Funds Turn to Health Precincts in Hunt for Returns

Some of Australia’s biggest healthcare property funds are turning to medical precinct development as yields soften and the market grows increasingly competitive.

Speaking at The Urban Developer’s Healthcare Property vSummit, Dexus head of healthcare partnerships George Websdale said the $1.3-billion Dexus Healthcare Property Fund was diversifying into the development space.

“We think there’s an opportunity to move into development,” Websdale said.

“We have a $16-billion development pipeline and a skill set to deliver very complex precincts … that’s a space we really like and that is a point of differentiation for us.

“For us the opportunity is very much development-led, buying real estate on the market at the moment is very competitive … and while we’ll continue to look at doing that we think there is an opportunity to move into that development space.”

Australian Unity head of property Chris Smith said the property fund had acquired some sites in “key precincts” to add to its healthcare portfolio but had been pursuing a develop and hold strategy more recently.

“Over the years we’ve built up our land bank as well,” Smith said.

“We’re quietly developing our own product, so we’re not buying as much on market.

“We tend to be getting a stronger yield that way and we just continue along that vein, trying to stick to our 60 to 70 per cent hospitals [asset split] and mainly along the eastern seaboard.”

The “precinct megatrend” is one that will continue to influence healthcare property assets into the future, according to Northwest Healthcare Properties senior vice president of precincts Alex Belcastro.

“There’s absolutely no doubt that we’re seeing this precinct megatrend across Europe, North America, and Australia and New Zealand,” Belcastro said.

“There’s a growing understanding that building precinct advantage in the public and private sectors and also universities through research is a key focus.

“That’s certainly an area where we’re seeing significant opportunity for the public and the private sector to come together.

“It’s a great time for healthcare globally and there’s no doubt that there needs to be a level of sophistication from investors as well.”

Northwest acquired a 50 per cent stake in Epworth at Geelong earlier this year, which includes land around the site. Belcastro said they would be looking to “build out the precinct” and agglomerate other sites for precinct development.

“We’ve been quite active in the develop to hold space … we’ve acquired a site in Coomera directly opposite the proposed new Coomera greenfield public hospital which is set to be the largest greenfield public hospital on the Gold Coast.”