$14 million buyout price on Vital management contract

Published 27 April 2011

ANZ Banking Group Ltd proposes taking out $14 million for the buyout of the Vital Healthcare Property Trust manager. It revealed that figure on 21 April, a day after announcing its intention to internalise management of Vital and the other former ING property trust, Argosy, but not to turn them into listed companies.

At Argosy, the proposed management buyout figure is $32.5 million.

Both trusts & their managers changed their names on 1 October 2010 after ANZ took full control of the managers from its former partner, ING. Shortly after that, the bank said it had received expressions of interest to acquire the management rights of its property management business, but didn’t say who was inquiring.

ANZ owns the managers, Vital Healthcare Management Ltd & Argosy Property Management Ltd, through its wealth management subsidiary, OnePath (NZ) Ltd.

Key elements of the Vital internalisation proposal:

The proposed $14 million payment to Vital Healthcare Management Ltd is to reflect the fair value of the management arrangements being relinquishedThe manager’s remuneration arrangements under the trust deed would also be varied so management services are provided on a cost recovery basis onlyThe new manager will be a newly formed company to which key employees, systems & infrastructure of the existing manager would transferAll directors of the new manager would be appointed at the direction of unitholders, and an appropriately qualified & experienced Australian director would be appointed to the boardThe transaction would be funded through the trust’s existing bank facilities.

The trust’s forecast 2010 financial year loan:value ratio may move to about 42% after allowing for all currently committed development funding, including the Lingard stage 3 development announced last week. This remains below the maximum banking covenant ratio of 45% and the trust deed limit of 50%. The board’s objective is to maintain the trust’s gearing below 40% of property assets over the medium term through the implementation of appropriate strategies, including a continuation of the targeted sale of non-core, lower value assets. Grant Samuel & Associates Ltd will provide an independent report on the merits of the final proposal which will be distributed to unitholders with the notice of meeting, expected to be held in early August. Earlier stories:

20 April 2011: ANZ proposes internal management for 2 NZ property trusts

25 February 2011: Vital Healthcare lifts operating profit 3.3%

15 December 2010: 71.5% takeup of Vital Healthcare rights issue

25 November 2010: Vital (ex-ING) Healthcare wins support for Australian expansion

1 November 2010: Buyer interest in ANZ’s 2 listed property trust managers

23 August 2010: ING trusts to become Argosy & Vital under ANZ management

6 August 2010: ING becomes OnePath, but property trusts to get different names

2 December 2009: ANZ settles takeover of ING share in joint businesses

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Attribution: Company release, story written by Bob Dey for the Bob Dey Property Report.

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