ASX-listed REIT to acquire Healthscope Hospital Portfolio

HealthCo Healthcare & Wellness REIT (HWC) has announced it will acquire from Medical Properties Trust a 100% interest in 11 private hospital in major Australian cities, leased to Healthscope for a purchase price of $1.2 billion, in a move that will transform it into the country’s largest diversified healthcare real estate investment trust (REIT).

To this end, the Australian Exchange Securities (ASX)-listed HWC has partnered with a newly established HMC-managed Unlisted Fund, the Healthcare and Life Sciences Unlisted Fund.

The $1.2 billion acquisition will be carried out in three tranches, with the first two tranches expected to be settled upfront and the last one to be completed on a deferred basis.

Tranche One will see HCW acquire four mental health/rehabilitation hospitals for $256 million with expected settlement in May 2023, Tranche Two will see the Unlisted Fund to acquire further three acute care hospitals for $474 million with expected settlement also in May 2023.

Following this, Tranche Three will see the Unlisted Fund acquire remaining four acute care hospitals for $470 million with expected settlement date in July to September, 2023, providing up to six months for HMC to complete an unlisted institutional raising of $259 million (50% of equity in the Unlisted Fund).

Upon settlement of Tranche Three in July-September, HCW will hold interests in all 11 hospital assets valued at $730 million comprising a direct 100% interest in four mental health/rehabilitation hospitals ($256 million) and around 50% equity interest in the Unlisted Fund which will own seven acute care hospitals valued at $944 million.

The acquisition will be funded through an underwritten $320 million equity raising, comprising a $89 million institutional placement and a $231 million, one for 1.90 pro rata accelerated non renounceable entitlement offer at an issue price of $1.35 per unit.

The trust also committed to undertake a minimum of $125 million of asset sales, expected to be contracted for sale by the time of settlement of the HCW acquisition, to ensure an “appropriate level of gearing is maintained with reference to HCW’s 30-40% target range”.

“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 chair, Joseph Carrozzi, said.

“HCW is well positioned to continue to unlock significant value and growth via its enlarged ∼ $1 billion development pipeline post this transaction. Importantly, the establishment of the unlisted fund provides HCW with a strategic and complementary funding partners for major healthcare development opportunities.”