Vital Healthcare questions left unanswered

AUCKLAND: Both Vital Healthcare Property Trust’s trustee and its manager have refused to answer questions about what authority the manager had to charge Vital for various fees.

The fees the manager, owned by Canadabased NorthWest Healthcare Property Real Estate Investment Trust, charged Vital in the six months ended December jumped to $22.1 million, up almost 75% from $12.7 million in the corresponding six months a year earlier.

That occurred at the same time as Vital’s net distributable income fell 18.7%.

The fees included base fees of $6.9 million, incentive fees of $5.1 million and another $10.1 million in other fees and expenses.

In addition, a further $9.5 million in fees owed to NorthWest were capitalised.

The other fees and expenses included an $A8.2 million ‘‘acquisition fee’’ for acquiring property from ASXlisted Healthscope.

However, the Healthscope acquisition hasn’t happened yet and NorthWest has said repeatedly that Vital isn’t yet a party to that transaction.

NorthWest said so as recently as April 1 when it announced proposed changes to its fee structure after an outcry from unitholders, including three institutions: ANZ Funds Management, Mint Asset Management and the Accident Compensation Corp, as well as the New Zealand Shareholders’ Association.

‘‘NorthWest is now in a position to focus on the Healthscope real estate opportunity and potentially agree terms with NorthWest REIT that could see Vital participate in a Healthscope transaction,’’ it said.

NorthWest itself doesn’t own any Healthscope properties yet. All it has is an agreement with property giant and fellow Canadian company Brookfields to buy $A1.26 billion worth of Healthscope’s property, should Brookfields’ takeover of Healthscope succeed.

Brookfields hasn’t even sent its takeover offer, which will be via a scheme of arrangement, to Healthscope’s shareholders. It has until April 24 to do so, although it does have the support of Healthscope’s board, suggesting its takeover is likely to succeed.

Never before having seen such fees charged ahead of a proposed transaction, BusinessDesk asked the trustee, Trustees Executors, where NorthWest got its authority to charge fees for a transaction that had not happened yet.

Other questions included why NorthWest undertook to refund Vital only $A5.2 million if Vital was not party to the Healthscope transaction? What happened to the other $A3 million? How was NorthWest justified in keeping it?

BusinessDesk also wanted to know why fees were being capitalised and what they were for.

Trustees Executors, which was supposed to be supervising NorthWest’s management of Vital, responded by email: ‘‘In relation to the specifics of your queries, we suggest you liaise with the manager.’’

BusinessDesk was surprised by this answer and so tried again: ‘‘To my mind, these are questions for the supervisor — why have a supervisor if they’re not?

‘‘Surely the supervisor should have a view on where the manager gets its authority from to charge additional fees? It’s clear that NorthWest thinks it’s able to do these things because it has done them. Would you please take another look at my questions?’’

Again, Trustees Executors responded: ‘‘Given that the financial statements have been prepared and signed by the manager . . ., we believe your questions would be better placed being answered by them.’’

So BusinessDesk did ask the manager which responded: ‘‘NorthWest is comfortable that it’s met its disclosure requirements and doesn’t plan to add to it at this stage.’’

Rubbing salt into the wound for Vital’s investors, NorthWest borrowed $A81 million from Vital last year to secure a stake in Healthscope, then beset by a number of predators planning a takeover. NorthWest wanted a seat at the table when Healthscope’s properties were carved up.

Although the first announcement of its stake in Healthscope was on May 8 last year, NorthWest refused to say back at that time whether Vital was involved.

It wasn’t until August last year, when NorthWest had to publish audited accounts for Vital, that investors learnt they had already lent NorthWest $A40 million to buy the Healthscope stake, which later increased. — BusinessDesk

❛ NorthWest is comfortable that it’s met its disclosure requirements and doesn’t plan to add to it at this stage