Australian Unity Healthcare Property Trust delivers total return over 20 per cent

Chris Smith

Chris Smith

The healthcare property sector continues to perform very strongly, with Australian Unity’s Healthcare Property Trust (HPT) delivering a total return of 20.01 per cent, (7.17 per cent income and 12.84 per cent growth) for the financial year ending 30 June 2016.

Valuations across the total portfolio were up nine per cent from the prior year and gross asset value now stands at more than $1.1 billion.

Chris Smith, head of healthcare property at Australian Unity Real Estate Investment, said the sector continues to demonstrate consistent performance, delivering solid income returns and good capital growth for investors.

“Recently released data from the IPD Australia Healthcare Investment Digest highlights the continued strong performance of the healthcare property sector driven by increased demand for assets, record low interest rates and broader investor appetite for the specialist assets.”

According to IPD, the sector’s total return for the year ended 30 June 2016 was 23.2 per cent, up from 18.5 per cent in the previous year.

IPD also reported that for the 12 months to 30 June 2016 the average capitalisation rate across the healthcare sector was 7.3 per cent, down from 8.4 per cent from the prior year*.

Mr Smith said Australian Unity maintain a positive and optimistic view of the Australian healthcare property sector.

“Over the coming year, we expect that strong investment demand will continue to provide support to valuations across all property sectors.

“Looking ahead, HPT is well positioned for growth through the development of new and existing assets, together with potential acquisitions.

“With occupancy of 97.64 per cent (by area) and Weighted Average Lease Expiry at 10.58 years (by income at 30 June 2016), our expectation is that HPT will continue to provide investors with a solid and sustainable level of distribution income over the medium term.

Mr Smith said the recent IPD data provides strong evidence that there is still room for healthcare assets to grow despite its double-digit returns over the last 12 months.

“Healthcare assets are becoming more widely sought after by investors, with the sector providing very steady distribution returns over the last 15 years – even throughout the GFC.

“In addition, our view is that major private healthcare operators are well positioned to continue steadily growing and expanding their businesses.

“We have very long term leases in place, upwards of 20 years in some instances, with a range of quality tenants, including some of Australia’s most successful companies and this makes an investment in healthcare property distinctly different to other property sectors where there isn’t that degree of tenant stability.

“Assets are still more thinly traded than other sectors, but we are seeing an increased level of brownfield and greenfield development to keep up with increased demand for healthcare services, which will continue to drive strong returns for investors in the sector,” Mr Smith said.

* MSCI IPD Australia Healthcare Investment Digest – Trends Quarter ending June 2016

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