Barwon adds St Kilda Rd building to $648m healthcare deals

Rob Morrison, Barwon’s founding partner and co-head of property, said that focus had been a boon, with healthcare real estate proving resilient, leading to a rerating of the sector and winning interest from domestic and institutional investors.

“The existing Barwon healthcare portfolios have been beneficiaries of this rerating,” he said.

Over the 12 months to October, the Barwon Healthcare Property Fund delivered a 20 per cent total return and the Barwon Institutional Healthcare Property Fund gave back a 35 per cent total return.

The building at 607 St Kilda Road, which had been held by a private investor, generates a large proportion of its income from hospital operator Alfred Health, making it a good fit for the Barwon Institutional Healthcare Property Fund.

“The acquisition of the St Kilda Road asset gives the fund a well-located metropolitan asset, acquired on sensible market rents and with a clear pathway to access and support [from] the continued growth being experienced in community mental health – anarea that has been under-serviced, but is now being well supported with new state and federal funding,” said Barwon’s head of healthcare property, Tom Patrick.

“We expect to see significant growth in this sector as clinical models adapt to support a more outpatient focussed delivery of care.”

The transaction was struck on an initial yield of just over 4 per cent and a rate of over $10,000 per sq m. Only one other asset over $50 million has changed hands in the tightly held St Kilda Road precinct in the last two years, after Flight Centre sold its headquarters at 436 St Kilda Road for $62.15 million early last year.

The transaction was brokered by JLL’s Josh Rutman, MingXuan Li and Simon Quinn, with Cushman & Wakefield’s Leigh Melbourne.

“It’s little wonder why assets are seeing such a depth of interest as the office investment market in Melbourne has been starved of opportunities in 2021,” Mr Rutman said.