to acquire


units.





This release should be read in conjunction with the Offer presentation which


can be found on our website - www.vhpt.co.nz

[Jaa]

Any thoughts on the rights issue?

I am glad it is a rights issue and is renounceable but they should have included a facility to automatically market and sell unclaimed rights and return the proceeds to investors (most are retired) ala NAB. That way no one loses.

Also any thoughts on NorthWest Partners creating Vital 2.0 in Australia? Will they be merged at some point in the future or just compete with each other for assets?

[macduffy]

but they should have included a facility to automatically market and sell unclaimed rights and return the proceeds to investors (most are retired) ala NAB. That way no one loses.


Yes, it worked for NAB - and for other attractive big issues. Not always the case with smaller companies and sometimes becomes the price to pay to get an underwriter on board.

[Toasty]

I'm going to take up my full entitlement. I was going to say that this company is generally unspectacular but recent weeks have been fairly buoyant. It has been a solid performer for me for the last 10 years. Between the DRP and occasionally adding in the small dips I have been pleased with its progress.

[Onion]

ANZ Securities have added VHPRC.NZX (https://www.anzsecurities.co.nz/DirectTrade/dynamic/quote.aspx?qqsc=VHPRC&qqe=NZSE) to my portfolio -- but haven't counted the ones I got in the recent DRP! The record date for the rights issue is 29/06/2016 so I reckon it should include the DRP shares issued on 24/06/2016.

I assume that when the documents are sent they will have the correct number so probably just a timing error with the ANZ Securities calculation.

Have I misunderstood something? Do others that participated in the DRP see the same?

[777]

ANZ Securities have added VHPRC.NZX (https://www.anzsecurities.co.nz/DirectTrade/dynamic/quote.aspx?qqsc=VHPRC&qqe=NZSE) to my portfolio -- but haven't counted the ones I got in the recent DRP! The record date for the rights issue is 29/06/2016 so I reckon it should include the DRP shares issued on 24/06/2016.

I assume that when the documents are sent they will have the correct number so probably just a timing error with the ANZ Securities calculation.

Have I misunderstood something? Do others that participated in the DRP see the same?

ANZ do not add your DRP shares to your portfolio. You have to do that manually. They simply calculate the rights on your total in your portfolio at the time. You will need to manually update both the shares and rights yourself.

[Onion]

ANZ do not add your DRP shares to your portfolio. You have to do that manually. They simply calculate the rights on your total in your portfolio at the time. You will need to manually update both the shares and rights yourself.

Thanks 777 - that explains it - they hadn't counted the last 2 DRPs in the calculation. I had to add a new "BONUS ISSUE" transaction to get the rights up to the correct amount. They don't allow editing of the "TRADABLE_RIGHTS_ISSUE" transaction.

[Lewylewylewy]

So how does one take advantage of the 2 for 9 offer? I was hoping there's be something from computershare or asb or something in the mail, but nothing. Hopefully it's not through the mail because I never get mine until it's past the time :(

[777]

Well it has nothing to do with ASB. They are simply share brokers. So expect it from VHP via their transfer agent(Link or Computershare, not sure who they use).
Mail or email? Depends how you have set up your communications.

[macduffy]

So how does one take advantage of the 2 for 9 offer? I was hoping there's be something from computershare or asb or something in the mail, but nothing. Hopefully it's not through the mail because I never get mine until it's past the time :(

Don't panic! Expected mailing of offer 1 July; offer closes 19 July.

(From company announcement)

[smalltrader]

Hi, I am a newbie on this rights offer. So from what I understand, ASB Securities should calculate and add VHPRC.NZX (https://www.anzsecurities.co.nz/DirectTrade/dynamic/quote.aspx?qqsc=VHPRC&qqe=NZSE) to my portfolio and I would be able to sell it in case I do not want to take up my entitlement. Is that right? So far I havent had anything change in my portfolio??? :mad ;:

[777]

Hi, I am a newbie on this rights offer. So from what I understand, ASB Securities should calculate and add VHPRC.NZX (https://www.anzsecurities.co.nz/DirectTrade/dynamic/quote.aspx?qqsc=VHPRC&qqe=NZSE) to my portfolio and I would be able to sell it in case I do not want to take up my entitlement. Is that right? So far I havent had anything change in my portfolio??? :mad ;:

You will get your entitlement in the mail shortly. That will confirm the number of rights hold. You can then sell that number the same way you sell any shares.

Don't get hung up on the Portfolio facility the brokers offer. It is for info only and only has trades you have done with that particular broker. Some people use multiple brokers so those trades won't reflect in other brokers portfolios. You have to make manual adjustments for those other trades.

Look at my post #63. Brokers are brokers nothing else. Your share holdings are managed by the registries. Big difference.

[smalltrader]

Thanks you so much for the clarification 777. Just one last question. So in case of selling the rights, I can just go sell, select Vhprc.nzx, choose the number... in ASBsecurities..eventhough its not appearing in my portfolio list???

[777]

Thanks you so much for the clarification 777. Just one last question. So in case of selling the rights, I can just go sell, select Vhprc.nzx, choose the number... in ASBsecurities..eventhough its not appearing in my portfolio list???

Yep. As easy as that.

[Lewylewylewy]

By the 1st of December 2016, VHP will become a registered managed investment scheme under the FMCA. Does anyone know what the implications of this are? Will this mean no more distributions and instead there will be dividends, or what? Will is mean that people can pour money in and they can expand quicker?

[Jaa]

A tidy profit from the rights issue of $1.1m for the underwriter, Forsyth Barr at today's VWAP of $2.195.

With 87% of new units taken up, remind me again why shareholders had to transfer $1.1m to Forsyth Barr?

[Onion]

Two announcements today...

1. Rights offer has been successful. https://nzx.com/companies/VHP/announcements/285957. (https://nzx.com/companies/VHP/announcements/285957) 87% of the rights taken up by holders.
2. Macquarie Group Limited has sold out nigh on 20% of VHP! https://nzx.com/companies/VHP/announcements/285952

I'm puzzled by the second of these. It doesn't seem to have affected the SP and the consideration was $0.00! Is this just an administrative transfer?

[Lewylewylewy]

Does anyone know when the shares from the rights offer get allocated for those who bought in?

[777]

Does anyone know when the shares from the rights offer get allocated for those who bought in?

From their announcement...

"The New Units taken up under the Rights Offer will be allotted and begin
trading on the NZX Main Board on 25 July 2016. Holding statements are
expected to be mailed to unitholders on 1 August 2016."


From ANZ Securties Diary Adjustments...

Monday 25/07/2016
VHP Vital Healthcare Property Trust Ordinary Units 2:9 Tradeable Rights 208cps - Alloted

[macduffy]

Two announcements today...

1. Rights offer has been successful. https://nzx.com/companies/VHP/announcements/285957. (https://nzx.com/companies/VHP/announcements/285957) 87% of the rights taken up by holders.
2. Macquarie Group Limited has sold out nigh on 20% of VHP! https://nzx.com/companies/VHP/announcements/285952

I'm puzzled by the second of these. It doesn't seem to have affected the SP and the consideration was $0.00! Is this just an administrative transfer?

Yes, it seems that a Macquarie subsidiary was the nominee holder of the shares which have either been sold or transferred to another party.

[Sideshow Bob]

Been travelling along well since rights deadline - 227c so 19c above rights. :t_up:

I wasn't originally going to take them up, but glad I did!

[RTM]

I wonder is this is what is going to happen to VHP ?

https://www.anzsecurities.co.nz/DirectTrade/dynamic/quote.aspx?qqsc=GHC&qqe=ASX
NorthWest unconditional takeover offer for Generation

Would explain the price jump towards the end of last week.

[Jerry]

What is the general take on the announcement http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/VHP/313537/273628.pdf ?
Was the drop in share price due to general growly sentiment or are there ramifications of this announcement regarding the integration of its Australian and New Zealand management platforms.

[peat]

What is the general take on the announcement http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/VHP/313537/273628.pdf ?
Was the drop in share price due to general growly sentiment or are there ramifications of this announcement regarding the integration of its Australian and New Zealand management platforms.



Good question Jerry and as I hadnt understood the announcement at the time , a question that made me go and investigate given that I am a small holder.

Firstly, Northwest is a 24% stake holder in VHP (Vital Healthcare Property Trust) and given the naming I am going to assume they also fully own the property management vehicle that VHP outsources their property management to.

