Barwon raises $150m for healthcare real estate
Barwon Investment Partners has raised $150 million for its growing healthcare real estate fund, sending a strong signal that new and existing investors are keen to increase their exposure to alternative property assets.
The successful raising – the fourth for the $1.5 billion Barwon Institutional Healthcare Property Fund – comes as a high-profile drama over the financial woes of the country’s second-biggest private hospital operator, Healthscope, plays out.
But the Barwon fund’s portfolio was carefully set up to weather just such challenges to the healthcare sector, according to Barwon’s director and head of healthcare property, Tom Patrick.
The fund is one of two focused on healthcare property that Barwon runs. It holds a diversified portfolio of 30 properties in Australia, ranging from pathology laboratories and oncology centres, to medical centres, private hospital and other healthcare and life sciences assets leased to public and private tenants.
Less the 2 per cent of the fund’s income comes from Healthscope, which is paying all its rent.
“The assets we own, we haven’t had our hospitals approaching us for rent relief at all,” Mr Patrick told The Australian Financial Review.
“That comes down to the amount of diligence in the way we approach our acquisitions.
“When you think about building out a portfolio in healthcare real estate it’s crucially important to ensure that you have diversity of tenant exposures.
“The risk in healthcare investment – be that real estate or private equity – is legislative change, change to the way funding occurs.
“By having a diversity of exposure in your portfolio, you mitigate that risk. We are not over-exposed to private hospitals, we have a good exposure.
“We have government tenants, primary care tenants, pathology, life sciences.”
Dodging turmoil
Major private hospital operators such Ramsay and Healthscope are under pressure and want health insurers to pay a higher percentage of their premiums to help boost their struggling financial models.
Healthscope is testing the waters for a potential buyout of its business, after breaching its rent obligations with one landlord – a property trust managed by David Di Pilla’s HMC Capital – and winning a short deferral from another, Northwest Healthcare Properties Real Estate Investment Trust.
Barwon has avoided that turmoil through its portfolio mix and is now tapping a shift in investment sentiment as the real estate cycle turns more favourably, sparked by the start of a rate cutting cycle, according to Patrick.
With the additional capital raised, the Barwon-run fund will look to acquire up to $230 million worth of healthcare-related commercial properties.
“We believe that as the market begins its recovery phase, healthcare real estate will continue to be among the most attractive sectors for investment,” Patrick said.
“The market, bolstered by tailwinds such as a growing and ageing population and technological advancement, remains a non-cyclical and defensive sector and we are excited to leverage our enhanced capital base to pursue new opportunities.”
