Generation Healthcare REIT : Chairman and CEO Presentation to AGM

Generation Healthcare REIT - 2016 AGM Chairman's speech

[Slide 1- Cover]

[Introduction]

Good morning Ladies and Gentlemen and welcome to the Annual General Meeting for Generation Healthcare REIT. As it is now 10:00 am and we have a quorum present, I have the pleasure in declaring the meeting open.

[Slide 2 - Agenda]

My name is Geoff Brunsdon and I'm the Independent Chairman of APN Funds Management Limited, the Responsible Entity of your Fund, Generation Healthcare REIT.

The meeting today has three principal objectives:

• To present the results and activities of the Fund for the 2016 financial year;

• Review the Fund's recent activities and performance; and

• To give you the opportunity to ask any questions you may have of Directors, Management or Advisers who are present here today.

Shortly I will hand over to the CEO of the Fund, Miles Wentworth. Miles will provide you with an overview of the year to 30 June 2016 and update you on the Fund's recent activities.

[Slide 3 - Directors]

I would now like to introduce my fellow Directors of the Responsible Entity:

• Michael Johnstone - who has been an independent Director since 2009 and is also Chair of the Audit, Compliance & Risk Management Committee.

• Jennifer Horrigan - who has been an independent Director since 2012 and is also Chair of the Nomination & Remuneration Committee.

• Howard Brenchley - who has been a Director since 1998 and a Non- executive Director since 2014.

  [Slide 4 - NorthWest Representatives]

• I would like to extend a special welcome to a representative from NorthWest Healthcare Properties REIT, the new owner of GHC's Investment Manager, Bernard Crotty who is a Trustee of NorthWest.

[Slide 5 - GHM Directors and Company Secretary]

I would also like to welcome:

• Miles Wentworth who is the CEO of your Fund and who will be known to most of you;

• Chris Adams, Director of Generation Healthcare Management; and

• John Freemantle, Company Secretary of APN Funds Management Limited.

  Also present in the audience are our external advisers:

• Peter Caldwell - from our auditor, Deloitte Touche Tohmatsu;

• James Morvell - from our legal counsel, Hall & Wilcox; and

• Julie Stokes - from our share registry, Link Market Services.

  [Slide 6 - GHC] [Slide 7 - Highlights]

  [Financial highlights]

  Ladies and Gentlemen, Generation Healthcare REIT delivered another strong result for the 2016 financial year reflecting the defensive nature of the sector and active management of the Fund.

  Most notably, Underlying Net Operating Income increased 27% from the previous year, to $21.8 million.

  Distributions per unit totalled 8.84 cents for the year, up 3% on the previous year and representing an 88% payout ratio to underlying net operating income.

  The Fund delivered a total return (being the movement in the unit price plus reinvestment of distributions) of 41.6% for the 12 months to 30 June 2016, significantly outperforming the S&P/ASX 300 A-REIT Accumulation Index by 17%.

  The Fund's exposure to the unique and growing demand for healthcare services which are predominantly a need and not a want, sees the Fund well positioned to provide investors with attractive risk adjusted returns. We have a solid balance sheet and continue to focus on enhancing and growing the property portfolio of the Fund in a value adding way.

  A couple of key milestones during the year included the commencement of construction at two of the Fund's key organic growth projects totalling just under $160 million, of which the Fund's joint venture share is forecast to be approximately $74 million. The two projects, being Casey Stage 2 with St John of God Healthcare and the expansion of Frankston Private with Healthscope Group, are both now well underway.

  [Slide 8 - Highlights]

  On 27 June 2016, we reported the sale of the Investment Manager of GHC, Generation Healthcare Management Pty Limited, by APN Property Group Limited and interests associated with Miles Wentworth and Chris Adams to the Canadian listed NorthWest Healthcare Properties Real Estate Investment Trust. It is very much business as usual at present, with the Responsible Entity, senior management and staff working on the Fund, remaining unchanged.

  The transaction provides GHC investors with access to the resources and expertise of NorthWest, a leading global healthcare real estate investment and management platform, which has operations and investments in Australia and New Zealand as well as in Canada, Germany and Brazil. I am sure that Bernard, a representative from NorthWest who is present here today, would be happy to chat informally with any interested investor at the close of this meeting.

  Looking at the health sector from a macro perspective the funding pressures on Government, insurers and the private individual continue unabated. This is a result of the particularly unique demand drivers being the ageing and growing population, people living longer and technology driving more health solutions. Cost increases are tracking well ahead of inflation and the Federal Government has a number of reviews underway, looking for ways to reduce cost, waste, be more efficient and invest more into preventative health. This is with a view to getting more value from the dollar invested into health services.

  There is no doubt that changes will be made. Where these changes will be felt is unknown until they are determined and agreed. Health though is one of the most politically sensitive sectors and as such changes are likely to be measured and whilst this is likely to come with significant public scrutiny, we believe any impact on GHC will be limited given the scale and quality of the tenants that we have within the portfolio.

  With the Fund investing into:

  • high quality property;

  • in quality locations with well-credentialed operators;

  • on long term leases with structured reviews; and

  • in a sector that has inherent and material growth the Fund is well positioned.

Finally today, I reiterate our previously announced earnings and distribution guidance for the financial year ended June 2017. We currently forecast underlying net operating income of 10.21 cents per unit and distribution per unit of 8.973 cents, an 88% payout ratio.

[Slide 9 - Fund Review Miles Wentworth]

I would now like to hand over to Miles, who will take you through the operational highlights of FY16 and provide you with an update on activities since year-end.

[Refer to Miles Wentworth, CEO Speech]

[Slide 26 - GHC Slide]

[Concluding address after Miles' speech]

Thank you Miles.

[General business]

Ladies and Gentlemen, given there is no formal business to consider at this meeting, we can move straight to general business. I would be happy to take any questions you may have about the activities of the Fund.

[Questions] [Meeting close]

If there are no further questions, I will call a close to the meeting.

Thank you for your attendance today and to those unitholders who participated by proxy.

The Directors, Management and the representative of NorthWest would be pleased if you would join them for light refreshments and an opportunity to ask additional questions.