From the last Annual Report

The Manager of Vital is Vital Healthcare Management Limited, awholly owned subsidiary of NWI Healthcare Properties LP. TheManager has responsibility for the management of Vital inaccordance with the Trust Deed.The Manager’s responsibilities include the day-to-daymanagement of Vital’s portfolio of properties and assets,negotiating the acquisition and disposal of assets, developmentand construction planning and management, treasury andfunding management, ensuring Vital meets its financial, reportingand other statutory and regulatory obligations andcommunicating with unitholders and the market.Vital does not engage or employ any Directors or employees ofits own. The Manager provides a highly experienced and diverserange of professionals with expertise across a range of areas


So I will also understand from the announcement that Northwest look to rationalise their property management platform (software as well as people?) and this will improve the services they provide to VHP. It may not of course reduce the cost of providing these services to VHP, but should keep them more competitive in case VHP considered other options.

I personally wouldnt see recent price movements in VHP as anything other than market fluctuations possibly based on projections of increased funding costs etc

[Jerry]

Thanks, Peat. General growly sentiment getting worse! :mellow: :)

[peat]

NTA given by NZX as 2.05 with 50cps earnings - sure earnings include revals but div of over 4%. Currently 2.09

remember this one has an average lease life of 18 years.

[peat]

Vital is at the forefront of this structural growth opportunity with the most experienced healthcare real estate management team in Australasia and the reputation as a preferred healthcare real estate capital partner, we are well placed for the future”.

[Jerry]

Structural Growth, but not much for the shareholders. However, the managers are a different Matter. This from Chris Lee...
Sadly for investors there was no increase to dividends in the profit announcement (last increase was June 2016) but what was even more disappointing for investors was the announcement of a 49% increase in the manager’s base management fee to $5.6 million and a 66% jump in the manager’s performance fee to $5.6 million.

[peat]

its looks to me as if something is beginning to happen here with VHP today , as sellers have started backing off and up to much higher levels than recently.

[Filthy]

its looks to me as if something is beginning to happen here with VHP today , as sellers have started backing off and up to much higher levels than recently.

reckon they might be doing a deal with HSO?

[peat]

reckon they might be doing a deal with HSO?
I dont know - Im just looking at price and depth action

[Jaa]

Anyone following the stoush at Vital?

Very disappointed that the board rolled over and agreed to loan $A81m to Northwest to invest in Healthscope. How is this in the best interests of shareholders? VHP is supposed to be a REIT investing in healthcare property not a bank or hospital investor. Completely against their mandate. Where are the so called independent directors?

Now at last, some of our institutions are standing up and fighting back! My units will be voting in favour of all proposals and if the board continues with their ridiculous "shareholders votes don't matter" lets have another vote to get rid of the manager and the board. :t_up:


ACC, ANZ Investments and Mint Asset Management together own 10 per cent of Vital's units and are challenging NorthWest which owns 25 per cent and is also the manager of the trust's healthcare properties.

ACC property portfolio manager Blair Cooper said over the past three years 22 per cent, 28 per cent and 31 per cent of rental revenue paid to Vital has gone to the manager in fees.

The base fees had soared by 150 per cent over the past six years but unitholders returns only rose 13 per cent.

ACC challenges "outrageous" management fees of Canadian manager of New Zealand hospital and healthcare buildings (https://www.stuff.co.nz/business/109104006/acc-challenges-outrageous-management-fees-of-canadian-manager-of-new-zealand-hospital-and-healthcare-buildings)


Northwest bought Vital’s management contract in 2011 for $11.5 million and has pocketed about $100 million in gross fees since then, an almost 870 percent return on investment over that period.

Over that same period, distributions to unitholders have risen from 8.1 cents per unit to 8.56 cents, a 5.7 percent increase.

Three instos pick a fight over Vital’s fees and management (http://www.scoop.co.nz/stories/BU1811/S00992/three-instos-pick-a-fight-over-vitals-fees-and-management.htm)

[RTM]

Thanks Jaa….appreciate the summary. Have been following but not closely, I am a holder (about 30K) and was shocked when I saw a headline recently as to how much NW were taking in fees. How do I vote my units ? Can I assign say ACC as my proxy ?



Anyone following the stoush at Vital?

Very disappointed that the board rolled over and agreed to loan $A81m to Northwest to invest in Healthscope. How is this in the best interests of shareholders? VHP is supposed to be a REIT investing in healthcare property not a bank or hospital investor. Completely against their mandate. Where are the so called independent directors?

Now at last, some of our institutions are standing up and fighting back! My units will be voting in favour of all proposals and if the board continues with their ridiculous "shareholders votes don't matter" lets have another vote to get rid of the manager and the board. :t_up:

ACC challenges "outrageous" management fees of Canadian manager of New Zealand hospital and healthcare buildings (https://www.stuff.co.nz/business/109104006/acc-challenges-outrageous-management-fees-of-canadian-manager-of-new-zealand-hospital-and-healthcare-buildings)



Three instos pick a fight over Vital’s fees and management (http://www.scoop.co.nz/stories/BU1811/S00992/three-instos-pick-a-fight-over-vitals-fees-and-management.htm)

[Jaa]

Thanks Jaa….appreciate the summary. Have been following but not closely, I am a holder (about 30K) and was shocked when I saw a headline recently as to how much NW were taking in fees. How do I vote my units ? Can I assign say ACC as my proxy ?

I received my voting form by email on the 4th, you can fill it out and post or email it back to computershare. No online voting option of course... :mad ;:

I find it a very tricky form and frankly disrespectful to unit holders as is the notice to the AGM. Both clearly bias the board's (Northwest's) opinion through tone, font size, styling and placement of information. The board seems to have forgotten they have a legal obligation to treat all unit holders equally.

I will vote my units FOR Paul Mead as an independent director and AGAINST Graham Stuart. I will also be voting FOR the 5 non-binding unit holder proposals. I also plan to contact my KiwiSaver provider to urge them to do likewise.

Guess we should appoint "Blair Cooper" of "ACC" as our proxy holder?

[RTM]

I received my voting form by email on the 4th, you can fill it out and post or email it back to computershare. No online voting option of course... :mad ;:

I find it a very tricky form and frankly disrespectful to unit holders as is the notice to the AGM. Both clearly bias the board's (Northwest's) opinion through tone, font size, styling and placement of information. The board seems to have forgotten they have a legal obligation to treat all unit holders equally.

I will vote my units FOR Paul Mead as an independent director and AGAINST Graham Stuart. I will also be voting FOR the 5 non-binding unit holder proposals. I also plan to contact my KiwiSaver provider to urge them to do likewise.

Guess we should appoint "Blair Cooper" of "ACC" as our proxy holder?


I was worried you would say that...had a quick look for the documentation earlier. Could not track it down immediately. Buggar !

[777]

Just had a call from VHP suggesting I vote for Stuart. Informed them I had yet to receive the forms. They must be worried.

[Onion]

Like Jaa I got an email on the 4th.

The notice of meeting is here: http://www.vitalhealthcareproperty.co.nz/vital-notice-annual-meeting-2018

But it only includes a sample proxy form. My personalised proxy form was attached to the email.

If you have problems they suggest:


If you have any queries regarding the information above, please contact Computershare Investor Services Limited by email, or call on 09 488 8777 Monday to Friday 8.30am - 5.00pm

[Onion]

They must be worried.

They might be worried that 75% of shareholders won't do what the 25% want them to do!

[Jaa]

Chris Lee & Partners weekly Market News email suggests the below ACC managers to assign proxy recipients to. Have written them in on mine.

"ACC will be sending representatives, so you might name Guy Elliffe of Wellington ‘or failing him’ Blair Cooper of Wellington as your proxy to attend the VHP meeting on 20 December and they’ll be happy to represent you."

They also suggest the vote may be close, so everyone here, please back some of the few activist investors NZ has and show the board and NorthWest who are the real owners of Vital Healthcare.

[peat]

Just had a call from VHP suggesting I vote for Stuart. Informed them I had yet to receive the forms. They must be worried.

yeh I had a call today too, explaining that the new dude was handpicked after an extensive recruitment process.

[Jaa]

More good news, a lot of passive institutions follow ISS voting advice.


