Centuria Healthcare Property Fund investor centre

1. Defendant’s Defence and Counterclaim by 15 October 2024;
2. Defendant’s Response to the Plaintiff’s Schedule A by 30 October 2024; and
3. Plaintiff’s Reply to the Defence and Counterclaim by 29 October 2024.

The matter returns to Court for review on 12 November 2024.

• The higher cost of debt incurred by the Fund due to the rapid move in interest rates. Since 2021 the cash rate, indicative of the Fund’s borrowing rate, has increased from 0.1% to 4.35% today, with a number of favourably priced interest swaps maturing during FY25. This means the cost of debt has significantly increased, which has a negative impact on distributions.
• Uncertainty in relation to the Weststate Private Hospital development and delay in completion.

• Fund holds an investment in the development of Weststate Private Hospital.
• The property is a short stay hospital with a commencing lease term of 25 years and 100% occupancy on completion.
• This is a fund-through project developed by Geon Property with coupon income accrued during the construction period.
• The incoming tenant (Weststate Private Hospital) has disputed certain building works (both in terms of what is required and who is responsible for the cost), and as a result the Manager has undertaken a detailed review of the scope of works. The dispute with the incoming tenant is currently the subject of court proceedings.
• The Manager has allowed a provision in the Fund’s unit price [and valuation] in relation to cost overruns and legal costs.
• By way of update on the court proceedings, the matter was in court in late February 2024. Weststate Private Hospital presented an amended statement of claim to introduce new allegations.
• The parties are scheduled to appear in Court again on 17 April for a directions hearing. It is anticipated that the court hearing may be a protracted process. The Manager will continue to keep the investors updated on the court proceedings as matters progresses.

• Acquisition Units will carry a preferential withdrawal right allowing holders of them to withdraw from the Fund – if the holders of Acquisition Units exercise their preferential withdrawal rights;
• the withdrawal price for an Acquisition Unit issued in a Trust is the withdrawal price (issue price) for ordinary units in the Trust. The issue price will be calculated in accordance with the Constitution (which will be an amount equal to the net asset value of the Trust, plus an adjustment for amortised establishment and acquisition costs, plus any buy spread); and
• Acquisition Units will rank equally amongst themselves in all respects.

Acquisition Units provide related party access to capital before other Investors.  Acquisition Units can be withdrawn at any time, including during the Fund Term and prior to Investors being able to withdraw their investment.  Acquisition Units will rank equally with ordinary units, except that the proceeds from the issue of ordinary units to incoming investors may be used to withdraw any Acquisition Units in priority to the redemption of ordinary units.

Currently, Centuria Capital Group or its related parties hold 13% in Acquisition Units and 7% in Redeemable Preference Units of total units on issue. If Centuria and/or related entities hold a majority, or considerable proportion, of all of the units on issue in a Trust (whether Acquisition Units or ordinary units), their collective voting power may also influence matters that require Investor resolutions.

The mediation process has unfortunately been temporarily suspended following the rejection of the proposed memorandum of understanding by the tenant. A meeting with the tenant and the tenant’s legal representative has been scheduled to discuss whether commercial terms can be agreed outside of the mediation process. Management will provide further updates as matters progress. It is expected further costs will be incurred to achieve practical completion and this may have an impact on future distributions and unit price.

The funding of this direct property asset was generated by Centuria Capital stepping in and providing $34.6m to CHPF by way of redeemable preference units over “The Bond” Private hospital, an existing asset in the fund.

The redeemable preference units have been issued with an 18 month maturity. The units must be redeemed at the issue price, therefore not materially changing CHPF’s economic exposure to the asset. The intent is to raise equity and divest select properties within the Fund over the next 18 months to paydown the redeemable preference units. In the event the Fund is unable to fund the reacquisition of the 49% interest in “The Bond” in 18 months, the Fund will then issue acquisition units to Centuria Capital. This will mean that Centuria will have an additional holding in the CHPF sitting alongside all current investors. The issuance of the redeemable preference units is forecast to be earnings accretive to CHPF.

