HomeCo's healthcare REIT primed for asset surge
Home Consortium has primed its proposed HealthCo REIT for an acquisition spree once it lists on the ASX later this year after revealing the listed fund will be able to co-invest alongside its unlisted wholesale sister fund in major healthcare assets including hospitals and aged care facilities.
Details of the co-ownership model were disclosed in an IPO presentation as HomeCo began to market its float candidate at investors and after it lifted its equity raise by $100 million to $600 million.
HomeCo will also seek to raise another $500 million this year for its unlisted healthcare fund as part of the fund manager’s big push into the niche, but expanding commercial real estate sector.
Combined, the two healthcare funds will be seeded with more than $1 billion of private hospitals, aged care facilities, child care centres, medical centres and life science hubs tenanted by the likes GenesisCare, the Commonwealth Government and Acurio Health Group on long leases.
Under HomeCo’s allocation policy, the unlisted wholesale fund may assist “HealthCo in accessing a larger pool of investment opportunities”.
“Each fund shares a complementary investment mandate and aims to co-invest in assets valued at up to $250 million in accordance with the allocation policy,” the fund manager disclosed.
Aged care, childcare and primary health care assets worth less than $100 million will be wholly owned by the HealthCo REIT, while both funds will have a right of first refusal to acquire the other’s interests in co-owned assets if and when they become available
With a second $500 million raising for the unlisted fund planned and initial gearing of less than 5 per cent for the HealthCo REIT, HomeCo will have plenty of balance sheet firepower for acquisitions in a market offering $218 billion of potential acquisitions and $87 billion of new development requirements, according to research by LEK Consulting.
Based on gearing of 35 per cent, Jefferies equity analyst Sholto Maconochie said HealthCo could hold assets worth $2.3 billion, or $1.3 billion more than what will be in the initial seed portfolio.
“We expect HealthCo to be very acquisitive, helped by its lower cost of capital wholesale fund,” Mr Maconochie said.
“We note that Aurrum Aged Care (which HomeCo CEO David Di Pilla has an ownership stake in) owns 9.22 per cent of ASX listed Japara Healthcare. This may provide the opportunity for M&A or joint ventures with Japara to further grow HealthCo’s funds under management.”
HomeCo will retain a minimum 20 per cent shareholding in HealthCo REIT, which is forecast to generate a 4.5 per cent distribution yield across a $555 million portfolio.
The unlisted fund will target a total return of 7 per cent in a sector, which offers exposure to mega trends like Australia’s ageing population and rising expenditure on healthcare.
In its analysis Jefferies noted HomeCo had additional $300 million of healthcare assets under due diligence.
The portfolio will also be bolstered by the completion of a number of developments, including a private hospital healthcare precinct in Camden in Western Sydney in partnership with operator Acurio Health Group and health hubs on the Gold Coast, Brisbane and St Mary’s.
So far this year, HomeCo has bought the Health Hub medical centre in Morayfield for $110 million, a number of childcare centres for $23.2 million and eight private oncology assets with triplenet leases to GenesisCare for $110.3 million.
