Vital Healthcare Management says it will benefit from holding longer leases through its planned purchase of Essential Healthcare Trust, in Australia, for nearly $A170 million.
The deal to buy 12 hospitals and medical centres will be mostly funded through raising $NZ150 million from unit-holders, who are being offered one new unit for every existing unit at $1.05 each.
That's a 22% discount to Monday's closing price. On Tuesday, the stock fell 7.5% to $1.24.
Vital Healthcare's general manager, David Carr says the deal lifts the property investor's average lease terms to 11 and a half years and leaves its portfolio fully tenanted.
Mr Carr says it'll also reduce the number of leases due to expire within five years from a third to a fifth.
He says the recent removal of building depreciation tax allowances in New Zealand influenced its decision to expand its portfolio in Australia.
If the transaction is completed, Mr Carr says, Vital Healthcare is proposing to change the management fee structure, and it already has the support of the manager's parent, ING, which in turn is owned by ANZ Bank.
The planned changes would see the base fee drop from .75% to .6% of the gross value of the trust's assets; the performance fee would be based on unit-holder returns rather than asset revaluations.