Healthcare funds circling $85m private hospital and hotel project

To be known as Wickham Private, the development will provide 5307sq m of leased medical space for consulting rooms, operating theatres, overnight beds and other medical services as well as hotel accommodation for those patients awaiting or recuperating from surgeries.

Construction will kick off in June, with completion expected in February 2023.

Barber Property Group director Paul Barber said the developer’s intention was to lease all or most of the floor space before divesting the property to an operator or fund seeking an ongoing revenue stream.

The hotel component has already been leased to a “major apartment hotel operator” on a 15-year lease.

“The project is inherently appealing to Australia’s largest medical [property] funds, who have been checking in on the progress of it,” Mr Barber told The Australian Financial Review.

“A [healthcare property] fund is the ideal end buyer of this project.”

Barber Property Group, which Mr Barber runs with his father Ray, acquired the 1400 square metre site for about $8 million in January from the Queensland Chamber of Commerce and Industry, records show.

Originally pitched as residential development, the site’s premium location close St Andrews Hospital and Brisbane Private Hospital and the success of other similar facilities in the US and Europe convinced the Barbers to pursue an integrated hotel and hospital project.

“Health is leading the property bounce back following the COVID-19 pandemic, and the integrated model is being implemented across the world as the new way of private healthcare,” Mr Barber said.

“We had hospital bed shortages pre-COVID, but it has become all the more evident over the past 12 months. We know how premium this space is, and the return on investment shows exactly that.”

He added that the integrated hospital-hotel model also appealed to health insurers because of the lower costs of accommodating minor surgery patients in hotel accommodation, as opposed to hospitals, during their recuperation.

“It is estimated that elective surgeries in a bespoke centre is approximately 20 per cent cheaper than in a general hospital,” he said.

“Not to mention the benefit of comfort, convenience, privacy and the ability to have friends or family close by for patients.”

Healthcare property has become a sought-after asset class on the back of demographic trends such as Australia’s ageing population and government support for further privatisation of many medical services.

A December report by JLL forecast yields on healthcare real estate such as private hospitals and medical centres to fall to record lows over the next 12 months as institutional investors pivot their portfolios away from office and retail property and towards the sought-after alternative asset class.

Barber Property Group is undertaking the project with the backing of a small group of investors. Debt funding will come from one of the big four banks.