Healthcare REITs continue to attract capital

Healthcare REITs continue to attract strong demand and capital, with news that Canada’s NorthWest Healthcare Properties REIT is looking to establish a $2.0 billion healthcare REIT in Australia. NorthWest, which is listed on the Toronto Stock Exchange (TSX: NWH.UN) will establish the new healthcare REIT as a joint venture agreement with a large sovereign wealth fund (which will own 70%) and NorthWest (which will own 30%), with a mandate to acquire and develop high quality core Australian healthcare real estate, including hospitals and related medical office buildings. The joint venture will initially be seeded with 4 properties worth $412M from the Generation Healthcare REIT portfolio that NorthWest acquired in 2017. The properties include 3 sites in Melbourne (Epsworth Clarendon, Epsworth Victoria Parade and Grey Street Centre and Carpark) as well as an Australian Red Cross Blood Supply property in Brisbane. Over time, further properties are expected to be acquired in the portfolio with NorthWest also expected to be looking at healthcare properties owned by Healthscope (ASX: HSO) who are considering sale and leaseback options. NorthWest acquired a 10% stake in Healthscope in May 2018.

Over the past few years, investors have been drawn to the healthcare properties due to attractive metrics which include stable long- term tenancies in a growing sector with high demand as a result of an ageing population. Last month, Heathley Asset Management announced that it had appointed advisors to consider options to list its $500M-plus portfolio of healthcare funds whilst Barwon Investment Partners recently acquired two medical facilities to increase its portfolio to over $600M. Also, in 2017, the Australian Unity Healthcare Property Trust (Australia’s largest healthcare property trust with $1.5 billion in assets), raised $430M in equity to fund its expansion plans.

Reporting Season commenced last week, with BWP Trust (ASX: BWP) releasing their FY18 results. Reporting Season continues this week with a number of A-REIT’’s reporting, including SCA Property Group (ASX: SCP), Investa Office Fund (ASX: IOF), Folkestone Education Trust (ASX: FET), Mirvac Group (ASX: MGR), Charter Hall Long WALE REIT (ASX: CLW) and Aventus Retail Property Fund (ASX: AVN).