Tax-efficient property investment – NZ Herald

Stillwater Lifecare, one of 23 senior care assets the fund is acquiring in the sought-after healthcare real estate sector. Image / Provided.

This content has been prepared by Centuria NZ and Bayleys Real Estate Ltd and is published by NZME as an infomercial.

For as little as $10,000, investors can enter the sought-after sector of healthcare real estate.

Centuria NZ has a long history of helping thousands of New Zealanders invest in quality commercial and industrial properties. They are part of the ASX 200-listed Centuria Capital group with approximately A$20 billion in Trans-Tasman assets under management* and have both a strong track record and a conservative approach.

Their latest opportunity offers anyone in New Zealand a tax-efficient way to invest in the sought-after sector of healthcare real estate with as little as $10,000.

Edith Cavell Lifecare, one of the assets the fund is acquiring, all leased to one of New Zealand's leading and largest aged care operators, Heritage Lifecare.  Image / Provided.
Edith Cavell Lifecare, one of the assets the fund is acquiring, all leased to one of New Zealand’s leading and largest aged care operators, Heritage Lifecare. Image / Provided.

Centuria NZ Healthcare Property Fund offers an initial forecast cash distribution of 5% per annum free of New Zealand income tax payable for the financial periods ending 31 March 2023 and 31 March 2024, primarily due to capital cost allowances .**
This means that investors will receive the full 5% cash distribution***, regardless of their personal tax situation.

Mark Francis, CEO of Centuria NZ, said that if the distribution for these periods was fully taxable (due to the absence of depreciation deductions and other adjustments) and did not have PIE status, the fund would have to provide a pre-tax equivalent of 7.46%. distribution for an investor on a marginal tax rate of 33% – or an equivalent of 8.20% for 39% to provide the same expected after-tax distribution of 5%.
“This attractive distribution rate, paid monthly to investors, combined with the fund’s strong fundamentals and potential for capital growth, makes it an attractive offering.

“The fund will initially acquire a portfolio of 23 aged care facilities located across New Zealand, all with new 30-year triple net leases to one of New Zealand’s leading and largest care-focused operators. aged care, Heritage Lifecare.”

Francis says the initial term of 30 years is very favorable by New Zealand standards. Combined with a tenant of this caliber in an area with favorable macro trends and inflation-linked growth, he says it provides a stable long-term income stream.

Mike Houlker, head of the investment products division of Bayleys, which markets the fund, says a key feature is that 30-year leases, with renewal rights totaling another 60 years to 2112, are structured in “triple net”. .

“A triple net lease means that all costs of capital expenditure, repairs, maintenance and other works, whether structural or otherwise, are not borne by Centuria NZ Healthcare.
“Each lease states that the tenant has the same responsibilities in relation to the premises as if the tenant were the ‘landlord’. This is widely considered to be the most landlord-friendly form of lease.”

Bayleys head of investment products Samara Phillips says another important feature of leases is annual rent reviews which reflect movements in the consumer price index (CPI), subject to a minimum increase of 1% per year and a ceiling of 4% per year.

Stillwater Lifecare.  Image / Provided.
Stillwater Life Care. Image / Provided.

“This will lead to an integrated growth in rents, an annual increase in rental income over the next 30 years and some compensation against inflationary pressures,” she said.

Phillips says another key aspect of investing is the sector, which is seeing growing demand with New Zealand’s rapidly aging population. It also benefits from high levels of recurrent public funding – estimated at 53% directly from the government and around a further 24% funded indirectly through residents’ pensions.

Chris Farhi, chief information and data officer at Bayleys, says healthcare real estate benefits from long-term demographics and the fact that healthcare spending is often mandatory. Healthcare real estate therefore has sought-after acyclical and defensive characteristics.

Palms Lifecare, one of the assets the fund is acquiring, all benefit from a sought-after 30-year triple net lease offering a stable revenue stream.  Image / Provided.
Palms Lifecare, one of the assets the fund is acquiring, all benefit from a sought-after 30-year triple net lease offering a stable revenue stream. Image / Provided.

“These factors contribute to lowering the risk profile of the healthcare real estate sector and making properties associated with the healthcare sector desirable additions to portfolios,” he said. “The outlook for New Zealand’s medical and healthcare real estate sector, including the aged care sector, continues to remain attractive.”

For more information, including a copy of the Product Disclosure Statement for Centuria NZ Healthcare as well as video and webinar details, visit www.centuriahealthcare.co.nz.

* Assets under management as of December 31, 2021. Includes contracted assets to be settled, cash and other assets. **Assuming a depreciation rate of 3.5%, based on land valuations and purchase price allocation reports received by Centuria NZ Healthcare to date, and assuming that Centuria NZ Healthcare does not sell any properties during the financial periods ending March 31, 2023 and March 31, 2024. Taxable depreciation recapture income may arise on any future sale of a property, which may result in tax being payable at that time . *** Projected cash distribution of 5% per annum before tax and after tax for the financial periods ending March 31, 2023 and March 31, 2024. Details on the calculation of the projected cash distribution and the risks associated with this investment can be found in the Product Disclosure Statement. The expected after-tax distributions only reflect New Zealand income tax. Pre-tax and after-tax cash distributions are not guaranteed and may change in the future. Centuria NZ Healthcare Property Fund Limited is the issuer of the shares to be issued under the offering 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 estate agents listed in this announcement. Nothing in this advertisement constitutes an invitation to subscribe or an offer of shares, securities or financial products to any person, in any country, in which it would be illegal to do so. Terms used in this advertisement have the same meaning as defined in the product disclosure statement, unless the context otherwise requires. Before deciding to invest, you should obtain independent financial advice that takes into account your personal financial goals and circumstances. Bayleys Real Estate Limited cannot provide such independent financial advice to you. Important information about the financial advisory service provided by Bayleys Real Estate Limited can be found at syndications.co.nz.