NBR understands Australian governance adviser ISS has advised unitholders to vote against Vital’s board on every resolution proposed to the AGM.

The voting advice from ISS recommends not re-electing Graham Stuart as an independent director and instead nominating Paul Mead, favoured by ANZ, ACC and Mint Asset Management, which collectively own 10% of the trust.

https://www.nbr.co.nz/story/respected-adviser-sides-vital-unitholders-management-fight

[Onion]

Chris Lee & Partners weekly Market News email suggests the below ACC managers to assign proxy recipients to. Have written them in on mine.

"ACC will be sending representatives, so you might name Guy Elliffe of Wellington ‘or failing him’ Blair Cooper of Wellington as your proxy to attend the VHP meeting on 20 December and they’ll be happy to represent you."

They also suggest the vote may be close, so everyone here, please back some of the few activist investors NZ has and show the board and NorthWest who are the real owners of Vital Healthcare.

The Shareholders Association will also be in attendance and will vote undirected proxies in favour of Paul Mead and the other resolutions. I've nominated NZSA as my proxy and given them discretion.

Read about their position here: https://www.nzshareholders.co.nz/pdf/proxies/VHP_PVI_2018_AGM.pdf

[Onion]

The Shareholders Association will also be in attendance and will vote undirected proxies in favour of Paul Mead and the other resolutions. I've nominated NZSA as my proxy and given them discretion.

Read about their position here: https://www.nzshareholders.co.nz/pdf/proxies/VHP_PVI_2018_AGM.pdf

And BTW you don't have to be a NZSA member to nominate them as proxy.

[Sideshow Bob]

Good luck - Sold out a number of years ago, and one of the reasons was the lack of internal management, and the level of costs.

Love a good shareholder vs board stoush!

[Onion]

Just had a call from VHP suggesting I vote for Stuart. Informed them I had yet to receive the forms. They must be worried.

NZSA says that the Manager has been contacting some unitholders pressuring them to change votes already cast!


Unheard-of behaviour by manager


Manager Throws Ethical Behaviour Out The Window

Presumably the managers have a good idea of how voting is going and don't like what they see!

PS. I don't own enough for them to bother calling me :)

[Soolaimon]

I was contacted a week ago and asked if I would vote for Stuart. I said I had not received voting papers which they promised to email me but as I indicated that I would vote as I see fit they have not yet sent papers. Any suggestions as to how I can vote before deadline?

[777]

I was contacted a week ago and asked if I would vote for Stuart. I said I had not received voting papers which they promised to email me but as I indicated that I would vote as I see fit they have not yet sent papers. Any suggestions as to how I can vote before deadline?

I had the same promise as well and nothing turned up. I also indicated that I would not vote Stuart so that may be the reason. I will visit Computershare on Monday.

[Soolaimon]

I had the same promise as well and nothing turned up. I also indicated that I would not vote Stuart so that may be the reason. I will visit Computershare on Monday.

Cheers 777, I will do the same.

[Jaa]

Call Computershare on +64 9 488 8777 or email them on vital@computershare.co.nz and demand your proxy form is emailed to you ASAP. You can return it via fax or email.

Deadline for voting is 2pm on Tuesday. Being 48 hours before the meeting, which is in and of itself outrageous. How can Computershare charge so much for such rubbish service?!?

Promising to send voting forms and not doing so is a misrepresentation that should have legal consequences, I would be mad as hell. Computershare like the board have a legal obligation to treat all unit holders equally. That is what we pay them for!

[777]

Promised forms dropped into my email about an hour ago.

[Onion]

http://www.sharechat.co.nz/article/87404e34/iss-supports-vital-healthcare-s-rebel-investors.html:


ISS SUPPORTS VITAL HEALTHCARE'S REBEL INVESTORS


(http://www.sharechat.co.nz/article/87404e34/iss-supports-vital-healthcare-s-rebel-investors.html)

[Soolaimon]

And BTW you don't have to be a NZSA member to nominate them as proxy.

Anyone heard the results of this meeting??

[777]

Anyone heard the results of this meeting??

This article suggests about 0830.

https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12179533

[Onion]

Anyone heard the results of this meeting??

No announcements as far as I can see. Only the AGM presentations from yesterday:

https://www.nzx.com/announcements/328738

[Onion]

Voting results out:

https://www.nzx.com/announcements/328807

3 of the resolutions had over 50% in favour of the rebels -- hopefully the managers take this seriously. they say they have established a process to deal with these resolutions.

Results (but see above link for the full announcement):


Non-binding Proposals Non-binding proposals passed:
Proposal 1: relating to the election or removal of Independent Directors
For: 137,113,960 (53.9%) Against: 117,412,541 (46.1%)
Proposal 2: relating to management fees
For: 137,904,997 (54.2%) Against: 116,647,180 (45.8%)
Proposal 3: also relating to management fees
For: 128,475,755 (50.5%) Against: 126,067,548 (49.5%)
Non-binding proposals defeated:
Proposal 4: relating to Board composition
For: 117,271,395 (46.1%) Against: 137,086,559 (53.9%)
Proposal 5, relating to policies and procedures

For: 117,437,126 (46.6%) Against: 134,721,703 (53.4%)

[Jaa]

Wow that's huge!!!

Well over 2/3rds of non-Northwest votes against the manager. Great day for shareholder democracy and advocacy.

Can we have a vote now to get rid of the manager? Looks like it would pass :cool:

[Beagle]

http://www.sharechat.co.nz/article/4c210188/just-how-bad-is-vital-healthcare-s-governance.html

Fees look odious to say the least and that's before we start talking about the inherent conflicts of interest !

[Beagle]

http://www.sharechat.co.nz/article/68b432cb/vital-trustee-s-fees-highlight-manager-s-even-richer-gravy-train.html?utm_medium=email&utm_campaign=Vital%20trustees%20fees%20highlight%2 0managers%20even%20richer%20gravy%20train&utm_content=Vital%20trustees%20fees%20highlight%20 managers%20even%20richer%20gravy%20train+CID_ee109 dee34bc270f9bf2a59444bc2977&utm_source=Email%20marketing%20software&utm_term=httpwwwsharechatconzarticle68b432cbvital-trustee-s-fees-highlight-manager-s-even-richer-gravy-trainhtml

Rampant greed ! No wonder the Trustee doesn't want to do anything about it, they're on the rich gravy train too and collecting nearly half a million dollars for doing what exactly ? Certainly its hard to argue they're putting unit holders interests at the forefront. Do I get a whiff of this thing heading to Court with the Trustees being sued for gross negligence with a new Trustee and manager to be appointed ? No wonder institutions are upset ! I would think they're currently examining their legal options...
I don't own but find this sort of apparent corporate and trustee malfeasance very interesting.

[peat]

I do own it, and am quite disheartened to hear about fee gouging at the management level. However they have a WALT of 18 years, against many other REIT's average closer to 5. Personally I prefer to pay higher fees for superior management though probably not this high. At present this tension hangs over the investment as a smelly cloud. This could give an opportunity for it to rise upon resolution. Returns (as per yield) arent too bad even with a leech so imagine what they might be?

[Beagle]

Some would say there is a massive leech and a trustee effectively playing possum stuck in the headlights because they've got too fat eating the spoils to move.
Someone needs to apply the legal blowtorch to this debauchery if its not resolved satisfactorily.

[Beagle]

http://www.sharechat.co.nz/article/2f4a3ee2/new-nzx-rules-to-strip-vital-healthcare-investors-of-rights.html?utm_medium=email&utm_campaign=New%20NZX%20rules%20to%20strip%20Vita l%20Healthcare%20investors%20of%20rights&utm_content=New%20NZX%20rules%20to%20strip%20Vital %20Healthcare%20investors%20of%20rights+CID_257e50 2bcb942bcc72e8226781290107&utm_source=Email%20marketing%20software&utm_term=httpwwwsharechatconzarticle2f4a3ee2new-nzx-rules-to-strip-vital-healthcare-investors-of-rightshtml

It goes from bad to even worse. I couldn't accept not even having basic listed checks and balances applicable to normal listed companies so this is on my BANNED list.

[Onion]

It goes from bad to even worse.

I've been a holder for several years now but bailed today.

I really like the proposition that VHP has -- i.e. health-related properties with stable long term tenants. But unitholders are being milked at present by the managers (NorthWest Healthcare Properties Management Limited).

