Canadian investment trust to sell off Australian healthcare properties

The Hurstville Private Hospital is owned by Northwest. There is no indication that it is one of the properties to be sold.
The Hurstville Private Hospital is owned by Northwest. There is no indication that it is one of the properties to be sold.

Canada’s NorthWest Healthcare Properties Real Estate, which this year teamed up with private equity in a successful $4.4 billion takeover of Australia’s second-largest private hospital operator Healthscope, will start selling off as much as $390 million worth of property in Australia.

The sale of some of the NorthWest property portfolio — which covers hospitals, medical buildings and aged-care facilities — is expected to attract interest from institutional investors who seek strong yields and properties with long-dated leases to quality health sector tenants.

A spokesman for NorthWest told The Australian the healthcare property assets would likely be sold on to other NorthWest investment vehicles, joint ventures or to external buyers. The assets up for sale have been held by NorthWest for some time and are separate to the Healthscope assets it bought as part of the takeover.

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Meanwhile, NorthWest chairman and chief executive Paul Dalla Lana, who this year teamed up with fellow Canadian asset manager Brookfield and Singapore’s sovereign wealth fund GIC to fund the Healthscope deal, has also told investors he sees a strong future in investing in Australian mental health facilities with that sector experiencing significant growth.

“We have a pretty active portfolio in Australia with that type of modality (mental health) in it, and it includes large assets like the Melbourne Clinic that was acquired as part of the Healthscope transaction, probably the largest psychiatric hospital in Australia as well as a number of regional facilities,” Lana told analysts at a recent earnings update.

“Mental health as a modality is experiencing very significant growth. So a lot of our operating partners are focusing on that.

“We would see that as an area of pretty secular growth in most of our regions and in health care in general.”

Mental health is becoming a key issue for governments and health sector operators with both federal and state governments pledging to pour hundreds of millions of dollars of fresh funding into the area.

Only last week the interim report of Victoria’s royal commission into the mental health system recommended a new tax or levy be implemented to fund a dramatic ramp up of services for mental health treatment, research and professionals.

In the meantime, Lana revealed NorthWest was looking to divest some of its Australian hospital, medical facilities and aged-care properties next year as it seeks to lower its debt and offload non-core properties.

“The REIT remains committed to reducing leverage below 50 per cent over the medium term, and has targeted a suite of higher cost debt for repayment in the remainder of 2019 and during 2020 … using resources from non-core and Australian joint-venture asset sales, which are also progressing well,” Lana said. “We are targeting approximately $C350m of JV asset sales in Australia for early 2020.”

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