Barwon has been investing in Australian healthcare property since 2014 and is recognised as a leading fund manager in the sector. We invest into healthcare property with traditional commercial leases and strong tenant covenants. We don’t invest into healthcare businesses. We select properties with good design and functional attributes that will ensure the asset will be fit for healthcare purposes for the long term.
Our Barwon healthcare investment portfolio currently totals approximately AUD $1b in gross asset value (as at June 2020) and includes primary healthcare facilities such as medical centres and allied health facilities, secondary health facilities including pathology laboratories, mental health clinics and day surgeries through to large tertiary healthcare facilities including high acuity private hospitals.
Barwon currently manages circa $750 million of investor equity in this sector with further committed capital ready for deployment. Our investors include large superannuation funds, institutional investors, family offices and private wholesale investors typically investing via their SMSF.
Barwon’s Healthcare Property strategies provides investors with exposure to a diversified portfolio of high quality and well leased healthcare assets which offer exposure to:
- Australia’s growing and aging population is driving strong growth in the demand for healthcare services
- Advances in care procedures and technology is driving demand for new and more specialised care facilities
- Increased prevalence of chronic diseases (e.g. diabetes, mental health, cancer, heart disease) is placing significant strains on the public health system.
- Government funding of sector helps underwrite growth and tenant credit quality
- Community health expectations and awareness is leading to increased demand for health services
- Unlike the US and UK, the Australian healthcare sector has traditionally not attracted significant institutional capital, although this has recently changed
- Some larger listed groups own hospital facilities, but most medical centres and smaller private facilities are privately owned
- Often opportunities are in small to medium sized assets, meaning less institutional competition.
- As medical centre business ownership becomes more corporatized (increasingly owned by private equity groups seeking to roll up centres to form larger portfolios), opportunities are being created for Barwon to be an active real estate capital partner working in partnership with private equity investment groups.
- Properties typically offer long leases (triple net) with CPI+ or fixed rent reviews, providing attractive, inflation-hedged long term income streams
- Property income yields typically range from 5.0% to 7.0%, with some capital growth potential through CPI linked or fixed rental reviews
- Low levels of leasing incentives relative to other sectors due to currently low healthcare property vacancy levels
- Weighted average lease expiry (WALE) typically 10+ years with fixed rental growth
- High credit quality of tenants due to sound sector fundamentals
- Patients/clients are loyal and support the facilities and personnel they know
- Low levels of speculative development in the sector
Tom Patrick heads the Barwon Healthcare Property team which comprises eleven investment professionals including portfolio managers, asset managers and investment analysts. Tom oversees the healthcare team’s investment activities including market research, investment analysis, portfolio strategy, property selection, due diligence and asset management.