As a small shareholder I know that individually have little control over the companies I invest in. But with VHP I have become increasingly uncomfortable that my interests and the interests of the management company have diverged and that their interests are in the driving seat. The votes at the annual meeting in December show that MOST unitholders have concerns. I see little prospect that the management company are going to kill the golden goose and significantly change their control over VHP.

[777]

I've been a holder for several years now but bailed today.

I really like the proposition that VHP has -- i.e. health-related properties with stable long term tenants. But unitholders are being milked at present by the managers (NorthWest Healthcare Properties Management Limited).

As a small shareholder I know that individually have little control over the companies I invest in. But with VHP I have become increasingly uncomfortable that my interests and the interests of the management company have diverged and that their interests are in the driving seat. The votes at the annual meeting in December show that MOST unitholders have concerns. I see little prospect that the management company are going to kill the golden goose and significantly change their control over VHP.

Did the same. Dumped them at opening. Had already reduced holding last week.

[Beagle]

The Trustee is supposed to be there to ensure unitholders positions are protected but is clearly asleep at the wheel, intoxicated from excess fees perhaps ?
If the share price was tanking I think unitholders would have an excellent case for a class action against the Trustee for negligence.

[peat]

given the ructions in management issues the price has actually held up not too bad so I've dropped my holding this morning. at a small profit and had a couple of divvies. As said I love the WALT and dont mind high fees to an extent but something is starting to smell here so prefer not to be supporting questionable behaviour. And in other news its a good time to have some extra cash.

[Onion]

There seems to be some love for VHP on the market recently. SP creeping up over the last week or so (i.e. after I sold out).

[Jaa]

Northwest are on notice, they need to radically improve returns for investors by lowering their fees or risk being voted out (the votes are there).

[peat]

There seems to be some love for VHP on the market recently. SP creeping up over the last week or so (i.e. after I sold out).

not for long.... sellers forcing the price back to 2:05 in one red candle.

[Onion]

not for long.... sellers forcing the price back to 2:05 in one red candle.

I feel better. Happy to be out for now.

[peat]

New Zealand Shareholders’ Association chair John Hawkins.
“In my view, it does matter when an investment looks like a cat and lives in a cattery but is actually a dog,”

http://www.sharechat.co.nz/article/b641a211/retrospective-nzx-rules-change-hurts-vital-healthcare-investors.html

[Beagle]

New Zealand Shareholders’ Association chair John Hawkins.
“In my view, it does matter when an investment looks like a cat and lives in a cattery but is actually a dog,”

http://www.sharechat.co.nz/article/b641a211/retrospective-nzx-rules-change-hurts-vital-healthcare-investors.html

Unitholders appear to have very good grounds to be barking mad ! Talk about being taken for a ride and so comprehensively muzzled you can't even have your say !
It beggars belief that the institutions haven't commenced legal action against the trustee for gross negligence in terms of looking after their interests. I'd be dusting off my insurance policy and ensuring the cover was topped right up if I was the trustee.

[RTM]

Delay to reporting. Enough on tomorrow anyway.


25/2/2019, 5:00 pm GENERAL
NorthWest Healthcare Properties Management Limited (the Manager), as manager of Vital Healthcare Property Trust (Vital), advises that Vital’s interim results for the period ending 31 December 2018 will be released on 1 March 2019. Vital’s interim results had previously been scheduled to be released on 26 February 2018.

Vital’s Trust Deed requires interim results to be announced no later than 75 days after 31 December, so the updated timing continues to comply with applicable regulatory requirements. The additional time will allow for finalisation of Vital’s results, which has been affected by the number of important strategic initiatives underway at the moment, including the Healthscope opportunity and the wider fee and governance review.

A conference call and webcast will be held at 11:30am (NZDT) with David Carr (Chief Executive Officer) and Stuart Harrison (Chief Financial Officer) of the Manager. You may join either or both of these.

Conference call
To attend the conference call, participants will need to dial in to one of the numbers below at least 5-10 minutes prior to the scheduled call time and identify themselves to the operator.

- New Zealand toll free 0800 122 360
- Australia toll free 1800 760 146
- North America toll free 1 844 393 3437

When prompted, please quote the Conference ID of 137117. Please contact Vital at enquiry@vhpt.co.nz if you require dial in details for any other country.

[Sideshow Bob]

https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12218120

Up, down or sideways......no one knows......

[peat]

indeed, transparency not a strong point, but they have reduced some fees, and also reduced their power (ability to sack ) but could well be a token effort , as you say not obvious.

[Jaa]

I have had a read of the new fee structure and my first reaction is are they serious?? They have made it even worse!

They have reduced the % GAV fee a bit but added a lot of (expensive) nickle and dime fees for just doing their job, renewing leases, development activity, buying and selling property etc. What is the % of GAV fee for then?!?!

The incentive fee on a straight increase in NTA has increased from 10% to 10.2%. No allowance for a reference index or even inflation and no highwater mark !

Also, the chairman is now not even nominally independent.

Bet they will make even more money under this structure than before. It's damming that they didn't bother forecasting what difference the changes will make to distributions or EPS or even to retrospectively apply it for last year.

Outrageous if you ask me, but then what did we expect. Lets vote them our for real this time. :mad ;:

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/VHP/332764/297712.pdf

[Jaa]

I have had a go at estimating the difference in fees payable to Northwest under the current and proposed changes.

For FY 18, NorthWest would have made an additional $1,410,674 in fees, not including the new leasing, property and facility fees for which the info isn't available to calculate. If I had to guess I would say they would add up to at least another $500,000 in fees. So roughly $1.9m WORSE than before.

Using the 1.88b gross asset figure at the interim report, NorthWest would still make an additional $808,560 in fees under the proposed structure, not including the new leasing fees etc. So roughly $1.3m WORSE than the current fee structure.

My calculations are here (please comment if I have made any mistakes or my assumptions are off):
Vital Healthcare Proposed Fee Structure (https://docs.google.com/spreadsheets/d/1sz8100e-xMazUni5brhKAi6985ReG4yxUeJol0D5PDM/edit?usp=sharing)

Another key point, is that if Vital acquires the Healthscope properties, NorthWest will have yet another big payday of 1.5% of the acquisition cost. This is in-spite of Vital being forced without a shareholder vote to bankroll this ridiculous venture.

Unit holders are being fleeced yet again.

[bull....]

https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12222436

Vital Healthcare manager and trustee refuse to answer questions on fees
I guess the article raises valid questionable points in what they are doing. I guess it is not illegal otherwise the FMA would be involved but i thought the law was revamped to stop this stuff happening

[Beagle]

WOW...looks like quite the scandal possibly pushing the envelope on what's "legal" right to the very edge.
One wonders how exposed from a legal perspective the trustee is in terms of gross recklessness or negligence ? How does what's going on possibly fit with the Trustees obligations in terms of protection of unit holders best interests ?
I think there is the distinct possibility that the institutions might band together and take legal action against both the manager and trustee. No wonder they have both stopped talking...this looks actionable to me.

[Soolaimon]

I as in for quite some time with this one but now even happier that I sold 2 months ago.

[Onion]

GOODMAN TRUST WON'T ADOPT NEW NZX RULES FOR MANAGED FUNDS (http://www.sharechat.co.nz/article/5526c54f/goodman-trust-won-t-adopt-new-nzx-rules-for-managed-funds.html)


That leaves the manager of the only other NZX-listed property trust, Vital Healthcare Property Trust, exposed as the only manager to adopt the new MIS rules which exempt it from a whole raft of listing rules.

Well done GMT.

[Beagle]

One is literally asking for trouble being a so called "shareholder" of VHP now.

[RTM]

https://www.nzx.com/announcements/334350

One thing I’ve learnt on here is to back my own judgment and not panic when the going is apparently getting a bit tough, nice to have some good news. The demographics favouring the retirement sector are also good for VHP IMO.
Disc : 3% of my portfolio. Buys @ 130 & 203.

https://www.nzx.com/companies/VHP

[RTM]

One is literally asking for trouble being a so called "shareholder" of VHP now.

Pleased I stuck with them.
Closed today @ $2.75.

[Toasty]

I am a little surprised that VHP has come back so far. I would have thought that owning Healthcare facilities and Hospitals would be a growth industry at this point.

[mcdongle]

In Europe governments are taking over private hospitals etc...

