REAL Asset Management (RAM) has acquired three regional hospitals in Tasmania and New South Wales for $100 million, as it moves forward with plans to list an essential services property trust on the ASX amid growing institutional demand for healthcare and medical assets.
Acquired from Canada’s Northwest Healthcare Properties, the hospitals include the 70-bed North West Private Hospital in Cooee, and in NSW the purpose-built 54-bed Dubbo Private Hospital in Dubbo and the 79-bed Mayo Private Hospital in Taree.
Each of the assets are leased to Australia’s third largest private hospital operator, Healthe Care, with weighted average leases of 15 years each and annual rent increases.
Simon Quinn of JLL brokered the transaction.
The purchases bring the total value of RAM’s essential services property portfolio to approximately $500 million. It now has 13 neighbourhood retail centres and six medical properties, four of which are private hospitals.
Director and head of real estate, Will Gray said RAM had taken its time and had been quite selective before proceeding with the purchase, adding that private and day hospitals of the quality of those obtained were rarely available. Each hospital is strategically located in a major regional health hub, supported by significant government investment.
“We have been actively working on this transaction for almost 12 months and see it as highly attractive to our investors given the long term sustainable and resilient income yield on offer in a high growth real estate sector.
“Australia is looking at long-term sectoral demand around the need for medical and healthcare service-based assets. The provision of private healthcare services, including the assets they occupy will only increase in demand as the public healthcare sector continues to be burdened by high patient demands and ageing assets.
“Accordingly, we are only now just starting to see the commencement of significant institutional demand to participate in the healthcare or medical property space.”
Home Consortium earlier this month launched an equity raising to partially fund the $163 million purchase of six health, education and government services properties and another big box retail asset, as it charges ahead with plans for another spin-off fund – a “Health, Wellness & Government REIT” – having just last month listed its own Daily Needs REIT that has a neighbourhood convenience and essential services focus.
ASX-listed investor Elanor has added a fourth asset to its Elanor Healthcare Real Estate Fund with the $23 million purchased of a medical facility in Perth’s south west, quickly following its acquisition of up two Woolloongabba properties leased to the state government’s Metro South Health, for $80.2 million and $37.25 million respectively.
In October, Dexus joined forces with its Healthcare Wholesale Property Fund to buy the Australian Bragg Centre in Adelaide, the nation’s first proton therapy centre, for $446.2 million.
Scott Kelly, managing director and chief executive of RAM, said the investment firm had been “judiciously assembling a portfolio of smaller neighbourhood-based retail and medical assets” over the past five years”.
“Record low rates and essential services-based tenure, among other factors, is supercharging investment demand for these types of assets, and so we plan to provide for that with some exciting capital markets initiatives in mid-2021.”