Sale of Non-Core Equity Investment realises $7.2Mn

May 23, 2005

Chief Executive Update

Sale of Non-Core Equity Investment realises $7.2 million and increases earnings

In mid April we announced the unconditional sale of our equity investment in hospital operator The Ascot Hospital & Clinics Ltd for $7.2 million, $250,000 above book value.

The funds generated from the sale received on May 12 – have been used to reduce borrowings, increasing pre-tax earnings by more than $440,000 a year.

Our equity holding in Ascot Hospital & Clinics was a historical one dating back to the time the hospital was founded and it became a tenant of our Ascot Hospital property in Greenlane, Auckland. While trading performance has been very good, for tax efficiency it has not been paying dividends. As the equity investment in the hospital operator was non core to Calan Healthcare, in line with our strategy the decision was made to sell our shares.

Final Asset Sale

The sale of this investment concludes the repositioning strategy we have been pursuing over the past 24 months.

That repositioning exercise has converted $25 million of non revenue producing assets into cash that has been used to retire debt, and has transformed the Trust into a low risk, medium return healthcare property fund involved in essential healthcare facilities.

Future Growth

The primary focus of your Directors and Manager over the past 24 months has been to bring our significant investment in Melbourne to completion, and to transform our asset portfolio into a fully performing one.

Now that these objectives have been achieved our focus will be directed towards achieving future growth.

We plan to grow the fund through strategic acquisitions via sale and lease back of existing assets, or from pre-committed new builds such as our $50 million Epworth Eastern facility, that are earnings positive. In regard to growth for the Australian Property Trust we are looking at joint venture partners or partnerships.

Rents On the Increase

During the course of the year ending June 2005 79% of our property portfolio will undergo rent reviews and, in line with our lease agreements, rents will be increased between 2.5% and 3%. The balances of leases are being reviewed on a 2/3 year cycle.

For the record, when Epworth Eastern opens in mid May, the average term to maturity of our leases will be 11.4 years (the longest of any listed entity by a significant margin) and the occupancy rate across the portfolio will be 99.4%.

Epworth Eastern Completed

Practical completion will be achieved this month, with the hospital opening its doors for business later this month.

Our annualised net income from Epworth Eastern will be approximately A$3.9 million a year. Other key statistics about this flagship building are

- Net lettable area 22,000 sqm
- Occupancy 100%
- Weighted average lease expiry 19.2 (years).

Where We Hold Assets
Calan's portfolio now consists of 12 properties across 3 sub-sectors of health, 72 tenants and is located in four main geographic locations. The location of the portfolio, weighted by value is:
Auckland 49% Melbourne 37%
Hawkes Bay 9% Whangarei 6%

Annual Meeting

At the 2003 Annual Meeting held in Auckland, we stated that we would look to hold future Annual Meetings in places other than Auckland to enable investors in other Centres the opportunity to attend.

The highly successful Annual Meeting held in Tauranga last year, had more than 200 attendees and the feedback received from our Bay of Plenty Unit Holders was extremely positive.

Given this, the Board has agreed to hold its Annual Meeting in Auckland every three years with the intervening two years rotated around other locations in New Zealand. It has been agreed by the Directors to hold the 2005 meeting in Christchurch.

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