ASX-listed HMC Capital has acquired 11 Healthscope-leased private hospitals across Australia from US-listed Medical Properties Trust for $1.2 billion.
The portfolio represents critical healthcare infrastructure in Australia’s capital cities and benefits from long term absolute net leases with Australia’s second largest private hospital operator.
The portfolio was acquired by AXS-listed HealthCo Healthcare & Wellness REIT and a newly launched $2 billion healthcare and life sciences Unlisted Fund.
“Our partnership with Healthscope on this transaction enabled HMC Capital to shape a compelling transaction with a significantly improved tenant covenant and rental growth upside via CPI-linked indexation and higher development returns,” HMC Capital Managing Director and CEO David Di Pilla said.
“This acquisition transforms HCW into Australia’s largest diversified healthcare REIT with greater exposure to critical healthcare infrastructure in Australia’s major capital cities. HCW is now well positioned for S&P/ASX300 index inclusion and will benefit from increased liquidity following the capital raising.”
“We have now commenced fund raising for the new unlisted fund which will co-own ~$1bn of Healthscope hospital assets with HCW. This acquisition accelerates our plans to establish an unlisted fund focused on large-scale healthcare opportunities and developments. We see this fund as being highly complementary to HCW and its ability to access larger-scale investment and development opportunities. We are already in active discussions with multiple domestic and global institutional investors who are undertaking due diligence on the opportunity.”
HMC said the purchase price represented an implied acquisition NOI yield of 5.8% and an unlevered internal rate of return of >9%.
The deal will be settled in three tranches with HCW acquiring $730 million of assets upfront and the remaining $470 million to be settled in Jul-Sep 2023 by the new unlisted fund.
In the first tranche, HCW to directly acquire four mental health/rehabilitation hospitals for $256 million with expected settlement in May 2023.
The second tranche will see the unlisted fund acquire three acute care hospitals for $474 million with expected settlement in May 2023.
In the third tranche, the unlisted fund will acquire remaining four acute care hospitals for $470 million with expected settlement between July and September 2023.
The HealthCo Healthcare & Wellness REIT will fund its part of the deal through a $320 million underwritten capital raising with support from HMC as manager via $123 million commitments in the entitlement offer, an HMC funded bonus unit and an improved base management fee structure for the REIT.
Under the deal, HMC will increase its assets under management (AUM) to $7.5 billion with the company now expecting to achieve its $10 billion AUM target by year-end 2023.