Notice of Special meeting
Notice Of
Special Meeting
Radius Residential Care Limited | www.radiuscare.co.nz
Caring is our calling
5 MAY 2022
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Radius Residential Care Notice Of Special Meeting May 2022
Radius Residential Care Notice of Special Meeting May 2022
Notice is hereby given that a Special Meeting of Shareholders of Radius Residential Care Limited
will be held as follows:
Date of Meeting: Thursday 5 May 2022
Time: Commencing at 10.30am
Online: meetnow.global/nz
Physical meeting (subject to Government restrictions and to the extent otherwise practicable): Eden
Park (Enter via Gate G), World Cup Lounge West, Level 4, South Stand, Reimers Avenue, Kingsland,
Auckland Venue (with entry to the meeting room available from 10.00am).
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Radius Residential Care Notice Of Special Meeting May 2022
Radius Residential Care Notice of Special Meeting May 2022
Dear Shareholder,
We are pleased to invite you to attend a
Special Meeting of Shareholders of Radius
Residential Care Limited (Radius Care), which
will be held at Eden Park (Enter via Gate G),
World Cup Lounge West, Level 4, South Stand,
Reimers Avenue, Kingsland, Auckland (and
online at meetnow.global/nz) commencing at
10.30am on 5 May 2022 (the Special Meeting).
BACKGROUND AND OVERVIEW OF UCG
TRANSACTION
On 30 March 2022, Radius Care announced the
acquisition of the land and buildings at four
strategically important leased sites from one of
Radius Care’s largest landlords, UCG Investments
Limited (UCG), for an aggregate acquisition price
of $46.7 million (the UCG Acquisition), being
an amount equal to independent valuations
undertaken by Colliers in the period November
2021 to January 2022. The UCG Acquisition will
be settled using debt funding provided under
new and existing facilities to be provided by
Radius Care’s banking partner, ASB Bank Limited
(ASB Facilities).
Radius Care currently leases five sites from UCG.
Concurrent with the UCG Acquisition, Radius Care
(through its wholly owned subsidiary Radius Care
Holdings) has also entered into an agreement to
acquire the land and buildings at the fifth leased
site from UCG for an acquisition price of $14.6
million (the Kensington Acquisition), together
with a separate agreement to nominate a third
party, Warehouse Storage Limited (WSL), to
acquire that fifth site in place of Radius Care (the
WSL Nomination).
Message from Brien Cree
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Radius Residential Care Notice Of Special Meeting May 2022
Radius Residential Care Notice of Special Meeting May 2022
UCG and Radius Care agreed that sale and purchase
agreements for all five of the sites owned by UCG
and leased to Radius Care be entered into, and settle,
concurrently. As Radius Care is not in a position to suitably
fund both the UCG Acquisition and the Kensington
Acquisition (the aggregate acquisition price for the UCG
Acquisition and Kensington Acquisition would be $61.3
million), Radius Care agreed with WSL for WSL to complete
the Kensington Acquisition, with WSL agreeing to grant
Radius Care an option to purchase that fifth site in the
future, should Radius Care elect to do so.
The transactions comprising the UCG Acquisition,
the Kensington Acquisition and the WSL Nomination
(together with the ASB Facilities, the UCG Transaction) are
conditional on shareholder approval, which will be sought at
the Special Meeting.
ALIGNMENT OF THE UCG TRANSACTION WITH STRATEGY
As outlined in Radius Care’s December 2020 Listing
Profile, Radius Care’s growth strategy includes the
purchase of strategically important facilities already
operated (but not owned) by Radius Care, to provide
greater control to undertake value enhancing initiatives,
particularly developments.
The UCG Transaction demonstrates execution of
this important limb of Radius Care’s strategy. The
acquisition of the four sites from UCG increases Radius
Care’s owned portfolio by 342 Beds at four sites across
Auckland, Hamilton, Palmerston North and Dunedin. The
acquisition also:
• Increases Radius Care’s development pipeline –
providing ownership of spare land at the four sites to
be able to build an additional 80 to 100 care home
units on this land, to increase profitability of the
sites. The timing and funding requirements for such
development are being assessed by the Board but it is
anticipated that it will be funded, at least in part, by the
development facility with ASB Bank.
• Increases Radius Care’s ability to optimise profitability
of existing care home units on the four sites by, for
example, making alterations to existing rooms to enable
greater levels of accommodation-supplement charging.
• Enables Radius Care to introduce Occupation Right
Agreements over care home units at the four sites.
In addition, the acquisition of an option to purchase the fifth
site currently owned by UCG, through the WSL Nomination,
will give Radius Care the ability to acquire that site in the
future should it wish to do so. The key terms of that option
are set out in the explanatory notes that form part of this
Notice of Meeting.
FUNDING
The $46.7 million purchase price for the UCG Acquisition
(and related transaction costs) will be fully funded by the
following new and existing facilities provided by ASB Bank:
• a new $23.675 million loan with a five-year term;
• an existing development facility that will be
partially ($15 million) repurposed to support
funding the UCG Acquisition for up to five
months; and
• a new $8 million bridge facility with a five-month
term.
Radius Care intends to undertake a capital raising
within five months of settlement of the UCG
Transaction to repay the $23 million of funding
to be provided under the existing development
facility and the bridge facility. The key terms of the
new facilities to be provided by ASB Bank are set
out in the explanatory notes that form part of this
Notice of Meeting.
SHAREHOLDER APPROVAL REQUIRED
Radius Care will hold the Special Meeting to consider
the approval by shareholders to the UCG Transaction.
The Resolution to approve the UCG Transaction is an
ordinary resolution, requiring a simple majority of the
votes of those shareholders who are eligible to vote
and voting to pass.
Accompanying this Notice of Meeting is an
independent appraisal report on the UCG Transaction
prepared by Calibre Partners (Independent Report).
Ahead of the Special Meeting, the directors
encourage you to carefully read this Notice of
Meeting and the Independent Report before making a
voting decision.
RECOMMENDATIONS
The Board considers the UCG Transaction to be
consistent with Radius Care’s growth strategy,
which includes the purchase of strategically
important facilities already operated by Radius
Care, allowing greater control to undertake value
enhancing initiatives. It is on this basis that the
Board recommends shareholders vote in favour of the
Resolution to approve the UCG Transaction.
Radius Care’s largest shareholder, Wave Rider
Holdings Limited, has informed the company that it
intends to vote in favour of the resolution to approve
the UCG Transaction.
Further details on how to vote and where to return
your proxy form are included on the proxy form itself,
as well as in this Notice of Meeting.
On behalf of the Board, thank you for your continued
support and we welcome your consideration of, and
participation in, the Special Meeting on 5 May 2022.
Yours sincerely,
Brien Cree
Executive Chairman
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Radius Residential Care Notice Of Special Meeting May 2022
Radius Residential Care Notice of Special Meeting May 2022
ORDER OF BUSINESS
A. Chair’s Introduction and Address
B. Consideration of and Voting on the Resolution
To consider and, if thought fit, pass the following ordinary resolution:
Resolution – Approval of UCG Transaction
That the entry into and performance of the UCG Transaction be approved
for all purposes, including Listing Rule 5.1.1 and Listing Rule 5.2.1.
By order of the Board
Brien Cree
Executive Chairman
14 April 2022
Notice of Special
Meeting of Shareholders
NOTICE is given that a Special Meeting of Shareholders of Radius Residential Care Limited (Radius Care) will
be held on 5 May 2022 commencing at 10.30am:
a. online at meetnow.global/nz; and
b. at Eden Park (Enter via Gate G), World Cup Lounge West, Level 4, South Stand, Reimers Avenue,
Kingsland, Auckland.
Capitalised terms in this Notice of Meeting have the meanings set out in the Glossary.
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Radius Residential Care Notice Of Special Meeting May 2022
Explanatory Notes
Explanatory Notes relating to the Resolution
Details of the UCG Transaction
The Resolution provides for Shareholders to consider and, if thought fit, approve the UCG Transaction. The UCG
Transaction comprises:
• the UCG Acquisition;
• the Kensington Acquisition;
• the WSL Nomination; and
• the ASB Facilities.
Each of these components of the UCG Transaction are described below.
UCG ACQUISITION
On 29 March 2022, Radius Care’s wholly owned subsidiary Radius Care Holdings entered into four conditional
sale and purchase agreements (the UCG Agreements) with UCG to acquire for a total purchase price of
$46.7 million four properties that are currently owned by UCG and leased by Radius Care. Those properties
(the UCG Properties) comprise:
• Radius Arran Court at 85 McLeod Road, Te Atatu South, Auckland;
• Radius St Joans at 371 Peachgrove Road, Fairfield, Hamilton;
• Radius Peppertree at 107 Roberts Line, Kelvin Grove, Palmerston North; and
• Radius Fulton, Dunedin at 530 Hillside Road, Caversham, Dunedin.
Each of the UCG Properties are currently leased by Radius Care on 10-year leases (with between 2.7 and 7.3 years
remaining to renewal) and with a further right of renewal for 10-year terms each in favour of Radius Care. Accordingly,
final expiry of the current leases, if all rights of renewal are exercised by Radius Care, would be as set out in the
table below.
The purchase price for the acquisition of the UCG Properties pursuant to the UCG Agreements is $46.7 million in
aggregate, allocated across the individual properties. This price is supported by individual independent valuations
undertaken by Colliers as set out in the table below:
Valuation DateValuation
Current remaining
lease term
Right of renewalFinal expiry
Radius Arran Court6 January 2022$14,185,0007.3 yrs1 x 10 yrsJuly 2039
Radius St Joans5 January 2022$11,000,0003.1 yrs 1 x 10 yrsMay 2035
Radius Peppertree17 November 2021$7,840,0002.7 yrs1 x 10 yrs
December
2034
Radius Fulton24 January 2022$13,650,0003.5 yrs1 x 10 yrsOctober 2035
Total$46,675,000
The above independent valuations of the UCG Properties, as well as the independent valuation of Radius Kensington
described below, were commissioned by UCG from Colliers for first mortgage purposes and provided to Radius Care to
assist its decision making in whether to acquire the UCG Properties and enter into the UCG Transaction. The valuations
were prepared as market valuations on a freehold ‘as is’ basis. Although the valuation date for Radius Peppertree
is earlier than for the other UCG Properties, the Board considers that the fundamental assumptions on which this
valuation was based have not materially changed and therefore the value of this property is unlikely to have materially
changed since the date of the valuation. The Board considers that the cash and time costs incurred in arranging a more
recent valuation report outweigh any benefits that an updated valuation report would provide to shareholders.
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Radius Residential Care Notice of Special Meeting May 2022
Radius Care has operated and leased each of the UCG
Properties for at least 15 years and, accordingly, has a
high degree of familiarity with and knowledge of these
properties. On this basis, the Board was comfortable
proceeding with the UCG Acquisition without any additional
reports or due diligence beyond the Colliers valuations
described above.
The purchase price is an amount equal to the aggregate
independent valuation of the UCG Properties. The Board
considers a purchase price equal to the independent
valuation of the UCG Properties to be a fair and reasonable
price for the properties given that the acquisition:
• is in line with Radius Care’s growth strategy to acquire
strategically important facilities already operated (but
not owned) by Radius Care, to provide greater control
to undertake value enhancing initiatives, particularly
developments;
• increases Radius Care’s development pipeline by
providing ownership of spare land at the four sites to
be able to build an additional 80 to 100 care home units
on this land, to increase profitability of the sites;
• increases Radius Care’s ability to optimise profitability
of existing care home units on the four sites by, for
example, making alterations to existing rooms to enable
greater levels of accommodation-supplement charging;
and
• enables Radius Care to introduce Occupation Right
Agreements over care home units at the four sites.
The purchase price is to be funded by drawdown under
the ASB Facilities as described under the heading “ASB
Facilities” below.
The UCG Agreements are conditional on Radius Care
obtaining shareholder approval to the UCG Acquisition and
the Kensington Acquisition, which will be sought as part of
the approval of the UCG Transaction at the Special Meeting.
There are no connections between Radius Care and UCG
other than in relation to UCG’s position as landlord of the
UCG Properties and Radius Kensington.
The UCG Agreements have each been entered into on
the Auckland District Law Society and the Real Estate
Institute of New Zealand’s template Agreement for Sale
and Purchase of Real Estate (11th edition) as amended and
supplemented by further terms of sale. Those further terms
of sale include the following key terms:
• Each of the UCG Agreements and the Kensington
Agreement must become unconditional or none may
proceed.
• Settlement of each of the UCG Agreements and the
Kensington Agreement are interdependent and all of
the UCG Agreements and the Kensington Agreement
must be settled at the same time.
• If settlement of any of the UCG Agreements or
the Kensington Agreement does not take place
on settlement date because of the default of one
of the parties, that party will be deemed, where
relevant, to be also in default under all of those
agreements.
• To the extent any of the UCG Agreements or
the Kensington Agreement are terminated or
cancelled by either party (in accordance with its
right to do so under the relevant agreement),
then all of those agreements will terminate
automatically, unless otherwise agreed between
the parties.
