ISPT and Hesta to develop OnCampus Hospital in Melbourne

11 August 2022

Industry superannuation fund-backed property investor ISPT and industry super fund HESTA have announced a joint venture partnership to acquire a 50-year ground lease from St Vincent’s Health Australia (SVHA), on which they will co-develop an ‘on hospital campus’ medical office building of circa 12,000 sqm in the heart of Melbourne’s healthcare precinct.

As part of the agreement, which will see the ISPT Core Fund and HESTA each co-invest 50 percent respectively, St Vincent’s will pre-commit to lease approximately 5,000 sqm of the building for 10 years, as it relocates its existing administration, office and health services f rom other hospital and satellite campuses.

The deal represents ISPT’s first direct property acquisition in the healthcare and life sciences sector. ISPT’s industry superannuation fund investors like HESTA as well as the ISPT Core Fund are actively seeking exposure within emerging sectors including healthcare and life sciences in the coming years.

The land at 31-35 Victoria Parade, Fitzroy is zoned for Public Use – Health and Community under the City of Yarra and is currently occupied by the former Brenan Hall building and an adjacent vacant site, which has been owned by St Vincent’s for a number of years and earmarked for development under its campus masterp lan.

Under ISPT and HESTA’s development proposal, designed by Bates Smart, the existing heritage listed Brenan Hall will be retained and incorporated into the ground f loor of the 12 level + basement, mixed-use healthcare accommodation building. The co-development represents a $140 million investment into the precinct.

The co-investment will add another cutting-edge medical facility to SVHA’s fast-evolving medical precinct that includes the Aikenhead Centre for Medical Discovery – Australia’s f irst collaborative, hospital-based biomedical engineering research centre – as well as St Vincent’s Hospital Melbourne and St Vincent’s Private Hospital Fitzroy, underpinning SVHA’s vision to create a world-leading medical, research and clinical campus in the heart of Melbourne.

Robert Pepicelli, General Manager, Healthcare & Life Sciences at ISPT, said the St Vincent’s co-investment is an exciting new partnership for all parties.

“We like the opportunity to combine the resources and expertise of ISPT, our investors’ aligned capital and our operator partners to ensure ongoing investment into the important healthcare and lif e sciences sector, which is a major employer and driver of economic activity in Australia,” he said.

“In this case, we are actively partnering with St Vincent’s to continue its valuable work in providing important medical research and health services to Australians.

“We especially like the opportunity to help shape the future-designed workplaces of the numerous and diverse workers within medical campuses, many of whom have their superannuation with HESTA and other investors of ISPT.

“It’s impossible to ignore that through ISPT and HESTA, the underlying ownership of this new medical office facility will be many of the workers on the St Vincent’s Fitzroy campus and other similar facilities around the country.

“We are focussed on working with operators at the early stag es of their real estate planning, to participate in the design, development and long-term ownership of the physical infrastructure which supports their operations”.

HESTA Chief Investment Officer, Sonya Sawtell-Rickson said  “This investment with ISPT supports our continued focus on identifying opportunities in Australia’s fast -growing healthcare sector.”

“Our deep connection and knowledge of the health sector has been built over many years meaning we’re well positioned to take advantage of investment opportunities like this, that we hope will directly benefit our members through strong, long-term returns while also providing impressive medical office facilities for many St Vincent’s hospital staff.”

St Vincent’s Health Australia’s Interim Group Chief Executive Officer, Ruth Martin said “This is an exciting development – for St Vincent’s and for Melbourne’s healthcare landscape more broadly,” said St Vincent’s Health Australia’s Interim Group CEO, Ruth Martin.

“St Vincent’s is in the process of building and delivering an internationally -renowned healthcare and medical research centre in the heart of Melbourne, and today’s announcement by ISPT and HESTA is a terrif ic endorsement of our vision.

“To be built alongside the under-construction Aikenhead Centre for Medical Discovery – and on the same grounds as St Vincent’s Hospital Melbourne and St Vincent’s Private Hospital Fitzroy – the planned development means more Australians will benefit f rom the ground-breaking clinical care and research carried out by St Vincent’s and our partners.”

ISPT and HESTA are currently working through a proposed development scheme with the aim to submit plans to council in the coming months. Once approved, the project is earmarked to reach practical completion by 2025.

Tom Byrnes f rom Charter Keck Cramer and Andrew Grant of APG Advisory brokered the transaction.