Acquiring a Portfolio of Healthcare facilities
The General Partner’s objective is to create, over a period of time, a portfolio of healthcare facilities that provide exposure to this unique commercial property category. We are attracted to this sector by the long leases that are typically in place, the support provided to tenant revenues through government subsidies, and the essential services provided by tenants.
Target Annual Cash Return
The Statement of Investment Policy and Objectives (SIPO) for the Limited Partnership will include a target distribution to investors of at least 5.75% per annum (Cash Net Pre-Tax Annual Yield on Equity).
There are a number of risks that could impact the performance and financial returns of the Limited Partnership. Potential general and specific risks include, but are not limited to, the following:
Liquidity – Property is an inherently long-term investment and cannot be easily sold. A property may be sold at a loss in which case Limited Partners may not be able to recover the full amount of their original investment. There is no guarantee of capital gain on the Initial Property or any other Properties acquired by the Limited Partnership in the future.
Tenant Default or Non-Renewal – the Tenants of the Initial Property, or the tenants of Properties acquired in the future, may fail to pay the rental and outgoings (defaulting) which may affect projected returns. Also, the current tenants may not renew lease arrangements and new tenants may be required. Costs, including lease incentives, may be required on re-leasing and there may be extended periods where a tenancy does not earn income.
Interest – Interest rates may increase and increase the mortgage repayments due from the Limited Partnership to the bank. 50% of the purchase price of the Initial Property will be funded by interest-bearing borrowings and the interest expense is a material expense for the Limited Partnership. Changes to bank loan terms and conditions, for example in respect to interest rates, bank margins, loan to value ratios, principal repayment requirements, etc, either as a result of bank policy changes or the requirement that the bank comply with changes to external regulatory requirements may affect the Limited Partnership. The General Partner will actively monitor interest rates during the life of the Limited Partnership.
Damage or Destruction – A property may be destroyed and the event may not be adequately covered by the insurer of the Initial Property (or any other Properties acquired in the future). The General Partner will arrange insurance on the Initial Property and recharges this cost to the Tenant in accordance with the Lease, and will follow the same practice with any other Properties acquired by the Limited Partnership in the Future.
Capital Expenditure – The capital expenditure for the Initial Property (and any other Properties acquired in the future) may be more than budgeted. Significant additional capital expenditure in excess of forecast amounts may be required for a number of reasons, including undertaking structural repairs or related work to bring a property up to a designated standard or to meet new requirements resulting from changes to current regulations or standards.
Transfer of Units – While Units in the Limited Partnership are transferable, a buyer for the Units may be difficult to find, and investors may not be able to realise their investments in the Limited Partnership before the Properties are sold.
Forecasts – Actual results are likely to be different to the forecasts since anticipated events frequently do not occur as expected and the variation may be significant and material. No warranty or representation is made in respect of whether the revenue, expenses, or any capital appreciation in the future will be achieved. Prospective investors should obtain their own independent valuation, legal, accounting and income tax advice in respect to their own individual circumstances.
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