Australian Unity Healthcare Property Trust delivers total return over 20 per cent

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The healthcare property sector continues to perform very strongly, with Australian Unity’s Healthcare Property Trust (HPT) delivering a total return of 20.01 per cent, (7.17 per cent income and 12.84 per cent growth) for the financial year ending 30 June 2016.

Valuations across the total portfolio were up nine per cent from the prior year and gross asset value now stands at more than $1.1 billion.

Chris Smith, head of healthcare property at Australian Unity Real Estate Investment, said the sector continues to demonstrate consistent performance, delivering solid income returns and good capital growth for investors.

“Recently released data from the IPD Australia Healthcare Investment Digest highlights the continued strong performance of the healthcare property sector driven by increased demand for assets, record low interest rates and broader investor appetite for the specialist assets.” 

According to IPD, the sector’s total return for the year ended 30 June 2016 was 23.2 per cent, up from 18.5 per cent in the previous year.     

IPD also reported that for the 12 months to 30 June 2016 the average capitalisation rate across the healthcare sector was 7.3 per cent, down from 8.4 per cent from the prior year*. 

Mr Smith said Australian Unity maintain a positive and optimistic view of the Australian healthcare property sector.

“Over the coming year, we expect that strong investment demand will continue to provide support to valuations across all property sectors.

“Looking ahead, HPT is well positioned for growth through the development of new and existing assets, together with potential acquisitions.

“With occupancy of 97.64 per cent (by area) and Weighted Average Lease Expiry at 10.58 years (by income at 30 June 2016), our expectation is that HPT will continue to provide investors with a solid and sustainable level of distribution income over the medium term.

 

Mr Smith said the recent IPD data provides strong evidence that there is still room for healthcare assets to grow despite its double-digit returns over the last 12 months.  

 

“Healthcare assets are becoming more widely sought after by investors, with the sector providing very steady distribution returns over the last 15 years – even throughout the GFC.

“In addition, our view is that major private healthcare operators are well positioned to continue steadily growing and expanding their businesses. 

“We have very long term leases in place, upwards of 20 years in some instances, with a range of quality tenants, including some of Australia’s most successful companies and this makes an investment in healthcare property distinctly different to other property sectors where there isn’t that degree of tenant stability.

“Assets are still more thinly traded than other sectors, but we are seeing an increased level of brownfield and greenfield development to keep up with increased demand for healthcare services, which will continue to drive strong returns for investors in the sector,” Mr Smith said.

* MSCI IPD Australia Healthcare Investment Digest – Trends Quarter ending June 2016 

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For more information, please contact

Mr Chris Smith
Head of Healthcare Property
Ph: 03 8682 4534
M: 0418 379 763

Australian Unity is a national healthcare, financial services, and independent & assisted living organisation providing services to almost one million Australians, including around 300,000 members nationwide. Australian Unity’s history as a trusted mutual organisation dates back 175 years. It has grown organically—by continually evolving and providing the services and products needed by the communities it serves—as well as through successful strategic mergers and diversification into new business activities.

Important information

Returns are as at 30 June 2016 for wholesale units in the Healthcare Property Trust inception date for the wholesale units is 28 February 2002. Returns are calculated and expenses and assume the reinvestment of distributions. Past performance is not a reliable indicator of future performance. In deciding whether to acquire, hold or dispose of the product you should obtain a copy of the current product disclosure statement and consider whether the product is appropriate for you. A copy of the PDS is available at australianunityinvestments.com.au or by calling investor services on 13 29 39.

APPENDIX

Major achievements in FY 16

The HPT purchased just over $200 million in new property over the last financial year.  Each purchase was carefully considered and made in line with its stated strategy to continually improve diversification, its weighted average lease expiry (WALE), occupancy and distribution yield. 

HPT also committed to new development and expansion initiatives of over $150 million during the period including; a $64 million total investment in the Robina medical precinct in the Gold Coast region of Queensland and ongoing, long-term multi-phase projects at the Peninsula Private Hospital in Langwarrin and The Valley Private Hospital in Mulgrave, both in Victoria. 

Over the year the HPT also purchased five assets through its strategic partnership with Primary Health Care, collectively valued at approximately $32.9 million.  In addition $30 million of development capital has been committed to these properties – with the majority of this earmarked for greenfield expansion.

