The article originally appeared in Australian Financial Review.
Real Asset Management has acquired four medical properties, including one of the country’s most exclusive rehabilitation retreats, to lift the value of its Essential Services REIT portfolio to $600 million before an IPO in the coming months.
RAM head of real estate Will Gray said that beyond these $42.5 million of new acquisitions, the fund manager was in exclusive due diligence on a further $50 million of medical assets and was running the rule over another $100 million of opportunities as it looked to increase the REIT’s exposure to the booming healthcare property sector.
He said that before the float, RAM was targeting a 60-40 weighting between its 13 well-established neighbourhood retail centres and its growing pool of medical assets.
Mr Gray said there had been about a 100 basis points compression in yields on prime healthcare assets since RAM’s $100 million swoop on three private hospitals in December last year on a yield of 5.65 per cent.
“It’s amazing what a difference six months make in the healthcare sector. The market has moved quite quickly and there is still some way to go,” he told The Australian Financial Review.
Given the competitive environment for assets and tightening cap rates, Mr Gray said it was “encouraging” that RAM had managed to acquire four properties on a blended cap rate of 6 per cent.
The acquisitions include the Banyans Health and Wellness residential
rehabilitation retreat 30km north of Brisbane, where stays start from a little less than $17,000.
RAM has also picked up two Perth medical centres – the Madeley Health Centre and the Swan Medical Centre – as well as the Willets Health Precinct, which includes two day hospitals in Mackay,
The fund manager revealed in November that it planned to pool assets from separate retail and medical property funds to create a listed trust of “essential services” real estate – an asset category that emerged out of the pandemic, signifying properties that remained open and that traded strongly during lockdowns.
In May, the Financial Review’s Street Talk column revealed that RAM had mandated four stockbroking firms to oversee its maiden IPO and had appointed former Scentre Group chief operating officer Greg Miles as the REIT’s non-executive chairman.
An equity raising of $250 million to $300 million was planned in November, and the portfolio was expected to deliver a distribution yield of about 5.75 per cent.
Given the strengthening market for neighbourhood centres and medical assets, Mr Gray said the equity raising was likely to be higher and the yield lower.
RAM Group Australia CEO Scott Kelly said the IPO would definitely happen in the second half of this year, possibly before September, but would depend on several factors, including when it went unconditional on the $50 million of assets currently in exclusive due diligence.