For as little as $10,000 investors can enter sought-after healthcare property sector. This content was prepared by Centuria NZ and Bayleys Real Estate Ltd and is being published by Review Publishing Ltd.
Centuria NZ has a long history in helping thousands of New Zealanders invest in quality commercial and industrial property. They’re part of the ASX 200 listed Centuria Capital Group, with approximately A$20 billion of Trans-Tasman assets under management* and have both a strong track record and conservative approach.
Their latest opportunity provides a tax effective way for anyone in New Zealand to invest in the sought-after healthcare property sector with as little as $10,000.
Centuria NZ Healthcare Property Fund offers an initial 5 per cent per annum forecast cash distribution with no New Zealand income tax expected to be payable for the financial periods ending March 31 2023 and March 31 2024, due primarily to depreciation deductions.**
This means that investors will receive the full 5 per cent forecast cash distribution*** regardless of their personal tax position.
Mark Francis, Centuria NZ’s CEO says that if the initial 5%p.a. forecast cash distribution for the above financial periods was fully taxable (due to no depreciation deductions and other adjustments), and did not benefit from PIE status, the fund would need to deliver a 7.46 per cent equivalent pre-tax distribution for an investor on a marginal tax rate of 33 per cent - or a 8.20 per cent equivalent for 39 per cent to provide the same 5 per cent forecast after-tax distribution.
“This attractive distribution rate, paid to investors monthly, in combination with the fund’s strong fundamentals and the potential for capital growth makes this a compelling offer”.
“The fund will initially acquire a portfolio of 23 aged care properties located throughout New Zealand, all with new 30-year triple net leases to one of New Zealand’s leading and largest aged care focused operators, Heritage Lifecare.”
Francis says that the initial 30-year term is highly favourable by New Zealand standards. Combined with a tenant of this calibre in a sector with favourable macro-economic trends, and inflation linked growth, he says it provides a long-term stable income stream. “Investments of this calibre with an attractive tenant covenant, 30-year ‘triple net lease’, geographically diverse portfolio and inflation linked growth are difficult to find in the current market,” Francis says.
Mike Houlker, Head of Bayleys’ Investment Products division, which is marketing the fund, says a key feature is that the 30-year leases, with rights of renewal totalling a further 60 years until the year 2112, are structured as ‘triple net’.
“A triple net lease means any costs of capital expenditure, repair, maintenance and other works, whether structural or otherwise, are not Centuria NZ Healthcare’s responsibility.
“Each lease stipulates the tenant has the same liabilities in regards to the premises as if the lessee was the ‘owner’. This is widely considered the most landlord-friendly form of lease.”
Bayleys’ Investment Products manager Samara Phillips says another significant feature of the leases is annual rent reviews that reflect movements in the Consumer Price Index (CPI), subject to a minimum 1 per cent per annum increase and a 4 per cent per annum cap.
“This will provide built-in rental growth, increasing rental income annually for the next 30 years and providing a degree of off-set against inflation pressures,” she says.
Phillips says another key aspect of the investment is the sector, which is seeing increasing demand with New Zealand’s rapidly ageing population. It also benefits from high levels of recurring government funding - this is estimated at 53 per cent directly from the government and an additional approximate 24 per cent funded indirectly via residents’ pensions.
Chris Farhi, Bayleys’ Head of Insights and Data, says that healthcare property benefits from long-term demographic drivers and the fact that health expenditure is often mandatory. Therefore, healthcare property presents desirable non-cyclical and defensive characteristics.
“These factors contribute to reducing the risk profile for the healthcare property sector and making properties associated with the healthcare sector desirable additions to the portfolios,” he says. “Prospects for the New Zealand medical and healthcare property sector, including the aged care sector, continue to remain attractive.”
For more information, including a copy of the Product Disclosure Statement for Centuria NZ Healthcare along with a video and presentation details visit www.centuriahealthcare.co.nz