Current property development and planned expansion activity – building the healthcare properties of the future

The HPT continues to work on a number of large-scale and long-term healthcare projects to provide mutually beneficial outcomes for patients, hospital operators and tenants, and investors.

With quality healthcare assets thinly traded the HPT’s strategy is not only to acquire quality properties when opportunities arise but to make long-term, significant investments in brownfield developments and greenfield expansion to build, improve and expand healthcare assets to meet increased demand.   

Some of the Trust’s most significant developments currently include:

  • $50 million multi-phase project at Peninsula Private Hospital in Langwarrin, Victoria  
  • $30 million development of the Robina Private Hospital, Queensland
  • $84 million multi-phase project at The Valley Private Hospital in Mulgrave, Victoria
  • $30 million of development projects via a strategic partnership with ASX listed entity  Primary Health Care

Peninsula Private Hospital, Victoria

The $50 million expansion includes a new emergency department, an additional 71 beds, new imaging facility, additional consulting suite space, 396 additional car spaces and a state of the art hybrid operating theatre.  The development is expected to be completed in August 2016.

Robina Private Hospital, Queensland

Work progresses on the new $22 million 90-bed private hospital.  Completion of the project is scheduled for September 2016.

The HPT has made a total investment of $64 million in Robina, Queensland which includes its development of the new hospital, co-located with the Robina public hospital.  Robina’s healthcare precinct, currently anchored by the Robina Hospital and Queensland Health is a premium, emerging location on the Gold Coast for health related investment.

The Valley Private Hospital, Victoria

After recently completing a $14.6 million project for a new 32-bed ward, four new operating theatres and multi-deck carpark, HPT is now in the final stages of preparing for three further staged developments costing $83.9 million. 

The first stage, costing $18.7 million, comprises a two storey building for an Icon Cancer Centre  including 400 square metres of consultancy space, 27 day chemotherapy chairs, administrative areas and 142 car parking bays.

The second stage, costing $34.7 million will provide for a new imaging department, day surgery unit, a 30 bed ward and an 11 bed high dependency unit/critical care unit, additional theatres and central sterile services department expansion.

The third stage, costing $30.5 million, includes a new hospital entry and foyer, 250 square metres of retail space for a café and pharmacy, two new wards to create 78 additional beds and two levels of basement car parking.

Primary Healthcare Strategic partnership

Following its strategic partnership with listed entity Primary Health Care, HPT is also actively pursuing substantial developments in Richmond and Greensborough in Victoria, Corrimal, New South Wales and Robina in Queensland.

80-82 and 84-88 Bridge Rd, Richmond, Victoria – brownfield and greenfield expansion

HPT acquired an existing freehold property at 84-88 Bridge Rd for $13.4 million, known as the HIS Diagnostic Imaging Centre during the financial year.  The property is immediately opposite Epworth Richmond hospital, at the core of an established healthcare precinct.

The second acquisition at 80-82 Bridge Rd cost $5.5 million and is an adjoining property with plans for redevelopment as a specialist consulting centre.  It will be known as HIS Specialist Centre. 

These lots will be amalgamated and redeveloped into a specialist consulting centre that will sit alongside the HIS Diagnostic Imaging Centre.  The development will comprise 1,222 sqm of net lettable area and be leased for a 15 year term.  It is scheduled for completion in April 2017.

Flintoff St, Greensborough, Victoria – greenfield expansion  

This property was acquired for $6.8 million and will be developed into a large format medical centre comprising a day surgery, pathology, radiology and other specialist practices.  The building will be leased to Primary Health Care on a 15 year term and is scheduled for completion in June 2017. 

46-50 Underwood St, Corrimal – greenfield expansion 

This property was purchased for $3.35 million and is zoned for the construction of a new medical centre.  It will be leased to Primary Health Care on a 15 year term from practical completion of the development. 

34 Investigator Drive, Robina – greenfield expansion

This parcel of land was acquired for $3.9 million as part of the strategic partnership with Primary Health Care.  It lies between the Campus Alpha Building and Lot 1 Campus Crescent, Robina and will be developed as a Primary Health Care medical centre to meet demand for healthcare services in the fast growing region.  It is scheduled for completion in 2019.