This article originally appeared in Australian Financial Review
Having amassed a $300 million portfolio of neighbourhood shopping centres, fast-growing fund manager Real Asset Management has turned its attention to the private healthcare sector with plans to build a medical property fund of a similar size.
The new fund, which has secured about $50 million in initial equity commitments from wholesale and sophisticated investors, has already made its first acquisition, the Miami Day Hospital and Medical Centre on the Gold Coast, which RAM secured off-market for $11.25 million on a yield “north of 7.5 per cent”.
RAM head of real estate Will Gray said the fund manager had identified future medical property deals worth about $120 million and hoped to grow the value of the fund to $150 million within 18 months as it hooks into the trend of an ageing population requiring greater levels of private healthcare.
“We expect this fund will over time grow to mirror the size of the retail property fund [currently 12 shopping centres] reaching $300 to $400 million,” Mr Gray told The Australian Financial Review.
The minimum investment in the new pooled fund is $500,000 with RAM expecting to attract a large pool of new investors alongside its current base of local and offshore high net worth investors and institutions as part of its new strategic healthcare play.
Mr Gray said investment would not just be restricted to medical centres, private hospitals and other medical-anchored facilities, but would include allied health services like gyms, pharmacies and rehabilitation centres. The fund will also participate in new developments.
The current major players in healthcare property are ASX-listed Dexus Barwon, Heathley and Australian Unity, but the sector remains highly fragmented with many assets owned by doctors and private investors.
“We see it as not being a saturated market and where institutional capital will come over time,” Mr Gray said.
He said medical-themed property was an emerging real estate sub-class that was starting to achieve recognition for its defensive characteristics and ability to perform when other asset classes did not because demand for healthcare was based on need and was non-discretionary and non-cyclical.
“As the cost of healthcare continues to rise, governments are moving towards alternative methods to fund healthcare, including a higher reliance on private sector providers. This will continue to underpin demand for medical space as the sector diversifies away from traditional public hospitals to private day hospitals and medical centres,” Mr Gray said.
“We’ve already identified a pipeline of opportunities and are dealing with a number of groups in off-market deals.”
RAM, which is led by former UBS investment banker Scott Wehl, recently expanded into the non-bank lending space after securing a $500 million funding line from a global investment bank to lend to local and overseas borrowers.
Its retail property fund includes the Broadway Plaza in Punchbowl in south-western Sydney, the Mowbray Market Place in Tasmania and Ballina Central on the NSW north coast.