The Fund will provide further communication to investors post the sale campaign.

Weststate are proposing that a mediation of the dispute take place by 1 September 2023. Given the significant progress we have made in relation to the design issues concerning the construction of the hospital, the Manager will be proposing for the dispute to be heard by 1 October 2023 as we will require more time to resolve the matter prior to the medication if possible. This will minimise the cost for both parties.

Today, Orange Private Hospital appointed EY as voluntary administrators of the business. The Fund will participate in the administration process and seek to maximise outcomes for Investors. The tenant contributes ~5% of the portfolio income, and whilst no change to the distributions to June 23 is anticipated, the reduction of income will negatively impact future distributions.

The Fund completed the land acquisition of 2-14 Wilson Street, 2A Lamington Road and 763 Sturt Street, West End QLD (WestState Private Hospital) for $10.0 million. Weststate Private Hospital is a fund-through opportunity for a total purchase price of $60.5 million at an initial yield of 6.0%. The fund-through is a 5-storey architecturally designed, purpose-built hospital comprising four operating theatres, one procedure room, 19-day beds and 26 overnight beds, and brownfield development of existing building to consulting suites. The Property will have a 25-year WALE at practical completion and will be 100% leased to Weststate Private Hospital.

Centuria Property Funds No. 2 Limited (Manager) as responsible entity of the Centuria Healthcare Property Fund (Fund) has entered into a co-owner’s agreement with Nexus Property Unit Trust in respect of Sundew Day Surgery. Under the co-owners agreement, no financial benefit is payable by the Fund. There are potential risks for investors associated with related party transactions, please see section 7 of the PDS for more details. More details of the Fund’s relationship with NPUT can be found in section 3.13 of the PDS. The co-owners agreement was subject to the Manager’s conflicts-of-interest policy and is on arm’s-length terms. A copy of the co-owners agreement is available by contacting the Manager at +61 2 8923 8923.

Please note that there will be a unit pricing blackout period for the above-mentioned fund over the Christmas period for the following dates 29/12/2020 – 31/12/2020.
The delayed prices will be provided between 4/1/2021 and 6/1/2021.

CHPF now owns 85% direct interest in Vermont South Medical Centre and 15% indirect interest in the property via Nexus Property Unit Trust (NPUT). The property value (net, 100%) for Vermont South Medical Centre is $51.7 million. In addition, CHPF also acquired a 85% direct interest in Hobart Day Surgery which is valued at $5.6 million (100%). Please refer to section 3.13 of the PDS for more information on NPUT.

Centuria Property Funds No. 2 Limited (Manager) as responsible entity of the Centuria Healthcare Property Fund (Fund) has entered into a co-owner’s agreement with Nexus Property Unit Trust in respect of Vermont South Medical Centre located at 645-647 Burwood Highway, Vermont South VIC and Hobart Day Surgery located at 8 Warnerford Street, Hobart TAS.  Under the co-owners agreement, no financial benefit is payable by the Fund.  There are potential risks for investors associated with related party transactions, please see section 7 of the PDS for more details. More details of the Fund’s relationship with NPUT can be found in section 3.13 of the PDS.  The co-owners agreement was subject to the Manager’s conflicts-of-interest policy and is on arm’s-length terms. A copy of the co-owners agreement is available by contacting the Manager at +61 2 8923 8923.

Centuria Property Funds No. 2 Limited (Manager) as responsible entity of the Centuria Healthcare Property Fund (Fund) has entered into a co-owner’s agreement with Nexus Property Unit Trust in respect of Bloomfield Medical Centre located at 1521 Forest Road, Orange NSW.  Under the co-owners agreement, no financial benefit is payable by the Fund.  There are potential risks for investors associated with related party transactions, please see section 7 of the PDS for more details. More details of the Fund’s relationship with NPUT can be found in section 3.13 of the PDS.  The co-owners agreement was subject to the Manager’s conflicts-of-interest policy and is on arm’s-length terms. A copy of the co-owners agreement is available by contacting the Manager at +61 2 8923 8923 .