Tax Effective Healthcare Property Investment

With as little as $10,000, investors can enter this sought-after property sector with an initial 5%p.a. after-tax forecast cash distribution^1,2 and the potential for capital growth.

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 management³ 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%p.a. 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.¹

This means investors will receive the full 5%p.a. forecast cash distribution² regardless of their personal tax position.

Mark Francis, Centuria NZ’s CEO says 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% equivalent pre-tax distribution for an investor on a marginal tax rate of 33%.

“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 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 leases’, 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 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 reflect movements in the Consumer Price Index (CPI), subject to a minimum 1% p.a. increase and a 4% p.a. 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 aging population. It also benefits from high levels of recurring government funding – this is estimated at 53% directly from the government and an additional approximate 24% funded indirectly via residents’ pensions.

Chris Farhi, Bayleys’ Head of Insights and Data, says healthcare property benefits from long-term demographic drivers and the fact 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.

¹ Assuming (i) a tax depreciation benefit based on land valuations and purchase price allocation reports received by Centuria NZ Healthcare for the Initial Properties, (ii) that Centuria NZ Healthcare does not sell or acquire any properties during the financial periods ending 31 March 2023 and 31 March 2024 and (iii) no change in relevant tax laws.Taxable depreciation recovery income may arise on any future sale of a property which may result in tax payable at that point in time.
²5% p.a. forecast pre-tax and after-tax cash distribution for the financial periods ending 31 March 2023 and 31 March 2024. Details of how the forecast cash distribution is calculated and the risks associated with this investment can be found in the Product Disclosure Statement. Forecast after-tax distributions only take into account New Zealand income tax. The pre-tax and after-tax cash distributions are not guaranteed and may change in the future.

³Assets under management as at 31 December 2021. Includes assets contracted to be settled, cash and other assets.

Centuria NZ Healthcare Property Fund Limited is the issuer of the shares to be issued under the offer to which this advertisement relates. A Product Disclosure Statement for the offer, which sets out the terms and conditions of the offer, is available, and can be obtained by contacting the Bayleys Real Estate agents listed in this advertisement. Nothing in this advertisement constitutes an invitation to subscribe for, or an offer of shares, securities or financial products to any person, in any country, in which it would be unlawful to do so. Terms used in this advertisement have the same meaning as defined in the Product Disclosure Statement, unless the context suggests otherwise. Before deciding whether to invest, you should obtain independent financial advice that takes account of your personal financial goals and circumstances. Bayleys Real Estate Limited cannot provide you with any such independent financial advice. Important information about the financial advice service provided by Bayleys Real Estate Limited is available at syndications.co.nz.