HomeCo Prepares IPO after Hospital Portfolio Acquisition

Property funds management group Home Consortium (HomeCo) has added a $110-million healthcare property portfolio to its growing healthcare REIT as part of plans to float a trust later this year.

Listed fund manager HomeCo will now take ownership, via sale-and-leaseback, of an eight-property portfolio operated by KKR-backed cancer care group GenesisCare.

The assets will be placed into HealthCo—a new healthcare properties trust expected to raise capital and be floated on the Australian Securities Exchange later this year.

HealthCo is targeting an equity raising of $1 billion and an initial first closure of at least $500 million in equity in order to facilitate its initial public offering process for future ASX-listing.

HomeCo now commands a $1.4 billion platform after floating in late 2019.

HealthCo would mark the second trust spun out of the HomeCo platform after the successful float in November of its Daily Needs REIT, which holds a $1-billion portfolio of retail assets.

The deal, brokered by CBRE, reflects a weighted average passing yield of about 4.5 per cent and provides HomeCo with income security and growth characteristics including 10.7 year lease term.

HomeCo managing director and former UBS banker David Di Pilla said the group had continued to target aged care, childcare, hospitals, primary care and government and life sciences assets within Australia’s $250 billion-plus health and wellness sector.

“We remain on track to establish HealthCo later this year and this update further demonstrates our ability to source high quality assets which are well suited to the model portfolio strategy we announced last month,” Di Pilla said.

“Pleasingly, we continue to execute our strategy in a capital efficient manner through active capital recycling.

“Our balance sheet is well capitalised with minimal debt, providing us with significant capacity to secure additional assets for HealthCo including several which are currently under due diligence.”

The group has also secured a 5ha site, across three parcels of land, in Camden, south-west of Sydney, which will allow HomeCo to deliver a “significant development”.

The parcels of land had been earmarked for a mixed-use medical campus including a large scale general hospital and biomedical facility.

HomeCo, alongside joint venture partner and operator Acurio Health Group, plan to develop the site into an integrated 78-bed private hospital.

HealthCo will develop the first stage of the hospital which will be leased to Acurio for 15 years.

The joint venture will also build an integrated health and innovation district as its second and third stages, with a potential $500-million gross development value.

Healthcare property has become a sought-after asset class on the back of demographic trends including Australia’s ageing population, government support for further privatisation of many medical services and the spread of Covid-19.

The country’s largest office landlord, Dexus, remains the most active investor in the healthcare sector in the past five years, spending $780 million, according to recent figures by Real Capital Analytics.

Dexus's expansion into the healthcare property sector has been gathering steam since it set up the wholesale fund four years ago, seeding it with a combination of assets under development.

Canada’s NorthWest Healthcare Properties is currently the second most active player, spending $294 million on healthcare assets in the past five years.

NorthWest is already the biggest manager of healthcare real estate in Australia and New Zealand with about $4.5 billion of properties under its control.

NorthWest owns a raft of hospitals, medical practices and the like leased to operators including Healthscope, Ramsay Health Care, Healthe Care and Sonic.

Centuria Healthcare has also assembled an ambitious development pipeline with an end value of more than $750 million in order to increase its exposure to the short stay hospital sector.