If shareholders approve the Resolution at the Special
Meeting, it is anticipated that settlement will occur on
6 May 2022.
The key dates of the UCG Acquisition are as follows:
UCG Agreements entered into29 March 2022
Special Meeting5 May 2022
Settlement occurs under the
UCG Agreements (assuming the
Resolution is approved at the
Special Meeting)
6 May 2022
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Radius Residential Care Notice Of Special Meeting May 2022
Radius Residential Care Notice of Special Meeting May 2022
KENSINGTON ACQUISITION AND WSL NOMINATION
Concurrently with the entry into of the UCG Agreements, Radius Care Holdings has entered into a conditional sale and
purchase agreement (Kensington Agreement) with UCG for Radius Care Holdings (or its nominee) to acquire for a total
purchase price of $14.6 million the other property (in addition to the UCG Properties) that is currently owned by UCG
and leased by Radius Care, being Radius Kensington at 135 Maeroa Road, Maeroa, Hamilton (Radius Kensington).
Radius Kensington is currently leased by Radius Care on a 10-year lease (with 2.1 years remaining to renewal) and a
further right of renewal for a 10-year term in favour of Radius Care. The purchase price is supported by (and equal to)
an independent valuation undertaken by Colliers as set out in the table below:
Valuation DateValuation
Current remaining
lease term
Right of renewalFinal expiry
Radius Kensington5 January 2022$14,600,0002.1 yrs1 x 10 yrsMay 2034
−WSL as landlord will grant Radius Care an
option to purchase Radius Kensington on the
following key terms:
Όthe option may be exercised at any time
between 24 May 2022 and the date of
final expiry of the lease (other than any
period commencing 35 business days
before and 10 business days after a rent
review date in the lease); and
Όthe purchase price will be the value
derived from applying a yield of 6.25%
to the annual rental under the lease at
the time of exercise of the option (for
example, if the annual rental under the
lease at the time of exercise of the option
was $912,605, the purchase price would
be $14,601,680 (being $912,605 divided
by 6.25%);
−Radius Care will exercise its right of renewal
to extend the term of the lease to 22 May
2034;
−WSL will grant Radius Care a further 10-year
right of renewal, extending the final expiry
date of the lease to 22 May 2044;
−the lease will be amended to provide for
annual CPI rental adjustments; and
−Radius Care will assume all responsibility for
building related issues and maintenance of
Radius Kensington.
The WSL Nomination is conditional on Radius
Care obtaining shareholder approval to the UCG
Acquisition which will be sought as part of the
approval of the UCG Transaction at the Special
Meeting.
Shareholders are not being asked to approve the
exercise of the option to purchase Radius Kensington
included in the WSL Nomination at the Special
Meeting. If Radius Care does elect to exercise
that option in the future, it will consider whether
shareholder approval is required at that time.
UCG and Radius Care agreed that sale and purchase
agreements for all of the properties owned by UCG
and leased to Radius Care (being the UCG Properties
and Radius Kensington) be entered into, and settle,
concurrently. Accordingly, in order to be able to acquire
the UCG Properties, Radius Care Holdings entered into
the Kensington Agreement at the same time as the UCG
Agreements. As Radius Care will not be in position to
suitably fund the purchase of Radius Kensington (in
addition to the purchase of the UCG Properties) as to do
so, in the Board’s opinion, would cause Radius Care to incur
an imprudent level of debt and possibly on terms more
onerous than those of the ASB Facilities as described under
the heading “ASB Facilities” below, Radius Care Holdings
has entered into a separate agreement (WSL Nomination)
with Warehouse Storage Limited (WSL) and Neil John
Foster (as guarantor of WSL’s obligations under the WSL
Nomination) to nominate WSL to acquire Radius Kensington
under the Kensington Agreement. As at the date of this
Notice of Meeting, Neil John Foster holds 5.79% of the
shares in Radius Care.
The Kensington Agreement is conditional on Radius Care
obtaining shareholder approval to the UCG Acquisition and
the Kensington Acquisition, which will be sought as part of
the approval of the UCG Transaction at the Special Meeting.
Like the UCG Agreements, the Kensington Agreement has
been entered into on the Auckland District Law Society
and the Real Estate Institute of New Zealand’s template
Agreement for Sale and Purchase of Real Estate (11th
edition) as amended and supplemented by further terms of
sale, which include the further key terms set out under the
heading “UCG Acquisition” above.
Under the terms of the WSL Nomination:
• WSL agrees to complete the purchase of Radius
Kensington on the terms set out in the Kensington
Agreement.
• WSL agrees that it will not take any action within the
period of six months following settlement ocurring
under the Kensington Agreement that would trigger the
first right of refusal under Radius Care’s lease of Radius
Kensington (the first right of refusal would be triggered
if WSL wished to sell Radius Kensington).
• With effect from settlement under the Kensington
Agreement, Radius Care’s lease of Radius Kensington
shall be varied as follows:
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Radius Residential Care Notice Of Special Meeting May 2022
Radius Residential Care Notice of Special Meeting May 2022
ASB FACILITIES
As noted above, the $46.7 million purchase price for the UCG Acquisition (and related transaction costs) will be fully
funded by the following new and existing facilities to be provided by ASB Bank:
• a new $23.675 million term loan with a five-year term;
• an existing development facility that will be partially (as to $15 million) repurposed to support funding the UCG
Acquisition for up to five months; and
• a new $8 million bridge facility with a five-month term,
(together the “ASB Facilities”).
The key terms of the new facilities to be provided by ASB Bank are set out in the table below:
New term loan facilityNew bridge facility
TermFive yearsFive months
Principal sum of the loan$23.675 million$8 million
Ordinary interest rate
Bid settlement rate quoted on the Reuters
Monitor System Page BKBM on the first day
of the relevant interest period plus 3.20%
per annum
Bid settlement rate quoted on the Reuters
Monitor System Page BKBM on the first day
of the relevant interest period plus 3.20%
per annum
Penalty interest rate2% above the ordinary interest rate2% above the ordinary interest rate
Interest payable fromSettlementSettlement
Interest paymentsMonthly in arrearsMonthly in arrears
Repayment
Interest only payments are required during
the term with the facility repayable in full at
the end of the term
Interest only payments are required during
the term with the facility repayable in full at
the end of the term
Financial covenants
Fixed charges cover ratio: The ratio of (a) EBIT plus rental expenses to (b) fixed charges
for the Group for the last 12 months must be greater than or equal to 1.30 times
Equity ratio: The ratio of total shareholders’ funds to total assets of the Group must be not
less than 30% until the earlier of (i) 30 September 2022 and (ii) an equity raising by Radius
Care, and thereafter must be not less than 40%
Leverage ratio: The ratio of senior debt to EBITDA of the Group for the last 12 months must
not be greater than 6.50 times until the earlier of (i) 30 September 2022 and (ii) an equity
raising by Radius Care, and thereafter must be less than 5.50 times
Other covenants
Radius Care must complete an equity raising of not less than $23,000,000 (net proceeds)
and apply the net proceeds of that equity raising within 5 months of settlement of the
UCG Acquisition in repayment of the new bridge facility and partial repayment of the exist-
ing development facility that will be repurposed to fund the UCG Acquisition.
Security
First ranking mortgage over each of the UCG Properties in addition to existing security
held by ASB Bank
In respect of the existing development facility, as noted above $15 million of the $20 million facility is to be repurposed
to support funding the UCG Acquisition for up to five months.
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Radius Residential Care Notice Of Special Meeting May 2022
Radius Residential Care Notice of Special Meeting May 2022
GROUP DEBT STRUCTURE
The following table sets out summary information in respect of the current drawn down facilities with ASB Bank and the
proposed facilities on settlement of the UCG Transaction:
Available
Facility
Current Loan
Values
Interest
Rate
Term
(Months)Repayable
CURRENT DRAWNDOWN FACILITIES
Facility A - General commercial & development facility$20,000,000$15,500,000Floating60Interest Only
Facility B - Development facility$20,000,000—Floating60Interest Only
Facility C - Acquisition facility $20,000,000$14,500,000Floating60Interest Only
$60,000,000$30,000,000
PROPOSED FACILITIES ON SETTLEMENT OF
THE UCG TRANSACTION
Facility A - General commercial & development facility$20,000,000Floating60Interest Only
Facility B - Development facility (amended)$5,000,000Floating60Interest Only
Facility B - Re-purposed acquisition facility (amended)$15,000,000Floating5Interest Only
Facility C - Acquisition facility $20,000,000Floating60Interest Only
Facility D - Term loan facility (new)$23,675,000Floating60Interest Only
Facility E - Bridge facility (new)$8,000,000Floating5Interest Only
$91,675,000
Following completion of the UCG Transaction and based on the last completed valuations of Radius Care’s properties
(which are between 8 and 12 months old) and the valuation of the UCG Properties referred to above:
• Radius Care will own properties of an aggregate value of $96.2 million and will have total debt finance of $76.7
million representing 80% of the aggregate valuations. Currently, Radius Care owns properties of an aggregate
value of $49.5 million and has a total debt finance of $30 million representing 61% of the aggregate valuations.
• Radius Care will have total assets of $333.4 million and will have total debt finance of $76.7 million representing a
debt to total assets ratio of 23%. As at 28 February 2022 Radius Care had total assets of $286.8 million and total
debt finance of $30 million representing a debt to total assets ratio of 10%.
As at 28 February 2022, Radius Care’s total debt finance was $30 million and its debt to revenue ratio (based on Radius
Care’s total revenue for the 11 months to 28 February 2022) was approximately 24%. Following completion of the UCG
Transaction Radius Care’s total debt finance is expected to be $76.7 million. Had the UCG Transaction completed on
28 February 2022, and on the basis of Radius Care’s total revenue for the 11 months to 28 February 2022, Radius Care
would have had a debt to revenue ratio of 62% on that date.
The Board has decided to finance the UCG Acquisition through the ASB Facilities rather than raise new capital due to
various considerations including tight timing to complete the transaction and current capital market conditions. It also
considers that the flexibility of a capital raise in the five-month period following settlement of the UCG Acquisition may
provide the opportunity for a more orderly and successful capital raise.
As noted in the letter from the Chair, and as is required as a covenant in the ASB Facilities, Radius Care intends to
undertake a capital raising within five months of settlement of the UCG Transaction to repay the $23 million of funding
to be provided under the existing development facility and the new bridge facility. Following the successful completion
of such capital raising the existing development facility will return to its current facility limits and terms. The structure
and timing (within the five months following settlement) of this capital raising has yet to be determined. Further
information regarding the capital raising will be provided to Shareholders, in accordance with Radius Care’s continuous
disclosure obligations, once a decision on structure and timing has been made.
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Radius Residential Care Notice Of Special Meeting May 2022
Radius Residential Care Notice of Special Meeting May 2022
Under IFRS rules the current leases of the UCG Properties are capitalised as right of use assets (“ROU”) with a
corresponding lease liability. The ROU assets are then depreciated and interest, associated with the lease liabilities, is
charged on a monthly basis. These two items generate a charge to Radius Care’s profit and loss of $278,489 per month
in respect of the UCG Properties. This compares to the monthly lease cash cost for the UCG Properties of $234,848
(plus GST) per month. As a result of the variations to the lease of Radius Kensington under the terms of the WSL
Nomination, the monthly lease cash cost for Radius Kensington is expected to increase by $7,301 (plus GST) per month.
Arran CourtPeppertreeFultonSt JoansTotal Kensington
Yearly lease payment$815,659 $470,459 $819,523 $712,536 $2,818,177 $912,605
Monthly lease payment $67,972 $39,205
$68,294 $59,378 $234,848 $76,050
IMPACT ON NET PROFIT BEFORE
TAX
Monthly lease payment $67,972 $39,205 $68,294 $59,378 $234,848 $76,050
IFRS 16 profit & loss lease reporting
Monthly depreciation of right of use asset $42,666 $27,564 $46,689 $41,037 $157,957 $53,738
Monthly interest cost on lease $38,991 $18,671 $34,013 $28,857 $120,532 $34,941
Monthly lease related costs charged to P&L $149,629 $85,440 $148,996 $129,272 $513,336 $164,730
AFTER ACQUISITIONArran CourtPeppertreeFultonSt JoansTotal Kensington
Expected monthly increase in the lease:
Monthly lease payment
$7,301
Expected monthly loan interest costs are as
follows:
ASB Finance $14,185,000 $7,840,000 $13,650,000 $11,000,000 $46,675,000
Interest rate4%4%4%4%4%
Estimated monthly interest costs $47,283 $26,133 $45,500 $36,667 $155,583
Incremental depreciation on buildings
Purchase price$14,185,000 $7,840,000 $13,650,000 $11,000,000 $46,675,000
Government valuation of land $5,248,450 $1,332,800 $3,276,000 $3,080,000 $12,937,250
Estimated value of buildings $8,936,550 $6,507,200 $10,374,000 $7,920,000 $33,737,750
Estimated monthly depreciation over 50 years $14,894 $10,845 $17,290 $13,200 $56,230
Total estimated interest cost plus depreciation $62,178 $36,979 $62,790 $49,867 $211,813
Estimated reduction in reported expenses $87,451 $48,462 $86,206 $79,405 $301,523
Estimated increase in reported expenses
$7,301
FINANCIAL IMPACT OF THE UCG TRANSACTION
The following information sets out the cash and non-cash monthly costs of leasing the UCG Properties against the
anticipated monthly costs of owning the UCG Properties, together with the increased monthly cost of leasing Radius
Kensington under the WSL Nomination:
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Radius Residential Care Notice Of Special Meeting May 2022
Radius Residential Care Notice of Special Meeting May 2022
If Radius Care purchases the UCG Properties, operating costs will reduce by approximately $301,523 (excluding Radius
Kensington) per month (difference between IFRS accounting for the lease when compared to the loan interest costs
plus building depreciation). From a cash perspective operating cash flow will improve by approximately $79,265
(excluding Radius Kensington) per month (difference between lease cost and interest on loans). These amounts will vary
following the repayment (or refinancing) of $23 million of the ASB Facilities that are due to mature five months after
settlement of the UCG Transaction. The remaining facilities with ASB Bank (including principal amounts thereunder) are
expected to be refinanced on terms to be agreed before the expiry of those facilities. The facilities with ASB Bank are
‘interest only’ facilities (that is, principal is only repayable at the end of the term of the facility with only interest payable
during the term). The Board considers such facilities to be common in the aged care sector and appropriate for Radius
Care.
