New loans to fuel Vital's expansion

NZX-listed healthcare property investor Vital, says it will use extended bank facilities to continue its capital development programme and possibly buy new properties.

In a stock exchange announcement, Vital Healthcare Management Ltd, the manager of Vital Healthcare Property Trust (NZX: VHP), says it has renewed funding terms with ANZ National Bank, for up to $A225 million and $NZ20m, in two tranches, up to 2017.

That gives it headroom of $A57m and $NZ15m, which will be "partially drawn down", the market release says.

Vital's first tranche of bank lending will expire on March 31, 2015, when $A100m and $NZ20m will have to be revisited.

VHM chief financial officer Stuart Harrison told NBR Online the bank facilities will be used to finish its existing programme of capital works.

It might also be used to explore new development opportunities within existing properties and the purchase of new properties.

"There could well be that ability to make new acquisitions within this financial year."

Mr Harrison says it is not correct to assume all of the Australian dollars will be spent in Australia, because of the bank facility is currency split.

"We're keen to keep an eye out for New Zealand opportunities," he says.

According to Vital's unaudited interim report issued in December, the trust's debt-to-total assets ratio as at December 31, 2011, was 39%.

Gearing as at June 30 this year is forecast at 42.9% but the board wants the medium to long-term gearing to remain below 40%, the interim report says.

With the renewal of the banking facility, Vital's loan-to-value ratio (LVR) was increased from 45% to 50%, aligning it with the trust deed.

But Vital chief executive David Carr says the long-term LVR intention remains.

The LVR will come back down, he says, with property sales and if valuations increase.

He says there are already two properties - one in New Zealand and one in Australia - which are being "lined up" for sale.

Millions on capital additions

According to December's interim report, Vital spent $15.45m on capital additions to investment properties, and $18.17m on property purchases in the six months to December 31, 2011.

That was against gross rental income of $24.44m, which was up 81% on the prior period.

Its accounts list capital commitments to purchase, construct or improve property of $42.24m.

VItal shares were pushed up 1.5c, to $1.195, by yesterday's announcement.

In December, Vital spent $A13m on an Australian private hospital and healthcare centre.

Vital Healthcare Property Trust is New Zealand's only NZX-listed specialist medical and healthcare property entity.

The trust has a total portfolio value of more than $550m, with 25 properties and 124 tenants in New Zealand and Australia, including Ascot Hospital in Auckland and Epworth Eastern Hospital in Box Hill, Melbourne.