International investment houses will swarm over the next major hospital to hit the market as pickings for projects around the half-billion-dollar mark stay slim.
In the past 10 years the appeal of the health sector to investors has skyrocketed, however the opportunities to invest are few.
The last major hospital deal was when HMC spent $1.2 billion in March to buy 11 properties in the Healthscope Hospital Portfolio.
Since then sales have been closer to the $100 million mark, including Victoria’s Epping Private Hospital sale in June for $76 million and Southport Private Hospital in Queensland which sold for $51 million,
But the lack of stock is creating an opportunity for developers to package up multiple projects around health hotspots to capitalise on this demand.
EY Oceania valuation expert Marcus Willison said institutional clients want to take advantage of the long-term yields and investments in an asset class that has shifted a long way from a cottage industry.
“You’ve got all of this institutional global money that wants to buy these landmark assets and because of the lack of supply, very rarely you see them,” Willison told The Urban Developer’s Healthcare Real Estate vSummit.
“So what you are finding is a lot of property trusts now are actually building from scratch.”
The underlying demographics of Australia’s aging population, performance and government backing of hospitals during the pandemic are driving this interest.
The assets owned by REITs are then leased by the public sector for 25 to 40 years, providing “phenomenal” returns.
“A lot of the operators are long-term institutional players now, ” Willison said.
“So really it’s sort of a set-and-forget type investment.
“If you’ve got a 25-year WALE to a Ramsey or a Healthscope or one of those big hospitals, you actually take out the property cycles because underpinning it is the demand for healthcare services in it.”
Willison said diversification was another factor pushing investment to sector as it moved away from retail and office.
“There has been no offering of an institutional transaction in the past six months over $500 million,” Willison said.
“They just don’t exist. If they came up, people would ... clamour for them.
“So that’s where there’s a real opportunity for the private developers to really take advantage of building them up and then selling to the institution, putting all the pieces together.”
Gain more insight into the sector—access The Urban Developer’s Healthcare Real Estate vSummit on demand here.