Radius Care also expects there to be a further uplift to EBITDA in the medium- to long-term following the purchase of
the UCG Properties, due to savings of cumulative CPI rent increases that would otherwise have to be paid on the UCG
Properties.
IMPACT ON BALANCE SHEETArran CourtPeppertreeFultonSt JoansTotal Kensington
Current Balance Sheet as at 28 February 2022
Right of Use Asset $9,468,063 $4,545,398 $8,189,614 $6,957,620 $29,160,695 $8,493,361
Right of Use Asset - Accumulated depreciation-$469,327 -$303,208 -$513,581 -$451,407 -$1,737,523 -$591,119
$8,998,736 $4,242,190 $7,676,033 $6,506,212 $27,423,172 $7,902,241
Lease Liability-$9,522,366 -$4,504,940
-$8,157,695 -$6,911,350 -$29,096,351 -$8,364,415
Net Liability-$523,630 -$262,750 -$481,662 -$405,137 -$1,673,179 -$462,174
AFTER ACQUISITION
Land and Buildings (at purchase cost) $14,185,000 $7,840,000 $13,650,000 $11,000,000 $46,675,000
Debt on acquisition (at a Group level)-$14,185,000 -$7,840,000 -$13,650,000 -$11,000,000 -$46,675,000
— — — — —
Net increase in assets $5,186,264 $3,597,810 $5,973,967 $4,493,788 $19,251,828
Net increase in liabilities-$4,662,634 -$3,335,060 -$5,492,305 -$4,088,650 -$17,578,649
Net improvement in reported net asset position
relating to transaction
$523,630 $262,750 $481,662 $405,137 1,673,179
The following information sets out the anticipated balance sheet adjustments that will arise following the UCG
Transaction. The impact on ROU and lease liability as a result of the variations to the lease of Radius Kensington
under the terms of the WSL Nomination are not reflected in this table it is unable to be determined at this stage,
however, the impact is not expected to be material to Radius Care:
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Radius Residential Care Notice Of Special Meeting May 2022
Radius Residential Care Notice of Special Meeting May 2022
IMPLICATIONS OF THE RESOLUTION NOT BEING
APPROVED
If the Resolution is not passed:
• Radius Care will not be able to satisfy the shareholder
approval condition in the UCG Agreements and the
Kensington Agreement and, accordingly, will not be
able to complete the UCG Acquisition and nor will WSL
be able to complete the Kensington Agreement. In such
circumstances, absent an alternative agreement being
reached with UCG that is viable for Radius Care, Radius
Care would need to cancel the UCG Agreements and
the Kensington Agreement and the UCG Transaction
would not proceed. Neither the UCG Agreements nor
the Kensington Agreement require Radius Care to pay
UCG (or WSL) any money in that circumstance.
• Radius Care will continue to lease the UCG Properties
and Radius Kensington from UCG.
• Radius Care may not have another opportunity to
acquire the UCG Properties and Radius Kensington for
some time.
• The development opportunities provided by the UCG
Acquisition would not be able to be completed.
• Radius Care will incur sunk costs of approximately
$300,000 in having pursued the UCG Acquisition
through legal fees, independent adviser fees, registry
fees, regulatory fees, financing fees and reimbursement
of certain UCG transaction costs.
KEY RISKS
The key risks associated with the UCG Transaction are:
• The $23 million of funding to be provided by ASB
Bank under the existing development facility and the
new bridge facility has a term of five months from
settlement of the UCG Acquisition, within which Radius
Care must repay it from the proceeds of a capital
raising or, failing that (and with the approval of ASB
Bank), refinance it or repay it from the proceeds of
asset sales. While Radius Care is confident, based in
discussions with its investment bank advisors, that it
can raise $23 million of net proceeds from a capital
raising within that timeframe, there is no assurance
that it will be able to successfully raise $23 million of
net proceeds through a capital raising or asset sales, or
that that funding can be refinanced in that timeframe.
If Radius Care is unable to repay the $23 million of
funding through a capital raise within five months from
settlement of the UCG Acquisition but is able to secure
refinancing of that funding with the approval of ASB
Bank (either with ASB Bank or another debt provider),
there is a risk that such replacement funding will be on
less favourable terms to Radius Care, which may result
in increased interest rate costs and/or more onerous
financial covenants to Radius Care.
• The interest rate on each of the ASB Facilities to be
utilised to fund the UCG Acquisition is a floating rate.
Market consensus is that interest rates are expected
to rise over the near term in line with increases in
the Official Cash Rate. Any interest rate increases on
the ASB Facilities will increase Radius Care’s cash
outgoings and reduce net profit after tax.
• If WSL (as nominee) fails to settle, and Neil Foster
(as guarantor of WSL’s obligations under the WSL
Nomination) fails to procure that WSL settles, the
Kensington Agreement, then Radius Care Holdings as
the party named as the purchaser in that agreement
will be liable to UCG for that failure to settle. If that
failure subsists following expiry of a settlement
notice served by UCG, then UCG may sue Radius
Care Holdings for specific performance or cancel the
Kensington Agreement and sue Radius Care Holdings
for damages. If the Kensington Agreement is cancelled,
then the UCG Agreements will terminate automatically
and the UCG Acquisition will not take place, unless the
parties agree otherwise. Under the WSL Nomination,
Neil Foster has indemnified Radius Care Holdings
against all losses that Radius Care Holdings may incur
directly or indirectly from WSL’s default in payment
of the purchase price under the WSL Nomination or
Kensington Agreement or in the performance of any
other obligations of WSL under the WSL Nomination
(which includes WSL’s obligations as purchaser under
the Kensington Agreement). Radius Case considers the
risk of such a WSL default to be low.
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Radius Residential Care Notice Of Special Meeting May 2022
Radius Residential Care Notice of Special Meeting May 2022
15
Radius Residential Care Notice Of Special Meeting May 2022
Radius Residential Care Notice of Special Meeting May 2022
LISTING RULE REQUIREMENTS
Shareholder approval is required for the Resolution by
Listing Rules 5.1.1(b) and 5.2.1.
Listing Rule 5.1.1(b) provides that, except with the prior
approval by an ordinary resolution (or a special resolution
if approval by way of special resolution is required under
section 129 of the Companies Act 1993) or conditional
upon such approval, Radius Care may not enter into
any transaction or series of transactions to acquire, sell,
exchange, or otherwise dispose of assets of Radius Care
in respect of which the gross value is above 50% of the
average market capitalisation of Radius Care.
The UCG Transaction constitutes a ‘transaction’ under
Listing Rule 5.1.1(b) as it involves Radius Care (through
its wholly owned subsidiary Radius Care Holdings)
entering into a transaction (being the entry into the UCG
Agreements and the Kensington Agreement which are
taken into account together for the purposes of Listing
Rule 5.1.1(b), notwithstanding that WSL will acquire
Radius Kensington pursuant to the WSL Nomination, as
the agreements were all entered into at the same time
by Radius Care Holdings with UCG) to acquire assets
having a gross value that exceeds 50% of the average
market capitalisation of Radius Care in that Radius Care’s
average market capitalisation at 30 March 2022 (being
the date that Radius Care announced the UCG Transaction
through the NZX) was approximately $103.7 million and
the aggregate purchase price for the UCG Properties and
Radius Kensington is $61.3 million. The UCG Transaction
does not constitute a major transaction for Radius Care for
the purposes of section 129 of the Companies Act 1993.
Listing Rule 5.2.1 provides that, except with the prior
approval by an ordinary resolution (or a special resolution
if approval by way of special resolution is required under
section 129 of the Companies Act 1993) or conditional upon
such approval, Radius Care may not enter into a ‘Material
Transaction’ with a ‘Related Party’. A Material Transaction
includes a transaction or related series of transactions that
involves Radius Care acquiring or disposing of assets of
Radius Care in respect of which the aggregate net value
(being the greater of the net tangible assets value or market
value) is above 10% of the average market capitalisation
of Radius Care. A Related Party includes an ‘Associated
Person’ of Radius Care and an ‘Associated Person’ includes
a person acting jointly or in concert with Radius Care.
The UCG Transaction constitutes a ‘Material Transaction’ as
it involves Radius Care (through its wholly owned subsidiary
Radius Care Holdings) entering into a related series of
transactions (being the entry into the UCG Agreements,
the Kensington Agreement and the WSL Nomination) to
acquire assets having an aggregate net value that exceeds
10% of the average market capitalisation of Radius Care
in that Radius Care’s average market capitalisation at 30
March 2022 (being the date that Radius Care announced
the UCG Transaction through the NZX) was approximately
$103.7 million and the aggregate purchase price for the UCG
Properties and Radius Kensington is $61.3 million.
WSL is a ‘Related Party’ of Radius Care as it is
an ‘Associated Person’ of Radius Care as, for the
purposes of Listing Rule 5.2.1, Radius Care and WSL
are considered to be acting jointly and in concert
in respect of the UCG Transaction as Radius Care
Holdings would not have entered into the UCG
Agreements and the Kensington Agreement had it
not also entered into the WSL Nomination with WSL.
Listing Rule 7.8.8(b) requires an appraisal report
to be prepared where a meeting of shareholders
will consider a resolution required by Listing Rule
5.2.1 (as is the case with the entry into of the UCG
Agreements, the Kensington Agreement and the
WSL Nomination). The Independent Report prepared
by Calibre Partners that accompanies this Notice
of Meeting constitutes an appraisal report for the
purposes of the Listing Rules. The appointment of
Calibre Partners was approved by NZ RegCo. Taking
into account the key issues noted in section 1.3 of the
Independent Report, Calibre Partners consider that
the terms and conditions of the UCG Transaction are
fair to shareholders.
The Board recommends that shareholders
vote in favour of the Resolution.
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Radius Residential Care Notice Of Special Meeting May 2022
Radius Residential Care Notice of Special Meeting May 2022
Procedural Notes and
Other Information
EXPLANATORY NOTES
Explanatory Notes relating to the Resolution are attached
to and form part of this Notice of Meeting.
ATTENDANCE
All Shareholders who are registered as at 5.00pm (New
Zealand time) on 3 May 2022 are entitled to attend online or
in person and vote at the Special Meeting.
Attendance online
To attend the Special Meeting online please go to https://
meetnow.global/nz. To access the Special Meeting, click
GO under the Radius Care meeting and then click JOIN
MEETING NOW. Select ‘shareholder’ on the login screen
and enter your CSN or holder number (which can be found
on the proxy form attached to this Notice of Meeting) and
mailing address post code (if in New Zealand) or, if outside
New Zealand, choose your country from the drop-down
list. The Computershare Online Meeting Platform enables
shareholders to view the Special Meeting and presentations
as well as providing the opportunity to vote and ask
questions. Instructions on how to participate are available
in the Virtual Meeting Guide accompanying this Notice of
Meeting.
Attendance in person
The venue for the Special Meeting for those Shareholders
attending in person is Eden Park (Enter via Gate G), World
Cup Lounge West, Level 4, South Stand, Reimers Avenue,
Kingsland, Auckland (with entry to the meeting room
available from 10.00am on 5 May 2022).
Radius Care may, in its sole discretion, elect to hold the
Special Meeting as an online only meeting if it considers
there are potential risks to the health of meeting attendees
or if an in-person meeting is prohibited by law, as a result
of developments in the COVID-19 situation in New Zealand
and restrictions on the size of public gatherings. In such
circumstances, Radius Care will provide Shareholders with
as much notice as is reasonably practicable by way of an
announcement to NZX and on Radius Care’s website at
www.radiuscare.co.nz.
PROXIES AND REPRESENTATIVES
If you are unable to attend the Special Meeting
in person or online, you may appoint a proxy
or representative (in the case of a corporate
shareholder) to attend and vote on your behalf. The
notice appointing a proxy or representative must be
received by Computershare Investor Services Limited
not later than 10.30am (New Zealand time) on 3 May
2022 by any of the following means:
Online
Visit www.investorvote.co.nz and follow the
instructions or, if you have a Smartphone,
by scanning the QR code on the first page
of the proxy form attached to this Notice
of Meeting and following the prompts
Email
Email corporateactions@computershare.
co.nz with “Radius Care proxy” in the
subject line
Delivery
Deliver your completed form to:
Computershare Investor Services Limited,
Level 2, 159 Hurstmere Road, Takapuna,
Auckland 0622
Mail
Post your completed form to
Computershare Investor Services Limited,
Private Bag 92119, Victoria Street West,
Auckland 1142
A proxy or representative need not be a Shareholder
and may be appointed by completing the proxy form
attached to this Notice of Meeting.
The appointment of a proxy or representative does
not preclude a Shareholder from attending and voting
in person or online at the Special Meeting. However,
please note that your proxy will not be able to vote
at the Special Meeting unless you have provided a
voting direction or discretion. If you do not provide
17
Radius Residential Care Notice Of Special Meeting May 2022
Radius Residential Care Notice of Special Meeting May 2022
an election in respect of the Resolution, your direction is to
abstain. If you make more than one election in respect of
the Resolution your vote will be invalid on the Resolution.