[Jaa]

How did these charlatans manage to waste $8m on "associated third party costs" for a failed attempt "to facilitate a foreign exempt listing on the Australian Securities Exchange".

The mind boggles! :eek2:

[RTM]

One is literally asking for trouble being a so called "shareholder" of VHP now.


Pleased I stuck with them.
Closed today @ $2.75.

And even more pleased now. Hit $3.00.
You just gotta be patient with some of these.
Yield is wrecked tho !

[Toasty]

Anyone participating in the capital raise coming up? Not the most exciting company I know, but I have been a unit holder for 15 years and it has certainly weathered the various storms and continued to pay a regular dividend. Leasing to Medical providers seems a good place to be at the moment.

[Filthy]

I think there will be a strong uptake, but I'll probably duck this one

[RTM]

I think there will be a strong uptake, but I'll probably duck this one

Have they announced the price ?
If reasonable....I will be in. Yes Toasty, quite a boring share, except when Beagle chimes in.
I need more of these boring shares in my portfolio.

[Jaa]

Have they announced the price ?
If reasonable....I will be in. Yes Toasty, quite a boring share, except when Beagle chimes in.
I need more of these boring shares in my portfolio.

$2.80 - only a 6% discount and that after a large run up in the previous few months.

An ok investment so long as interest rates don't reverse direction and start rising.

[RTM]

$2.80 - only a 6% discount and that after a large run up in the previous few months.

An ok investment so long as interest rates don't reverse direction and start rising.

Hmmmmm...thanks....yes....6% discount not enough, especially after the recent run up.
I think in the next year or so I may well be able to buy them on market cheaper than $2.80.
I'll be passing on this.

[dibble]

Hmmmmm...thanks....yes....6% discount not enough, especially after the recent run up.
I think in the next year or so I may well be able to buy them on market cheaper than $2.80.
I'll be passing on this.

You know the drill by now, price that was (artificially??) ramped up before will drift back towards 2.80 target, leaving that dilemma whether to wait to the last minute to see if they drop to below whatever the 5 day average will be etc etc. Its all good fun.

[RTM]

You know the drill by now, price that was (artificially??) ramped up before will drift back towards 2.80 target, leaving that dilemma whether to wait to the last minute to see if they drop to below whatever the 5 day average will be etc etc. Its all good fun.

Yes.
3.4% of my portfolio. Modest dividend at current price. I’ll stay with my current holding.
Quite happy with that, cost 187c.

[RTM]

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/VHP/374670/349113.pdf

Interesting presentation. They are operating in a good sector. Would like to see improving return (dividend ) going forward. Modest portfolio % - 2.5
Quite interested in the Manager as well.
https://nz.finance.yahoo.com/quote/NWH-UN.TO?p=NWH-UN.TO&.tsrc=fin-srch

[KenFF]

Another capital raise in 2 years in a row. Last time (2020) it was $2.8 and the price was never go down beyond that. Now it's $2.9, seems a reasonable bargain, especially in this era when almost every stock is over-valued.

[winner69]

Many of you in VHP

I’ve always stayed clear because of the Northwest connection

See BusinessDesk has a bit on recent cap raise bring up dodgy dealings by Northwest on the previous raise and mention of FMA etc etc

Doesn’t give investors confidence

[nztx]

Many of you in VHP

I’ve always stayed clear because of the Northwest connection

See BusinessDesk has a bit on recent cap raise bring up dodgy dealings by Northwest on the previous raise and mention of FMA etc etc

Doesn’t give investors confidence


With you there Winner - have always stayed clear of this one & the recent VHP SPP/Bookbuild as well :)

[peat]

I’ve always stayed clear because of the Northwest connection

See BusinessDesk has a bit on recent cap raise bring up dodgy dealings by Northwest

Doesn’t give investors confidence

Jenny Ruth picks a bone sometimes eh!? and this company seems to be a repeat offender , so as much as we love the WALT and the medical sector, we wont take part.

[Onion]

Many of you in VHP

I’ve always stayed clear because of the Northwest connection

See BusinessDesk has a bit on recent cap raise bring up dodgy dealings by Northwest on the previous raise and mention of FMA etc etc

Doesn’t give investors confidence

I used to be a holder but sold out when it became apparent that the managers benefit much more from certain decisions that the unit holders. I still like the segment they invest in but have not been tempted back into the fold..

[Snoopy]

Many of you in VHP

I’ve always stayed clear because of the Northwest connection

See BusinessDesk has a bit on recent cap raise bring up dodgy dealings by Northwest on the previous raise and mention of FMA etc etc

Doesn’t give investors confidence


With accounting reporting conventions getting more and more prescriptive, I find it interesting that more and more 'non-standard' accounting disclosures are being adopted to 'better reflect' the true underlying performance of the business.

While perusing the VHP accounts the latest non GAAP measure to come to my attention is AFFO or 'Adjusted Funds From Operations'. The warning sign for me here is that you can apparently 'adjust' for anything you like. The big adjustment that VHP makes is a $12.402m incentive fee expense that is added on to net profit (in the context of a $51m net profit before tax) . That incentive fee is payable to 'Northwest', the Canadian based management company that operates the management contract for VHP. In one sense I can see the logic of disconnecting these incentive payments from normal operational performance. The problem I have is that VHP is using AFFO as a measure from which to derive their dividend. The net effect of this is that last year Vital Healthcare paid out a significant amount more than their profits in dividends. Is this another version of the old borrowing to pay dividends trick?

Since the incentive fee does have to be paid in some form, this looks like VHP are being dishonest to their unit holders, by falsely inflating the yield from their property trust by disregarding a real cost on their business. Thoughts?

SNOOPY

[Snoopy]

Any thoughts on the rights issue?

I am glad it is a rights issue and is renounceable but they should have included a facility to automatically market and sell unclaimed rights and return the proceeds to investors (most are retired) ala NAB. That way no one loses.


The above refers to a former capital raising in 2016. It looks like VHP have 'learned', and organised their latest rights issue as Jaa suggested. I am not sure that those who 'did not take up their rights' will be happy with the proceeds returned though:

From the 16th May market announcement:
"As the volume-weighted average price for the existing units on the last trading day prior to the retail bookbuild was less than the offer price, in accordance with the Offer Document the price for the Retail Bookbuild will be the same as the Offer price, being $2.95 per new unit. This means that no premium in respect of the Retail Bookbuild will be paid to retail unitholders who did not take up their entitlements in full or who were ineligible to participate.".

Now I have nothing against the VHP business per se. I think the long leases locked in are good. And VHP is the only property trust entirely dedicated to the wider medical profession property. My beef is that the share price has been bid up too highly, with the resulting measly yields available to unit holders not reflective of the risk.

"Gross proceeds of approximately $30.7m. (including ~$1.8m of additional new units under the Offer)"
"Eligible retail unitholders took up 34.0% of their entitlements."

Maybe after looking at their options, existing VHP unit holders have reached the same conclusion that I have, as an outsider.

SNOOPY

[winner69]

Solid result

Unlike many in sector shareholders get a pay rise this year ….keeping un with inflation

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/VHP/396763/376299.pdf

[fungus pudding]

Solid result

Unlike many in sector shareholders get a pay rise this year ….keeping un with inflation

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/VHP/396763/376299.pdf

Is VHP a PIE?

[ithaka]

Is VHP a PIE?
It appears to be
https://www.vitalhealthcareproperty.co.nz/app/uploads/2021/02/Issue-of-Incentive-Units.pdf

[fungus pudding]

It appears to be
https://www.vitalhealthcareproperty.co.nz/app/uploads/2021/02/Issue-of-Incentive-Units.pdf

Excellent. Thanks muchly.

[RTM]

https://www.nzherald.co.nz/business/topped-off-166m-expansion-at-wellingtons-wakefield-hospital-marked/RPFVBFNSABGQNGDCTGXKWCHULE/?lid=m6perg5kkhp2

For those interested.

"Progress was marked today on the $166 million expansion of Wellington’s largest private hospital.
Sue Channon, chief executive of Evolution Healthcare which operates Wakefield Hospital, said a topping-out ceremony was held when the new building’s structure reached its highest point.
Hawkins is working at the hospital between Rintoul St and Florence St, Newtown.

