Australian Unity has raised $291 million for its unlisted Healthcare Property Trust after two years of requests from its yield-dependent retail investor base to reopen the high-returning fund for new investment.
The fund manager closed the equity raising “within a week or so of opening” the 20-year-old trust that made an annual net return after fees and expenses of 13.02 per cent over the five years to December, said Australian Unity’s head of healthcare property Chris Smith.
“I think the situation for self-funded retirees has worsened,” Mr Smith told The Australian Financial Review on Monday.
“We had a lot of inquiries from November 2017 until late 2019 about when the fund would reopen for new applications.”
The benchmark cash rate halved to 0.75 per cent between November 2017 – the time of the unlisted trust’s last equity raising – and the end of last year, marking an equivalent decline in interest rates paid to the retirees living on their income from term deposits.
But the global lower-rate environment that has been hard for yield-dependent investors has been good for developers. The trust, which also has a $740 million debt facility – just $330 million of which it has drawn upon – recently lowered its average cost of debt to 3.2 per cent from the 4.2 per cent level it set it at 12 months ago.
“That makes a bit of a difference when out in the market purchasing,” Mr Smith said.
The abundant supply of cheaper capital is proving a boon to the $2 billion healthcare trust.
It currently has a development pipeline of $675 million that includes the $390 million Surgical, Treatment And Rehabilitation Service (STARS) in Herston, Queensland – being funded in part from the $420 million the fund raised in 2017.
Subsequent projects it has embarked upon include a $28 million upgrade to Peninsula Private Hospital in Langwarrin, Victoria, and a $22 million expansion at Beleura Private Hospital in Mornington, also in Victoria.
Part of the equity raised late last year will be used for acquisition of the $237 million – before stamp duty and acquisition costs – portfolio of six aged-care properties in Queensland operated by Infinite Care.
Three of the properties are in Cairns, one in Toowoomba and one each in the outer Brisbane’s Ipswich and Cornubia.
Mr Smith said the trust was also close to finalising an operator for the $100 million private hospital it planned to develop in Melbourne’s western suburb of Sunshine. He declined to give any details such as the number of beds or the market niche of the hospital.
“It’s a bit premature to announce that,” he said. “We’re close to finalising terms with the hospital operator and other key tenants.”
Until 2015, the fund was open every day for applications, but with demand overwhelming its ability to invest sustainably, it suspended new applications and changed to opening only at selected times.
“There is a lot of cash around wanting to find a home for good solid returns,” Mr Smith said.
“Due to the popular demand for the trust we were finding that the level of inflows weren’t sustainable. We weren’t able to invest any capital appropriately in line with the inflow. So we suspended units.”
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