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Calan Disposes Of Non Yielding Assets

February 18, 2005

Calan Disposes Of Non Yielding Assets And Increases Distribution

Calan Healthcare Properties Trust completed the sale of two non revenue producing assets during the six months ended 31 December 2004. This freed up $11m in cash for future investment.

The Board increased the quarterly distribution to 2.15 cents with effect from the December 2004 quarter ( previously 2 cents a quarter ). This will bring the full year distribution to 30 June 2005 to 8.45 cents ( 8 cents last year ) and 8.6 cents over a full 12 month period.

The pre tax distribution of 2.15 cents per unit, for the December 2004 quarter, was announced to the market on 28 January 2005.

The net effect of the asset sales (as previously announced on completion of the sale of the Artemis Medical Centre) is a $1.9 million, one-off loss on sale, that reduced the net surplus after tax for the six months to $3.3 million. The Artemis Medical Centre was written down in prior financial years through the Revaluation Reserve and now with completion of the sale, the previous write-downs have been reversed and the net loss is reflected in the current Statement of Financial Performance. Without this adjustment the net surplus after tax was up 8.8% on the prior half year.

The sale of the non revenue producing assets did impact on the net surplus after tax but was a necessary part of achieving our goal of returning our property portfolio to a fully yielding one. The funds released by the asset sales will generate additional pre-tax earnings of more than $970,000 over the coming 12 months through interest cost savings on a reduced debt position.

As a result of the asset sales, rental income declined by 3% to $6.8 million. On a like with like basis rental income was up 1%.

Total assets increased to $212 million in the six months as a result of an increased spend on Epworth Eastern in conjunction with increased property revaluations.

Operating expenses were down 4.3% to $1.3 million on the same period last year. Tax expense has increased to $839,000 (up 30%) in line with a lower deduction for building depreciation.

In the past six months the Trust has made substantial progress in transitioning the portfolio to a low risk, medium return healthcare property fund comprised of properties involved in essential healthcare facilities with long leases and financially sound tenants.

Our new flagship investment, the NZ$50 million Epworth Eastern hospital complex in Melbourne, is now nearing completion and is expected to be completed in April 2005 with its doors scheduled to open for service in mid 2005. With the completion of Epworth Eastern the Trust’s weighted average lease term will increase from 9.53 years to 11.29 years.

Our focus in the second six months will be on:

Open Epworth Eastern, the Trust’s second flagship property, as a fully operational hospital Advancing the conversion of our two remaining non yielding assets, and Seeking acquisitions that add value to the portfolio.

Our expectation for the second six months of the current financial year is for an improved result against the comparable period last year. The Board remains confident that the pre tax distribution of 8.6 cents per annum per unit is sustainable.


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