“Evolution’s $166m investment in redeveloping Wakefield Hospital has reached its highest point,” a company statement said today. "

Etc

[benbob]

Please enlighten me. NTA=$3.17 SP=$2.31 ... Why dont directors sell all the assets and wind up the company and give us all a 40% boost on our share price. Is the NTA possibly false?

[Sideshow Bob]

Please enlighten me. NTA=$3.17 SP=$2.31 ... Why dont directors sell all the assets and wind up the company and give us all a 40% boost on our share price. Is the NTA possibly false?

There is a number of companies on the NZX with NTA above their share price/market cap, especially the REITs. It does indeed beg the question, and in VHP's case their ATH is about $3.30 - so probably hardly ever been over its NTA.

Share price has fallen as interest rates have increased, as buyers are generally buy for divvies/yield - so they want a higher yield (even now gross yield is <5%).

There will be a methodology behind the valuation of assets (which I expect is all tangible, rather than a value of intangible assets) - and the question would be whether these values would be realisable in the market.

Following on from this, another question is the relatively poor return on assets? In terms of the old chestnut of "maximising shareholder value", winding the company up and selling assets above book value could be the way - can't recall it having been done with a larger company.

Of course, directors would be doing themselves out of a job, and also depended what larger shareholders wanted to do.

It is sometimes a bit of a trap sometimes - buying companies at lower than NTA. But typically that value is never truly realized.....at least to shareholders.....;)

[Rawz]

Its a bit like inception.

The property market is happy to value properties at a certain rental yield.
The share market is happy to value these reits at a certain dividend yield.

[Fortunecookie]

There is a number of companies on the NZX with NTA above their share price/market cap, especially the REITs. It does indeed beg the question, and in VHP's case their ATH is about $3.30 - so probably hardly ever been over its NTA.

Share price has fallen as interest rates have increased, as buyers are generally buy for divvies/yield - so they want a higher yield (even now gross yield is <5%).

There will be a methodology behind the valuation of assets (which I expect is all tangible, rather than a value of intangible assets) - and the question would be whether these values would be realisable in the market.

Following on from this, another question is the relatively poor return on assets? In terms of the old chestnut of "maximising shareholder value", winding the company up and selling assets above book value could be the way - can't recall it having been done with a larger company.

Of course, directors would be doing themselves out of a job, and also depended what larger shareholders wanted to do.

It is sometimes a bit of a trap sometimes - buying companies at lower than NTA. But typically that value is never truly realized.....at least to shareholders.....;)

I think you hit the nail on the head.

In addition to the regular dividend, how do you realise value over an above that. Yes they can continue to grow earnings but as you say the return on assets aren't great.
Take for example KPG, NTA is great so it is well secured. A few months ago I looked at their BTR project. Unit cost averaged around $750K and that was on land that they already owned.
Apply market rent, how do they intend to extract above average returns.

So there are few companies that are reits or some quasi form of reits.

On a side note, I do believe BTR is the way of the future.
There is tremendous benefit when there is one landlord or has majority ownership as opposed to multiple.
I can see reits taking this approach as relatively speaking, rent repayment from renters are alot safer compared to commercial.

[Snoopy]

Please enlighten me. NTA=$3.17 SP=$2.31 ... Why don't directors sell all the assets and wind up the company and give us all a 40% boost on our share price. Is the NTA possibly false?




Its a bit like inception.

The property market is happy to value properties at a certain rental yield.
The share market is happy to value these reits at a certain dividend yield.


I think this comment by Rawz is on the money. The current historical gross dividend yield for VHP, based on a share price of $2.31, is 4.949%. Now imagine what that dividend yield would drop to if the share price rose to its NTA. Actually no imagination is necessary. The answer is: $2.31/$3.17 x 4.949% = 3.606%.

As I write this, the best big bank interest rates on offer for a 5 year term deposit at ASB is 5.25%. So a higher return and more security than VHP. On that basis you could say that VHP, even at $2.31, is overvalued. And using the same measuring stick, VHP at $3.17 is simply 'pie in the sky'. While the tools used to value VHP at its asset backing are no doubt legitimate, the answer makes no sense for dividend investors.

The only explanation I can offer is that the market values medical company tenants highly and unlikely to go out of business just because the business cycle turns down. Hence the reason VHP shares are priced at a premium on market to other REITs (even if I am only talking about yield). I think for investment purposes the dividend yield record is a much better valuation metric than looking at net asset backing. I would almost go as far as to say, for REITs, net asset backing, which jumps up and down anyway on interest rate fluctuations, should be ignored.

SNOOPY

[Snoopy]

Anyone participating in the capital raise coming up? Not the most exciting company I know, but I have been a unit holder for 15 years and it has certainly weathered the various storms and continued to pay a regular dividend. Leasing to Medical providers seems a good place to be at the moment.



$2.80 - only a 6% discount and that after a large run up in the previous few months.

An ok investment so long as interest rates don't reverse direction and start rising.

A short excerpt from 'Taking Stock' 29th June 2023 by Fraser Hunter

--------------------------

Healthcare Property Sector

The property healthcare sector consists of just one company, Vital Healthcare Property Trust (VHP). VHP specialises in acquiring, developing, and managing high-quality, well-tenanted properties in the healthcare sector across New Zealand and Australia. The portfolio is diverse and consists of 47 properties including hospitals, out-patient facilities, aged care facilities, and research facilities.

Due to its needs-based nature, VHP has a high occupancy rate (98.4%) and longer lease terms (average expiry 17.2 years) than the rest of the sector. VHP has a strong history of delivering investor returns through steady growth in asset values and the ability to increase rents. While VHP's exposure to the healthcare sector positions it for continued earnings and dividend growth, its main risk lies in its valuation, as it trades at a higher P/E than the sector, has a lower rental yield, and relatively high gearing.

--------------------------

The bit in bold got me thinking.

If the value of an asset is the 'discounted value of future cashflows', and if the contracted values of those cashflows stretch out for 17 years (as opposed to 8 for a big box retail property owning company like Investore) does that mean VHP is more valuable for the same annual yield profile? The reason I am asking is that many property rental deals contain 'rights of renewal'. If you operate a large supermarket on a key site, then there is is good chance you will take up your 'right of renewal' despite that right of renewal not having to be signed up to for some years. So despite such cashflows being 'likely', does the fact that these renewal contracts are 'not signed' means these likely future cashflows are rated at zero for property company valuation purposes?

The reason I am asking is that this could (partly?) explain why VHP is a company higher rated (by that I mean the market bids it up to a lower yield) than the likes of IPL. You could argue that both supermarkets and medical centres represent businesses in which consumers spend because of 'need' rather than 'greed'. So I am really puzzled why the yield of IPL as a listed entity is so much better than that of VHP.

SNOOPY

[Snoopy]

Due to its needs-based nature, VHP has a high occupancy rate (98.4%) and longer lease terms (average expiry 17.2 years) than the rest of the sector.

--------------------------

The bit in bold got me thinking.

contain 'rights of renewal'. If you operate a large supermarket on a key site, then there is is good chance you will take up your 'right of renewal' despite that right of renewal not having to be signed up to for some years. So despite such cashflows being 'likely', does the fact that these renewal contracts are 'not signed' means these likely futIf the value of an asset is the 'discounted value of future cashflows', and if the contracted values of those cashflows stretch out for 17 years (as opposed to 8 for a big box retail property owning company like Investore) does that mean VHP is more valuable for the same annual yield profile? The reason I am asking is that many property rental dealsure cashflows are rated at zero for property company valuation purposes?


Vital have let it be known, in advance of their annual result release, that the 'capitalisation rate' for the company is now 5.06% for FY2023. This implies an annual divisor factor of:
1/(1-0.0506)= 1.0532, which equates to a multiplication factor of 0.9495

This means the earnings discount factor, moving out 'n' years in the future is 0.9495^n

Over FY2022, the operating profit, which includes interest expense already removed, in this case (i.e. this is EBT) was $56.5m. Let's assume tax is paid at a rate of 30%. Now let us assume operating profit grows by 2% per year. What is the discounted cashflow valuation of earnings both 8 and 16 years into the future?




