Centuria Healthcare Property Fund acquires $167m portfolio

21 September 2021

Centuria Healthcare has further expanded its unlisted open-ended fund, Centuria Healthcare Property Fund (CHPF), with a seven-asset portfolio acquisition worth c. $167million on a weighted average passing yield of 5.0%.

The acquisitions almost double CHPF’s total portfolio value (95% increase) to $342million with 14 properties and lengthens its WALE from 7.4 years to 11.4 years. Occupancy remains at 100%. CHPF has a further $11.7million pipeline due to settle in October, which will increase the fund’s value to $354million.

The current transactions diversify CHPF into mental health real estate, with assets including a $50.1million mental health hospital, a $12million mental health outpatient centre and two dementia care residences worth $7.4million. In addition, CHPF acquired a private, short-stay hospital worth $60.5million, a $8.45million rehabilitation hospital and a $28.6million medical centre.

Andrew Hemming, Centuria Healthcare Managing Director, said, “We are pleased to expand CHPF not just with additional high-quality assets, but with assets that further geographically diversify the portfolio as well as diversify the fund into mental health. The portfolio acquisitions are all institutional-grade healthcare properties, which are also underpinned by leases to a diversified range of leading healthcare operators – both private and public.”

CHPF secured the $50.1 million Perth Clinic, located at 21-29 Havelock Street, West Perth WA, on an 11.6-year WALE. It is Perth’s largest mental health hospital, 100% leased to a 25-year established operator, Perth Clinic. The tenant provides a range of mental health services including, inpatient programmes, day programmes, and specialised treatments. Perth Clinic comprises two adjoining buildings, providing a three-level mental health hospital, three levels of consulting suites and an office building with a total 4,856 sqm of net lettable area (NLA).

The mental health outpatient centre acquisition is located at 411 Nepean Highway, Frankston VIC. The $12 million property, built in 2016, is 100% leased to a Victorian State Government public health service, Peninsula Health, on an eight-year lease. The asset comprises a three-storey facility with a 1,577sqm NLA.

Both dementia care residences are fund-through projects. The sites are situated at 18 Lisa Crescent and 35 Chiltern Crescent within Sydney’s north-west suburb, Castle Hill. They are both 100% leased to Group Homes Australia (GHA) on a 15-year term. Each will accommodate up to 10 residents with dementia and will be operational by Q2 FY23.

Mr Hemming, said, “Mental health hospitals, for both inpatients and outpatients, are a major growth area within the healthcare sector. Equally, dementia care operators that provide personalised, non-institutionalised homes – such as GHA – are growing in demand.”

The short-stay hospitals include a $60.5million fund-through development of the new Weststate Private Hospital in Townsville’s West End, QLD. The development, located on the corners of Wilson Street, Lamington Road and Sturt Street, will amalgamate six land parcels into a single c.8,000sqm mixed-use site. Development approval has been received to complete a five-storey, purpose-built hospital, complete with four operating theatres, one procedure room, 19 day beds and 22 overnight beds. The property is pre-leased on a 25-year lease to Weststate, a newly established operator including three founding specialist surgeons as well as a cohort of medical professionals and investor associates.

CHPF’s other recently acquired short-stay hospital is the $8.45million MetroRehab Hospital, located at 175 Addison Road, Petersham in Sydney. The 1,850sqm, 37-bed property is 100% occupied and secured on a 13.2-year WALE. The operator provides rehabilitation care for stroke recovery, Parkinson’s treatment, brain injury and neurological & cancer rehabilitation.

Mr Hemming, explained, “These hospitals align with CHPF’s investment strategy to acquire healthcare properties that utilise effective models of care within markets with strong demand. Weststate, in particular, concentrates on best practice patient care that also lowers out-of-pocket expenses. This will be a game-changer for the North Queensland private healthcare market.”                                                

CHPF has also secured the $28.6million Sunbury Medical Centre at 38-44 Gap Road, Sunbury VIC, which is 100% occupied and provides a 7.7-year WALE.

The pure-play unlisted healthcare fund recently completed its fourth capital raise, securing $62.4million in investments. To date, the Fund has successfully been fully subscribed for all its equity raises, collectively generating more than $192million in investment.

Mr. Hemming concluded, “Since CHPF launched a year ago, it has generated strong traction from investors seeking to benefit from this resilient asset class, which provides relatively stable income streams. Our open-ended fund enables investors to benefit from the healthcare real estate sector’s strong tailwinds, which is why each of its fundraises have been fully subscribed to date.”

Since its inception in August 2020, CHPF has delivered an 8.00% total return to existing investors and a weighted average capitalisation rate (WACR) of 5.33%. It has a target distribution rate of 5.50cpu in FY22.

CHPF’s portfolio has four distinctive sub-market including short-stay and day hospitals, specialist centres, medical centres, and mental health properties.

Independent valuations of CHPF properties provided a $6.2 million gain (+3.6%) as at 30 June 2021. The Fund also recently secured a new 20-year lease with Nexus Hospitals at its Vermont South Private Hospital, VIC, and a 10-year lease extension with BGH Capital at Forrest Family Practice, South Bunbury, WA.

Acquisition Summary

PropertiesStateProperty TypePurchase PricePassing YieldNLA (sqm)WALE (yrs)Occupancy
Perth Clinic, Havelock Street, West PerthWAMental Health$50.1m4.05%4,85611.6100%
411 Nepean Highway, FrankstonVICMental Health$12.0m4.90%1,5777.9100%
Weststate Private Hospital, 2-14 Wilson Street, West End, TownsvilleQLDShort Stay Hospital$60.5m6.00%8,80325.0100%
MetroRehab Hospital, 275 Addison Road, PetershamNSWShort Stay Hospital$8.45m5.09%1,85013.2100%
Sunbury Medical Centre, 38-44 Gap Road, SunburyVICMedical Centre$28.6m4.49%1,8847.7100%
GHA, 18 Lisa Crescent, Castle HillNSWDementia Care$3.7m5.75%N/A15.0100%
GHA, 35 Chiltern Crescent, Castle HillNSWDementia Care$3.7m5.75%N/A15.0100%
Total / Weighted Average $167.055.02%18,97015.75100%

Perth Clinic was sold via a public Expressions of Interest campaign, marketed by JLL’s Simon Quinn and Nigel Freshwater along with CBRE’s Derek Barlow and Aaron Desange.

Genera45’s Daniel and Chris Steffe acted for the vendors of the Frankston mental health outpatient centre and Weststate Private Hospital.

Colliers Shalain Singh acted for the vendors of the Sunbury Medical Centre.