Dexus Healthcare Fund Surpasses $1bn

Fresh from raising funds to target properties for its wholesale Healthcare Property Fund, Dexus has secured two life sciences buildings in a Melbourne biomedical precinct.

The two properties, the Manning Building and Building 4 at 399 Royal Parade, were acquired for $138.7 million and are part of Monash University’s Parkville campus.

The buildings are currently home to the university’s Faculty of Pharmacy and Pharmaceutical Science and hold a weighted average lease expiry of 12.4 years.

They neighbour the Royal Melbourne Hospital, Royal Women’s Hospital, Royal Children’s Hospital, Melbourne Private Hospital and St Vincent’s Hospital Melbourne.

The medical property was brokered by CBRE’s Mark Coster in an off-market deal and struck on a yield of 4.5 per cent.

The acquisition by Dexus, the country’s largest office landlord, now pushes the vehicle’s portfolio past the $1 billion in assets under management.

The fund (DHPF) currently has five core investors, including the Employees Provident Fund Malaysia, which put $100 million into the fund in 2019.

The executive general manager of funds management at Dexus, Deborah Coakley, said investor appetite for healthcare had ramped up “massively” since DHPF was launched in 2017 as part of an asset diversification strategy by Australia’s largest commercial landlord.

“This transaction continues our strategy to grow and diversify DHPF through the acquisition of high-quality developments and stabilised healthcare assets,” Coakley said.

“There are further opportunities in Brisbane and Perth currently under review.”

The acquisition follows the recent completion of the North Shore Health Hub, a premium healthcare facility in the North Shore Hospital precinct in St Leonards, north Sydney.

Dexus also recently acquired the Australian Bragg Centre in Adelaide’s BioMed City precinct.

Other assets owned by the fund include College Junction in Brisbane, and GP Plus Healthcare Centre and Calvary Private Hospital in Adelaide.

Addressing the group’s quarterly results, chief executive Darren Steinberg said he had been pleased with the continued momentum across the funds platform, as Dexus progresses initiatives in the fund, healthcare and its new opportunity fund.

“Our continued focus on our relationships with third-party capital partners will assist with opportunities we have in the pipeline,” Stienberg said.

Over the recent quarter, the fund raised $125 million in new equity.

Yields in healthcare real estate have been gradually tightening as governments and the private sector recognise the rising need for more efficient and effective models of care to service medical precincts and suburban areas.

Institutional investors have been quick to embrace the once-niche sector which is currently experiencing a shift that has accelerated since the pandemic, while also pivoting their portfolios away from office and retail property.

According to recent forecasts by JLL, the estimated value of real estate in the healthcare sector is between $95 billion and $105 billion, providing plenty of scope for investments of scale.