Year
Operating EBTOperating EATDiscount FactorPV OEATSum Period to date



2023
$57.6m$40.3m1.0$40.3m


2024
$58.8m$41.1m0.9495$39.0m


2025
$59.9m$41.9m0.9015$37.8m


2026
$61.1m$42.8m0.8560$36.6m


2027
$62.3m$43.6m0.7717$33.6m


2028
$63.6m$44.5m0.7327$32.6m


2029
$64.9m$45.4m0.6957$31.6m


2030
$66.2m$46.3m0.6606
$30.6m
$282.1m (after 8 years)


2031
$67.5m$47.3m0.6272$29.7m


2032
$68.8m$48.2m0.5955$28.7m


2033
$70.2m$49.1m0.5654$27.8m


2034
$71.6m$50.1m0.5369$26.9m


2035
$73.1m$51.2m0.5098$26.1m


2036
$74.5m$52.2m0.4840$25.3m


2037
$76.0m$53.2m0.4596$24.4m


2038
$77.5m$54.3m0.4363
$23.7m
$494.7m (after 16 years)



This table is telling us that, using real world numbers, it makers quiet a difference whether your rental contracts run for 8 years or 16 years. The 16 year rent contract is worth: $494.7m / $282.1m = 1.75 times more. My gut feeling was that because those extended contract dates were so far out in the future that ratio would be much less. So my gut feeling was wrong, which was a good reason to really check out the numbers!

Does this explain why -in this time or rising capitalisation rates- the shrinkage of asset values at VHP of just 6.4% - was relatively modest?

SNOOPY

[Snoopy]

Does this explain why -in this time or rising capitalisation rates- the shrinkage of asset values at VHP of just 6.4% - was relatively modest?


Just been to a broker seminar presented by Aaron Hockly, who is the equivalent of the CEO if Vital Healthcare Property Trust (VHP), had any employees. (All the staff at VHP are employees of property manager Northwest, including the 19 or so based in Auckland and approximately double that number based in Melbourne). VHP is but one of five property investment arms managed by 'Northwest Healthcare Properties Management Limited', based in Canada. But VHP is the only one of these funds with a public listing, with the other four all majority controlled (70% stake) by the sovereign wealth fund of the Singaporean government. I managed to get a chat with Aaron after the seminar, so he was able to clear up a lot of my questions.

I was concerned that the rise in capitalisation rate that has been pre-announced to 5.06%, would be matched by an equivalent rise in discount rate. That in turn would see the present value of discounted cashflows of the future (that 17 year income stream) discounted to the extent that the value of VHP units might be significantly affected. Aaron was being coy, given the results of the company are to announced to the market on Thursday next week. But he said that the capitalization rate and the discount rate were not necessarily as closely coupled as that, as discount rates also needed to account for the quality of the lease agreements and what that meant for the surety of income going forwards.

Further to that he said that many of the 'cap and collar' CPI lease agreements, which limited CPI linked rent rises to well below the actual CPI rate of 7% that we are seeing, did have 'catch up clauses' where excess CPI rises could be carried through into future years. Failing that there were also 10 year reset clauses, where over that much longer period, rent that had fallen behind inflation could be 'made up', as that part of the rental agreement rolled over.

I asked about 'competition' from the other arms of Northwest in securing future development projects. Australia is pretty much on the doorstep of Singapore after all! Aaron said that VHP had first dibs on all New Zealand projects and aged car opportunities in both Australia and NZ. As far as Australia was concerned, Northwest arranged it so that new opportunities were offered first on a rotational basis to the five different property arms managed by Northwest. While superficially this sounds 'fair' (because you wouldn't want one property owning associated arm of Northwest bidding against another), in fact VHP did have a disadvantage because of the higher capitalisation rate hurdles that applied in Australia and New Zealand, when evaluating new opportunities. A Singaporean arm of Northwest might make a go of a project with a 4% yield on completion, where VHP needs around 6% to make an equivalent project viable.

According to Aaron, most of the acquisition opportunities for VHP have dried up. They have either already been sold to global long term asset owners, or the price that VHP might have to pay has become too high. That means that from now on, Vital will be undertaking new developments, which, initially at least, will involve more construction contract risk that has been typical of VHP in recent years. An investor asked if these new developments had further opportunities for yield improvement by 'building out' more lease-able space on current sites. Aaron's answer was a fairly definitive 'no', although he did add that where VHP had been able to purchase adjacent land to existing developments, that remained a possibility. I asked about public private partnerships in development of the 'health precincts' that VHP now favours. He said VHP had not gone the PPP way, although he did note the new birthing unit being built in Christchurch on the old Police site was the be fully tenanted by 'Health New Zealand'.

The biggest threat to VHP in the near term is rising interest rates, because costs are rising faster than any rent increases can cover. To that end, Vital had put some of their less desirable properties up for sale. Even in these tough times they had been able to sell assets at a 9% discount to book value, verses something like a 27% discount that it was possible to buy VHP shares at on market. Properties put up for sale had doubts about end of contract lease renewals. One instance being where a hospital had acquired land to develop a new facility that looked like it might 'replace' a building where an existing lease had just a few years until expiry.

The long term strategy for VHP management is to keep AFFO (Adjusted funds from operations) growing at a rate of 2-3% per year. That does not sound a lot in the current interest rate climate. But long term Aaron is convinced this policy will provide a satisfactory return for unit holders. Reassuringly, VHP is able to over-rule potential new project purchases that might benefit Northwest (because if the size of the property portfolio under management at VHP increases, then Northwest fees increase, tied to the value of assets being managed) but not VHP (because the yield available on some new rental contracts make them not viable for VHP, the property owner). Aaron said the NZ domiciled directors are there to ensure the NZ unit-holders interests are looked after in this regard.

It is unusual for an NZ based property company to have most of their assets in Australia. This obviously limits the NZ imputation credits that are able to be attached to dividends paid to NZ unit-holders. But Aaron seems adamant that the arrangement works well, because no 'extra' tax is deducted from the Australian income at source if it is brought back to NZ. This sounds a bit odd to me. Even though no extra tax is deducted when the money leaves Australia, that doesn't remove the liability to pay income tax on that money to the NZ government once it hits the bank account of an NZ domiciled entity. In practice I suspect any retained profits in Australia stay in Australia, to fund Australian developments. Aaron also made an off the cuff remark about some of the Australian assets being subject to NZ's FIF tax regime. I was shocked by that because generally Australian assets that produce taxable income in Australia are exempt from FIF. So maybe some of these 'Australian' assets are held my offshore companies in Singapore or Bermuda or something? Whatever, I guess VHP have done all the calculations to make sure the tax paid is optimized for VHP!

SNOOPY

discl: do not hold, but considering it.

[Sideshow Bob]

https://www.nzx.com/announcements/416066

Northwest Healthcare Properties Management Limited (Northwest), as manager of Vital Healthcare Property Trust (Vital), released its results for the 12 months ended 30 June 2023 (FY23) today.

Vital continues to have a market leading portfolio of high-quality, healthcare assets across Australia and New Zealand valued at NZ$3.4 billion with ~99% occupancy and a weighted average lease term (WALE) of 17 years to the leading healthcare operators for each country. Work undertaken during FY23 is expected to further enhance the quality and future earnings of the property portfolio for the benefit of Unit Holders.

FY23 highlights include:

1.Growth in Adjusted Funds From Operations (AFFO), which is a proxy for underlying cash earnings, of 8.1%. This includes the contribution of 5.3% net property income growth on a like-for-like, same property basis (3.6% on a like-for-like, same property, constant currency basis).
2.Commencement of a non-core asset divestment programme with ~NZ$155 million already transacted and a target of a further ~NZ$100m to be divested in FY24.
3.Continuation and replenishment of Vital’s committed development pipeline including commencement of construction of:
a. A$140 million RDX development on the Gold Coast.
b. NZ$43 million expansion of Ormiston Hospital in Auckland.
c. NZ$23 million expansion of Endoscopy Auckland.
d. A$64 million cancer centre at Macarthur Health Precinct,
Sydney (stage 1).
e. A$29 million mental health facility at Mount Eliza, Melbourne.
Note: all figures above other than Endoscopy Auckland include land.
4. Several significant ESG / sustainability achievements including being ranked second globally for healthcare real estate by GRESB.
5. Delivering to the distribution guidance of 9.75 cents per unit
(cpu).

Fund Manager, Aaron Hockly, says that Vital is part way through a process of further upgrading and enhancing its property portfolio, in-line with announcements made over FY23.