If you do not name a person as your proxy, or your named
proxy does not attend the meeting, but have indicated
on the proxy form how you wish to vote, the Chair of
the Special Meeting will vote in accordance with your
express instructions.
You may appoint the Chair of the Special Meeting as your
proxy. If you appoint the Chair of the Special Meeting
as your proxy and elect to give him discretion on how
to vote, then he intends to vote your shares in favour of
the Resolution.
ORDINARY RESOLUTION
The Resolution must be passed by an ordinary resolution of
Shareholders, i.e. by a simple majority of the votes of those
Shareholders entitled to vote and voting on the Resolution
in person or by proxy.
VOTING RESTRICTIONS
In accordance with Listing Rule 6.3.1, Radius Care will
disregard any votes cast in favour of the Resolution
by WSL and its Associated Persons (including Neil
John Foster). Any discretionary proxies given to
persons disqualified from voting under Listing Rule
6.3.1 will not be valid. Such persons may, however,
vote non-discretionary proxies where the relevant
Shareholder has indicated on the proxy form how the
Shareholder wishes that person (as proxy) to vote
NZ REGCO NO OBJECTION
This Notice of Meeting has been reviewed by NZ
RegCo. NZ RegCo has confirmed that it has no
objection to this Notice of Meeting. However, NZ
RegCo takes no responsibility for any statement in
this Notice of Meeting.
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Radius Residential Care Notice Of Special Meeting May 2022
Radius Residential Care Notice of Special Meeting May 2022
Glossary
ASB BankASB Bank Limited
ASB Facilities
The new and existing facilities to be provided by ASB Bank to fund the UCG Acquisition,
as further described under the heading “ASB Facilities” in the Explanatory Notes
Associated PersonHas the meaning given to that term in the Listing Rules
BoardThe Board of Directors of Radius Care
EBITEarnings before interest and tax
EBITDAEarnings before interest, tax, depreciation and amortisation
Explanatory Notes
The explanatory notes on the Resolution attached to, and forming part of, this Notice of
Meeting
GroupRadius Care and its subsidiaries
Independent Report
The independent appraisal report prepared by Calibre Partners, a copy of which
accompanies this Notice of Meeting
Kensington Agreement
The agreement for sale and purchase of real estate in respect of Radius Kensington
between Radius Care Holdings Limited and UCG and dated 29 March 2022
Listing RulesThe listing rules of the NZX Main Board
Notice of MeetingThis notice of special meeting, including the Explanatory Notes
NZXNZX Limited
NZX Main BoardThe main board equity security market operated by NZX
Radius CareRadius Residential Care Limited
Radius Care HoldingsRadius Care Holdings Limited, a wholly-owned subsidiary of Radius Care
Radius KensingtonThe property located at 135 Maeroa Road, Maeroa, Hamilton
ResolutionThe resolution set out in this Notice of Meeting
Shareholders
Those persons recorded on the Radius Care share register as a shareholder of
Radius Care
Special MeetingThe special meeting of Shareholders to be hold on 5 May 2022, starting at 10.30am
UCGUCG Investments Limited
UCG Acquisition
The acquisition of the UCG Properties in accordance with the UCG Agreements as
described in the Explanatory Notes
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Radius Residential Care Notice Of Special Meeting May 2022
Radius Residential Care Notice of Special Meeting May 2022
UCG Agreements
The agreements for sale and purchase of real estate in respect of the UCG Properties
between Radius Care Holdings Limited and UCG and dated 29 March 2022
UCG Properties
The properties located at:
• 85 McLeod Road, Te Atatu South, Auckland
• 371 Peachgrove Road, Fairfield, Hamilton
• 107 Roberts Line, Kelvin Grove, Palmerston North
• 30 Hillside Road, Caversham, Dunedin
UCG Transaction
The UCG Acquisition, the Kensington Acquisition, the WSL Nomination and the ASB
Facilities, each as further described in the Explanatory Notes
WSLWarehouse Storage Limited
WSL Nomination
The deed of nomination between Radius Care Holdings Limited, WSL and Neil John
Foster and dated 29 March 2022
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Radius Residential Care Notice Of Special Meeting May 2022
Radius Residential Care Notice of Special Meeting May 2022
Radius Residential Care
ADDRESS
Level 4, 56 Parnell Road, Parnell, Auckland
PHONE
+64 9 304 1670
EMAIL
investor@radiuscare.co.nz
Caring is our calling
---
The Special Meeting of Radius Residential Care Limited will be held at Eden Park (Enter via Gate G), World Cup Lounge West, Level 4, South Stand, Reimers Avenue,
Kingsland, Auckland on 5 May 2022 commencing at 10.30am.
If
shareholders do not wish to attend the Special Meeting in person at Eden Park shareholders will have the opportunity to attend and participate in the Special
Meeting online at https://meetnow.global/nz. The Virtual Special Meeting will be accessible on both desktop and mobile devices. Please refer to the Virtual
Meeting Guide that accompanies this Proxy/Voting Form for further information.
Proxy/Voting Form
www.investorvote.co.nz
Lodge your proxy online, 24 hours a day, 7 days a week:
Smartphone?
Scan the QR code to vote now.
Your secure access information
Control Number:
CSN/Shareholder Number:
You will need your CSN/Securityholder Number and post code or country of residence (if outside New Zealand) to
securely access InvestorVote and then follow the prompts to appoint your proxy and submit your voting instructions.
For your proxy to be effective it must be received by 10.30am on 3 May 2022
Defined terms in this Form have the meaning given to them in the Notice of Special
Meeting.
How to Vote on Items of Business
All your securities will be voted in accordance with your directions.
Appointment of Proxy
If you are unable to attend the Special Meeting, you may appoint a proxy or
representative (in the case of a corporate shareholder) to attend and vote on your
behalf. To do this, enter the name of your proxy or representative in the space
allocated in ‘Step 1’of this Form. A proxy or representative need not be a shareholder
of the company.
The Chairman of the Special Meeting is prepared to act as a discretionary proxy for any
shareholder. If, in appointing a proxy, you have not named someone to be your proxy
(or your named proxy does not attend the meeting) but you have indicated on this
Form how you wish to vote, the Chairman of the Special Meeting will be your proxy
and will vote in accordance with your express instructions. If appointed as a
discretionary proxy, the Chairman of the Special Meeting intends to vote in favour of
the Resolution.
Voting of your holding
To direct your proxy how to vote on the Resolution, you should tick the appropriate
box in ‘Step 2’ of this F orm. Your proxy will not be able to vote at the Special Meeting
unless you have provided a voting direction or discretion. If you do not provide an
election in respect of the Resolution, your direction is to abstain. If you make more
than one election in respect of the Resolution your vote will be invalid on the
Resolution.
Atte
nding the Special Meeting
Bring this Form to the Special Meeting to assist with registration. Companies or body
corporates that wish to attend through a representative must ensure that the
representative brings a copy of this Form appointing him or her to the Special Meeting.
The
appointment of a proxy or representative does not preclude you from attending
and voting in person or online at the Special Meeting.
Vo
ting Restriction
As set out in the Notice of Special Meeting, in accordance with Listing Rule 6.3.1, the
Company will disregard any votes cast in favour of the Resolution by Warehouse
Storage Limited and its Associated Persons (including Neil John Foster).
Per
sons subject to the voting restriction may not be appointed as a discretionary proxy
(but can be appointed as a non-discretionary proxy and expressly directed how to vote
if appointed by a person who is not disqualified from voting).
Si
gning Instructions for Proxy Forms
Individual
Where the holding is in one name, the shareholder must sign.
Joint Holding
Where the holding is in more than one name, all of the shareholders should sign.
Power of Attorney
If this Form has been signed under a power of attorney, a copy of the power of
attorney (unless already deposited with the Registrar) and a signed certificate of non-
revocation of the power of attorney must be produced to the Company with this
Form.
Companies
This Form should be signed by a Director jointly with another Director, or a Sole
Director can also sign alone. Please sign in the appropriate place and indicate the
office held.
>> GO ONLINE TO VOTE, OR TURN OVER TO COMPLETE THE FORM
Lodge your postal vote or proxy
Online
www.investorvote.co.nz
By Email
corporateactions@computershare.co.nz
Subject Line “Radius Care Proxy”
In Person
Level 2, 159 Hurstmere Road, Takapuna,
Auckland 0622
By Mail
Computershare Investor Services Limited
Private Bag 92119, Victoria Street West,
Auckland 1142, New Zealand
For all enquiries contact
+64 9 488 8777 or
corporateactions@computershare.co.nz
PROXY/VOTING FORM
>>STEP 1: Appoint a Proxy/Corporate Representative to Vote on Your Behalf
I/We being a shareholder/shareholders of Radius Residential Care Limited
hereby appoint of
or failing him/her of
as my/our proxy or representative to exercise my/our vote in accordance with the instructions below at the Special Meeting of
Shareholders of the Company to be held at Eden Park (Enter via Gate G), World Cup Lounge West, Level 4, South Stand, Reimers
Avenue, Kingsland, Auckland and virtually at meetnow.global/nz (refer to the Notice of Special Meeting) on 5 May 2022
commencing at 10.30am and at any adjournment of that meeting.
>>STEP 2: Voting Form or Proxy/Representative Voting Instructions
Tick the box that applies. Tick only ONE box in respect of the Resolution. Please note: If you mark the “Abstain” box, you are
directing your proxy/representative not to vote on your behalf during the poll and your votes will not be counted in computing the
required majority.
Ordinary Resolution For Against Proxy
Discretion
Abstain
1.That the entry into and performance of the UCG Transaction be approved for
all purposes, including Listing Rule 5.1.1 and Listing Rule 5.2.1
>>SIGNATURE OF SHAREHOLDERS (s) This section must be completed.
Shareholder 1 Shareholder 2 Shareholder 3
or Sole Director/Director or Director (if more than one)
Contact Name Daytime Telephone Date
If your proxy/representative will be attending the Special Meeting remotely, please ensure that you provide their contact details
(phone and email address). If this information is not provided, we cannot guarantee remote admission to the Virtual Special
Meeting for your proxy.
Proxy Contact Details ( Phone): and (Email):
Special Meeting of Radius Residential Care Limited
to be held at Eden Park (Enter via Gate G), World Cup
Lounge West, Level 4, South Stand, Reimers Avenue,
Kingsland, Auckland, on 5 May 2022 commencing at
10.30am.
ATTENDANCE SLIP
---
Radius Residential Care Limited
Independent Appraisal Report in relation to the proposed
UCG Transaction
14 April 2022
calibrepartners.co.nz page 2
Table of contents
1. Executive summary ............................................................................................................................................................................................. 3
1.1 Introduction ................................................................................................................................................................................................... 3
1.2 Potential outcomes ................................................................................................................................................................................... 3
1.3 Key issues to be considered by shareholders ......................................................................................................................... 4
2. Background ............................................................................................................................................................................................................... 5
2.1 Current situation ......................................................................................................................................................................................... 5
2.2 The UCG Transaction ................................................................................................................................................................................ 5
2.3 Purpose of the Report and regulatory requirements ........................................................................................................ 6
2.4 Other ................................................................................................................................................................................................................... 7
3. Industry overview .................................................................................................................................................................................................. 8
3.1 Overview ........................................................................................................................................................................................................... 8
3.2 Key industry drivers .............................................................................................................................................................................. 10
4. Radius overview .................................................................................................................................................................................................. 13
4.1 Background and history .................................................................................................................................................................... 13
4.2 Operations ................................................................................................................................................................................................... 14
4.3 Share ownership ..................................................................................................................................................................................... 15
4.4 Share price performance .................................................................................................................................................................. 16
5. Financial overview............................................................................................................................................................................................. 17
5.1 Financial performance ........................................................................................................................................................................ 17
5.2 Financial position ................................................................................................................................................................................... 19
5.3 Capital expenditure .............................................................................................................................................................................. 20
5.4 Dividends ..................................................................................................................................................................................................... 20
6. Evaluation of the UCG transaction ........................................................................................................................................................ 21
6.1 Bases of evaluation ................................................................................................................................................................................ 21
6.2 Rationale for the UCG transaction .............................................................................................................................................. 21
6.3 Consideration paid for the UCG Acquisition properties ............................................................................................... 22
6.4 Terms and conditions of the UCG Acquisition ................................................................................................................... 23
6.5 Terms and conditions of Radius Kensington lease and option agreement with WSL ........................... 23
6.6 Impact of the UCG Transaction on Radius’s financial statements ....................................................................... 24
6.7 Implications of the resolution not being approved ........................................................................................................ 26
6.8 Other factors relevant to shareholders .................................................................................................................................... 26
Appendix 1: Sources of information ................................................................................................................................................................ 27
Appendix 2: Qualifications and declarations ............................................................................................................................................. 29
calibrepartners.co.nz page 3
1. Executive summary
1.1 Introduction
Radius Residential Care Limited (Radius or the Company) is a New Zealand incorporated company listed
on the NZX Main Board. Radius provides health and aged care services for elderly persons. It has a
nationwide presence, operating 23 aged care facilities and 3 retirement villages, offering a full range of
accommodation and care options.
On 30 March 2022, Radius announced that it had entered into conditional sale and purchase agreements
with UCG Investments Limited (UCG) to acquire the land and buildings of four aged care facilities currently
operated by Radius (UCG Acquisition). The total consideration for the four properties is $46.7 million and
is based on independent valuations of the land and buildings prepared Colliers.
