The Australian Unity Healthcare acquires a medical technology facility in St Leonards, NSW.

The Australian Unity Healthcare Property Trust (HPT) will shoot through the $500 million in funds under management mark, with the acquisition of a medical technology facility at 8 Herbert Street, St Leonards, New South Wales for $38.5 million, says Chris Smith, Australian Unity’s head of healthcare and retirement property funds.

HPT is an unlisted property trust that invests in healthcare related property assets with a primary focus on delivering regular income, plus the opportunity for long-term capital growth.

“The purchase of this property will enhance the geographic, property type and tenant income diversification of HPT and will be funded by capacity within the existing debt facility. The property represents an initial yield of 9.8 per cent and as such is accretive to earnings,” Mr Smith says.

“HPT has an outstanding history of delivering stable income and capital growth to investors. We believe this property will contribute to the continued success of the trust. Since inception HPT has returned 11.44 per cent and its 10 year return stands at 11.56 per cent. Over three years it has returned 7.28 per cent and the one year return stands at 9.48 per cent,” Mr Smith says.

The Herbert Street property is a modern three storey medical technology facility, with a net lettable area of 10,556 m2 and basement security car park for 156 vehicles. It is located only seven kilometres from Sydney’s CBD and walking distance from the main hospital building of the Royal North Shore Hospital (RNSH) precinct.

The anchor tenant of the property is leading global prosthetics and medical equipment manufacturer and distributor, Stryker Australia. Other tenants include RCPA Quality Assurance Programs, an entity closely associated with the Royal College of Pathologists of Australia.

This is the second acquisition for HPT in St Leonards since the purchase of 176 Pacific Highway in 2008. This property is home to the North Shore Specialist Day Hospital and is the company headquarters of Virtus Health.

“Healthcare property continues to be attractive and highly sought after as an asset class. HPT has seenconsiderable investor support over the past year, with inflows comparable to pre-GFC levels,” Mr Smith says.

“The long-term outlook for healthcare is extremely positive. Australia’s ageing population, and the associated health and medical implications of this, mean demand for private healthcare and related services will continue to grow.

“There is already evidence of expanding demand in the sector and having built significant capacity for further acquisitions, HPT stands ready to capitalise on this demand for the benefit of its investors.

“Further to the St Leonards acquisition we are working on a number of other property acquisitions and brownfield developments that will result in further growth and accretive earnings for HPT by 30 June 2014.

“The acquisition focus is on hospitals, medical centres and other health related type assets in New South Wales and South-East Queensland valued at over $10 million,” Mr Smith says.

Australian Unity Investments (AUI) was named the winner of the 2013 Australian Property Institute NSW Excellence in Property Awards in the Property Trust Industry category, and it also was named theProfessional Planner / Zenith Investment Partners Direct Property Fund Manager of the Year for 2013.

Over the past 13 years, HPT has grown to become one of the largest and highest-rated unlisted property funds in Australia. Today, the Trust has a diversified tenant base and following the completion of this acquisition, will hold a quality direct portfolio of 25 healthcare properties across Australia, which together with its other assets, will be valued at over $520 million.

AUI manages a range of diversified property funds, covering healthcare, retail, industrial, commercial and office property and has over $1.7 billion in property assets under management (as at 31 October 2013).

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Located in the commercial and retail heart of Melbourne’s CBD, 330 Collins Street comprises approximately 18,337 sqm of A-Grade office space over 20 levels, including 18 office floors, extensive retail accommodation, ground floor foyer, plus two basement floors. The building underwent significant refurbishment in 2003.

AMP Capital Portfolio Manager Damian Fitzpatrick said AMP Capital saw an opportunity for Sunsuper to acquire a property that met its investment criteria in both geographical location and projected income returns, with the asset to benefit from the longer term rental growth forecast for the Melbourne CBD office market in the coming five years.

“Demand for quality office space in Melbourne’s CBD is increasing due to less development activity as a result of the financial crisis,” said Mr Fitzpatrick.

“With Melbourne’s commercial office market well positioned for growth, due to low vacancy and a strengthening in market conditions, the property will offer Sunsuper ongoing positive returns and afford tenants extensive prime retail frontage at a time when commercial vacancy rates are decreasing.

“330 Collins Street is a quality asset and one of the best located office buildings in Melbourne. The property is currently 100 per cent leased to a range of high quality tenants. With large office floor-plates for this location, combined with its substantial retail frontage, AMP Capital’s asset management team believe significant value can be unlocked for Sunsuper to deliver strong investment performance.”

Sunsuper’s Chief Executive Officer Tony Lally said Sunsuper placed significant emphasis on diversification within its investment portfolios – a strategy which had served members well over both the short and longer term.

“This addition to our growing property portfolio in the Melbourne office market offers excellent prospects for returns for our members. We are particularly pleased to have been able to purchase such a high quality asset in this key Melbourne CBD location.”

Mr Lally said the purchase also complemented Sunsuper’s national growth strategy.

“This property at 330 Collins Street, along with our recent purchase of 35 Clarence Street in Sydney, is a great fit for Sunsuper in terms of quality and location. We’re confident that our members will benefit from future growth and strong tenant demand in both the Melbourne and Sydney CBDs as a result of these acquisitions,” he said.

According to CB Richard Ellis’ latest Melbourne CBD office report, no large office buildings are expected to come on the market in Melbourne’s CBD for three years, while demand from tenants will continue to remain strong.

AMP Capital’s Property Portfolio Service was established more than 15 years ago and specialises in building bespoke real estate portfolios for clients. Portfolios may include a range of products such as Australian and international direct property, listed property and development funds, Australian wholesale and offshore funds as well as emerging products under an ‘alternative property’ allocation.

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