Generation Healthcare REIT : Sales of healthcare platform to Northwest Healthcare Properties REIT

Microsoft Word - APD ASX Announcement _FINAL FOR RELEASE_ - 27 June 2016.docx

27 June 2016

Sale of healthcare platform to NorthWest Healthcare Properties Real Estate Investment Trust (TSX: NWH.UN)

APN Property Group Limited (APD) today announced that it, and entities associated with executives Miles Wentworth and Chris Adams, have sold their interests in its healthcare real estate investment management platform to NorthWest Healthcare Properties Real Estate Investment Trust (NorthWest) for $58.5 million and have agreed to sell units in Generation Healthcare REIT (GHC) to NorthWest for $2.20 per unit (the Transaction).

APN Funds Management Limited (APNFM the responsible entity for GHC) will remain as the responsible entity of GHC and any future change of responsible entity would require the approval of GHC unitholders. In addition, APD has agreed to provide certain services to NorthWest for a transition period of up to 2 years to ensure a successful transition. Messrs Wentworth and Adams will also continue to provide services to NorthWest for a period of up to 2 years and GHC's existing dedicated property team have been offered employment with NorthWest.

Mr Chris Aylward, Chairman of APN Property Group Limited, said: "This transaction is an excellent outcome for both GHC's investors and for APD's shareholders. NorthWest is a well-resourced, experienced manager of healthcare assets with a global platform which will continue to be supported by our team to ensure GHC's outstanding investment performance continues.

We are pleased that through its co-investment, NorthWest will have a strongly aligned interest with all of GHC's investors. We have also ensured, as has APD's independent responsible entity, that appropriate governance arrangements have been implemented given NorthWest's other investments across the global healthcare real estate sector.

Miles Wentworth and Chris Adams initiated GHC in conjunction with ING Real Estate in 2006 through an initial public offering, with APD acquiring its interest in mid 2011. The decision to transact was weighed carefully and decided on jointly.

We are delighted with the investment performance GHC has delivered over a substantial period of time. We are pleased with the terms of the transaction which reflect the significant value in the platform. We believe NorthWest is buying an excellent business with significant upside potential and we are looking forward to remaining involved with NorthWest to assist in the execution of GHC's investment strategy in the healthcare real estate sector.

While GHC has been an excellent contributor to APD's profits in recent years, this transaction is a compelling opportunity for APD's shareholders. We have three other business divisions with products which are enjoying strong and growing support, with modest levels of debt and relatively high, consistent income yields. With substantial cash resources to deploy at the appropriate time to pursue growth opportunities, APD's prospects to continue to deliver value for shareholders are excellent."

Sale Details

The Transaction consideration is paid today, except for the sale of units in GHC which are subject to put and call options exercisable at any time before 30 September 2016 at a price of $2.20 per unit (note this is after the ex-distribution date for the 4.42 cent per unit distribution in respect of the 30 June 2016 half year).

In addition, the vendors have retained a material economic interest currently estimated to be approximately $6.0 million in respect of recognised but deferred performance fees in accordance with GHC's existing fee arrangements. This consideration is subject to certain conditions and is payable on the later of (a) when paid from GHC, and (b) two years from the Transaction completion date (and is payable provided NorthWest remains the manager of GHC as at the payment date).

Timing and pro-forma key metrics

Consideration items (APD interest only)	Date	Gross consideration
Management platform	27 June 2016	$35.6 million
GHC co-investment units	30 September 20161	$54.5 million
Recognised deferred performance fee2	Refer above	$2.5 million
Total Consideration	$92.6 million

Key metrics	31 December 2015	Pro-forma3
Cash	$11.9 million	$73.0 million4
Net Tangible Assets	33.5 cents per share	43.0 cents per share
Funds Under Management	$2.4 billion	$2.0 billion

1. At latest.

2. Payment subject to terms and conditions as noted.

3. 31 December 2015 numbers adjusted for the Transaction.

4. After assumed repayment of the $15.0 million Macquarie Bank debt facility and the payment of forecast tax liabilities arising from the Transaction but before receipt of the deferred performance fee consideration.

Use of proceeds

A further update on APD's intended use of proceeds will be made at APD's full year results presentation.

ENDS

For further information, please contact:

Tim Slattery Executive Director

T +613 8656 1000

M +61 400 444 864

E tim.slattery@apngroup.com.au

Michael Groth

Chief Financial Officer T +613 8656 1000

M +61 409 936 104

E mgroth@apngroup.com.au

About APN Property Group

APN Property Group Limited (ASX code: APD) is a specialist real estate investment manager. Since 1996, APN has been actively investing in, developing and managing real estate and real estate securities on behalf of institutional and retail investors. APN's focus is on delivering superior investment performance and outstanding service. Performance is underpinned by a highly disciplined investment approach and a deep understanding of commercial real estate.

www.apngroup.com.au

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