1
Contemporaneous with the UCG Acquisition, Radius entered into an agreement with Warehouse Storage
Limited (WSL), whereby Radius nominated WSL (WSL Nomination) to acquire a fifth site from UCG, in
place of Radius, for a consideration of $14.6 million (Kensington Acquisition). Pursuant to the terms of
the WSL Nomination, Radius will continue to lease the fifth site from WSL and is granted an option to
acquire the site between 24 May 2022 and the final expiry of the lease in 2044.
UCG and Radius have agreed that the sale and purchase agreements for all five properties will be entered
into and settle concurrently. In other words, either all the properties will be sold to Radius and WSL, or
none at all. The UCG Acquisition, the WSL Nomination and the Kensington Acquisition are collectively
referred to as the UCG Transaction.
1.2 Potential outcomes
The UCG Transaction is conditional upon shareholder approval. Radius shareholders are being asked to
vote to approve or reject the UCG Transaction by ordinary resolution. Radius’s largest shareholder, Wave
Rider Holdings Limited (35.4%), has indicated its intention to vote in favour of the transaction.
The possible outcomes are:
• Shareholders approve the UCG Transaction
If Radius shareholders vote to approve the UCG Transaction, then the UCG Acquisition, the WSL
Nomination and Kensington Acquisition will be executed and settled. Radius will acquire four
properties from UCG and enter into a lease agreement with WSL for the fifth site, with the option to
purchase the property.
• Shareholders reject the UCG Transaction
If Radius shareholders vote to reject the UCG Transaction, then none of the UCG Acquisition, the WSL
Nomination or Kensington Acquisition will be executed. If the properties are not acquired by Radius,
UCG may market the properties for sale more broadly and they may be acquired by a new landlord.
These properties may not become available for sale again for several years.
1
Valuations prepared by CVAS (WLG) Limited, trading as Colliers.
calibrepartners.co.nz page 4
1.3 Key issues to be considered by shareholders
For shareholders deciding whether to approve or reject the UCG Transaction, key issues to be considered
include:
Benefits
• The UCG Transaction is in line with Radius’s strategy and provides future development opportunities.
• The purchase consideration for the UCG properties is based on independent valuations for each of the
properties, performed by Colliers. The property valuations are based on a market value definition of
value which is broadly similar to other definitions of value premised on market participants acting in
their economic best interests.
• The acquisition of the properties is accretive to EBITDA (excluding the impact of NZ IFRS 16).
• The annual lease payment for Radius Kensington will initially increase by approximately $87,000 at
the three yearly CPI review due 22 May 2022. The existing lease will continue on the same terms,
subject only to the variations noted at Section 6.5 of this report, including the grant to Radius by WSL
of an option, at Radius’ discretion, to acquire the property of Radius Kensington in the future. This
provides Radius with future flexibility.
• The current cost of debt to fund the acquisition is lower than the rental yield on the properties.
• The UCG Transaction reduces operating cash flow risk and volatility by removing a fixed cost from the
cost base.
Risks
• The UCG Transaction will initially be fully debt funded, and partially debt funded for either three or five
years. The introduction of debt increases the financial leverage of the business. While the credit
margin is fixed, the base rate is floating and exposes Radius to interest rate risk.
• Radius plans to raise equity capital of approximately $23 million within the next 5 months. Equity
markets are inherently uncertain and can be volatile for a prolonged period of time. This may
influence the amount that can be raised through a capital raise and / or the number of shares that
need to be issued to raise $23 million. A capital raise will have a dilutive effect on existing shareholders
to the extent they do not participate in the event in proportion to their existing shareholding.
• There are likely to be incremental costs of ownership, for example expenditure on large capital items
which Radius currently does not pay for as a tenant.
Taking account of the above key issues, we consider the terms and conditions of the UCG Transaction is
fair to Radius shareholders.
The above should be read in conjunction with our analysis of the UCG Transaction at Section 6 of this
Report.
Voting on the UCG Transaction is a matter for individual shareholders based on their own views,
circumstances, and investment objectives. It is therefore not possible to prescribe or advise what action an
individual should take in respect to the UCG Transaction. Our advice is necessarily general in nature and is
intended to assist each shareholder to form their own opinion as to what action they should take given
their specific circumstances.
calibrepartners.co.nz page 5
2. Background
2.1 Current situation
Prior to its listing on the NZX in December 2020, Radius leased the land and buildings of the majority
(approximately 80%) of its aged care facilities. Since December 2020, in line with its strategic objectives,
Radius has pivoted towards increased facility ownership in instances where ownership will provide Radius
with greater control to undertake value accretive growth initiatives. Radius currently operates 23 aged
care facilities, of which it owns 8 and leases 15. It also owns and operates three retirement villages.
Radius’s leases are typically long term in nature with the average remaining lease term across the portfolio
being 9.7 years until the next renewal date (or 23.8 years until final expiry). The leases are subject to
periodic rental reviews, either linked to inflation or independently assessed market rent reviews. In terms
of the lease agreements most are triple net lease agreements, meaning that Radius bears the cost of
maintenance, pays for the building warrant of fitness and outgoings.
At the time of listing Radius communicated its growth strategy, part of which is to:
• Purchase strategically important facilities already operated (but not owned) by Radius, providing
greater control to undertake value enhancing activities; and
• To leverage its brownfield development capabilities to undertake value accretive facility extensions
and reconfigurations.
2.2 The UCG Transaction
Radius is proposing a series of transactions, summarised as follows:
The UCG Acquisition
Radius, through its wholly owned subsidiary Radius Care Holdings Limited (Radius Holdings) has entered
into conditional sale and purchase agreements with UCG to acquire the land and buildings of four aged
care facilities currently leased by Radius.
The properties subject to the UCG Acquisition are:
Table 1: Four UCG Acquisition sites
Facility Location
Current
care beds
Purchase
price
Passing initial
yield
Radius Arran Court Te Atatu South, Auckland 102 $14,185,000 5.75%
Radius Fulton Caversham, Dunedin 93 $13,650,000 6.00%
Radius Peppertree Kelvin Grove, Palmerston North 62 $7,840,000 6.00%
Radius St Joans Fairfield, Hamilton 85 $11,000,000 6.50%
The total purchase price for the properties is $46.675 million, which is based on independent property
valuations prepared by Colliers for each property.
The UCG Acquisition will initially be 100% debt funded, utilising Radius’s new and existing facilities with
ASB Bank Limited (ASB). Radius intends to raise $23 million in equity capital later in 2022 to partially
repay the bank debt.
Each site presents development opportunities. Radius has indicated that it will be able to add between
80 and 100 additional care beds to its portfolio should it pursue further development at the four sites.
calibrepartners.co.nz page 6
The Nomination and the Kensington Acquisition
The same as for the UCG Acquisition, Radius Holdings has entered into conditional sale and purchase
agreement with UCG, to acquire the land and buildings of fifth property already leased by Radius, the
‘Radius Kensington’ site in Hamilton.
Radius has stated that it is not in a position to suitably fund both the UCG Acquisition and the acquisition
of the Kensington site. It has therefore entered into a separate agreement with WSL, whereby:
• Radius will nominate WSL to acquire the land and buildings of Radius Kensington. WSL is wholly
owned by Neil John Foster, who is also a shareholder of Radius, holding 5.79% of the shares on issue.
• Radius and WSL will enter into a lease agreement with the following terms:
− The current lease term expires in May 2024. Radius will exercise its right to extend the term of the
lease to 22 May 2034 and WSL will grant Radius a further 10-year right of renewal, extending the
final expiry date to 22 May 2044.
− The lease payments will be indexed to inflation on an annual basis.
− Radius will assume responsibility for all building related issues and maintenance of
Radius Kensington.
− WSL will grant Radius and option to acquire Radius Kensington at any time between 24 May 2022
and the final expiry of the lease in 2044. The purchase price will be determined based on a yield of
6.25% calculated on the annual rent at the time the option is exercised. The yield of 6.25% is the
yield used by Colliers in its independent valuation of the Radius Kensington property.
2.3 Purpose of the Report and regulatory requirements
Radius has engaged Calibre Partners to prepare this Appraisal Report (the Report) pursuant to the
NZX Listing Rules.
NZX Listing Rule 5.2.1
The UCG Transaction (which includes the UCG Acquisition, the WSL Nomination and the Kensington
Acquisition) is subject to Rule 5.2.1(b) of the NZX Listing Rules, which states that an Issuer must not enter
into a Material Transaction if a Related Party is, or is likely to become a direct party to the transaction,
unless the transaction is approved by Ordinary Resolution, or the transaction is conditional upon such
approval.
A Material Transaction includes a transaction or related series of transactions that involves Radius
acquiring assets in respect of which the Aggregate Net Value (being the greater of the net tangible assets
value of market value) is above 10% of the Average Market Capitalisation of Radius.
A Related Party includes an Associated Person which includes a person acting jointly or in concert with
Radius.
The UCG Transaction is expected to be a Material Transaction as it will exceed 10% of Radius’s Average
Market Capitalisation. As Radius and WSL will be acting jointly and in concert in respect of the
UCG Transaction, and because of WSL’s association with Neil Foster, WSL is expected to be an
Associated Person, and therefore also a Related Party of Radius for the purposes of Listing Rule 5.2.1.
calibrepartners.co.nz page 7
Purpose of the report
NZX Listing Rule 7.8.8(b) requires that a notice of meeting for the purposes of Rule 5.2.1 must be
accompanied by an Appraisal Report.
Calibre Partners was approved by NZX Regulation Limited (NZRegCo) on 31 March 2022 to provide an
Appraisal Report related to the UCG Transaction.
Calibre Partners issues this report to the directors of Radius for the benefit of non-associated shareholders,
to assist them in forming their own opinion on whether to vote for or against the resolution in respect of
the UCG Transaction.
2.4 Other
The sources of information we have had access to and relied upon are set out in Appendix 1.
This Report should be read in conjunction with the statements and declarations set out in Appendix 2
regarding our independence, qualifications, general disclaimer and indemnity, as well as restrictions on
the use of this Report.
References to ‘$’, ‘NZD’ or dollars are to New Zealand dollars, unless specified otherwise. When referring to
Radius, references to financial years or ‘FY’ mean Radius’s financial years ending 31 March.
Tables may not add due to rounding.
calibrepartners.co.nz page 8
3. Industry overview
3.1 Overview
The aged care residential services industry has changed over the last five years as facilities have
progressively moved to high-care or hospital level models in line with increased resident acuity levels. The
industry previously relied on institutionalised care however a growing number of market participants have
been rolling out more contemporary integrated living options across aged residential care, retirement
living and home care
2
.
Over the past five years there has been an increase in the number of elderly people with higher functional
dependency needs which has supported industry performance, which is expected to have grown at an
annualised rate of 6.3% for the five years ending 2021-22. New Zealand’s ageing population and the
increasing proportion of the population aged over 70 will continue to drive industry expansion.
The continuum of care
There are three related sectors providing accommodation, support and care which together provide a full
continuum of care options to meet individual needs.
• Home based support: this is part of the Government’s strategy to encourage and assist people to
remain supported in their own homes.
• Retirement villages: cater for individuals who can live independently or require low levels of
assistance.
• Aged care: covers low acuity care (rest homes) and high acuity and specialist care (hospital, dementia,
psychogeriatric, physical and intellectual care). Care is provided under a Ministry of Health (MoH)
certification
3
.
Figure 1 illustrates the typical movement of a resident through the continuum of care as they age, and
greater assistance is needed.
Figure 1: Continuum of accommodation and care
Source: Radius Residential Care Limited NZX listing profile, December 2020
2
Aged Care Residential Services in New Zealand report by IBISWorld, May 2021.
3
Radius Residential Care Limited NZX listing profile, December 2020.
Home based
support
Retirement
village
Rest home
care
Hospital
care
Dementia care
and other
specialist care*
Radius Care
Online Shop
Radius Care
Retirement Village
Radius Care
Aged Care
Units
(including with some
level of assistance)
Lowest level of
assessed care
Highest level of
assessed care
Specialist care for dementia
or other specialist needs
Low acuity High acuity and specialist care
DHB assessed care and increasing acuity
* Other specialist care includes psychogeriatric, physical and intellectual care
calibrepartners.co.nz page 9
20%
30%
80%
60%10%
Propo
sed
Brow...
Longe
r term
focus
Industry participants and portfolio mix
Within the broader industry, the largest market participants are predominantly NZX-listed companies
(Radius, Ryman Healthcare, Summerset Group, Oceania Healthcare and Arvida Group). The other
significant operators are Metlifecare and global healthcare and insurance company, Bupa.
Radius is distinct from the other listed operators in that it is predominantly focussed on rest home, and in
particular, specialist high acuity care. It offers residents 24 hour-a-day certified hospital, dementia or rest
home care services. Staff, including qualified nurses, provide residents with complex nursing care and
assist residents with their daily activities.
Figure 2 shows the accommodation mix in each NZX-listed operator’s portfolio.
Figure 2: Aged care and retirement village operators’ portfolios by accommodation type
Source: Radius Residential Care Limited NZX listing profile, December 2020.
Entry into a rest home is usually prompted by deteriorating health or family support no longer being able
to meet the required level of care. Residents can access a rest home from either a retirement village or
directly from the community. To enter a rest home, a resident requires an independent assessment by a
District Health Board Needs Assessor. Work and Income New Zealand provides means-tested subsidies to
support rest home residents with care fees.