“This is primarily through the sale of non-core assets and the reinvestment of sales proceeds into developing new healthcare facilities in key healthcare precincts with strong sustainability characteristics. These enhancements are expected to support future earnings growth for Unit Holders.” says Hockly.

Macarthur Health Precinct in Campbelltown, Sydney is an example of a development where funds are being reinvested. The precinct is anticipated to comprise a three-stage development with stage one, a ~A$64m comprehensive cancer centre (costs includes land), currently underway (July-22 commencement) and due for completion in the second half of FY24. Stage two is expected to comprise a major medical office building and day surgery and due to be committed to in the next 12 – 18 months. Stage three is expected to be an ambulatory care facility to be progressed thereafter.

“Net property income growth in FY23 was a healthy 18.1% reflecting acquisitions, developments and rent reviews delivering a 3.6% increase on a same property, constant currency basis,” continues Hockly.

“Like many businesses, Vital has experienced the impacts of increasing interest costs contributing to rising debt costs in FY23. We have balanced this by prudently raising equity ahead of investing in new developments which contributed to AFFO per unit falling in FY23. We anticipate that our ongoing portfolio enhancements will support AFFO growth per unit in future periods.”

Outlook

Despite recent heightened market volatility, healthcare property remains a defensive asset class, underpinned by a high level of government support and non-discretionary spending. This has been demonstrated by recent sales in the sector notably in Australia.

Vital has A$180m of debt headroom which, in conjunction with asset sales, will fund its development pipeline and has no debt expiring until March 2025.

FY24 distribution guidance of at least 9.75 cpu has been provided.

Online-only Annual Report

As part of Northwest’s and Vital’s sustainability efforts, Trustees Executors Limited, as Vital’s supervisor, has agreed to waive the Trust Deed requirement for Northwest to print and post the FY23 Annual Report and FY24 Half Year Report and instead will post a summary report to those Unit Holders who have elected to receive a hard copy.

As usual, the full Annual Report and Half Year Report will be released to the NZX, made available on Vital’s website and emailed to Unit Holders who have provided an email address to Computershare. In addition, Unit Holders may request a hard copy be posted to them. Northwest will monitor Unit Holder feedback on this initiative over the next 12 months to determine, in consultation with the Supervisor, how to proceed with subsequent reports.

This initiative is expected to save over 250,000 pages of paper and divert 500kg of waste from landfill per annum, equivalent to a reduction in greenhouse gas emissions of 1,532.16kg CO2e.

Refer to the attached documents including Vital's FY23 Annual Report, Investor Presentation and Annual Report Summary for full details of Vital's results.

[Snoopy]

Fund Manager, Aaron Hockly, says that Vital is part way through a process of further upgrading and enhancing its property portfolio, in-line with announcements made over FY23.

“This is primarily through the sale of non-core assets and the reinvestment of sales proceeds into developing new healthcare facilities in key healthcare precincts with strong sustainability characteristics. These enhancements are expected to support future earnings growth for Unit Holders.” says Hockly.


I am investigating how the mooted change in depreciation deductibility might affect earnings of VHP going forwards. So far I am not having much luck. There is no quantification of how depreciation affects the FY2023 or FY2022 annual results that I can find. Of course much of the VHP portfolio is in Australia. Income from that source is beyond the reach of any future New Zealand National or Labour lead governments 'denial of depreciation' rights.

p82 of AR2023 has this to say about tax rates:
"The Group is subject to New Zealand tax on assessable income, including assessable Foreign Investment Fund ("FIF") income attributed from its Australian subsidiaries (applying either the Fair Dividend Rate ("FDR") method or the attributable FIF method), at a rate of 28%. Its Australian subsidiaries are subject to Australian withholding tax on assessable income at a rate of 10% for interest income or 15% for 'fund payment' amounts as they are Australian Managed Investment Trusts (MIT), for which a New Zealand tax credit is generally available."

I was a little surprised to see mention of FIF income treatment in relation to the Australian property portfolio. This would indicate that the Australian property portfolio does not have a franking credit account, a situation that I find odd. Perhaps the Australian MIT structure that holds VHP's Australian assets has something to do with this. Anyone know?

In any event, a change in depreciation deductibility for income tax purposes would only affect the NZ property holdings. As of EOFY2023,(AR2023 p81) these earnings only represented:

$949.378m / $3,288.356m =28.9% of all managed property assets

It is interesting that in AR2023, the word 'depreciation' is only printed twice, with both of those mentions being in the same sentence on p84:
"Deferred tax on depreciation: Deferred tax is provided for in respect of New Zealand properties for the depreciation expected to be recovered on the sale of investment property."

This got me thinking. If there is no depreciation allowed on NZ commercial buildings, does that mean there will be no 'depreciation recovered' tax to pay on the selling down of parts of the NZ portfolio in the future? I imagine that any depreciation claimed under older income tax rules might still be recovered and taxed under a depreciation regime in NZ that no longer allows commercial building depreciation as a legitimate expense. Anyone know?

SNOOPY

[Snoopy]

The current historical gross dividend yield for VHP, based on a share price of $2.31, is 4.949%. Now imagine what that dividend yield would drop to if the share price rose to its NTA. Actually no imagination is necessary. The answer is: $2.31/$3.17 x 4.949% = 3.606%.


I wrote the above on 20th June 2023. I am fairly sure I pulled that gross yield figure off the NZX website, back on the day. Yet so complex are some of those dividend statements from VHP, I wondered if the NZX algorithm got the yield right? I will do my calculation 'looking backwards' from 20-06-2023 to get an historical dividend rate. Let's see if I get the same answer:




Ex-Dividend dateTotal Cash Distribution {A}Tax exempt Distribution {B}Taxed Cash Distribution {A}-{B} or {C}Imputation Credits @28% (if fully imputed) OR PIE recognised {C}/0.72-{C} or {D}Actual Imputation credits {D}x{E}Imputation Rate {E}Gross Dividend {B}+{C}+{D}


07-06-2023$0.02437500$0.00568231$0.01869269$0.00726938$0 .0021686129.8321%$0.03164444


08-03-2023$0.02437500$0.01158482$0.01279018$0.00497396$0 .0010149920.4060%$0.02948960


30-11-2022$0.02437500$0.01197639$0.01239861$0.00482168$0 .0009537919.7813%$0.02919668


07-09-2022$0.02437500$0.02437500$0.00000000$0.00000000$0 .000000000%$0.02437500


Total$0.11470572



To calculate the gross yield based on a share price of $2.31: 11.470572 / 231 = 4.966%

With $NZ2.5b of properties on Australia and $NZ1b of properties in NZ, a 1/(1+2.5) = 28.6% imputation rate is what you might expect if the NZ and Australian property portfolios were equally profitable. That makes the imputation rates declared look 'believable' (because no NZ imputation credits would be earned in Australia), except for the September quarter result where no imputation credits at all were earned. I took a look forwards and Vital pulled exactly the same trick in September 2023. Why these two fourth quarter derived earnings offer no imputation credits I have no idea. Some kind of wrap up accounting calculation perhaps? But if that were generally true, then the same thing would apply to the September 2021 dividend as well, - which it doesn't. Go back another year and it is the September 2020 and December 2020 dividend that both pay no imputation credits. Maybe it's a problem too difficult for a dog to solve? I think I will go and lick up the supper dish instead....yum!

I still don't understand why no matter what percentage of imputation credits were actually paid, a PIE unit-holder can get the benefit as if tax was paid at a rate of 28%. But there you go.

SNOOPY

[Snoopy]

Is VHP a PIE?


In light of my post 172, I wonder if it is worth revisiting this question?

I know what a pie is. It has a pastry encased cavity which holds the ingredients and a pastry top to seal it off. But what about a potato top pie? There is more pastry in the lower half of the pie than in the pastry seal on top. So it still looks like a pie, and can pass as a pie. But what about if that lower bit was the potato section and there was a fitted pastry lid to seal it? Would that still be a pie? It would look like a pie. But it wouldn't really taste like a pie. And that is where VHP sits in my view. The bulk of the PIE case is Australian spud, but with a layer of 'NZ pastry' taking the publicity limelight (VHP is NZX listed after all) and sealing the top. It doesn't taste like a PIE because of the only partially (1/3) tasty dividends spun out, while the other 2/3 of the taste comes from a less fulsome Aussie flavour. So is VHP really a PIE? I would say NO.

SNOOPY