Radius
Care
Oceania
Summerset
Arvida
Ryman
Proposed
Brownfield
Developments
Oceania
Summerset
Arvida
Ryman
Longer
term focus
Existing portfolio composition Focus on portfolio development
Units Care beds Care suites
Units Care Beds Care Suites
calibrepartners.co.nz page 10
Product and services segmentation
Figure 3 shows the industry product segmentation and relative profitability. The industry is segmented
into dementia care, psychogeriatric care, long term hospital care and rest home care. Each segments’
revenue as a proportion of total industry revenue is shown in figure 3, together with relative profitability
(measured as $EBITDA per resident). Radius’s portfolio is oriented towards high acuity and specialist care,
the highest margin segment in the industry with high barriers to entry, supported by strong expected
demand levels.
Figure 3: Aged care residential services industry segmentation
Source: Radius Residential Care Limited NZX listing profile, December 2020, IBISWorld
3.2 Key industry drivers
3.2.1 Ageing population
New Zealand’s ageing population and increasing levels of dependency are key drivers of demand for both
aged care and retirement villages services. As shown in Figure 4, it is estimated that the New Zealand
population aged 75+ years will grow at 3.3% per annum over the next 28 years, increasing from 332,000
to 833,000 by 2048. The growth rate is expected to slow after 2043 and increase again in 2063.
4
Figure 4: Population aged 75+ years
Source: Statistics New Zealand
4
Statistics New Zealand
0
200
400
600
800
1,000
1,200
1,400
207320682063205820532048204320382033202820232020
Population (000)
75-79 years80-84 years85 years and over
~$6k EBITDA/resident
~$10k EBITDA/resident
~$4.8k EBITDA/resident
13%
Speacialist dementia care
3%
Psychogeriatric care
46%
Rest home care
39%
Long term hospital care
calibrepartners.co.nz page 11
People aged 75+ years currently represent 7% of New Zealand’s population and this is expected to
increase to 14% by 2048.
In combination with the ageing demographic, life expectancy and the number of years dependency has
increased. Demand for age-appropriate accommodation is anticipated to increase due to forecast growth
in both the absolute and relative number of elderly people in New Zealand, particularly in the cohort aged
85 and over. As people age, they become more susceptible to a range of age-related and degenerative
conditions, which results in the need for ongoing assistance with their everyday activities and personal
care.
5
Compared to previous generations, elderly people moving into full-care residential facilities are
older and have more complex needs.
3.2.2 Regulation and Government funding
Aged care residential services
Government funding plays a significant role in the aged care services sector.
Residential aged care facilities are required to be certified by the MoH under the Health and Disability
Services (Safety) Act 2001. Aged care is provided by the District Health Boards (DHBs), which receive
funding from the government under the Residential Care and Disability Support Services Act 2018
6
. DHBs
have a contract in place with certified aged care providers, in the form of the MoH’s national age-related
residential care contract (ARRC Contract) to provide residential care to eligible residents. Funding under
the ARRC contracts is set each year following a national review.
Care beds are funded by the government or can be privately funded through resident contributions.
Approximately two thirds of residential aged-care residents receive a means-tested partial or full subsidy
through funding from DHBs
7
.
Over the next five years, the incidence of complex and chronic conditions among the elderly is anticipated
to increase, contributing to rising demand for aged care services and government funding. In particular,
rates of dementia are expected to continue rising
4
.
Retirement villages
Retirement villages make up a smaller proportion of Radius’s portfolio. Retirement village operators must
comply with the Retirement Villages Act and appoint a statutory supervisor to protect the financial
interests of the residents. Units in retirement villages are privately funded with incoming residents
acquiring the right to occupy a unit under an Occupational Rights Agreement (ORA). Retirement village
operators typical earn revenue through Deferred Management Fees (DMF), movements in the fair value of
investment property and weekly service fees
8
.
Retirement village operators generally price their units with reference to prevailing house prices in the
area surrounding a village. Under the ORA ownership model, operators will generally capture capital gains
for the units if house prices in the area appreciate in value.
Over the last 10 years, New Zealand residential property prices have experienced strong growth. The
Housing Price Index (HPI), which is a measure of property values in New Zealand, increased by 141% over
this period. In absolute terms, New Zealand’s median house price increased from $354,000 to $880,000
between January 2012 and January 2022.
5
Aged Care Residential Services in New Zealand report by IBISWorld, May 2021
6
Total government expenditure on aged care services report by IBISWorld, September 2021
7
Aged Care Residential Services in New Zealand report by IBISWorld, May 2021
8
Radius Residential Care Limited NZX listing profile, December 2020.
calibrepartners.co.nz page 12
Prior to 2022, the growth in house prices has been driven by a combination of:
• Natural population growth and strong net migration;
• The construction of new homes historically lagging demand for housing; and
• A historically low interest rate environment since 2008/2009.
The above factors have historically provided a highly supportive environment for house price appreciation.
Since late 2021 however, many economists have signalled the expectation of a tightening real estate
market in the near to medium term.
calibrepartners.co.nz page 13
4. Radius overview
4.1 Background and history
Established in 2003, Radius is a New Zealand owned and operated company providing specialist and aged
care services with a portfolio of 23 aged care facilities, comprising more than 1,700 beds and
approximately 1,700 employees. It also owns three retirement villages with a total of 101 units. Radius is
headquartered in Auckland.
While Radius provides some low acuity rest home level care, its aged care offering is focussed on the high
acuity and specialist care segment of the market (being hospital, dementia, psychogeriatric, physical and
intellectual care). The high acuity and specialist care segments have the strongest expected demand
growth, the highest care bed EBITDA margins, as well as strong barriers to entry
9
.
Radius was brought into New Zealand ownership in 2010. The current Executive Chairman, Brien Cree led
a management buyout of the company in early 2010.
On 10 December 2020, Radius Care listed its 176 million ordinary shares on NZX at $0.80 each (implying
a market capitalisation of $141 million). All shares were fully subscribed by existing owners, staff and
others.
A timeline of key events since Radius’s listing is shown in Figure 5 below.
Figure 5: Timeline of key events
Source: NZX announcements
9
Aged Care Residential Services in New Zealand report by IBISWorld, May 2021
December 2020 Radius is listed on the NZX. 176 million shares issued at a share
price of $0.80 per share.
April 2021 Radius exercised its right to acquire development land in
Christchurch. Resource consent was granted to build a facility
totalling 70 care beds, 30 care suites and 94 retirement village
units.
July 2021 Radius announces a fully subscribed $30 million placement at
$0.52 per share. Proceeds to be used to fund the cash component
of the $31.4 million acquisition of four strategically important sites
(the Ohaupo acquisition). Shares worth $10 million issued to
Ohaupo as part payment for the properties.
August 2021 Oversubscribed retail offer raises $8.2 million. Shares issued at
$0.52 per share.
October 2021 Radius announce the acquisition of Clare House for $14.5m, being a
3% discount to the independent valuation prepared by Colliers.
March 2022 Radius announces the UCG Transaction.
calibrepartners.co.nz page 14
4.2 Operations
Radius operates a nationwide portfolio of aged care facilities with a focus on key urban and regional
centres. It also operates three retirement villages in Waikato, Timaru and Invercargill.
The geographic distribution of Radius’s aged care facilities is shown in Figure 6
Figure 6: Radius geographic coverage
Source: Radius Residential Care Limited
AUCKLAND
Leased 2
Sites
188
Beds
-
ILUs
188
Total
Owned 1 60 - 60
WAIKATO
Leased 3
Sites
258
Beds
-
ILUs
258
Total
Owned 1 76 22 98
NEW PLYMOUTH
Owned 2
Sites
118
Beds
-
ILUs
118
Total
OTAGO
Leased 1
Sites
93
Beds
-
ILUs
93
Total
PALMERSTON NORTH
Leased 1
Sites
62
Beds
-
ILUs
62
Total
NAPIER
Leased 1
Sites
45
Beds
-
ILUs
45
Total
NORTHLAND
Leased 3
Sites
155
Beds
-
ILUs
155
Total
INVERCARGILL
Owned 1
Sites
69
Beds
25
ILUs
94
Total
CANTERBURY
Leased 2
Sites
193
Beds
-
ILUs
193
Total
Owned 2 138 54 192
BAY OF PLENTY
Leased 2
Sites
266
Beds
-
ILUs
266
Total
Owned 1 63 - 63
Denotes leasehold sites
Denotes leasehold sites
calibrepartners.co.nz page 15
4.3 Share ownership
Radius has a total of 269,243,089 shares on issue. As at 28 March 2022, the top 20 shareholders
accounted for 75.7% of the ordinary shares on issue.
Table 1: Share Register as at 28 March 2022
Shareholder Shares Percentage
1 Wave Rider Holdings Limited 95,312,500 35.40%
2 Neil John Foster 15,595,040 5.79%
3
Aaron Snodgrass & Brian Maltby & Simon Curran & Frances Valintine & Peter
Alexander & Jonathan Mason
10,866,430 4.04%
4 Forsyth Barr Custodians Limited 6,671,364 2.48%
5 Perpetual Corporate Trust Limited (Act Private Equity No 3 Fund) 5,994,760 2.23%
6 Perpetual Corporate Trust Limited (Roc Alternative Investment A/C VI) 5,994,760 2.23%
7 Perpetual Corporate Trust Limited (Roc Asia Pacific Co Investment Fund II) 5,994,760 2.23%
8 BNP Paribas Nominees (NZ) Limited 5,603,493 2.08%
9 Accident Compensation Corporation 5,097,500 1.89%
10 Glenn Raymond Miller 4,807,692 1.79%
11 Trevor Maxwell Jones 4,807,692 1.79%
12 Leveraged Equities Finance Limited 4,735,630 1.76%
13 New Zealand Depository Nominee Limited 4,708,162 1.75%
14 FNZ Custodians Limited 4,691,726 1.74%
15 Takatimu Investments Limited 4,617,783 1.72%
16 Central Lakes Direct Limited 4,434,102 1.65%
17 Quintin Louis Proctor 4,326,924 1.61%
18 HSBC Nominees (New Zealand) Limited 3,761,196 1.40%
19 Andrew John Clark 3,066,502 1.14%
20 Custodial Services Limited 2,632,023 0.98%
Top 20 shareholders 203,720,039 75.66%
Remaining shareholders 65,523,050 24.34%
Total 269,243,089 100.00%
Source: Computershare data, which looks through shares held by New Zealand Central Securities Depository as a bare
trustee custodian
The majority shareholder is Wave Rider Holdings Limited with 35.4% shareholding. Brien Cree has the
power to control the exercise of the rights attaching to the shares held by Wave Rider Holdings Limited.
Other than Wave Rider, the shares are widely held by institutional and retail investors.
calibrepartners.co.nz page 16
4.4 Share price performance
Figure 7 presents the prices and volume of the shares traded in Radius since 20 December 2020 (listed
on 10 December 2020).
Figure 7: Share Price and volume traded on NZX Main Board
Following the listing, Radius’s share price initially rose to $1.09, however between January 2021 and early
July 2021 it gradually declined to $0.89 per share. This was largely attributed to the uncertainty
surrounding the COVID-19 pandemic. The share prices of competing aged healthcare services companies
recorded a similar decline over the period.
On 9
July 2021, Radius announced an equity capital raise of $40 million, issuing new shares at $0.52 per
share. The funds were used to purchase land and buildings of four sites from Ohaupo Holdings Limited
(Ohaupo) and to pay down existing debt. Shares worth $30 million were issued to institutional
shareholders, high net worth investors and retail investors, the remaining $10 million dollars’ worth of
shares were issued to Ohaupo as partial consideration for the property acquisition.
Since July 2021, the share price has declined further to $0.38 per share immediately prior the UCG
transaction announcement.
0
1000
2000
3000
4000
5000
6000
7000
8000
0.00
0.20
0.40
0.60
0.80
1.00
1.20
DJFMAMJJASONDJFM
FY21FY22
Monthly volume ('000)
Share price($)
Monthly volumeShare price
FY 21 Full Year Results
Announced
Placement of $30 milion new shares to
institutional and other investors and
$10 million to Ohaupo Holdings Ltd at
$0.52 per share
FY22 Interim Results
Announced
UCG Transaction
Announced
calibrepartners.co.nz page 17
5. Financial overview
5.1 Financial performance
Table 2 summarises Radius’s earnings for the years ending 31 March 2018 to 2021 and the interim
period ending 30 September 2021. The financial statements below are based on Radius’s management
accounts, with a reconciliation to the audited statutory accounts. The financials exclude abnormal/non-
recurring amounts.
Table 2: Profit and loss summary ($000)
FY18
Actual
FY19
Actual
FY20
Actual
FY21
Actual
H1FY22
Actual
Residential Care Fee Income 99,085 108,095 113,359 121,217 64,458
Deferred Management Fees 400 573 671 1,081 449
Total operating income 99,485 108,668 114,030 122,298 64,907
Employee Costs (58,361) (64,683) (70,852) (73,479) (39,292)
Facility Expenses (24,425) (26,553) (27,152) (27,882) (21,105)
10
Overhead Expenses (8,768) (9,251) (10,148) (12,570)
EBITDA 7,931 8,181 5,878 8,368 4,510
Depreciation and amortisation (2,962) (3,583) (3,700) (4,263) (2,200)
Earnings before Fair Value Movements 4,969 4,598 2,178 4,106 2,310
Net Interest Expense (543) (805) (1,134) (812) (389)
Fair Value Movement of Investment properties 684 1,442 (649) 2,879 (65)
Underlying Profit 5,110 5,235 395 6,172 1,856
Tax Expense (1,336) (1,052) 500 (324) (328)
Net Profit/(Loss) 3,775 4,183 895 5,848 1,528
One-off adjustments
Add: Government Subsidy
353 794 -
Less: Share Based Payments
- (1,664) -
Add: Gain on acquisition of leased property assets
- - 1,403
Net IFRS 16 Adjustments
(4,081) (3,274) (1,597)
Per audited statutory accounts
(2,833) 1,704 1,334
Source: S&P Capital IQ and Radius management accounts
The management accounts do not reflect certain NZ IAS and NZ IFRS adjustments. Most notably the
impact of NZ IFRS 16 Leases (NZ IFRS 16) is not shown in the management accounts. Radius uses certain
non-GAAP measures such as ‘Underlying Profit’, which are discussed in Section 6.6. A reconciliation to the
net profit after tax per the audited financial statements is included in the table above.
Revenue
Radius principally derives its revenue from residential care and related services. Rest home, hospital and
service fee charges are governed by the individual care admission agreement with each resident. The
resident incurs a daily charge fee stipulated in the agreement and is set by the Government each year.
The majority (approximately 64%) of Radius’s revenue is Government funded revenue provided under the
ARRC Contracts. Government aged care subsidies received from the MoH, and included in care fees and
village services, amounted to $78.0 million in FY21 (FY20: $72.5 million). Radius is focussed on increasing
the proportion of revenues derived from non-Government sources, particularly increasing resident
10
Facility Expenses include other overhead expenses in H1FY22.
calibrepartners.co.nz page 18
adoption of privately funded accommodation supplements and increasing retirement village revenues.
The proportion of government funded revenue as percentage of total revenue has decreased from 65.8%
in FY20 to 63.8% in FY21.
Residential care fee income increased from $99 million to $121 million between FY18 and FY21,
representing a compound annual growth rate of 6.9%. Growth over this period is as a result of improved
occupancy, more specialised bed offerings and additional accommodation supplements.
Deferred Management Fees (DMF) are related to the Occupation Right Agreements (ORA) for the
retirement units. DMF is only received when residents exit their units. The accounting for DMF is sensitive
to the expected turnover of residents, because DMF is recognised on a straight-line (accrual) basis over the
expected occupancy period for residents.
Operating expenses
Employee costs account for the largest proportion of total expenses incurred by Radius. It increased from
$58.4 million (58.7% of revenue) in FY18 to $73.5 million (60.1% of revenue) in FY21. The primary reasons
for the higher employee costs as a proportion of revenue are wage inflation (increased further due to
border related supply constraints), hiring more people into senior management roles ahead of the NZX
listing and expansion of Radius’s village and residential care operations requiring more support staff.
Radius also incurred additional Covid-19 related costs during FY20 and FY21 for protective equipment,
additional sick leave and isolation leave and other health and safety expenses related to Covid-19.
Facility expenses relate to the amount spent on maintenance and upkeep of facilities. Other overhead
expenses include general admin, information technology, professional services etc. Between FY18 and
FY21 these combined costs have increased in absolute terms, however at a slower rate compared to
revenue. In line with its communications at the time of listing, management has focussed on maximising
cost efficiencies where possible.
calibrepartners.co.nz page 19
5.2 Financial position
Table 3 shows Radius’s financial position as at 31 March for the years ending 2018 to 2021 and as at 30
Sep 2021 based on management accounts and audited financial statements.
Table 3: Historical Financial Position ($000)
11
Mar 18 Mar 19 Mar 20 Mar 21 Sep 21
Cash 1,768 4,236 2,317 2,761 6,741
Trade receivables 7,406 6,549 7,648 7,744 10,502
Inventory 181 168 308 548 629
Property, plant and equipment 17,836 18,886 32,303 32,896 64,247
Investment properties 20,058 23,727 27,831 31,675 31,773
Right-of-use assets – – 181,431 177,170 137,038
Intangible assets 16,996 16,996 16,996 16,996 16,996
Other assets 2,479 2,776 2,006 3,635 3,636
Total assets 66,724 73,338 270,840 273,425 271,562
Trade and other payables 11,697 13,245 14,086 14,911 15,230
Refundable ORA 11,532 15,531 17,518 20,591 21,534
Loans - Bank 22,285 20,465 31,427 27,212 18,712
Lease liabilities – – 185,304 184,305 144,366
Shareholder loans 5,067 5,070 – – –
Other liabilities 1,433 1,159 1,685 2,313 1,596
Total liabilities 52,014 55,470 250,020 249,332 201,438
Net assets 14,710 17,868 20,820 24,093 70,124
Source: S&P Capital IQ and audited financial statements
Property, plant and equipment and Investment properties are significant assets on Radius’s balance sheet.
Property, plant and equipment (PP&E) includes acquired land and buildings and furniture, fixtures and
fittings. The significant increase in the PP&E balance in recent years has been driven by Radius’s growth
strategy. PP&E increased from $32.9 million in March 2021 to $64.3 million in September 2021 following
the Ohaupo acquisition in July 2021 for $31.4 million.
Investment properties include completed freehold land and buildings, freehold development land, and
buildings under development. This consists of independent living units and common facilities, provided for
use by residents under the terms of an ORA. Investment properties are valued on an annual basis by CBRE
Limited (CBRE).
Historically Radius has funded its acquisitions and development through mix of debt and equity. It targets
a debt-to-equity ratio of approximately 30%.
The refundable ORA’s are repayable when the resident vacates the unit or upon the termination of the
ORA and subsequent resale of the unit. The amount repayable has increased over the years with
development of new units and subsequent sales.
The increase in the net assets between March and September 2021 is due to a $35 million capital raise
used to partially fund the Ohaupo acquisition and pay down debt. A further $10 million worth of shares
were issued as part payment for the Ohaupo properties.
11
The presented financial position statement includes the impact of NZ IFRS 16
calibrepartners.co.nz page 20
5.3 Capital expenditure
Radius’s historical capital expenditure is summarised in Table 4. Radius incurs capital expenditure on asset
replacements, land and building acquisitions and development of retirement villages. Radius has a strong
pipeline of greenfield and brownfield developments.
Table 4: Capital expenditure ($000)
FY17 FY18 FY19 FY20 FY21
Total capital expenditure 8,803 6,015 6,929 15,028 4,542
Total capital expenditure (capex) includes maintenance capex as well as development capex. Maintenance
capex (which is used in the available funds from operations calculation) is in the region of $4 million per
annum. No incremental maintenance capex is expected from the UCG Transaction (excluding future
developments).
Radius expects to add an additional 124 care beds and 42 independent living units through brownfield
development pipeline (excluding the UCG Transaction).
5.4 Dividends
Radius’s dividend policy is to target a pay-out ratio of 50% to 70% of a full financial year available funds
from operations (AFFO) with an interim dividend to be paid in December and a final dividend to be paid in
June of each year.
Radius declared a fully imputed interim dividend of $0.70 per share for H1FY22 up 20% on prior
comparative period. This was paid to shareholders on 23 December 2021.
Radius’s interim and final dividend for FY21 and FY22 are shown below. All dividends have been fully
imputed.
Financial Year Interim Div. Final Div.
FY22 0.70
FY21 0.58 0.89
calibrepartners.co.nz page 21
6. Evaluation of the UCG transaction
6.1 Bases of evaluation
NZX Listing Rule 7.10.2 requires an Appraisal Report to consider whether the terms and conditions of the
UCG transaction is fair to the Non-associated Shareholders.
As there is no legal definition for the term ‘fair’ in the NZX Listing Rules or in any New Zealand statute
dealing with securities or commercial law, we consider the UCG transaction is fair to Non-associated
Shareholders if:
• The price paid for the UCG properties is reasonable; and
• The terms and conditions of the proposed agreement with WSL to lease the facilities of Radius
Kensington, and the option to acquire the property, are fair.
We have evaluated the fairness of the UCG transaction by reference to:
• The rationale for the UCG transaction.
• The consideration paid for the UCG acquisition properties.
• The terms and conditions of the UCG acquisition.
• The terms and conditions of the Radius Kensington lease and option agreement with WSL.
• The impact of the UCG transaction on Radius’s performance and financial position.
• The implications of the resolution not being approved.
• Other factors that we consider relevant to shareholders.
We set out each of these issues below.
6.2 Rationale for the UCG transaction
Part of Radius’s stated growth strategy is to:
• Purchase strategically important facilities already operated (but not owned) by Radius, providing
greater control to undertake value enhancing activities; and
• Leverage its brownfield development capabilities to undertake value accretive facility extensions and
reconfigurations.
Radius purchases properties in the following instances:
• There is a clear development opportunity which may be currently constrained by the landlord;
• The landlord has the financial capacity to fund development however the rental increase is not
attractive;
• It provides an enhanced legal position through direct ownership, allowing the ORA product to be
offered;
• It gives Radius greater control over larger capital items; and/or
• There is a financial benefit if the cost of debt funding is lower than the annual rent charge.
calibrepartners.co.nz page 22
Radius has already started executing on this strategy with the development of Glaisdale and Windsor
Court and the acquisition of Thornleigh Park, Lexham Park and four Ohaupo properties prior to 2022. The
UCG Acquisition will increase Radius’s owned portfolio by 342 beds, as well as:
• Acquire nearly one third of its remaining legacy leasehold properties which may not become available
for sale again for several years. If successful, following the UCG Transaction, Radius will own 12 of its 23
aged care residential facilities and an option to acquire another;
• Increase Radius’s development pipeline. With the exception of Radius Kensington, there is vacant land
at each of the sites, presenting future development and growth opportunities;
• While Radius Kensington is not being acquired by Radius it is part of the portfolio of UCG properties
offered for sale. The terms of the UCG offer is that the portfolio of properties is sold. Either all five
properties are sold to Radius and WSL, or none. Therefore, the WSL Nomination to acquire the
property is key to securing the remaining four UCG properties;
• The UCG Acquisition and Kensington properties are individually profitable sites and Radius has
historically been responsible for repairs and maintenance and minor capital improvements. The
properties have therefore been maintained to a high standard and no incremental maintenance or
operational costs are anticipated with ownership of the facilities; and
• Radius will continue to lease the Radius Kensington facilities with the option to acquire it in the future.
6.3 Consideration paid for the UCG Acquisition properties
The purchase price for the UCG Acquisition is based on independent valuations performed by Colliers for
each of the properties. The valuations were carried out between November 2021 and January 2022. UCG
instructed Colliers to prepare the valuations for Westpac New Zealand Limited for first mortgage purposes.
Colliers does not disclose any potential conflicts of interest it may have by acting on UCG’s instructions.
We are not specialist property valuers however we have reviewed the valuation reports and note the
following:
Definition of value
The valuer’s definition of value is market value which it defines as follows:
“Market value is the estimated amount for which an asset or liability should be exchanged on the
valuation date between a willing buyer and a willing seller in an arm’s-length transaction, after
proper marketing and where the parties had each acted knowledgeably, prudently and without
compulsion”.
This definition is broadly similar to other definitions of value premised on independent market
participants, not acting under compulsion or duress, but acting in their economic best interests when
pricing an asset.
Qualifications and experience
The valuer confirms that the valuations have been undertaken in accordance with the requirements of the
International Valuation Standards (effective 31 January 2020) and the Australia and New Zealand
Valuation and Property Standards and Guidance Papers for Valuers & Professionals. The signatory to the
reports is stated as being experienced in the location and category of the properties valued.
Methodology
The properties have been valued as investment properties with leases in place rather than a freehold
going concern. As a primary valuation methodology, Colliers has adopted a ‘direct capitalisation of passing
income’ approach as its primary valuation approach. To do this it capitalises an assumed market rental for
the subject property by a market yield (or capitalisation rate).
calibrepartners.co.nz page 23
The current rental of each property is compared to the rental observed for other aged care facilities to
establish whether it is reflective of a market rental and can be used in the valuation. In all instances the
current rental paid by Radius is deemed to be consistent with a market rent, albeit the range observed is
wide.
The yield (or capitalisation rate) at which the rental payment is capitalised is based on the yield observed
across a number of comparable transactions of aged care facilities. Generally, the sales reflect a broad
range of implied yields, which reflects the specifics of each transaction such as the value of the underlying
land, the physical characteristic of the buildings, rent relative to market, length of the lease in place etc.
Colliers considers the transaction evidence, the characteristics of the subject property and applies
professional judgement and experience in its conclusion on the capitalisation rate it applies.
Market risk
Colliers highlights the increased latent risk across all asset classes and property sectors due to COVID-19.
The risk relates to how the future will play out over the coming weeks, months and years. As such, it
considers this is a variable that cannot be explicitly priced. Colliers notes its market value is determined as
at valuation date and is based on events and circumstances up to that date and reflects sentiment at that
point in time. The valuations were performed between November 2021 and January 2022.
6.4 Terms and conditions of the UCG Acquisition
In total, the UCG Acquisition consideration is $46.675 million. Initially the purchase price will be 100%
debt funded using the following existing and new facilities provided by ASB.
• New ASB loan facility: $23.675 million with a term of up to five years.
• Existing development facility: $15 million will be repurposed to fund the UCG Acquisition for five
months.
• Bridging facility: $8 million with a term of five months.
Radius intends to raise approximately $23 million in equity capital to pay down the existing development
and bridging facilities within 5 months of acquiring the properties. The decision to delay a public capital
raise was due to the recent volatility in equity markets.
6.5 Terms and conditions of Radius Kensington lease and option agreement
with WSL
As part of the Kensington Acquisition and WSL Nomination, Radius and WSL will enter into a variation of
the lease on the following terms:
• The current lease term expires in May 2024. Radius will exercise its right to extend the term of the
lease to 22 May 2034 and WSL will grant Radius a further 10-year right of renewal, extending the final
expiry date to 22 May 2044.
• The annual lease payment will be revised from $912,605 to $1,000,215. The current lease payment to
UCG is based on the last rental renewal, the increase under the WSL agreement is effectively resetting
the lease payment in line with CPI increases since the last rent review.
• The lease payments will be adjusted annually for inflation.
• Radius will assume responsibility for all building related costs and maintenance of Radius Kensington.
• WSL will grant Radius an option to acquire Radius Kensington at any time between 24 May 2022 and
the final expiry of the lease. The purchase price will be determined based on a yield of 6.25%
calculated on the rent at the time the option is exercised.
• The yield of 6.25% is the yield used by Colliers in its independent valuation of the Radius Kensington
property and derived on the same basis described in Section 6.3.
calibrepartners.co.nz page 24
6.6 Impact of the UCG Transaction on Radius’s financial statements
Reporting measures
The impact of the UCG Transaction on the financial performance and position is based on the impact it will
have on EBITDA, Underlying Profit and AFFO which are non-GAAP financial measures.
Underlying Profit and AFFO do not have a standardised meaning prescribed by NZ GAAP. Radius uses
Underlying Profit and AFFO, with other measures, to monitor financial performance and for determining
dividends. Radius uses these measures consistently across reporting periods, and management believes
these non-GAAP financial measures provide stakeholders with additional helpful information on the
performance of the business. The non-GAAP measures are consistent with how the business performance
is planned and reported within internal management reporting.
Underlying Profit is a measure that excludes the impact of NZ IFRS 16. It reflects the actual lease rental
expense rather than the NZ IFRS 16 equivalent, which instead includes depreciation on the right of use
asset and interest expense on the lease liabilities.
AFFO is calculated from Underlying Profit and is adjusted to exclude depreciation and amortisation and
include (i.e. deduct) maintenance capital expenditure.
We have described the outcome of our analysis below. Our analysis was performed on the FY22 results (11
months actual plus one-month budget) and board approved FY23 budget. We are unable to include our
analysis showing the FY22 and FY23 numbers as these are not publicly available (Radius expects to
announce its FY22 results by 30 May 2022). We have therefore presented our analysis describing the
incremental effect on earnings and cash flows.
Impact on financial performance (excluding NZ IFRS 16)
Based on the current rental expense and anticipated inflation adjustments, the acquisition of the UCG
properties will provide an incremental $2.8 million to FY23 EBITDA (excluding the impact of NZ IFRS 16).
This is net of the annual increase in the Radius Kensington lease.
The transaction will result in additional depreciation and interest charges of $0.6 million and $1.1 million,
respectively in FY23. The interest charge assumes a capital raise is successful in, or around, July 2022.
Following the expected paydown of debt, the interest charge related to the UCG Transaction will decrease
to $0.94 million in FY24. The equity capital raise will incur transaction costs, estimated in our analysis to be
in the region of $1.2 million.
The cumulative rental saving over a five-year period, including inflation adjustments, is $13.8 million (net
of the Radius Kensington lease impact), in comparison to the cumulative cost of debt across the same
period being $5.7 million (including establishment fees) and $1.2 million capital raise transaction costs.
The per share impact has not been included as the terms of the future capital raise are not yet known,
however it will increase the number of shares on issue and create a dilutive impact on the per share
measures.
Impact on AFFO and dividends
Radius targets a dividend pay-out ratio of 50% to 70% of the full financial year AFFO. The impact on AFFO
is expected to be accretive, in line with the increase in EBITDA, however adjusted for higher associated
depreciation and interest costs.
Radius bears the cost of maintenance capex at its facilities regardless of whether they are leased or owned.
Therefore, no incremental maintenance capex is expected as a consequence of the UCG Transaction.
calibrepartners.co.nz page 25
The net impact of the incremental cash flows related to the UCG Transaction is positive over a five-year
period, as shown in figure 7. Note this does not factor in the potential acquisition of Radius Kensington,
the proposed capital raise of repayment of the ASB facility ($23.675 million) at the end of either three or
five years.
Impact on Radius’s financial position of the proposed transaction
The UCG transaction (and future proposed capital raise) will increase Radius’s total assets, debt and equity.
Our analysis of the impact on Radius’s financial position is based on the balance sheet as at 28 February
2022. We have used this as a proxy for the financial position at the time the transaction concludes on 29
April 2022.
The equity ratio, measured as the ‘book value of total shareholders’ funds’ divided by ‘total assets’, remains
above the minimum of 30% as required by the ASB covenants for the period prior to the capital raise, and
is greater than the minimum 40% required by ASB following the proposed capital raise.
We consider the definition of value adopted by Colliers to be broadly consistent with other definitions of
value premised on market participants acting in their economic best interests. Colliers are professional
property valuers with the necessary skill and experience to value the subject properties.
(2,0 00)
0
2,00 0
4,00 0
FY23FY24FY25FY26FY27
Figure 7: Incremental cash flow
Ren tal savingInterest exp en seNet of cap raise an d d eb t paydownNet inc remen tal cash flow
calibrepartners.co.nz page 26
Summary of the impact on Radius’ financial performance
The Radius Kensington lease agreement will increase by approximately $87,000 per annum at the time
of the transaction. This is to reset the lease terms in line with inflationary increases since the last rent
review. The remaining terms of the lease agreement with WSL are substantially consistent with the
terms of the original UCG lease agreement and considered representative of a market related
commercial agreement.
The yield at which Radius can acquire the Radius Kensington property is fixed and based on current
market yields for comparable properties. As Radius has the option to acquire the property at its
discretion, should 6.25% become unfavourable relative to market yields in the future Radius need not
exercise its option and can continue leasing the property. The option provides future flexibility to Radius.
The UCG Transaction will be accretive to both EBITDA and AFFO (excluding the impact of NZ IFRS 16)
and provides positive incremental net operating cash flows over the next five years.
6.7 Implications of the resolution not being approved
If Radius shareholders vote to reject the UCG Transaction, then none of the UCG Acquisition, the WSL
Nomination or Kensington Acquisition will be executed. If the properties are not acquired by Radius, UCG
may market the properties for sale more broadly and they may be acquired by a new landlord. These
properties may not become available for sale again for several years.
6.8 Other factors relevant to shareholders
Other factors the shareholders may consider in making their decision include:
Benefits
• The UCG Transaction is in line with the company’s stated strategy and provides future development
opportunities.
• The current cost of debt to fund the acquisition is lower than the rental yield on the properties.
• Reduce operating cash flow risk and volatility by removing a fixed cost from the cost base.
Risks
• The UCG Transaction will initially be fully debt funded, and partially debt funded for either three or five
years. The introduction of debt increases the financial leverage of the business. While the credit
margin is fixed, the base rate is floating and exposes Radius to interest rate risk.
• Radius plans to raise equity capital of approximately $23 million within the next 5 months. Equity
markets are inherently uncertain and can be volatile for a prolonged period of time. This may influence
amount that can be raised through a capital raise and / or the number of shares that need to be issued
to raise $23 million. A capital raise will have a dilutive effect on existing shareholders to the extent they
do not participate in the event in proportion to their existing shareholding.
• There are likely to be incremental costs of ownership, for example expenditure on large capital items
which Radius currently does not pay for as a tenant.
calibrepartners.co.nz page 27
Appendix 1: Sources of information
Documents relied upon
Key information sources we have used and relied on, without independent verification, in preparing this
Report include the following:
• Radius Residential Care Limited NZX listing profile dated 10 December 2020.
• Radius Residential Care Limited, 2021 Annual Report.
• Radius Residential Care Limited, 2022 Interim Financial Statements.
• Radius Residential Care Limited, 2021 and 2022 Interim Results Presentations.
• Radius Care UCG Investments Limited Properties purchase & development paper dated 23 March
2022.
• Five-year forecast model prepared by Radius management.
• Management reconciliation of management accounts to statutory financial statements.
• Signed Deed of nomination for Radius Kensington.
• Radius Care ASB term sheet.
• Colliers valuation report, Radius Peppertree, 17 November 2021.
• Colliers valuation report, Radius Arran Court, 6 January 2022.
• Colliers valuation report, Radius Fulton, 24 January 2022.
• Colliers valuation report, Radius St Joans, 5 January 2022.
• Lease agreements for Arran Court, Fulton, Peppertree, St Joans and Kensington.
• Aged Care Residential Services in New Zealand report by IBISWorld, May 2021.
• Total government expenditure on aged care services report by IBISWorld, September 2021.
• Statistics New Zealand.
• Reserve Bank of New Zealand website.
• S & P Capital IQ.
• NZX Announcements.
• Other publicly available information.
We have also had discussions with Radius’s management in relation to the nature of Radius’s business
operations, the known risks and opportunities for the company in the foreseeable future, and the
UCG Transaction.
In our opinion, the information contained in this Report, together with the information set out in the
Notice of Meeting circulated to shareholders with this Report, is sufficient to enable the Non-associated
Shareholders to make an informed decision with respect to the subject matter of the UCG Transaction.
In accordance with NZX Listing Rule 7.10.2(f), all material assumptions on which our appraisal opinion is
based are contained in this Report. The key material assumption we made when preparing this
independent appraisal report is what will occur if shareholders reject the UCG Transaction. We refer to
Sections 1.2 and 6.7 of this Report.
calibrepartners.co.nz page 28
Reliance upon information
In forming our opinion, we have relied upon and assumed, without independent verification, the accuracy
and completeness of all information that was available from public sources and all information that was
furnished to us by Radius and its advisers. We have no reason to believe any material facts have been
withheld and we believe that we have been provided with or obtained all information needed to prepare
this Report.
We have evaluated that information through analysis, enquiry and examination for the purposes of
forming our opinion, but we have not verified the accuracy or completeness of any such information.
We have not carried out any form of due diligence or audit on the accounting or other records of Radius.
We do not warrant that our enquiries would reveal any matter that an audit, due diligence review or
extensive examination might disclose.
calibrepartners.co.nz page 29
Appendix 2: Qualifications and declarations
Qualifications
Calibre Partners is an independent New Zealand Chartered Accounting practice. The firm has established
its reputation nationally through the provision of professional financial consultancy services with a
corporate advisory and insolvency emphasis, and because we have no audit or tax divisions, we avoid
potential conflicts of interest that may otherwise arise. This allows Calibre Partners to regularly act as an
independent adviser and prepare independent reports.
The persons responsible for preparing and issuing this Report are Grant Graham (BCom, CA),
Shaun Hayward (BCom, BProp, CFA) and Gillian Andrews (BCom, BSc, CA(SA)). All have significant
experience in providing corporate finance advice on mergers, acquisitions and divestments, advising on
the value of shares and undertaking financial investigations.
Disclaimers
This Report should not be used or relied upon for any purpose other than as an expression of
Calibre Partners’ opinion as to merits of the proposed transaction. Calibre Partners expressly disclaims any
liability to any Radius shareholder that relies, or purports to rely, on this Report for any other purpose and
to any other party who relies, or purports to rely, on the Report for any purpose.
This Report has been prepared by Calibre Partners with care and diligence, and the statements and
opinions given by Calibre Partners in this Report are given in good faith and in the belief, on reasonable
grounds, that such statements and opinions are correct and not misleading. However, no responsibility is
accepted by Calibre Partners or any of its officers or employees for errors or omissions however arising
(including as a result of negligence) in the preparation of the Report, provided that this shall not absolve
Calibre Partners from liability arising from an opinion expressed recklessly or in bad faith.
Indemnity
Radius has agreed that, to the extent permitted by law, it will indemnify Calibre Partners and its partners,
employees and officers in respect of any liability suffered or incurred as a result of, or in connection with,
the preparation of the Report. This indemnity does not apply in respect of any negligence, misconduct or
breach of law. Radius has also agreed to indemnify Calibre Partners and its partners, employees and
officers for time incurred and any costs in relation to any inquiry or proceeding initiated by any person,
except where Calibre Partners or its partners, employees and officers are guilty of negligence, misconduct
or breach of law, in which case Calibre Partners shall reimburse such costs.
Independence
Calibre Partners and the persons responsible for the preparation of this Report do not have at the date of
this Report, and have not had, any shareholding in, or other relationship, or conflict of interest with Radius
that could affect their ability to provide an unbiased opinion in relation to this transaction. Calibre Partners
will receive a fee for the preparation of this Report. This fee is not contingent on the success or
implementation of the proposed transaction or any transaction complementary to it.
Calibre Partners and the persons responsible for the preparation of this Report have no direct or indirect
pecuniary interest or other interest in this transaction. We note for completeness that a draft of this
Report was provided to Radius and its advisers, solely for the purpose of verifying the factual matters
contained in this Report. While minor changes were made to the drafting, no material alteration to any
part of the substance of this Report, including the methodology or conclusions, were made as a result of
issuing the draft.
Consent
Calibre Partners consents to the issuing of the Report, in the form and context in which it is included, in
the information to be sent to Radius shareholders. Neither the whole nor any part of the Report, nor any
reference thereto, may be included in any other document without the prior written consent of Calibre
Partners as to the form and context in which it appears.
---
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